Things learned from dinner with Tyler Cowen:

Always order salmon when at a good restaurant (they have to do something good with it to keep it on the menu).

At a fish restaurant, the greater the number of Asians the better. The greater the number of pretty apricot tarts, and joke-telling happy people, the worse the restaurant as they're not serious about food.

Order the ugly and unknown as they have to be good to be on menu.

The best strip malls for food don't have a big box like Walmart.

Conscientiousness is the key quality to get a job for young people these days.

The median income has declined some 10% in last 10 years.

The rate of unemployment for males of working age these days is 18% up from 8%.

Le Bernadin (New York, NY) is his favorite American restaurant.

Get the best sushi on side streets rather than avenues, and stay away from Paris for good food.

He has eaten at Noma in Copenhagen.

Cowen was New Jersey chess champion or some such at age 14. His step daughter Yanna is very expert at health care, and works for a firm The Advisory Board Co. that is very interesting.

German economists have depth but not agility unlike his friend Kasparov, who has both but is better at the tactics than Karpov.

Canned food has the best (i.e. least) environmental impact.

Italian wine growers are leaving their firms disproportionately to their female progeny but he doesn't believe the explanation is mainly genetic as in Galton's demonstration that the decline of eminence in England was due to the eminent marrying heiresses who were relatively barren.

A good question that Tyler always asks before ordering any item of the waiter is "if this were your last meal on earth, what would you order?".

Steve Leslie writes: 

I liked the last point. Here are a few extra thoughts. If you have a favorite restaurant, get to know the owner, the maitre d, the bartender, and the ex chef. When you make your reservations, mention the owner by name and tell them you want a good table.

Find out what the specials are for the evening. If there is any advanced preparation necessary tell them to set aside enough for you. If necessary leave your credit card. When you arrive, ask to speak to the chef for just a moment. Depending on the place you might be able to go into the kitchen and speak to the chef directly.

Send a drink to the kitchen for the chef and one to the bar for the bartender. This lets them know that you are discriminating and want special service. They will respect this. Trust me they will take care of you. 

If you want service you have to kiss a little ass. Ask the chef what is they would recommend. and go with it. 

If you are traveling ask the concierge to suggest somewhere to eat. Have them make the reservations for you. That is their job. Also ask them if they have privileges at private restaurants and clubs by staying at the hotel. Be specific as to what you are looking to eat. Fish, chops, steak, Chinese, Japanese, Italian, Brazilian Beef, Asian Fusion.

When you arrive, be polite and friendly but not snobbish or pretentious. Be pleasant. If the place doesn't meet your expectations, mention to the owner or the manager that things were not to your standards. They will take care of it for you. Once again deftness is the key. Fine dining should be a special experience. In the words of Julia Child "Bon Apetit"!



 One of the funny things about Secretariat was seeing deceased Harvard devl eco prof Hollis Chenery showing his true colors raw and ugly when he thought that there was an offer of 8 for the horse and his share would be x. "I'll sue if you lose it," he immediately told the sister. All family ties went out the window. Apparently in breeding syndication deals, there is a performance clause which is that you don't pay as much if the horse doesn't win the triple.

Amazingly Chenery apparently gave the other owners of the syndication rights a guarantee that Secretariat would only lose one race as a three year old. Or else the price was reduced substantially.

The movie is played out against a backdrop of the decline of the racing business. "It's a minor sport," said Chenery, and it's good to see it back in the news. When we went to Belmont with the specs a few years ago, on a high August day near the Belmoont Stakes there were about 3 people in the entire track, and we got a real bargain on the food since no one was there besides us. At Meadowlands, there's a lonely Ben and Jerries and that's it.

Steve Leslie comments:

It is often said one thing that separates a champion from all the challengers is their heart.

Now there is the physical heart and there is the intangible heart. the heart within the heart.The spiritual heart. The heart that cannot be defined by physical measure. The true spiritual heart cant be quantified by mechanical means, it cant be captured nor conquered. There once was a champion who had the rare blessing of both.

Secretariat was in all likelihood the greatest racehorce of all time. He was sired by the marvelous champion Bold Ruler and foaled March 30th 1970 In a sport that measures margins of victory as "by a nose" or "by a neck" and a "photo finish" Big Red as he was called was so majestic and powerful he won he just didn't win. He vanquished. He crushed. He completely destroyed the field at the 1973 Belmont Stakes winning by 31 lengths and establishing a world record at the mile and a half distance that stands to this day. Although I watched the race on television and it happened 33 years ago, I will NEVER forget the image of Secretariat charging toward the finish line on the backstretch with no horse in sight. And even though the race was never in doubt, there was absolutely no quit in him at all. It was as if he were telling the racing world that I am going to give you a show that you will never see again. You bought a ticket to watch me run and I will not disappoint you. And the ground shook and crowd thundered. They should have created a word to describe the event that day. Secretarian. Even though I grew up in a blue collar town in the rust best of the United States, From that moment on, I became a life long fan of the Sport of Kings. He gave me a story to tell to my children and my children's children that I had the honor to watch the mightiest of the mighty. The greatest of all the greats.

He also set speed records at the Kentucky Derby and the Preakness. The only horse in history to accomplish that herculean feat. He thus became the the first triple crown winner since Citation in 1948. All in all, there have been only 11 horses to have been christened triple crown winners. This requires an entrant to win 3 races in 5 weeks against the most elite field in its sport and across 3 varying distances on three different tracks. A bronze statue of the great horse stands in the paddock area of Belmont Park in Elmont NY forever immortalizing this most unique of equines.

After his unfortunate death in 1989 due to laminitis an incurable hoof disease, he was euthanized on October 4th. He was buried whole at Claiborne Farms in Paris Kentucky. This is such a unique honor befitting the great champion. By tradition, thoroughbreds are buried by parts, their head to symbolize intelligence, their heart to signify strength and their legs to describe power.

An autopsy was performed at the University of Kentucky; by Dr. Thomas Swerczek, the veterinarian who performed the autopsy. To his utter amazement, he found that Secretariat's heart was the largest he had ever seen in a horse—approximately three times the size of a normal horse's heart. Unlike most enlarged hearts, Secretariat's showed absolutely no signs of disease. The heart weighed 21 pounds (9.6 kg); the normal is 7 pounds (3.2 kg). He had a powerplant that was nuclear when all the others were running on diesel.

In 1999 a commemorative stamp was issued by the United States Postal Service to honor the spectacular champion. A fitting honor to one whose likes we may not see for a hundred years or more.

As we approach the Kentucky Derby and the Run for the Roses I wanted to take the time to honor this most amazing turf warrior with a humble tribute befitting him . I can only say that if you ever saw him run My Lord you would never forget it.

An autopsy was performed at the University of Kentucky; by Dr. Thomas Swerczek, the veterinarian who performed the autopsy. To his utter amazement, he found that Secretariat's heart was the largest he had ever seen in a horse—approximately three times the size of a normal horse's hea



Komodo DragonI just finished watching the series Life on the Discovery Channel. I learned so much it was as if I took a year's course in Biology, and Botany. There were so many lessons applicable to life and the challenges we as humans face each and every day.

I thought it might be interesting to suggest an animal and its application to the market.

For example, I think of the Komodo dragon who will bite a water buffalo and wait patiently for weeks for the deadly venom to take effect. Ultimately the Buffalo succumbs to the poison and is consumed by a ravenous pack of dragons. As a reward for its patience the dragons will not need to worry about their food intake for another 4 weeks or so.

Or a crocodile, one of the oldest creatures on the planet dating back hundreds of millions of years. It has remained essentially the same yet has continued to survive. What is it about a crocodile which has allowed it to thrive while all other contemporary creatures vanished. There are unquestionably hundreds more of examples and I feel this would be a worthwhile exercise.



 My brother collected stamps when we were young but I thought philately will get you nowhere and became a numismatist instead. It was from the 6th to 8th grade when I would spend all free hours and all free cash flow investing in rare coins. It was my first obsession with trading, because I did it for the joy of making money one day, not to have one of every coin.

All my coins were housed neatly in books with a ledger for each item’s cost, condition, where found, and value. Each quarter the revised published values would come out and I would update the ledger with new values, unrealized gains and losses, and foot and cross foot the big book to get my profit. It was strictly a buy and hold strategy with dollar cost averaging thrown in — each week’s allowance and odd job money was invested. It was a contest with my best friend at the time; to see who had the best value change from period to period, but he would often in bad quarters fudge the grades a bit higher for marketing purposes. I never did that — he probably runs a hedge fund now.

There was a kind older gentleman who ran the coin shop in Springfield, Virginia where we would stop after school to gaze the coins and plan our purchases. He took a kindness to us and offered us tips and favors when trading, waiving part of the regular vig, to entice us. Maybe it was an angle too, like buying drugs, he was often referred to as the “coin dealer.” There was an auction board on the wall where people could put up their coins for sale each week with penciled in bids to close Wednesday nights at 6PM. It was eBay before Bill Gates dropped out of Harvard.

I learned the hard way about the dangers early on when I went a little crazy sensing some extraordinary “values”– someone put a bunch of stuff on the wall at a 30% discount to the book listed value. In no time I had accumulated $136 of winning bids and got the first margin call of my life. While than may not seem a large sum right now, getting a substantial margin call 6th grade early 1970’s for the son of a working military man, it was all the money in the world. I had until close of business Friday to pay. The only way to pay was to borrow, or sell assets. Unable to admit this stupidity to my parents I was forced to sell assets. And the only buyer in town was the coin dealer. And the only value he paid was 50% of book. So I sold $250 worth of my collection to add $200 in “value,” it was the worst quarter of my young trading career, and a devastating but valuable lesson.

After that I bought strategically, and sold even more strategically, and never with borrowed funds. The collection was worth $650 in 1977 as compiled from “Handbook of United States Coins-With Premium List” (1977 thirty-fourth edition by RS Yeoman), the last time I paid much attention to it. It sits untouched in a box in my closet that hasn’t been opened in 32 years and seven relocations — for security purposes it’s taped shut and marketed in big red letters “baby toys.” As for returns, I checked one coin, my favorite, a nearly uncirculated (let’s call it AU-50) 1909 S V.D.B.. At the time it was worth $112.50 according to the book, and now is worth $660.00 according to coincollecting.com. That’s 5.7% return for 32 years. Not bad.

Steve Leslie writes:

I met Bruce McNall in the late 1980s when he put together limited partnerships of rare coins with Merrill Lynch. He is a short stubby character who gained fame via sports team ownerships and celebrity status, associating with the likes of John Candy and Wayne Gretzky. He was responsible for bringing Gretzky to LA and owned some assets with him. One in particular was the most famous baseball card in history, the Honus Wagner. He began his career as curator for Getty Museum and went on ultimately to Federal prison after coins began disappearing from the partnership. He was considered the ultimate authority on rare, ancient coins. A tragic story but one that is becoming all to familiar.



NascarDuring the weekend, there were several auto-racing events broadcast. While briefly paused on one of these broadcasts, NASCAR I believe, a commentator referred to auto-racing as a "sport". The comment struck a nerve; does auto-racing fit the definition of a sport?

I broadly define a sport as a skilled activity where the fundamental kinetic energy is produced by the participating athlete's muscles, with locomotion sometimes augmented by the effects of gravity.

Therefore, I argue that although professional auto-racing requires extraordinary physical fitness, focus and skill, a sport it is not.

Tony Kinoue remarks:

As an avid "motorsport" fan, I have to agree. I presume many fellow fans might find it offensive to say auto racing isn't a sport, but I believe it isn't.

A good way of classifying different activities as sports or not, is the risk you face when practicing them.

What would happen if a soccer player failed to score a goal? The ball would not enter the arbitrary area defined by general convention. May the L_rd save us all. The same can be applied to most sports that involve balls.

On the other hand, activities such as auto racing carry with them a much higher probability of mistakes resulting in serious injury or death. Boxing also comes to my mind as an example. Does this make them more or less of a sport than ball sports? I don't know, but to me they aren't sports.

And what about those "sports" that ESPN often broadcasts these days? Domino, poker, billiards. Lots of skill and strategy no doubt, but where's the risk? Monetary risk is a component in all sports described before these.

I'm not trying to imply one is better than another, but they are all certainly different.

Steve Leslie replies:

ESPN is Entertainment and Sports Programming Network. Therefore just because some activity is shown on the channel does not define it as a sport.

If auto racing is not a sport then what category would it be? It is entirely impossible to compete in auto racing without a car. That is a given. So where does the driver and the team fit in? To be a driver one must have great endurance, maintain excellent physical skills, such as quick reactionary times, reflexes, excellent hand to eye coordination and other qualities. Further, the team must have great physical skills. There is plenty of picking up and moving heavy objects, tires are extremely heavy, pit stops must be performed in seconds and it must be coordinated in a fashion to ensure the shortest time spent in the pits. Strategy is essential. A pit stop is like running a play in football. There is vast preparation throughout the week, strategy sessions before and during the race and a few seconds to execute everything. Auto racing is most definitely a sport when seen in its entire context.

Poker, on the other hand is a game. There is hardly any physical activity required. Blind people and quadraplegics play the game. And it can be played online.

Other games as shown on ESPN are dominoes, scrabble, spelling bees…

Billiards, darts, bowling, curling, cricket and horseracing are definitely sports. They just happen to be more subtle than baseball, rugby, soccer, and the major sports — football, basketball and hockey.



SwanIn my limited experience, risks such as the "Black Swan" type are unusual. Most of the risk we newbie traders assume are not real risks — only mismanagement of risk. One of the most common is "impulse trading" (i.e., trading without an edge or overtrading).

Well, last week I had a lesson on Impulse Trading. I was driving with my family (wife, kid and the nanny) to the border of our state and country — Jaguarão, a city on the border of Uruguay — to do some shopping at the free market shops.  The travel couldn't be by plane (there's no airport there), so we went on a 5+ hour driving trip.

You know, my boy is almost 3 months now — and he is my first son. So I was driving in a long (for me) journey with my boy in the car. There were moments where one, two or three trucks were  blocking  the road, and of course, I wanted to pass them. Another time, I would risk every chance to pass them. But now I had my kid in the car so I only took the completely free-risk shots. There was nothing in  the world that would made me risk my boy's life in brave and daring driving. No way!

Immediately I felt ashamed of the times I took trades that were not "high Sharpe situations". How could I be so risk-idiot? For a person not money-centered (which I believe I am not) trading is the most difficult challenge. Because it's so easy to mismanage risk. "Oh, it's just another losing trade - no big deal". It is a big deal!

If I approach trading with the notion that my wife and kid are in the car, I will become the most aggressive risk manager. And they are: the money that is lost is the money they will not enjoy — and, G_d forbid, money that they will lack.

So, from now on, my wife and kid are in the car on every trade!

Scott Brook reacts:

Black Swans may be rare, but they are game-enders.

That's why you should never go "all in" when playing poker. I get derided all the time for saying this, but I made a lot of money playing poker back in the 80s using this strategy. Of course, that was in the days when you could play stud poker and not this "Texas Hold'em" crock that they play today. In today's MTV fast paced, leverage to the hilt world, you have to go all in to compete. Otherwise, people aren't interested in doing business. They want the big returns and they want them now, "D%mn the torpedo's, full speed ahead!"

You could call me a grinder. I always found a way to grind out a winning night playing poker. Sure I was boring, and yes, I was still subjected to the occasional black swan, but even after the swan wreaked havoc on me, I might have been wounded, but I was still standing and able to play the game.

P.S.: I've also traveled cross country with small children. I found it to be a less than pleasant experience. That's a black swan I would like to avoid for the rest of my days!

J. P. Highland adds:

1. Poker is a great trading boot camp. Folding is the hardest part to master, learning that second rate hands usually finish second.

2. In trading you have two opponents, one is Mr. Market and the other one yourself. The second is a tougher SOB to manage.

Steve Leslie writes:

Tournament poker and cash poker are two distinct animals. They are entirely unrelated and require different skills. WSOP main event is no-limit hold-em which for years was a very small event. Look at the event fields up to 2002 — they were quite small. When Johnny Chan won his first title I think fewer than 50 people were involved. All that changed when Chris Moneymaker won. Also the big game players like Greenstein, Reese, didn't even play tournament poker. TV and the Internet changed all that. Now last year's winner was under 24 and beat Phil Hellmuth's record set back in 1987. Their techniques comsist mainly of bluffing and hyper aggression. Most crash and burn early but there are so many of them like ants that it is impossible to kill them early so some make it to the latter stages. Mr. Brooks and I are anachronisms. Try to find a seven card stud game or draw poker. They don't exist anymore. Nobody knows how to play them. Even Omaha is difficult to find. In the Cincinatti Kid they played five card stud. When I played poker in the 1990s they were closing up card rooms. All that is left today is no-limit hold-em cash and no-limit hold-em tournament. Finally, the skills you can learn from poker are transferrable to trading on many levels. Others have written exhaustively on this. I strongly suggest two books: Zen and the Art of Poker by Phillips, and Zen in the Martial Arts by Hyams. Start there.



1. One often talks about the difficulty of proving the gravitational attraction, and of course the much more important question of expectation around rounds. However, one light at end of tunnel, is that there have been at least eight excursions back and forth around Mr. Big Round in S&P: 1000. No other round has anything like this.

2. The Israeli market predicted or preordained every move n the S&P for last x weeks.

3. The POMO is a license for the banks to feather their nests at the expense of the poor unlucky souls whose debt is not guaranteed, and whose losing assets must be sold at distress.

4. There is always a web between currencies and other markets, a feeding chain if you will. But the web is always changing just when the public gets on to it, as Bacon would say.

5. The market abhors stability like the man a —-

Michael Bonderer reports:

John Mackey, the objectivist and entrepreneur, penned an op-ed on his suggestions for healthcare in the WSJ on August, 11, 2009. This has led to a 'progressive' furor and calls to boycott the company he co-founded, Whole Foods Market Inc. The least that any Daily Speculator can do is go out of his way to spend money in his stores. I have linked his piece and the WSJ's editorial follow-up.

David Higgs remarks:

Walter Isaacson's book Einstein tells of the difficulties Albert dealt with on his generalizing gravity in his Entwurf theory. It wasn't until he applied mathematics to it that he started to get the problem correct. Not sure if mathematics the answer here with the human element such a dominating element, be it a Madoff, a GS, an Obama or anyone else out to swindle the little guy, yet the wall of worry sure seems to hold true…

Steve Leslie surveys:

Don't look now but Dow 9500, S%P 1022, NAZ 2014, GS 163. In the words of Roseann Cash: "My baby thinks he's a train." Stock market up 50% since March.

Cash for Clunkers ends Monday — 450,000 cars sold as a result. One program that the Government got right. Now the dealers need to get their money from government — only 2% paid out so far. Is it true that the next thing is cash for appliances?



NavyHappy 4th of July to all. My son Charles entered the US Naval Academy at Annapolis a few days ago. Induction Day is a somber and dignified occasion for new recruits and their families. Its nerve raking as well, particularly for the young men and women that commit to honoring and protecting the US Constitution for the next nine years of their young lives.

This weekend, I am going to have a few beers and sweat out the Yankee games hoping that they can keep pace with the enemy to the north. Its pretty comfortable for me and my family but please take a moment to reflect that we are a nation at war and there are many young people and their families that have more serious thoughts on their minds.

Photographs of Induction Day are available on the Naval Academy web site . We were lucky enough to have our son pictured going high and tight.

Steve Leslie replies:

I am proud to be in a country that allows you to say God Bless You and God Bless America.

Congratulations on your sons induction into the Naval Academy. I am sure you are extremely proud. This is truly a remarkable accomplishment as admission standards are so high and applications approach over 12,000 men and women with only 1400 slots available.

My family has maintained a residence in Annapolis for 20 years and I have had the pleasure of visiting the academy on many occasions. There are some extremely interesting and fascinating things to see and do around the Annapolis area and I would strongly encourage everyone who can to visit Annapolis at least once to get a sense of the history of the place. It is situated in downtown Annapolis directly on the harbor and Chesapeake Bay. A truly amazing location. Some terrific activities to attend are the Herndon climb where 1000 plebes attempt to climb the 21 foot tall monument greased with lard. Also one should see the Bancroft Hall the worlds largest dormitory and King hall where all midshipmen are fed simultaneously 3 times a day.

Washington D.C. is a 30 mile train ride away and a side trip to downtown would be in order. I recommend the Museum of American History to view the star spangled banner. My personal favorite is the display of American coins and currency. It is inconceivable to visualize the enormity of the Smithsonian museums and the various artifacts on exhibit. No trip or education would be complete without a visit to the Lincoln Memorial. There one can stand on the steps where Martin Luther King Jr. gave his I have a dream speech, and gaze across the reflecting pool toward the Washington Monument. Farther off in the distance one may see the Capital building. The Vietnam Veterans Memorial is on the left of the pool . The Korean War Memorial is on the south side of the reflecting pool.  The National Zoo is just north of DC. One can see the Chinese Pandas on exhibit. A short drive and one may visit Arlington Cemetery in nearby Arlington Va.

Every child in America should have the opportunity to visit Washington D.C. at least once in their life.



Russell Sears says:

My knowledge of baseball is shallow. I played only two years in a little league as a kid. I was on a small town team in Glencoe, OK my 5th and 6th grade years. The only years I was still able to compete and start in three sports teams (Basketball Baseball and Track). I played second base, led the team with walks and on base percentage, steals and fewest errors for an infielder. So, much of my knowledge is rudimentary. However, as a dedicated athlete and coach in distance running, I recognize many of the lessons carry over from most sports to investing/trading and a investor/trader's life.

Here is my list with some explanation to at least one way it relates to an investor/trader if it was not obvious.

1. To get an edge, rely on statistics, not folklore or gut response (See Michael Lewis's Moneyball).

2. To make a solid hit you must shift your weight at the right time. Good traders move their weight in and out of the trade.

3. Plan on shifting your weight in the direction you want the ball to go before the pitch/market or you end-up chasing the pitch/market fouling to the left. Or on offense you take action. Plan where you are headed. Risks analysis can help determine where you want to play, is there more opportunity in being too early or more risks. Or will the opportunity still be there if you are a little late.

4. Don’t expect the opponent to give you the same hit twice. Don’t chase returns. Expect the markets to react to your success.

5. Changes of pitcher occur everyday and a team that was easily beaten one day is completely different the next. Don’t expect every day to be the same easy win or tough loss, despite yesterday’s scorecard.

6. Your placement in the outfield will determine your ability to cover the most area. Remember it is easier to run forward / be more aggressive than it is to back-up. On defense you react, position yourself accordingly. It often is easier to get into a trade than out of one, (think real estate). Allow yourself more time to get into a trade than selling out of one. It easy to find a willing seller as even in a hot market the net buyers are often flipping trades. But it can quickly turn into a dead market. And conversely a short trader can be hard to move quick enough, though right in the general direction.

7. Pay attention to the strike zone before your turn to bat. Different umps will shift it and the pitcher will know where the corners and edges are. They will also know where the ump is being conservative or liberal. Keep track of the rule changes around the edges. See current FASB rules for example.

8. Patience and opportunity cost move inversely as the count moves against you. The best learn to deal with this pressure. (See Ted Williams)

9. As the runner moves around the bases the positions placement and responsibilities shift with him. Know the economic cycle where the opportunities pop-up and disappear. Know where you are most vulnerable.

10. Backing up other teammates limits losses associated with many errors. Double check trades before execution.

11. Keep the ball in front of you. Have limits to losses. Don’t get too far behind on a trade.

12. Keep your eyes on the ball. Don’t ignore a trade.

13. A student of the game knows when and where an error is likely to occur. Learn from past mistakes, others' as well as your own.

14. Standing firm while a fast ball is coming at you is not instinctive. But a inside slider is even scarier. Instincts need to be channeled properly. Risk premium or the opportunity in risks is often not instinctive.

15. Identifying the pitch's path is hardest part to hitting. Identifying shifts in the market is often hardest part of trading.

16. Quick simple planned communication keeps teammates from running into each other when the balls in play. Same communication helps firms govern their traders.

17. Everybody loves the game when the sky is blue, but the season is won in all weather. Everybody wants to be an “investor” in the good times, but many of the best lessons, the ones that can make investor’s career, occur in the hard times.

18. The concession prices are a lesson in supply and demand. Demand often trumps relative value. Bubbles and panics often occur by demand ramp-ups and then collapse. Because there is no clear 7th inning stretch for a trader or posted game schedule. Be very careful how many hot dogs you place on the grill even though demands high and how much inventory you will carry despite the labor day fire sale of hot dogs.

19. Fan loyalty proves that being number 1 is not necessary for success. Hubris of striving to be the “best” can poison many a career, stock or management team.

20. Minor league games can be fun for the whole family. Small investments are great for teaching kids the principles of investing.

21. Next time at the ballpark count the generational divergent groups (eg Father/Son) ;sharing with the next generation of fans keeps the excitement in the game. Sharing with an older generation keeps the relationship fresh.

22. There are many crazy fans and media experts out there that think they know every move a team and player should make. Many simply wish they could play. Ignore the Monday morning quarterbacks advice. Most of the media and the advice people feel compelled to give those succeeding is worthless or down right dangerous. (See the “magazine cover” effect for a bear market.)

23. But accept the critic’s concern as a compliment. For many this is the only compliment they can give.   Contrarian thinking or buying when others are selling too much and selling when others are buying too much is the basis of trading, expect to swim against the tide sometimes. These critics think anecdotal evidence in hindsight proves they know more than you, but trust a good record keeping/scoring system more than the backdated critic.

24. Joining the club: That knowledge, experience or friends inside the clubhouse may get you a job. That intelligence may get you a well paying one. But that a unique talent is highly scouted and is priceless. This carries over in most careers, perhaps one reason why athletes often make good investment professionals.

25. If you are up to bat, it doesn’t matter what position you came from.

26. Those that get the most players on base often win. Home runs are nice but singles are the game changers.

27. A walk gets you on base same as a close single without the risks. This is stressed in the lower leagues. A good eye for business opportunities can beat the market. In main stream, the number of “rich” entrepreneurs out ranks the rich traders.

28. Run hard for first base no matter how easy an out it appears you hit into. Errors happen, only those still trying get to turn the error into opportunity.

29. Individuals pursuing their own individual success can work as a cooperative team. Form your team so that everybody wins.

30. Occasionally, the manager must step in to tell a batter to take one for the team: Bunt, to advance the runner on base. Team players know that long term success outweigh short term personal gains. Pick teammates that know how to bunt.

31. Don’t let the opponent know what your signals are. Hide your limits and stop losses until you pull the trigger.

32. The pitcher and catchers signals are sacred information. Don’t deal with firms that let others know your trades or allow front running of any form.

33. Scouting like due diligence should dig for the observed facts, not simply rely on their reputation. See Madoff or any of the other sellers of bogus reputations.

34. Know the difference between playing to win and looking to next season. The new talent brought up is out to prove themselves. Don’t underestimate their hunger. The big established and the small hungry players have their niche.

35. People tend to be afraid of cultures they don’t know, race has little to do with an individual’s success. (See Jackie Robinson). Global funds can diversify your portfolio.

36. However, cultures that support the game have the most individuals hitting the big times. While globalization can be good, not every country has the same culture to support capitalism. (See the freedom index and long term returns).

37. The pitcher has to have the most control of any of the players. They should be the most organized and controlled. Traders need the most governance and control.

38. The fastball pitcher needs the most rest, lest the fewest innings with shortest careers. Save your emotional energy for when it is needed.

39. Injuries and life happens. Being willing to take yourself out of the game a few days can prevent a season or career ending blow-up. Listen to the advice of a good sports doctor/risks manager on this one.

40. The clean-up pitcher may not get the glory of the win, but can save many a game, and often prolong his career with his knowledge. The support crews are critical.

41. Don’t make enemies with the umps. Don’t make enemies with the regulators no matter how unfair the rule.

42. Respect the home team’s advantage. Investing in local companies you know well can be profitable. Likewise commodity markets often have their natural experts .

43. Don’t call attention to yourself off the field. Too much conspicuous consumption makes you a target.

44. Listen to your mentors, the coaches, the voices of experience, follow the successful.

45. Give respect to those that played before you and the other players.

46. Win or loss, shake hands after the game. The opponent is only “the opponent” on the field. Off the field he is most likely a kindred spirit.

47. Sometimes the best competition is the friendly competition of a teamate. As irons sharpens iron, friendship sharpen individuals

48. Pride and self-respect can motive and drive you through difficult and seemingly impossible situations. (see Lou Gehrig)

49. Tragic situations can be turned into triumph. The unfair harsh blows in life can make you bitter or better.

50. Hubris and narcissism may fool others into respecting you, but will be your downfall.

51. Steroids, banned substances: there will be those that cheat and seemingly get away with it. But often lost in the broadcast are the majority of the players that did not cheat and still achieved greatness. There will always be cheaters, but the generalization against the whole is not to be believed. Don’t tolerate this attitude with your investment advisors.

52. Those cheating rob baseball for their own gain and develop a love/hate relationship to it. Those investors that have love/hate relationship with capitalism and the markets are not to be trusted.

53. Those prone to criticism think the road to success is lined with cheats. But often the temptation to cheat is greatest in the declining years after they tasted glory. Don’t let yourself succumb to the thinking that to stay in the game you too must cheat. Often the answer is to accept a less visible role at least for awhile. See excuses from fraudsters of why they started hiding losses .

54. Character is not necessary to have talent. But character often determines how far and how long the talent will last.

55. Until the last out is counted, there is always hope for a turn-around. But the manager should play the game to a realistic assessment of the situation.

56. Playing not to lose, can cause your collapse and give the opponent that hoped for turn-around. (See Met’s Red Sox World Series). The bigger risk is often playing too conservative, as if you already have won.

57. What you deliver to the team matters, not who your parents are which school you came from or who is rooting for you. True in trading and sports

58. Those from the humblest background are often the hungriest.

59. Hunger with expert guidance produces the stars time after time. Those with the true hunger will choose substance over style every time. Many small programs would do better to spend the money to improve their coaching than to improve their facilities. Facilities are to impress the visitors, not those with a true hunger.

60. Coaching programs that produce one great talent from scratch to the big leagues may be a random lighting strike. But coaching more than one great talent is validation the coach’s program towers above others in attracting that talent and ones coaching abilities. Look for mentors by those they have mentored. See Vic’s former traders successes.

61. Coaches can make a tremendous difference in a kid’s life, but the kid has to want the change. Those that really want it seek out the best coach/mentors.

62. Kids with pushy parents usually make terrible teammates. Don’t hire kids with pushy parents for your firm.

63. Pushy parents make the worst coaches. Avoid investing in nepotism, be it a private company, or an investment advisor. (see 3rd generation inherited company’s failure and major loss rates).

64. Maintaining a routine when you are in a slump can help.

65. But using that routine as an excuse to avoid necessary changes will bring you to ruin.

66. Besides strength training, a flexibility routine can help prevent slowly losing your edge to tightness and expand your range of motion. Repetition can limit some opposing muscles range of mortion. But to maximize that skill or other skills you often need to maximize the range. Recognize and prepare for a wide range of markets: a range bound market, versus bear or bull, versus momentum or decelerating markets

68. Batting practice is essential for most positions. As is throwing the ball and game of catch. Exercise specificity implies cross training takes more effort than training specific to your sport, position and motions. Markets trade differently learn to trade one market at a time.

69. Even though you may be the hero, and put in the hard work, you did not do it alone. The big leaguer honor their parents, and family.

70. Injuries and doubt will occur. Know when to ask for the help and support of others.

71. Be generous to those that supported you during your recover periods.

72. Losses happen. Take your share of the responsibility and learn from it.

73. There are core talents; you must inherently have to succeed. And there are skills that you can develop. Pick your field of play that matches your core talents. Dedicate your time to practicing to sharpen the skills and strengthening the core talents. There are many roles in investments pick one that suits your temperament and core strengths… not necessarily the most glamorous.

74. While there may always be another day and another game. Yet, the players themselves come and go…don’t squander the opportunity given you as a player. Opportunity cost is hidden to many investor, and financial employees .

75. Develop a love of the game. As these love turn into a love of life, you have succeeded no matter the outcome of the game.

76. Women have dramatically ruined many a man's career.

77. But many a woman have quietly supported motivated and made a man, by sacrificially believing in him before others.

78. However, the boisterous courage given by alcohol and other substances have also dramatically killed many a career.

79. Family and true friends have given many a kid the edge needed in the lean obscure years. Support your family’s efforts in capitalism.

80. True friend are those that will tell you what they think you need to hear, not just jump on the bandwagon of the rising star.

81. Practice and play hard. But allow yourself to rest and recover.

82. While beating the odds to make it to the majors does not necessarily make you an interesting, nice person. Yet, the unique qualities that lead to success often do.

83. Kid’s dreams are the foundation of the game. If you love the game nurture the dreams in every kid.

84. Learn from a kid’s dreams: how to give your best, despite the odds of being the best.

85. Learn from a kid’s dreams: Don’t be afraid to test your limits. But be realistic where the limits are.

86. Don’t let dreams of grandeur turn into delusion of grandeur.

87. Though almost all are as poor as mice for years and few ever realize their dream, almost all would not trade chasing their dreams for anything. Few regret chasing their dreams when they are young without obligations.

88. Many little leagues are coach and sponsored by those that chased their dreams. Most never came close to the big leagues. Give back to the community when you “make it”.

89. A good coach doesn’t let kids buy into the cheering fans propaganda. Out side the game they need the most practice of anytime. So inside the game they are the most prepared, and then will remind them of this during the game. Work hard, but have faith in yourself.

90. Most players have 5 minutes of playing time in 2 to 3 hours of down time. Even the pitcher has days off between games. Road trips and hours of repetition in practice. Learning Alertness in the midst of boredom, is lesson most traders can relate to.

91. At a certain point you look around and everybody is trying extremely hard, everybody is knowledgeable of the game. At first you learn trying harder won’t get you there. Next you learn working smarter won’t either. Finally you learn to exploit your particular niche. If you are going to make it in an extremely competitive field your niche strength will have to take you there.

92. But as a parent, coach or mentor, the kid has to come to this conclusion on their own. Because first they must learn to love the game, to give their all. Next they must learn to love themselves to learn to take care of their bodies and finally, they must learn to adapt to love life.

93. Most kids will not make it into the big leagues or even minor level. But most with a good coach and a decent attitude will grow from the experience. Many adults continue to play for the fun and exercise. Trading and making your own investment decisions have their own similar rewards of autonomy.

94. Learn where and when to accept criticism. Measure yourself against valid criteria, to learn what to improve.

95. While there are only 9 basic positions. The infinite stories that emerge from the many teams the various talents each have a rich life behind them.

96. Hustle in and out between innings. Starting with the right attitude makes work better.

97. Don’t hit into a double play. Don’t take the other side of a market after losing on one side for the day.

98. Intentional spiking, beaning the batter etc. may not be provable, but will get you kicked out of the game just the same. You cannot legislate morality. Still, everyone knows when you are being a jerk. Avoid those that think they deserve to be a jerk. 98. Pick a bat that is appropriate for your size. As a kid, you need to be honest with yourself on what the biggest size is that doesn’t slow you down. Don’t trade with too big a percentage or too much money, if it is causing you to slow your thinking and ability to execute.

99. If you are making the same mistake over and over ask a coach to help.

100[!]. The truly hungry players wanting most to improve, keep a diary of their
training and failures and accomplishments.

Finally, while not intentional on my part this repeat what Wooden already said. But it deserves repeating. Wooden’s “Pyramid of Success”

James Sogi writes:

The catcher and pitcher work with each other. The catcher has a different and better view of the batter and what he is doing and can feel the batters positions, mood and tactics. The catcher often signals to the pitcher a strategic call. The pitcher's aim is to the catcher's mitt which the batter cannot see. There is an interesting dynamic between the pitcher and catcher and batter. The ump stands in back and is a fourth level variable.

Baseball in general has an odd dynamic of one batter, and up to three, but typically fewer than three, runners against nine fielders. Seems the odds are stacked against at the get go but the advantage is systemically designed to switch back and forth from defense to offense. Again we see the switch coming after three outs, three bases, three strikes, three fielders, nine innings. Why threes? 

Steve Leslie sends his lessons:

As they begin the regular season, the goal of every baseball team is to reach the playoffs. How a team reaches the playoffs reveals a relationship between baseball and markets. Maybe more lessons than one!

Within the current structure of Major League baseball, there are two leagues: The American League and the National League. Inside each League, there are three divisions: The East, the Central, and the West. Four teams from each League reach the playoffs, including the winner of each division, plus the team with the best record from the remaining teams. A review of the 2008 season reveals some interesting facts that may be illuminating with regards to markets.

Looking first at the American League, the winners of each division were the Tampa Bay Rays in the East, the Chicago White Sox in the Central, and the Los Angeles Angels in the West. The Boston Red Sox qualified by virtue of the wild card.

The Angels had the best record in the American League, winning 100 games, achieving a .617 winning percentage. Of the playoff teams, the White Sox had the worst winning percentage, at .546, and qualified only by defeating the Minnesota Twins 1-0 in a one game playoff at the end of the season. Think about this: What dept the Twins from gaining a spot in the playoffs, after playing 162 games, was one single game, lost by one single run.

In the National League, the Philadelphia Phillies won the East division with 92 wins, thus overcoming division rivals the New York Mets, who wilted in the last two weeks of the season. The Central was captured by the Chicago Cubs with 97 wins. The West was represented by the Los Angeles Dodgers, who won but 84 games and finished just two games ahead of the Arizona Diamondbacks. The wild card team, with 90 wins, was the Milwaukee Brewers. The Dodgers, thus, finished barely above .500, yet made the playoffs, despite having just the 8th best record in the National League alone!

So, what lessons can be gleaned from these facts about the 2008 big league season? The first thing that stands out to me is that the difference between success and failure–as defined by the parameter of making the playoffs–can be razor thin. The difference can come down to one game, even a single run. A long regular season consists of 162 games, and every game–even every run, perhaps every individual play–carries a high level of significance. Baseball is a six month day-in and day-out grind, just to make it to the playoffs. Toss in Spring training plus playoffs and it is extended to eight months. If you're not playing a game, then you're travelling. If you're not travelling, then you're working out. It's a brutally tough road, requiring great commitment and substantial sacrifice.

The next point I see is that you can still make the playoffs despite being an average team. The Dodgers made it despite winning 13 less games than the Cubs. In other words, sometimes the path to success involves surviving a tough year, confident that good things can happen.

My third point is evidenced by the Mets. They were generally considered the front-runner in the NL East, but could not finish with any strength, so they missed the playoffs, letting down their avid fans. Front runners, as you see, sometimes get run over.

Fourth, the Cleveland Indians were expected by many to go to the World Series by virtue of their strong pitching, particularly C.C. Sabathia and Cliff Lee. After a dismal start to the season, Cleveland dealt Sabathia to the Milwaukee Brewers. In baseball and in markets, that which seems obvious to many may prove to be incorrect in the end.

Point five comes from the New York Yankees. The Yankee machine, with the largest payroll in baseball, a stable of minor league players, and one of the best run organizations in professional sports, still disappointed, and missed the playoffs. Likewise, there are great companies and great stocks, and they are not necessarily the same at the same time.

Finally, and probably most interesting, is that virtually nobody picked the Tampa Bay Rays to win the American League East or even make the playoffs, let alone progress to the World Series. The Rays had a long and storied history of being a terribly run franchise. Pre-season prognosticators place them behind perennial contenders the Yankees and Red Sox. Still, the Rays went all the way to the Series. Though they lost to the Phillies, this shows that there are always dark horses. A team can get hot and pull everything together for one magical season–or even for a particularly poignant part of that season–provided everyone gets on the same page and dedicates themselves to the same goal. Furthermore, it exemplifies the dictum that even experts sometimes miss the ugly duckling that will become the elegant swan, and that beaten down undiscovered stocks and markets can suddenly become big winners!



Mike and CusThe athlete or team that learns to work within the framework of its personality or underlying character is the one that will experience the likeliest chance of success.

Tony Dungy and Peyton Manning were the first team in the history of the NFL to win 12 games in six straight seasons. Dungy is one of the most phlegmatic and calm coaches and Peyton Manning is one of the most intellectual practitioners of his position. Together they were a magical fit.

Tom Landry and Roger Staubach were another great team. John Madden along with Ken Stabler and the loose cannons on the Oakland Raiders were also terrific. Marvelous Marvin Hagler had the Petronelli Brothers to look after him. He was a cold calculating, efficient master of the "sweet science" . They were great businessmen and trainers.

Muhammad Ali had Dr. Ferdie Pacheco, Bundini Brown and Angelo Dundee in his corner during fights. All characters in their own way. Mike Tyson had Cus D'Amato. He was the father Tyson never had, who also trained Floyd Patterson, another youth in search of a father figure. Cus brought Bill Cayton and Jim Jacobs as manager and Kevin Rooney as trainer. Tyson became the youngest heavyweight champion and quite possibly the most lethal. When he lost Cus, Don King took over, it was the end of his meteoric rise.

Ivan Lendl and Tony Roche were a great fit both technically and methodically. Bjorn Borg and Lennart Bergelin were another. They both had even tempers and demeanors. The free-spirited Williams sisters have their father Richard, a renowned character, in the stands, cheering them on. John McEnroe, on the other hand, was largely of his own creation. His New York attitude and epithet-filled insults, his "Mac attacks," were legend. His talent and success were undeniable.

Tiger Woods is quite similar to Jack Nicklaus in course management and demeanor. They were always under control — icemen on the golf course. They prowl and hang around like a nuisance until the other players start to crack and then they close the deal. Phil Mickelson, on the other hand, is more of a risk-taker and has stated that his idol growing up was Arnold Palmer, another guy who took chances.

For the speculator, businessman, or anyone to find success in his chosen field, it is critical he understand who he is first as a person and surround himself with others who can work within that specific framework. He must incorporate the strategy that best uses his specific skills and work tirelessly to perfect those skills. Finally, he must unleash it in the public forum which will drive him over the top of the mountain and toward great reward.



 Does checkers have more to offer to the speculator than chess as the chair suggested?: "moving backward and forward one square at a time is a very binary thing".

May I add that backgammon is similar to checkers in this regard. I find myself a two dimensional person. That is to say I visualize things linearly. It is very easy for me to work with numbers whereas I am challenged by construction projects as they require a three dimensional view. I recall in my past Mensa testing, I scored very highly on math, reading, average on two dimensional analysis and below average on three dimensional analysis. Checkers is very much a two dimensional game and chess is three dimensional.  

Furthermore of all the pieces in checkers are effectively 2 D and chess pieces are 3 D. A knight may jump an opponent's piece and Castling is a very effective strategy to protect the King both are 3 D. In trading, we see everything on a flat screen. The numbers are representative of the collective thought at the time and once again are organized and in "code" so to speak. Charts have an x axis and a y axis and are laid out like a board.

Scattergrams are 2 D. Movements are in points once again 2D no "en passant" allowed. I offer these comments to the group in the hopes that my esteemed colleagues will expand upon this. My friend the great GM needs to interject his view with his usual remarkable insights which he has accumulated from his years of devotion to the great game of chess.

Alan Millhone comments:

A MBackgammon is okay, but I never liked games of chance with dice involved as part of the game. Checkers on the surface is such a simple game to learn the rudiments as to who moves first, taking your jump, crowning a piece, etc. Chess looks so impressive to the masses as you have pieces moving in many directions. In fact, that back and forth motion takes away from Chess. In Checkers you push a piece forward and it remains there till jumped, moved forward again or becomes a King which is equal to two singles, unless brought in by your opponent for a crown then out again for a stunning 'in and outer' .

Checkers is top of the heap for depths and combinations the majority will never come to enjoy. Joe Schwartz once told a reporter in Vegas that a spectacular combination or win, etc in Checkers is like "having an orgasm of the mind"! Joe is so right.



DiverInflammations occur in the markets– bubbles if you will. If they become too large like aneurysms if not treated they burst. Like an infection or a disease, if left untreated they can be very dangerous to the system and can even cause death. Think about the application with speculation. Keep the hyperbaric chamber in mind in the event you ever need one. Long used as a method to treat "the Bends," an affliction when a scuba diver rises to the surface too quickly. It has been clinically proven that treatment of a wound along with treatment with a pressurized chamber dramatically improves the healing process. Along with the hyperbaric chamber the patient breathes 100% oxygen.

I have an associate who was bitten by a recluse spider on her arm on a Friday. By Monday, the poison had necrotised a patch on her arm many inches in diameter and the destruction was spreading. She was at risk of losing her entire arm. The physician placed her on massive antibiotics and hyperbaric therapy. It was through these very aggressive measures that they were able to save her arm and her life. Diabetes patients are also using hyperbaric chambers to treat their advanced stages associated with this disease. Some use it as a holistic method for anti-aging and some years back, Michael Jackson was rumored to sleep in a hyperbaric chamber perhaps as a treatment for his massive plastic surgery abuse on his face.

hyperbaric home models can be found on ebay for $8000.



 This site is devoted to revealing lessons that will endure for a lifetime. One of the familiar themes that Daily Speculations has offered over the years has been Westerns.

1. L'Amour. One of the favorite writers discussed here is Louis L'Amour. In researching Mr. L'Amour's work, I have decided to list my favorite films that are based upon Louis L'Amour novels for those who would like to watch a movie inspired by Mr. L'Amour's work. They are in no particular order of personal preference.

Hondo Short story "The Gift of Cochise" 1953 John Wayne

The Shadow Riders 1982 Tom Selleck, Sam Elliot

The Quick and the Dead 1995 Gene Hackman, Sharon Stone, Leonardo DeCaprio

Conagher 1991 Sam Elliott, Katherine Ross

Crossfire Trail 2001 Tom Selleck,Virginia Madsen

2. My favorite Westerns in general

The Man Who Shot Liberty Valence


Open Range

Fort Apache

The Treasure of the Sierra Madre

High Noon


Butch Cassidy and the Sundance Kid

Tom Horn

The Magnificent Seven

3. My favorite Western Miniseries

The Sacketts

Lonesome Dove

4. My favorite Western Comedy

Support your local Sheriff

Kim Zussman insurges:

What about the Italian favorite “The Good, the Bad, and the Ugly”? (Also known on Wall St as “The Three Faces of Heave”).

Lots of market parables there, including the tug-of-war between fear and greed, continuously changing levels of deception, unhuman fearlessness, and a whole way of life based on fairy-dust.

OK not fairy-dust; gold.

Great fun with Eli Wallach and Clint Eastwood, ca 1966.



I know to many this is very basic commentary but it may prove helpful to some here: This explains in one paragraph why things go down a lot faster than they go up. Hedgefunds, mutual funds and pension funds must sell on the way down. They have no choice. They must meet margin requirements and other technical requirements. This forced liquidation scenario is the most wicked of wickeds that the unfortunate fundamental investor faces in their education.

Remember near the end of the movie Trading Places where the Duke brothers (Ralph Bellamy and Don Ameche) are approached by the exchange with their margin calls. Their comment was “we don’t have that kind of money!” Same thing there as here. This is the cataclysm when people trade with OPM (other people's money). They are universally more cavalier and reckless than if they have their own capital at risk. LTCM in 1998 suffered the same fate when they had a famous decoupling of their spreads. Their models, suddenly and evidently without warning, [stopped working; the firm faced margin calls and] had to liquidate. Then, the Investment Banks and Commercial banks came to the rescue because they saw ultimate value in the spreads. Otherwise they would have not gotten involved and the Fed would have had to step in and take over the company. At the time, they controlled over a trillion dollars of assets on their books. Whereas with an intangible to go up in price it takes many months to build up a position and to trade ahead of the fundamental estimates.

This scenario is very well described by Dr. Hersh Shefrin in his book Beyond Greed and Fear: Understanding Behavioral Finance. He eloquently describes how it takes a fundamental analyst approximately nine months for their estimates to catch up with a stock price. What we see today especially with the stock market is pure technical trading. It has everything to do with liquidity needs in an environment where credit is non-existent. Until this picture becomes clearer when Investment Banks and Commercial Banks will give up their new found capital and help companies thaw out from this very arctic deep freeze credit crisis, we shall continue to trade in a black hole of confusion. I actually heard a “professional” comment, “It has been three weeks since the Federal Reserve and the Treasury put forth their solutions. How long do you think it will take for these things to start to work?” Summary: It took years for us to get into this mess, we are not going to get out of this one overnight.



What are the odds? A man who excels in the obscure sport of bodybuilding, hails from Austria, can't speak English, moves to America, makes an obscure Hercules movie. Now he starts to make movies about a mythical character named Conan. He becomes the biggest box office draw in the world, marries into one of the most powerful political families in America, is elected Governor of the largest state in America and lives a fantasy that we can usually read about only in fairy tales.

Do you think you could learn something from such a man?



vicAn interesting question is to what extent news is news. Oct 16 at 3:00 pm, news of a rescue plan for the insurers came out with the market down 1%. It immediately rallied 4%. The question is would it have done it without the "news"? And to what extent was the news in the market? Looking at Israel one notes it was down only 2%, catching up with a 12% decline in the US. The extent of the decline at 11:00 was similar to yesterday, and last week, and the path similar to last Thursday. Would it have repeated without the news, and was the news elicited, as I have often said, without quantifying for Thursday, to be the last gasp? It would be interesting to generalize this question. For example, gold rallied a few percent the day before a Libyan jet was downed in 1983, and it turned out that the downing of the plane was already planned as a shot across the bow to our friend Muammar.

George Parkanyi adds:

This whole crisis has very much been managed with strategically released "news." Every time the market has started to turn ugly, the Fed, Treasury, central banks, larger institutions take some action and make some kind of announcement designed to reassure the markets and the public.

Today for example, Warren Buffett announces he's buying (probably already has bought [chuckle!]) equities. The announcement had great timing, as everyone hangs on every word of his [except on this web site], this is a Friday, also a volatile options expiry day, and there's been a little bit of recent upward momentum. I'm sure (well my guess anyway is that) the Feds asked Buffett that if and when he did start buying, to let them know so they could time the announcement to maximum effect.

Steve Leslie writes:

Interesting philosophical question "When is news news". Answer: All news is news. I suppose your question truly is when is some news more important than other news. Obvious answer: news that is unexpected is important news and news that the consensus is keying on or deems relevant at that particular moment in time.

For example if one were to study the movie Trading Places with Eddie Murphy and Dan Ackroyd we see that by having information that was not available to the general public ahead of time, it gave them a great advantage to trade ahead of the news and make a great deal of money in Orange Juice futures.

We also see in the movie Wall Street which is based on the life of Ivan Boesky and his corrupt methods, Gordon Gekko makes huge fortunes trading ahead of public informations but is driven under by manipulation of information by Charlie Sheen into the marketplace. Boesky was written of more thoroughly in Den of Thieves by Stewart

Years back there was a scandal at the Wall Street Journal where one of their writers for the Heard on the Street column was secretly sharing his column with a few people before it was published. This was back when a mention of a stock in the "column" was worth a few points. This landed him a jail term as I recall.

Dr. Doom Henry Kaufman of Salomon Bros fame, used to have profound impact on the markets esp the bond market with his prediction on interest rates. This was when interest rates were very sensitive.

Farther back, Joe Granville market maven could move markets with a special call on stocks.

Dan Lundberg could move the oil markets with his release of data on the oil industry back during the oil crisis of the 79's and 80's. We see this to an extent today with Pickins when he decides to publicly discuss oil.

Efficient Market theorists will explain that the market adjusts to all available news in the world eventually. I suppose the psychology and sensitivity (volatility) will determine to some extent how profound that impact will be immediately and blended out over time. Thus from this perspective all news should have only an ephemeral quality to it.

A pure technical analyst like Stan Weinstein author of Secrets of Profits in Bull and Bear Markets will state that the charts tell all. It is just a matter of being able to read them correctly. Bob Prechter became famous by his trading in the 80's using Elliot Wave Theory then fell out of favor by "losing his touch" and making a series of bearish calls during the greatest run in the equity markets in history.

Back in 1942 with the World War still very much in doubt the US stock market performed very well. Was this due to the massive ramping up of the US military machine or was the market anticipating a victory by the allies a full 2 years before victory in May of 1945.

Perhaps the real answer lies in blending of thought. Similar to Einsteins Theory of Relativity and Quantum mechanics. Neither fully explains the universe but a unified theory gives a much better heuristic.

I hope these comments are helpful.



V N1. Of the 100 biggest markets around the world, almost all are down 40- 60% in dollar terms with the exceptions' being Tunisia and Botswana. The impact of the decline this week, unless rapidly reversed, is going to be very severe on purchases. The previous 20% caused great angst; imagine what this decline will do to those who rely on retirements. The positive feedback of the decline in a negative direction also impacts the election results with every market decline making it more likely the Republicans will be blamed for the situation.

2. The worst aspect of the decline this week from a health point of view was that fixed income around the world cratered, thereby reducing world wealth by a good 15% as opposed to the normal situation where the equities go down 10% and the fixed incomes go up 8% leaving total wealth down only a little. And the people that talked about how bearish it was for stocks because commodities were up would never say that it's bullish now because commodities are down 40% over the past four months.

3. A new word should enter the market vocabulary, a waterboarding decline, being a decline that seems to have a breath of life at the open before going into a death spiral.

4. Because of the decline in all sectors, the wealth/price ratio has stayed relatively constant with corn, copper, soybeans, wheat and oil down 40- 50% since June 30, thereby keeping the number of bushels and barrels we can buy with one DJIA relatively constant, making the number of ounces of gold you can buy with the Dow less than 10 for the first time in a googol, and looking like a bargain for the Dow.

Paolo Pezzutti writes:

In other crises you could see the flow of money from bear markets to more promising assets. From equities to bonds, from equities to housing, from technology to defensive, and so forth. You could see investors moving away from the "bad" returns toward the "new" vein of expected future returns. This time it is a simultaneous meltdown and loss of money everywhere. Only cash has been a safe haven in each country. At least until some of the currencies initiate a fast devaluation path on lack of trust not only of the banking system but also of a country's ability to navigate these stormy waters. Only a few months ago I was confident to see the financial system, at least in the US, finding a good base and start recovering. After all the financial system of the US could not simply collapse! I was not expecting this could go so far. There were many predicting a financial armageddon but I did not pay too much attention. Catastrophists have always been around. The fact that money is simply being burned actually makes it quite difficult to have a complete recovery. I am afraid it will take many years. Because in this case, simply, the flow of investments cannot return to equities. This time there is not enough money to move away from some other asset. What I am really afraid of, and I go back to a previous post I wrote about the end of the US dominance era, is the following: this crisis signals the transition to a new balance of power in the world. I learned at my expense that systems and large organizations continue to act ignoring that they are moving at the edge of an abyss. Factors for a change of balance accumulate but they are ignored. Suddenly they ignite rapid and impressive changes with an avalanche effect (black swans?). It seems that these transitions cannot occur smoothly or gradually. Awareness does not grow gradually. People live in a dream until they are brought abruptly to reality. The reality is that the US and Europe have lived a number of years spending and consuming more than they could afford. Continuously growing current account deficit and immense flows of money out of our countries did not ring the bell. Now, whatever the specific cause that started the crisis we are brought to reality. More regulations vs less regulations, more government vs less government are the discussions we hear in order to try and find a solution. The problem lies in the fact that our societies consume and spend more than they earn accumulating debts that eventually nobody will be able to pay. This has to be changed somehow. And hopefully not through increased presence of the governments in the economy or, even worse, through protectionism. Of course emerging markets are suffering a lot in this crisis. We are the main source of income for them and we finance their surpluses. Moreover, we will not be able to go back soon to previous levels of demand. However, the relative weight of some of these countries will increase as their internal demand will pick up to fuel their growth while we lick our wounds. And demography explains the dynamics of aging western societies. We need to be aware that this historical shift is developing and accelerating. I do not think we will be able to go back to "business as usual". This will have effects in the long term, in my opinion, also in the strategic posture of the US and Europe and in their role in the world governance. There are already signs of increased weakness from the military and political perspective. More in general, we need to understand the possible answers to this crisis. And the implications. This phase, however, if my analysis is correct, could be an opportunity to invest in those emerging markets that will grow faster than we will be able to do (provided that one still has the liquidity to do it).

Steve Leslie remarks:

If it were not enough for ACORN to help destroy the housing market in Florida by being the pointpersons for loans to unqualified buyers, now it seems they wish to start another stain on the Sunshine State with voter fraud. It seems that Mickey Mouse tried to register to vote in the state of Florida at the behest of the political action group. They are currently under investingation in 13 states for voter fraud. My one question would be how in the world did Mickey fill out the application and sign it with those huge hands? And if Mickey Mouse is registered will the other Disney characters soon follow?



I recently went to an Ace Hardware store with my neighbor Gary, who needed to take care of some things. I asked him why he chose to come to Ace rather than the Loews that was right next door or the Home Depot less than a half mile away.

First, he told me, the business is locally owned and he likes to support local businesses. Second is he feels right at home with the friendly helpful staff on hand to help him and answer any questions he might have.

With some skepticism, I walked through the door with Gary and immediately one of the employees greeted us and inquired how he might help. Gary mentioned that he needed some keys made for his auto. One of the staff said to follow her and she would take care of that right away. She proceeded to make the keys and then said before he left to go out to the car to insure that they work and she would wait. He came back and said they were just fine. He also said he needed some propane for his grill. He brought his tank in but they said that he needed a new tank and he bought one and they filled it while we waited inside conversing with the employee who made the key for us.

After the tank was filled, we got into the Cadillac Escalade he just bought and drove away. Immediately, he looked at me and said "Do you see what I mean?" "That is why I shop at Ace." I now understand.



I've decided to call it quits on the trading front (I was trading only my personal account) due to reasons of insufficient capital. Just thought I'd share my last trading blog post.

The final blog post concerns Ivan Drago, and an accounting of the similarities between myself and the real Caravaggio.

1/ In Rocky IV, Rocky Balboa is in Apollo Creed's corner watching Creed get absolutely pummelled by Ivan Drago, a stone cold Russian killing machine. Creed is under-trained and over-the-hill and Rocky knows it, but he can't bring himself to dropping the towel and calling an end to the fight until it is too late - Drago delivers a literal killing blow with no remorse, famously commenting 'If he dies, he dies.'

Rocky, sorely racked with guilt and anger, desperately needs revenge. He heads out to Russia to train in the mountains and fight Drago on his own turf. Up against the odds, Balboa achieves the impossible. He succeeds in defeating Ivan Drago, winning over the hostile crowd in the process. Let's get one thing straight: this is Hollywood. Rocky Balboa was in the wrong. He should have dropped the towel and let Creed's pride take a hit. Balboa let his friend die and there is no coming back from that. Beating Drago in a revenge match may bring some sense of justice but the responsibility still lies with Balboa. We can also make the case that just as Creed shouldn't have fought with Ivan Drago, nor should Balboa, despite all his training and despite the victorious outcome. Of course, that may not have made for a very exciting movie. Hollywood is filled with such underdog stories and they make for enjoyable viewing but we must remember that if you fight the odds all the time in the real world, they'll eventually catch up with you. (1)

Here we have one of the most important lessons from the game of trading: process trumps outcome over the long-term. It is because of this idea that I am making the decision to throw in the metaphorical towel. For all intents and purposes, my trading life is over. It was inevitable.

Just as we should consider the alternative outcomes that never materialised in Rocky IV, so we must do the same with our trading. I know that I have died many a death in the alternative histories that never happened but that could have happened had the gods of chance not been so generous with the roll of the die. My capital is pathetically low (an affliction suffered by most traders) and I wanted to build up my equity to the stage where I could enact the right trading processes. I knew it was only then that I could start trading properly. But the paradox is that in order to get there I needed to take outsized risks to build up the capital in the first place. It was a classic Catch-22 situation, one where I had to follow the wrong path to get to the right path. I crashed and burned, worked my back up, burned again, and partially recovered. But it is not sustainable. I cannot keep on fighting the Drago. It is not healthy and conducive to practising the virtuous life.

My passion for the financial markets remains undimmed but this is my last blog post for the foreseeable future. I hope it serves as a useful record of a solitary trader's efforts. The journey has been worth taking in every respect and I thank you all.

In this section, I compare my trading life with that of the real Caravaggio.

2/ Caravaggio the artist lived from 1571 to 1610 and what a life. He was a supremely gifted painter but Caravaggio was not a nice person to be around. Rebellious to the extreme and prone to outbursts of excessive aggressiveness, Caravaggio was always getting in trouble every where he went, trouble that would often included a burst of violence along the way.

I don't model myself on this guy but there are similarities. My antics in the market place were often akin to Caravaggio's pointless brawls and arguments, usually ending with me the worse for wear and filled with gloomy self-loathing. By the time I started this blog I felt I had a much better control of my emotional trading faculties, but just as Caravaggio was left badly wounded after he fought and killed Ranuccio Tommasoni in a knife-fight in Rome, I too was left with permanent scars from these pointless battles. These tumultuous events were pivotal in both lives. The artist had to flee to Naples as the authorities in Rome had put a price on his head (a pena capitale). In my objective mind I knew my days in the trading arena were numbered, but I tried to run from this reality. Caravaggio the artist continued to paint. I continued to trade. The lives we made for ourselves caught up with us both.

The desperate search for redemption is another tie that binds. Caravaggio, somehow hearing that Rome was likely considering granting a pardon, made his way back to Chiaia in Spanish Naples, where it his thought his first patroness may have been able to help in influencing the papal authorities in Rome to issue to the pardon on his behalf. Alas, it is here that the artist was so brutally attacked and mutilated by unknown assailants that word spread of his death. In Simon Schama's 'The Power of Art', Schama notes that Caravaggio stayed in Chiaia and kept painting. He says of these paintings they 'were images of redemptive suffering and, yet again, decapitation, as if he couldn't get the image of his own pena capitale, his capital sentence, out of his mind.' My brush with death came this February, and it was a dangerous one. My self-loathing hit a new high, made worse that the fact that my capital sentence (a shortage of capital) was of my own making. I equated redemption with getting back to break-even - this would be my pardon from Rome - but I now realise that it is not here that redemption lies. It lies in being true to oneself and stopping now.

[PIC : David with the Head of Goliath, 1610]

It is during Caravaggio's time at Spanish Naples that he painted David with the Head of Goliath, pictured above (2). The painting is widely thought to be a form of double-self portrait; at the very least the decapitated head is surely Caravaggio's. As with almost all art, the exact meaning of the piece is open to interpretation but right now the message that resonates with me is one of a deep understanding of the self, of the idea of redemption by making a clean break of the troublesome Caravaggio of old, and lastly, there is a heap load of self-loathing (see David's disgust with what he is holding). Schama says of this painting, 'You see something that had never been painted before and would never be painted again: a portrait of the artist as ogre, his face a grotesque mask of sin', describing the young slayer of the giant Goliath as the 'most conflict ridden David ever to be imagined in either marble or paint.' I can relate. There have been times when I felt like David and the market was Goliath, and other times when the market seemed the true David and I the ogrish Goliath, but the long standing truth is closer to idea of the double self-portrait, that I am both characters, and that today I officially severed the wicked head of my alter-ego (3). There will be no more half measures.

Rebirth denied - Caravaggio met with a tragic end. Still seeking redemption but now with a pardon apparently on the way, the artist boarded a boat for Rome, taking with him a collection of paintings he intended to give to people of influence and win favour. However, when the ship pulled in at the port of Paulo he was arrested for unknown reasons. By the time Caravaggio got out of jail the ship had sailed off with his paintings still on board. Some think that Caravaggio actually saw the ship sailing away and that, in a frenzy, he gave chase. What we do know is that Caravaggio made it as far as Port Ercole but there he collapsed on a beach with severe fever. In this pitiful state, he was taken to a local hospital where the troubled artist died. So near and yet so far.

As with Caravaggio's near redemption, my ship has also sailed (4). In the place of the important payload of valuable paintings are valuable trading secrets that could lead to success in the market. These are the product of several years of relatively intense trading and they will stand me in good stead when and if I ever return to trading with a reasonable level of capital. Of course, they are not secrets of the 'key to riches' variety, simply crucial lessons that I noted from my experiences trading the markets. My full-time trading career is over. I still plan to trade in extremely small size, seeding my two trading accounts with £500 each, but this is only to maintain an active in the markets until the day I am ready to return, if ever.

[PIC : Saint Jerome in Meditation, 1605]

These introspective paintings of Saint Jerome and Saint Francis touch on ideas of contemplation of the self, mortality, and man's role in relation to the world. It is apt to end with a famous quote by Socrates:

'The unexamined life is not worth living.'

The End

(1) Later Rocky films address this issue, with the writers giving Rocky Balboa permanent brain damage as a direct result of the thunderous blows delivered by Ivan Drago. Rocky also experiences a humbling of his financial status that forces the boxer to give up his extravagant high-life and return to his old neighbourhood.

(2) Wikipedia observes the letters H-AS OS inscripted on David's sword, an abbreviation for the latin phrase 'Humilitas occidit superbiam', or 'humility kills pride'.

(3) The non-Caravaggio me lives on here.

(4) Given my chosen trading name of Caravaggio, the question of whether I subconsciously expected this fate hangs over me. Fortunately I don't delve that deep.

Steve Leslie writes:

Your insights are exquisite and insightful and express feelings that all of us who have been at this for any extended time have gone through. Although your trading may take a hiatus (I suspect you will be back) I hope you continue to write on your lessons learned and share on this website. It takes a very special person to admit defeat but all of us have done so in our trading lives. One of the central themes of Stallone characters is the underdog who withstands great odds against him and finds the character to endure rebuild and ultimately vanquish the foe. It closely parallels his personal life in many ways. I look forward to more postings of your marvelous vision going forward. We here have much to learn from you.



Chair1. It was symmetric with the previous week where it opened limit up on the news. They had reached a compromise, and then it went limit down, indeed 100 down when they didn't reach an agreement. Amazing that the time horizon is so short. As soon as they voted the agreement down, it was clear that they'd come up with an agreement shortly. The stock market took care of that. "It's amazing how a 900 point drop in Dow can get their attention" with all the lobbyists involved, and the power increases, but yet the leverage of traders is so great that they automatically get exited from their positions on bad news even if it's going to be reversed the next day at the open.  

2. This crash and the Oct 19, 1987 both were symmetric in that the Secretary of the Treasury caused it. In the first one, Jim Baker said, "The Europeans have to strengthen the currencies." In this case, there was revulsion against a political plan to feather the nest of both parties. The bonds in both cases had their biggest up moves in history, but in 1987 they stayed up for the next week, and in this case they reversed the next day. Commodities had one of their worst days in history showing that all markets are interrelated and when wealth goes down, all spending is reduced.

3. This crash brought all markets to many year lows, and was the final revulsion, the final throwing the frog into hot water that cleared the decks as the move the next day, one of biggest in history, showed. The discount rate is always ready to be lowered when the market goes down by more than 4% in a day as it did on Jan 21, and in Aug 2007.

4. The European markets were down a few percent more than the US at the open, as were Japan and Israel, foretelling what was going to happen. 

Steve Leslie notes:

We tend to remember October '29 and October '87 — but since 1990 October has been the best month of the year on average for performance. November and December rank #2 and #3. Also, the Dow has been down four straight quarters — extremely rare.



I see Vikram Pandit brought out the cane today and walked up to the Wachovia window to buy the debt in exchange for $1 per share of C stock. Other canologists such as Buffett and BAC did likewise last week. Mitsubishi came across the Pacific and picked up some MS. I saw Icahn on Fast Money itching to pull out his own cane. Perhaps he will be buying more Biogen. I myself find comfort in my position of MSFT, which announced an increase in their dividend and a share buyback program. They are in stout financial shape relative to other corporations.



ScottIn high school, I had scholarship feelers to play Div. II college football. I could run a 4.5 forty and high jump 6'8". I thought I was on top of the world. Then I got sick with a horrible case of mononucleosis and almost died. My playing days were over. At the time I was devastated.

Now my oldest son wants to play football. I will not let him. Why? Because as devastating as it was to get sick and have to give up football (the best I ever ran a 40 after that was in the high 4's, and I couldn't jump anything like I used too), as an adult I've come to view it as a blessing in disguise.

To this day, my knees, ankles and back ache to the point of being almost debillitating at times. I get headaches and my memory doesn't work as well as it used to. As a corollary to this, I also suffered several concussions while playing sports. I was knocked silly numerous times and was knocked out cold more than a handful of times.

Then today I see this article on MSN about the danger of concussions and wonder if there isn't a connection.

Looking back, I wish I had never played football. Yes, basketball pounded my joints and I'm sure baseball and track did their fair share of damage, but I don't think they cumulatively added up to the pounding I experienced playing football. Yet I love to watch the game to this day and look forward to playing at our annual Thanksgiving morning touch football game every year with the guys from church (of course, I can hardly walk for the next two or three days afterward).

The human body eventually wears down and doesn't recover from the constant beatings that we get in life, unlike the markets which will shake off the bad things that happen and eventually move forward. At least I hope so.

Anton Allostrat agrees:

My football career closely parallels Scott’s except I ended as a college sophomore with a complete knee reconstruction. Protecting a loved one from near-certain long-term physical damage, which is the likely outcome when humans repetitively and intentionally collide, is the responsible and caring parental responsibility. The key is to give the prospective athlete other choices, minimal-contact sports that have a much lower injury rate. When addressing this issue with my son, no matter how clear my descriptions of the long term consequences on the human body, I’m sure he couldn’t completely comprehend what it is like to feel the effects of cumulative injuries in a middle-aged body.

Matt Johnson replies:

With all due respect, I feel like you're taking your issues and dumping them on your son. Not letting someone do something, or not do something, is like holding onto a losing position because "the economics haven't changed." Go with it, don't fight it, support your son in his adventures and he'll love you for it.

Craig Bowles adds:

I agree with Matt. I still look back thankfully at the bonds made and pushing beyond the simple limits in many of our heads. The most important thing is to learn technique early. My father always called it putting a shoulder on somebody. Hitting with the head is crazy and nothing like the feeling of a good solid shoulder lick. Maybe you should make sure the coaches know how to coach blocking and tackling. I wouldn't want my kid playing for a lot of coaches. That would just ruin a kids confidence. My fifth-grade coach was the best one and fortunately taught the solid basics.

Mark Candon reminisces:

Flag FI played soccer in college, but later tore up my knee in 1980 playing of all things, flag football.What the heck was I doing playing flag football? Perhaps having the most fun I ever had in any sport. Violence is a beautiful thing when you are doing the hitting. I’ve always liked contact, and football gives it to you in spades. There’s nothing like it. Why do you think all these people play football?

Yeah, it’s years later and I should probably be getting a new knee, but the rest of my body has been in better shape since 1980 because I’ve had to work out to keep the knee strong. I wish it had never happened, but I never for a moment regarded it as a terrible thing.

In sports, you have the chance to be the master of that world between the lines. In football, it comes in that long instant after the snap of the ball. A savage, athletic, and beautiful moment. I loved it. Believe me, I’ve had moments in other sports, but football’s the ultimate for adrenaline. You’re playing defense, it’s fourth and inches, and you’re amped. You can’t wait for the snap, because you’re going to drive that guy opposite you into forever.

Steve Leslie reflects:

I am reminded of a short little story.

In the jungle, A gazelle wakes up in the morning and begins running. For the gazelle knows that if it does not start running then it will be eaten by the lion. The lion wakes up and starts running. The lion knows that if it does not start running, it will not catch the gazelle. The moral of the story is that whether you are a lion or a gazelle, if you want to survive the day, you had better hit the ground running.

Thomas Edison once said most of success in life is showing up for work every day.

Vince Lombardi said "The good L_rd gave you a body that can withstand nearly anything, it is your mind you have to convince."

Unfortunately, we do not have the luxury of creating our own rules. Many times the odds are stacked heavily against us. But remember in the end, life is one long statistical game eventually the breaks even out. It is a journey and not a destination therefore we never arrive. It is like the horizon, you never reach it.

Take cheer for we all feel the pain of life. You are not in this alone. Some times this provides small solace. But then again solace is sometimes all we have.

Reid Wientge writes:

My doctor in high school, Dr. Campbell, recommended not playing football. He was quiet and convincing. I had been to a different doctor numerous times for pain and swollen hands — I played both defensive end and fullback and so could not wrap my hands. You see, my doctor had served in Vietnam prior to private practice. I am certain that he could not bear to see young men injure, scar and permanently damage their bodies.

Doug Johnston offers:

I played football in HS and at a Div I college program. I do believe that your HS experience is more exception than rule. HS football is fun and gives a boy/teenager many valuable life lessons in an environment of teamwork and fun. Football in HS is not brutal. Let him be a kid and enjoy his decision. If he were to be offered an opportunity to play in college — run away! College football is a big business and the payout of a scholarship is not nearly fair value for the "student-athlete."



U S GrantWill the Treasury's plan be successful? The future "price" of MBS will be higher than any current estimate, but real estate lending will not resume until prices and the incomes of the borrowers become reasonable, even if the Treasury spends trillions. The single family home prices are coming close to the point of reasonable equilibrium now here in California, but I doubt they are anywhere close to that in the parts of the country where things were OK until this spring (NYC, for example).

What is fascinating to me as an outsider is that the question that Ulysses Grant successfully resolved by resumption of the unitary gold standard (1875) — the financial safety and assured purchasing power of savings — is not seen as of the key problem to be resolved. Everyone is worrying about the borrowers; but it is the savers who need to be reassured first. Some of my friends have wisely pointed out that the actual value of cash savings has been viciously eroded over the past few years by the rise in the price of everything from gasoline to boiled ham. If the Secretary of the Treasury were to announce a consumer TIPs plan, one that would guarantee consumer savings and demand deposits against institutional default and erosion of purchasing power, there would be a flood of deposits to banks that would be more than enough to save the banks.

What Grant understood was that the assurance that their money was as good as gold would allow individuals to "save and do better" and get on with their ordinary (sic) lives without having to pretend to be speculators. He was not a snob, but he knew, from a lifetime of family commercial experience, that most people were better at working than they were at trading and that the promise of liberty for American citizens had to include their right to have money that was permanently sound. What he also understood was that speculation involved the risk of catastrophic loss, and there must not be any government protections against that possibility. This is why he was able to accept the collapse of his fortune from the fraud of a partner with such equanimity; it was a risk he had already accepted when he made the bet. He would have been saddened but not surprised to see very rich people demand that bad credits be made good in the name of "the financial system"; that was what they had done throughout his tenure as President in demanding that the currency be expanded perpetually so that there was never a scarcity of credit.

If you are curious about the panic of 1873, you might look into the career of Bethel Henry Strousberg — a now-forgotten figure whose frauds were the ignition point for bringing down the credit house of cards, which was built, like the present one, on a fantasy of real asset prices' (in that case, railroads rather than houses) rising to the sky.

Kim Zussman sees a different analogy:

Recently here there have been discussions of what happened to Russians who bought property as the Tsarist empire collapsed c.a. 1917, and no doubt Putin's thugocracy is hoping the same for US.

Stefan Jovanovich replies:

W'steinThe biggest losers in that case were the French investors who had bought Russian railway bonds and government bonds during the pre-War boom. It had seemed to them a reasonable investment since Russia was the fastest-growing economy in the world in the decade leading up to 1914.

A side note: The philosopher Ludwig Wittgenstein's father Karl was considered an oddball for buying American rail bonds after the Panic of 1907 when "everyone knew" that America's best days were behind it. At that time his peers in Austria were buying German paper instead. Twenty plus years later his children were able to escape the Nazis by buying their way out of Austria using the proceeds from those same bonds which they had dutifully held to maturity. The German paper that so many of their friends had owned evaporated during the post-war currency hyperinflation.

Steve Leslie muses:

My experience as a financial advisor and broker for over 25 years tell me this about people and their reactionary practices. The next shoe to fall will be in October when retail investors get their monthly brokerage account reports and mutual funds statements and see how much money they have lost. Impulse will take over and they will issue across the board liquidations of mutual funds, annuities & etc. I just see so much pressure on the system in the short term technically that we are far from a resolution of this going forward.



CarouselOrdinarily when the football season starts, I wait all week for the Sunday games. It's my favorite sport at this point in my life for the reason that it entails only one day to follow. (Life's far too interesting to be be glued to TVs and newspapers all week obsessively following something as mundane — if addictive — as sports. But football is only one day, so I can get my fix with only a minimal time commitment.) The only problem is it takes place during my favorite months of the year and that has always caused more than a little cognitive dissonance. I hate to waste beautiful autumn afternoons inside. Yet, it's such compelling competition. A Faustian deal: Sacrifice the peace of nature for the violence of football. Made worse decisions.

So anyway yesterday I had planned to watch the games when my phone rang about 9 AM. It was my buddy, Jeff. Wonderful guy, accomplished marathoner and sailor. Told me that he had not felt entirely right on Thursday, so went to the doctor. Left the next day with a new friend, a stent in his heart.

So it goes.

Not easily one to be deterred, though, he and his young lad of a son, Mick, 4, were to set off for a daytrip from San Francisco to picturesque Santa Cruz, about 85 miles down the coast. His lovely wife, Cathy, staying home to do some paperwork, he kindly asked, Want'a go?

Took the inland route down Route 9 through the Redwoods. Twisting around the wooded turns, could smell them in the sweet air as we sped past.

Had never been to Santa Cruz before, and to the fellow uninitiated, highly recommend it. Pure postcard. A time gone by.

Had lunch on the wharf. Folks fishing off it, sea lions barking 'neath it. The rollercoaster and ferris wheel of the broadwalk as a backdrop. Pointed out to me and his son ("Don't tell your mother") the balcony of the apartment that he and a former girlfriend had shared some 30 years prior. Hard to beat for an impromptu afternoon.

After young Mick had his fill of rides and candy, we made our way back North. This time hard by the coast, Highway 1, 'twixt cliff and surf. Exhilarating.

What a wonderful daytrip. Recommend it to anyone visiting out San Francisco way.

Even should it be a football afternoon.

Steve Leslie barbecues:

Years back when my father was alive our ritual was to spend Sunday evening together. I would play and walk a round of golf in the afternoon, listening to the game on my Walkman. Then come 7 pm I would fire up the grill, turn on Prime Time on ESPN and start the cooking. The traditional fare would be beef. One Sunday it might be brats soaked in beer and mailed from my excellent friend in Wisconsin. Another, could be steak, sirlion, London broil or strip. We would have ribs, country style, baby back, pork, beef, you name it. I would prepare the ribs in the morning, steaming them for two hours to make them extra tender. I would add some liquid smoke to enhance the taste. Then I would slap on the specialty sauce and store them in the refrigerator for later use. Beans and corn-on-the-cob were the usual sides. A nice cocktail such as a Jack Daniels on the rocks, or a glass of merlot, accompanied the meal. We would eat while watching the show and would laugh and smile when Chris Berman did his "he could go all the way!" All the while, my faithful companion Stoli, a purebred cocker spaniel and named after the vodka, would stand by ready to chew on the rib afterward, provided it was beef. Pork ribs were off limits — too brittle and they damage the insides of a dog. Then we would turn on Fox TV to catch Martin, In Living Color and Roc Live. Shanaynay, Men on sports, Heavy D. — priceless moments. After all these years, the times I spent with Dad stand out as the highlight of my life. He has been gone for nearly a decade now. Stoli passed away two years ago. Now there is just me left and I no longer cook on Sunday evening. There is a void in my heart that will never be replaced. Perhaps that is as it should be. One thing is for certain. Our Sunday evening was more valuable to me than any football game before or after. And I would give plenty for one chance to go back and relive the moment with those two just one more time.



KingsOne thing you learn from poker is that you can play the hand perfectly and still lose. There are never-ending ways to lose a hand of poker. All long term players realize that humble pie does not taste very good. To extrapolate from Dr. Keynes, The game can remain irrational far longer than you can remain solvent.

Bad beat story: I am short stacked in a cash game. Woman to my right puts in a small raise pre-flop. I call with wired 9-9. Flop comes 9 K 3. Woman puts in a small bet. I go over the top and go all in, hoping she has some sort of a hand and begging a call. She beats me into the pot and calls. I show her my three 9s and she shows me a pair of Kings to go with the one on the flop. Of course her hand holds up and wipes me out for the day. The odds have got to be a few in a thousand that this happens. But it happened to me. And at the worst point in time. Murphy's Law prevails again.

Ironically, I saw the same thing happen to Daniel Negreanu get knocked out of the World Series of Poker with an identical scenario. He rolled up a set on the flop only to have an opponent roll up a better set.

As Forrest Gump said "It Happens."



The 2008 Bejing Olympics are officially underway. The international spectacle has now begun and the forbidden kingdom will show to the world what $40 Billion dollars does when it is in invested in the the greatest sports exhibit ever undertaken by a country.

By all accounts its promises to be the most incredible and spectacular Olympics ever conducted. It will far outdistance anything attempted up to this point. Three full weeks of non stop pageantry, ceremony and athletic competition. It will have something for everyone, athlete and non athlete alike. There will be more human interest stories than can possibly be cataloged or chronicled. There will be athletic endeavors and accomplishments that have never been seen before. It will be watched by billions all over the world and will prove to be memorable beyond imagination. This is China's opportunity to show the world that they are moving from a country of isolationism and communism to free market capitalism. Be prepared for a veritable onslaught of Large Corporations and marketeers to pound the world with incredible ads and promotions the likes of which will be off the charts.

The inherent beauty of the Olympics is that it is performed only ever four years. That seems like a sufficient intermission to whet the appetite and keep it all fresh for everyone to enjoy without diluting the overall product. Few of us will even recall the events of those that transpired at the 2004 Olympics at Athens Greece.

The magnificence of the Olympics is it is still in a very large part one of the few venues in the world left where the true amateur athlete will be competing. Oh there will be the featured marquee professional events such as men's basketball and the Dream Team 3. Tennis will also be contested and soccer, but by and large it will ultimately focus on the pure amateur. Those who compete for the love of the sport and the thrill of the competition without regard to financial compensation. Those who suffer, train and sacrifice their entire lives for one opportunity one chance to compete on an international stage and against an assemblage of the most formidable competition their sport has to offer.

We also will get a rare glimpse at such rarely documented sports such as rowing, badminton, Equestrian, handball and many others.

So fasten your seatbelt, fix your Tivo, order your box from your local cable provider or satellite company get your Barcalounger ready for the event of a lifetime. I am sure this website will be ready and willing to chronicle the results as they unfold.

For home viewing, NBC has a marvelous website devoted to coverage of all the sports.

Steve Leslies updates:

Dara TorresOne week has transpired since the magnificent and indescribable opening day ceremony that unveiled the Beijing Olympics. The events are unfolding at an incredible pace and it is impossible to track all of the astounding accomplishments that are unfolding at warp speed.

The talk of these Olympics has been in swimming. Michael Phelps has solidified his name in the history books as the most decorated Olympian in history. He has earned eight gold medals to complement the six gold and two bronze that he won in the Athens Olympics. He has surpassed Mark Spitz's seven gold medals that he won in the tragic 1972 Munich Olympics.

Dara Torres, four time gold medalist, is competing in her fifth Olympics at 41 years old. Her first Olympics was in 1984 in Los Angeles. She did not compete in the 1996 or the 2004 Olympics. She had a real shot at a gold medal in the 50 meter freestyle. In a sport where 25 is old, she astounds the world by competing at a world class level, despite her age and the fact that she gave birth to her daughter two years ago. It is much more that the neoprene Speedo that she wears that is an attribution to her success.

Rebecca Adlington of Great Britain broke the oldest standing world record in swimming in the 800 meters freestyle. Janet Evans previously held the record which she set in Tokyo on August 20 ,1989. This is the longest event that women contest in swimming.

The other marquee event, track and field, is just getting underway and already a new world record has been established in the 100 meter dash. Usain Bolt of Jamaica ran the event in 9.69 seconds the first human ever to break the 9.7 barrier with no significant tailwind. Bolt is aptly named for a 100 meter dash.



dartsDarts is a very interesting and enjoyable game. It is like other games that on the surface appear very simple. However, proper study and mastery of this game can go very far in the advancement of the good speculator.

The sport of darts began during medieval times in England. It began as training in the martial arts. It was seen as an alternative to the use of arrows and archery to be used against its adversary. Henry VIII was an avid practicioner of the sport and through the aggressive expansion of the British Empire it eventually found its way to the United States and around the world.

Around 1900, darts began to become formalized as a legitimate sport with specific rules and regulations. The two most popular forms of the game are 301 and cricket. 301 is the most obvious. Each player starts with 301 points and aims to reduce his score to zero. He must initiate his scoring by hitting a double. Then his score is quickly reduced to zero. The game ends when the player's final score ends on zero exactly by "doubling out" or hitting a bullseye.

Cricket is a more intricate game requiring skill and strategy. It uses the numbers 15 through 20 and the bullseye and by progression of hitting points, doubles and triples, the winner emerges.

The beauty of darts is that everyone can participate, man, woman and child. It requires very limited space. Dart leagues are a great way of socializing and meeting new people. It is also a great pastime, to share a pint and discuss the news of the day.

Various skills must be incorporated to become a good dart player. Focus, attention to detail, and strategy are very important. A basic understanding of mathematics is involved. However there is a far deeper aspect to darts. This is the mental part. This is where the player must incorporate the mind along with the body to develop a balance. A zen-like peace. Once the dart thrower learns the technical aspect of the game, he must learn to release the physical part to allow the mind to take over. Relaxation techniques along with proper breathing are also valuable tools.

It is through this merger that the dart player finds success.

Edward Talisse remarks:

Daily Speculations has benefited from lessons in chess, checkers, surfing, baseball and other competitive pursuits. A comment about darts was overdue in my opinion. Like others, I fell in love with the sport during my university years and largely played in pub settings. It's a great way to meet new people and get the competitive juices flowing. There are many variations of dart games. For example, 501, 301 and Cricket are all played differently in the UK, Australia, France, Japan and the USA. I've played in competitions in each of these countries and am always surprised to learn about local variations. Preparation definitely counts. Also, I have found it pays to be aggressive. Go for the tough shots first and leave the easier ones for the close. Most players close the easier shots first and leave the difficult shots (like bull's eyes) to later in the match. Its the same with trading and investing. I think putting your upfront energy and effort into the most difficult tasks is the best strategy.



Dr RafterI purchased and have read Shinya's book. The early chapters were interesting, but further reading produced disappointment.

At some point he mentions chimpanzees and how their colons are clear of problems because they are vegetarians. At that point I lost some respect because he obviously does not know about chimps being huge meat eaters. It is actually pigmy chimps or bonobos that are vegetarians, and not normal chimpanzees. Scientists aren't supposed to make mistakes like that. Just like traders are not supposed to confuse General Motors with General Mills.

He believes that judicious control of enzymes are the answer. He makes several references to chewing one’s food fifty times to promote the salivary glands to produce enzymes. And he mentions that fruit is a good source of enzymes, but he never mentions where to enhance one’s supply of enzymes. I only know casually that papaya and pineapple contain digestive enzymes (I’ve used them in food preparation). I would have expected that such an expert would have elaborated on that, but he doesn’t even mention it.

From the first few chapters one gets the idea that he is going to be very scientific, but then nothing happens. Maybe his ideas are correct. Because of his experience he could have been a most credible proponent. Consider the concepts, but don’t waste your money on the book.

Steve Leslie extends:

I am sure Shinya's book is a credible book and I hope it works out for you. If on the other hand you wish to look elsewhere, I suggest you study the life of Jack Lalanne, an American icon in the field of fitness and nutrition. You may have seen him on TV representing his juicer. This follows in the path of the original Juice Man. This product was promoted by infomercial by the man with the gray furry eyebrows some years back. Jack Lalanne had the original show on television titled The Jack Lalanne Show which ran from 1951 to 1985. This is the longest running show on exercise ever in the history of television. He founded a string of health clubs that he eventually sold to Bally Total Fitness. He invented a weight and pulley system and was the inventor of the Smith machine. His feats of strength are accomplishments of Herculean proportion. At age 70 he swam 1.5 miles handcuffed and shackled towing 70 boats with 70 people in Long Beach Harbor en route to the Queen Mary. He once held the world record for pushups, doing 1033 pushups in 23 minutes. He performed this on the TV show You Asked For It. Jack is now 93 years young, still active with a thriving business, and exercises every day. If you want to study someone and utilize his advice, I suggest you go to Jack Lalanne.



If you are a fan of comics, as I am, I highly recommend the show on the History Channel about Batman. Just an absolutely fascinating show. It gives great insight into the Batman character — a rare glimpse into genius. It is so well done it is indescribable.



The Athlete's Paradoxical Commandments by Russ Sears adapted from Dr. Kent M. Keith "The paradoxical commandments "

The Races are inconsequential, brutally tough, and self-centered.

Race hard anyway.

The talent you spend years training may be destroyed overnight and certainly will quickly fade with age.

Train anyway.

The most talented men and women with the biggest dreams can be destroyed by the smallest virus or felled by the mindless cramp .

Dream big anyway.

Sportsmanship and Integrity make you vulnerable.

Play fair anyway.

Few truly root for the unknown underdogs, most follow only the top dogs. Revel in being an unknown underdogs anyway.

If you do win, people will accuse you of cheating, being a druggie and egotist with selfish motives. Win anyway.

The victories you have today will all be forgotten tomorrow. Celebrate anyway.

With more success, you will win fake friends and true enemies. Embrace them anyway.

Cynics will berate you, referees will misjudge you, opposing spectators will belittle you, fans will abandon you and even coaches will move on. Love them anyway.

Race your best, even your body will betray you, exposed to many who will indeed kick you in your most tender spots . Race your best anyway.

You'll find the prize on the inside each morning's as you've learned to always kick back as you run.

Steve Leslie adds:

Excellent insights. The truly great teachers are able to use simple statements to explain the complex. Jesus, Mohammad, Buddha, Sun Tzu and many others conveyed their wisdom through the use of parables and analogies. This website functions at the highest level when it maintains its esprit de corps and engenders this spirit. You have helped further the mission through your sharing. Someone once said "We don't necessarily need to be told things as much as we need to be reminded."



Yesterday I was just putting my 7 year old son to sleep; he asked me to tell him about my childhood.  I told him that when I was growing up in Russia we did not have VCRs and so on.  He asked me: "Pa what is VCR?".  I was shocked.  I did not realize that his generation will not know what a VCR is.

Steve Leslie reminisces:

Here is the technology that I had in my home when I was seven years old in a middle class neighborhood in Ohio: One black and white TV with rabbit ears, three networks and a local TV channel that signed off no later than 2am. A record player (mono). Two telephones and one line (my cousins had a community line where you could hear other people's conversations. A few radios — AM dominated the airways (CKlW was out of Detroit). I think I did have a combination clock radio in my bedroom. That was pretty much it. A typical day: We got home from school around 3pm. We usually walked home, most likely a mile or two. Watched American Bandstand and the Merv Griffin show. A few years later an episode or two of Dark Shadows. Did our homework, ate our family supper, went outside to play until dark then came in cleaned up for bed. Fell asleep listening to the Cleveland Indians ballgame. On Saturday, if we were lucky we could go to the movies for a Saturday matinee. We brought our own popcorn and candy. I never thought then or believe now that I ever lacked in anything of value in my childhood.

Leon Mayeri writes:

We cancelled our cable TV subscription several years ago when our youngest son was born. We have a 13 year old who enjoys watching occasional PBS documentaries with our rabbit ears analog TV. Our six year old selectively watches sports on what amounts to only three local stations, but we also actively encourage reading in our household. There’s an alternative to the plethora of mindless commercial shows: you can rent the occasional DVD for the whole family to watch, or watch something fascinating on PBS together.

Our teenager has, predictably, become fascinated with other screens: first it was game-boy, then iPod, then a MacBook laptop. and now he has hit the grand slam with his state of the art Samsung phone. His Bar Mitzvah brought great fortune and instant distraction.

Simply stated, the best plan of attack with all this heightened technology is to have active discussions about science, technology, and worldly events with your children at the dinner table, and make frequent visits to your local library. Amazon and Barnes are most helpful as well. As long as they learn to read, they have a chance to succeed.

Jeff Watson remarks:

Having converted my entire music to digital format by the mid 90s, my large collection of LP’s has sat boxed up in a closet unused for years. My turntable died in the early 90s. Last year, my son discovered the LPs, bought a turntable on eBay, and has been playing LPs whenever he is home. He considers it retro, therefore “cool.” Those pops, clicks, and hiss from the vinyl bring back a wave of nostalgia every time I hear one played. One thing I really miss is the “album art, which was a valid art form in it’s own. Albums covers and liners in the 70s from bands such as Yes, Pink Floyd, Fleetwood Mac and the Stones provided some of the best examples. Unfortunately, album art just doesn't translate very well to a CD cover.



I personally believe that the Uptick Rule should be reinstated or large money pools will be created to drive stock prices down on selected companies.

Alex Forshaw replies:

Why do you find it ok that speculators drive prices up, but not down?

Sam Humbert counters:

I will show you an article, the subject of which was how CNBC was unknowingly complicit in the fall of Bear Stearns. You might find it informative. 

Jason Goepfert says:

So one of the largest investment banks and securities traders in the nation was taken down because traders didn't have to wait for an uptick to sell short? It didn't have anything to do with the fact that they had bitten off way more than they could chew and should have been deleted as on ongoing concern? That seems a little fanciful to me.

There were hundreds of stocks that were taken off the uptick rule for a couple of years prior to July 2007, in a trial balloon run by the regs. They studied the trading patterns on those stocks extensively compared to those that were still subject to the rule, and found little difference in trading patterns. The rule was not lifted by whim.

With penny pricing, it doesn't take much to get an uptick in a stock. If a large fund(s) really wanted to take down a company, the uptick rule makes no difference. They would just buy a bunch of shares, get the stock on an uptick, then short the hell out of it again. Or buy puts, or any of the other derivatives they have available.

The stock would go to zero whether the rule was in place or not. See Enron et al.

Blaming the uptick rule is lazy.

Sam Humbert  comes back again:

Marty Whitman of 3rd Ave Value Fund has issued a statement in effect also blaming the elimination of the Uptick Rule as one of the factors that the bear raid on Bear Stearns was successful.

I agree with Marty Whitman.

As to driving prices up versus driving them down, there is a difference. Quickly falling stock prices can cause a panic which could cause money withdrawals from some stocks such as brokerage and banking firms, which in turn can cause bankruptcies and job losses. 

Dylan Distasio recalls:

The fact of the matter is that uptick rule was easily avoided prior to its elimination through the use of married puts aka "bullets." When I traded intraday (before the SEC essentially eliminated this use of them in 2003), we used to use them on a daily basis. 

Gibbons Burke also disagrees with the uptick rule:

If all the artificial barriers [such as the uptick rule] are removed the knowledge that stocks are more susceptible to bear raids will temper the irrational exuberance that lofts stock prices far beyond their real value, which causes them to correct just as dramatically.

Wall Street is institutionally bullish, and it extends even to the press covering the street, so support for the uptick rule is understandable, if not reasonable and rational. For example, I know from personal experience that Dow Jones requires all employees to sign agreements when they're hired on to never ever sell short, or be effectively short with options. No one on the entire staff of the Wall Street Journal has any interest in or ability to benefit from stocks going down. It renders the Journal a tout.

Mr. Albert has the day trader's perspective:

1) the nasdaq 100 had no uptick rule for quite a while before the general repeal

2) S stocks on the Nasdaq, certainly the most subject to bear raids as they have much shakier financials and tend to be story stocks, never had an uptick rule since I began trading in 1996

3) none of the SHO pilot stocks was more volatile than the comparable non Pilot stocks (in need to find the acedemic reference but it is there). IMO the specialist system (not the uptick rule) was a stabilizing force in the markets so now we have more vol

James Lackey has seen it all before:

All you get from more rule making, margins, uptick or program rules etc is bigger gaps at opens and closes. Restrict intra day moves and the energy must be transferred somewhere else. 

Steve Leslie updates:

Yesterday the SEC announced that they were selectively reinstating the uptick rule for Fannie Mae and Freddie Mac. Why just those two stocks? I have no idea what this accomplishes other than a symbolic gesture. Could you imagine commodities having a limit up or limit down rule for just corn or beans? Couldn't they just raise the margin requirements for borrowing stocks ? As usual governments are late to the party. Back in 1987 the Government began looking at computerized trading and the use of collars. Of course this was after Oct 19th debacle. Look at Hurricane Katrina and see the government in action during a crisis situation. And yet there are still those who try to tell the public that the government is the solution to its problems. The bankrupt LA Times had a front page article arguing for government intervention in the financial markets, especially subprime. Politicians' cliches include "we can't drill ourselves out of the oil crisis and it is the speculator who is the cause of the problem." They are the ones who need to be ratted out and summarily chastised and shot. And then they use trite phrases like "We need to send a message to these oil companies and the speculator that they are going to be reined in." And then they hold a hearing in front of cameras, ask mindless, rehearsed questions formulated by their aides and attempt to project themselves as informed. Yet they expose themselves as what they truly are. Robots, empty suits whose prime objective in life is to get re-elected and retain their cushy phoney baloney jobs. And Nero fiddled while Rome burned. I think I will go outside and get a breath of fresh air.



BullIn all seriousness, does anyone note a similarity in art and life here vis a vis the Nadal / Federer match and S&P today, 7-07-2008? It was a most unusual day in SPU: neutral in morning,  then a terrible fall starting at noon, then a dramatic rally, then a horrible fall after 15:38. Okay. Vis a vis Federer, considering him a bull. He loses the first two sets (the terrible fall). He wins the next two sets (a dramatic rally) to unchanged at two sets each. Then he loses the fifth set (a horrible fall) in darkness. Most readers will think I'm overreaching. I say the evil hand of the Mistress was at work copying the Wimbledon finals.

Steve Leslie replies:

Federer vs Nadal reminds me of McCain vs Obama. An interesting dynamic. McCain (bull) and Obama (bear). By all accounts, this is a Democrat year and McCain should be double digits behind in the polls and he is fighting long odds. Like winning six straight Wimbledons against a 22 year old very hot Wunderkind. Yet he is holding up despite everything's going against him and his party. After the Denver convention we will see a bump in Obama's numbers. This is akin to losing the first two sets. Then the Republicans will have their convention and McCain will benefit. Set three and four. Finally in November we will see an end to the longest campaign in history. Which is set five. It could also very well be decided by extra games. Key states such as OH, MI, PA, FL. In many ways this may decide if there is a bull market out on the horizon waiting to run. 



 Ah, the 4th of July, Independence Day is upon us once again. The smell of charcoal will waft across the nation as back yards everywhere become a monument to man's eternal desire to cook meat over open flames while consuming malt beverages and yelling at the kids. The streets of our towns and cities will be bedecked in red white and blue. There will be parades and old soldiers will suck in that gut and wear their uniform proudly down Main Street once again. High school bands will march sharply and play badly and politicians will wave at the crowd. There will be fireworks all over the country form NY harbor to Armpit Alabama, there will be pyrotechnic celebrations of our nations founding. I'll be right there with pride as always. I have a bunch of firecrackers in the closet, a few roman candles and bottle rockets to shoot up the neighborhood on Thursday. We are into gin and tonic season and I'll have a few of those as I celebrate my PETA (people eating tasty animals) membership by grilling up the largest steaks I can find. There will be friends and family, boats and fireworks and all the trimmings as we celebrate the 4th Kent Island style. I will, as I always do, stop and think of all that has gone into our 232 years of existence as a nation. So many have given so much to make and keep us a great nation. One of course think of the military, the soldiers, sailors and marines who have fought ot preserve our cherished freedoms. From the scared citizens who stood on Concord green, hearts beating wildly beneath buckskin as they held a musket in sweaty hand, to the scared GI who mutters a quick Hail Mary before leaving the green zone, the commitment and sacrifice they have given our country is staggering. I talked to a friend who returned today from visiting Normandy. He talked of the raw powerful emotion he felt looking at the beaches and cliffs those young men assaulted and took. He wept at the cemetery where so many of those young men found their final resting place. Our military won our independence form Britain over 200 years ago and has protected and preserved our status and place in the world ever since. There is no thank you large enough. Without them, there is no us.

I have written before of the contributions of businessmen to our nation. These are often overlooked as men of business are too often vilified and perceived as bad, or even evil. But the contributions of Thomas Edison, Henry Ford, The Rockefellers, the Bill Gates and even the Warren Buffetts [Ed.: this may be going too far] to our society cannot be ignored. In the name of profit and gain they have spurred technological innovation and industrial revolution. They bought light into our homes and automobiles into our garages. Because of them we can fly across the globe, have microsecond access to just about anything form a laptop computer. They have provided jobs and contributed generously to build schools, libraries and cultural centers across the United States. Again, without them, there is no us. Then there is the other businessman who makes our nation great. The little guy. Maybe he owns a tire shop and repair center that provides 7 or 8 jobs. He keeps his customers cars maintained and safe, saving them money and possibly their lives. Perhaps she owns a small accounting service helping others deal with intricate financial and tax problems. Or a restaurant that serves thousands of people a year good food at decent prices. Dozens of people will be employed at such a place, form youngsters with their first job to the middle aged waitress who is raising a couple of kids and works hard to give you the best possible service and dining experience. Small business owners have ink stained hands form their printing press, grease under their fingernails that will never come out entirely, they have sunburn from long days providing landscaping and yard services. They have eye strain from late nights reviewing budgets and payrolls. They live on a curious mix of Mylanta , hope and energy. They make our communities better places to live; they provide countless jobs, pay endless taxes and are the financial support for thousands of local charitable and cultural organizations. Without them, there is no US.

Then there are the so called average men and women. They go to work at a variety of jobs each day. They manufacture the products we use, they provide services to make out lives better. They raise their kids to be better educated than they are and hopefully have an even better life. They spend the money that supports business and industry. They pay the taxes that make the country function. They go to church and pray for a better world. They socialize with friends and neighbors and share each others burdens and joys. They may live in Wheatfield, Mo. or the upper east side of New York City. They are us. Their daily efforts to make their own lives better is what makes the country a little better and a little stronger as the years go by.
I know we are far from perfect. There is no perfect man and no perfect nation. I know that the rest of the world is not that fond of us at times. We are perceived as arrogant and materialistic, spreading the gospel of hip hop and coca cola around the globe. Of course, if the citizens of the governments that despise US did not want  hip hop and Coke, we would not be successful at this. There are more people who are free on this planet because of us. Without us Europe would be either a German Dictatorship or a Soviet colony. Here would be no communist China, they would be part of the Japanese Prosperity Zone. Latin America would be Spanish America and Portuguese America. We have never gone to war over territory. We have never annexed a defeated foe. We have taken the sons and daughters castoff by ther nations and turned them into Americans who have given the world far more than the world has given the United States. Perhaps we are not perfect, but I will take our imperfections over dictatorships and theocracies that still dominate many of the governments of the world.

Many decry our culture. Yes, I am afraid we did give you McDonalds and MTV. We also gave you jazz and Ernest Hemingway. From our lands came Faulkner, Twain, Updike, Kerouac and Mailer. Yes, Brittany Spears is our fault. But we made up for it with Bogart, Sinatra and Katherine Hepburn. From the American soul came the blues and rock and roll. Elvis, Dylan and Robert Johnson all are cut from American cloth. Charlie Parker, count Basie and Miles Davis may be well loved across Europe but they are form the United Sates and their sound and culture was born and thrived here. True we are responsible for the genetic cesspool that is the NBA, but we also give you baseball with Babe Ruth, Mickey Mantle, Joe DiMaggio and Cal Ripken. Our sports are not reserved to the upper classes. A baseball game can be enjoyed by anyone with a ticket, or on a radio while changing the oil or a local tavern television while enjoying a cold adult beverage with a few friends. The good and the great that has come out of our nation far exceeds the average or bad.

The United States of America. Born of a desire to be free to govern, worship, think and live the way each wished. Expanded by the speculations of Thomas Jefferson and the explorers who sought knowledge and land. A land where risk taking and speculation to better one's life is encouraged and supported, where an uneducated immigrant can someday see his sons and daughters attend world class universities. A country where you can, through your own vision and hard work, be who you want and live how you want to live. A place where you are responsible for you own life, but your neighbors are quick to help. A nation that is always first to respond to a disaster whether at home or in a far off land.

We are not perfect. But I still have not seen anything better. The single most important export of the US has been our concepts of freedom and principles of Liberty. It is a nation founded built and protected by the individual efforts of its citizens. It is the land of the free and Home of the brave because of the men and women who are born here, immigrate here and live here. They are US.

So be it the backyard grilling burgers and hollering at little Johnny to stop squirting the damn hose all over everybody; or on a terrace in Manhattan; by the lake in Chicago, in the wastelands of Wisconsin with a G&T in hand and gleam in your eye; a boat on the Chesapeake with beer and bikinis in great abundance; or wherever this 4th of July finds you. Remember for a moment to raise a glass in honor of all those who served, who lived, who built, learned, worked, raised kids and strived for a better life. In their strivings, we have found a better nation.

Steve Leslie writes:

Just a wonderful panoply Tim has crafted to describe  America the Beautiful. This is befitting of an op-ed piece appropriate for any major newspaper in America. Tim's words resonate loud and clear down on the Space Coast of Florida. I personally wish to thank him for sharing his thoughts. G-d Bless America, still and always the land of opportunity.



This is in from the "just when you think you have seen it all" department.

Last evening, I watched one of my favorite shows on the Discovery Channel , "Dirty Jobs" with host and celebrity Mike Rowe. I say celebrity because I saw his status verified by a stint on The O'Reilly Factor and that I was in a card game last week and every sweaty and unshaven man at the table knew who Mike Rowe is. The women were less informed. By watching the show you are introduced to some of the most disgusting jobs imaginable. Here are some of the bad ones:

Chick separator. Separating female chicks from rooster chicks.
Noodling. Hand fishing for catfish in rivers.
Chumming for shark
Crawfishing, in the bayou in Louisiana
Cleaning up a house after a flood. This is too disgusting to describe.
Cow inseminator

Last evening I saw one that reminded me of this market. Snake catcher. Catching a snake was not too bad, but the downside is that you tend to get bitten by the snake. Hopefully by only non-venomous ones. But afterward was the sick part. They made the snake vomit to discern what it had eaten recently to determine its dietary habits and the ecosystem that it was in.

I felt that this is my new description of a bear market. What would make a snake vomit? Dow down seven of eight months. Worst June since 1930. GM's lowest price in 50 years. Market back to where it was at the start of the century. Merrill at 34, Citigroup at 17. Bear Stearns out of business. Residential real estate prices falling every month. Oil up 40% this year. Foreclosures reaching all-time records. Guy Ritchie and Madonna split. Those are some real house of pain facts. And some real snake vomit numbers.

So the questions abound and the nabobs quack, when will we see the turnaround that is hoped for and what will impel the market to right itself and go forward?



PitcherI wonder why tennis serves are not more similar to baseball pitchers'. I have tried to revamp my serve and am picking the left leg up high and following through with the right, the way all the right hand pitchers do, and it increased my speed and accuracy. Is there a flaw in this approach or analysis? I remember from squash the fastest serves I ever saw came from baseball pitchers.

Bill Humbert replies:

I remember Pat Cash reflecting that he felt he would have had a better serve landing on his left foot. Other great servers like Becker and Laver landed on the dominant (right) foot also. I switched from this style to the modern style while still in juniors — I found it easier to control, and easier to reposition myself at the baseline. But it would seem to suit a serve-volleyer to land on the dominant. Speaking of tennis, here is a little essay I wrote: Looking in The Mirror.

Players often go through long periods with their confidence low (I am in one now, both in my tennis and my investing). I believe that I am a good tennis player, capable of a certain standard of play, while my body is able ( which at the moment is not! ). I believe that with planning, practice, hard work I can get myself out of this rut, even though this is one of my worst. However that belief is not there when it comes to my trading and investing. Last year I blew up, losing too large a chunk of what I'd accumulated ( and spent ) over the years, and I've not traded since. I've gone back to work after having semi-retired, literally starting over. Not only that, I look in the mirror and ask whether those ten years of success and wealth accumulation were due to in large part luck - I'm starting to believe they were, and with that loss of belief there is no way I can apply the same principles I'm applying to the tennis court to get my mojo back. If you see a failure in the mirror, you will fail time after time. Here are some of the simple but expensive lessons I've learnt since watching Federer beat Nadal last year at Wimbledon.

1. Know your strengths and nurture them. We are all built with a particular strength, it's there to be nurtured. The right mentor might enlighten us, or sometimes even friendly opponents. Most improvement in a player's game comes from recognizing this strength and finding the opportunity to apply it over and over. Hide and protect your weaknesses, apply your strengths. You'll win more than you lose. Do you know yours?

2. Imitation leads to elimination. Much time is wasted by players trying to be what they are not, and giving away what they are best at in the process. Create your own style - that way you'll know its not been seen before.

3. Accept your shortcomings. Every player has holes in their game. A big step is made in accepting this. A player can then make better judgments on which balls to attack. This nurtures a more patient approach as the player realises he cannot hit every ball for a winner, cannot win every point.

4. Keep it simple. You do not have to be able to do know everything or do everything well to be successful. Success and winning is as much about getting the basic stuff right over and over again.

5. Know your next move. Rule 1 in grasscourt tennis: volley to the open court. With this rule in mind, you are applying an edge over and over without having to think about it. Your opponent may start anticipating, but he will be at a disadvantage more often than not. Having a set of moves from basic court positions simplifies your game. The task is then to execute. A good plan is very hard to beat even when they know what your are doing.

6. Don't play if you are injured. There nothing to gain. Injury means less practice, hesitancy during play, losses, and a spiral of falling confidence. Much like a depleted trading account which isn't letting you play as you would.

7. Do what it takes to restore your confidence. Any trick will do. Sports and trading are confidence games, and you are a useless player without it.

8. Know when it's time to hang up the racquets.

Steve Leslie writes:

I don’t follow tennis much any more but I have been researching some of the greatest players. As I suspected, on the men’s side Federer and Sampras are both 6′1″ according to Wikipedia. Becker is 6′4″. The women Lindsey Davenport and Venus Williams both go over 6′ and Sharapova is 6′2″. So compound their height and the high tech racquets that can withstand immense tightening of the strings and this in all likelihood are concomitant reasons why the serves are so fast today.

Basic physics dictates that to get greater velocity on the ball, the racquet head speed must be high. How you get there is up to you. Roscoe Tanner had a very compact swing as I recall. He was a striker. Becker would get there through a very long arc on his serve. He was more of a sweeper.

I do think that there is a corollary to the elbow problems that pitchers face and that is tennis elbow. Most likely due to the snap that the tennis player tries to get through the ball to obtain a little more velocity and the stress they put on the joint itself.

I know in golf that high clubhead speed is attained through shaft length, flexibility of shaft and acceleration through the strike zone. There is also a trampoline effect that is realized through the composite material used on the face and the design of the actual clubhead itself. In his day, Greg Norman was probably the greatest driver of the ball, which is a combination of accuracy and distance. He is considered a sweeper. Hank Kuehne and Daly are more strikers.

I still will never understand how or why Bryant played with a broken leg. Hacksaw Reynolds also allegedly played with a broken leg. A word of caution here. Bryant also had half his team quit at Texas A&M during his boot camp and according to the show on ESPN one almost died from heat exhaustion. Kerry Wood may have been permanently ruined because of abuse and pitching hurt and before he was sufficiently healed. And my all time hero, Dave Dravecky pitched after receiving treatment for bone cancer and broke his arm forcing amputation of his arm. These are two stark examples. I could also mention Mike Ditka, Joe Namath, Dick Butkus Dan Marino who walk like 80 year old men. There is a big difference in playing with pain and playing when really physically damaged.



VN _ AubMy first encounter with Victor Niederhoffer was through this Daily Speculations website. I had known of Victor by reputation through various columns written about him and his books. I began to send contributions to the website back in 2006 and they were published. I sent a personal email and shared this with him. I told Victor that what struck me was the common admiration we had for our fathers that he wrote about in his book. He replied and told me that he would be sending me an autographed copy of The Education Of A Speculator. When it arrived I opened it and on the front of page 1 is the inscription:

To Stephen Leslie in honor of our fathers. Victor Niederhoffer

This was the beginning of a relationship that I regard highly. So to honor our fathers I am sharing this. I hope that those who visit this website remember their fathers on this most very special day. I know Victor and I will.

Alan Millhone recounts:

AlanMy Mother is 86 and gave me a nice Father's Day card. My Wife gave me a nice card as well and so did my Daughter for Father's Day. My Brother is 12 years my junior and I sent him a card.

My own Father passed on in 2003 and I only wish that today I could have handed him a card as I did for so many years in the past. I noted with interest how the late Tim Russert visited his Father as best he could and I could tell he was a loving Son. Harry Chapin wrote a song many years ago about being too busy and your children growing up before you realize it. There are some of us who had their differences with their Fathers, but in the end you only get one real Father. Time is passing all of us by, make the best of what days left we all have.

Happy Father's Day to all of you.

Jeff Watson adds:

My father was, is, the most important role model I ever had. He shaped my character, and always encouraged me to think outside the box. He never doubted me when I embarked on my career in speculation. Education was very important to him, just for the sake of learning, and he insisted that I attain the highest level possible, which I eventually did. I went over to his house today, presented him with a nice card, and gave him a new "Big Bertha." Contrast that with my son, who I love dearly. He got up at the crack of dawn, and left for the other coast. I got a text message telling me he was over in New Smyrna Beach FL, surfing. No mention of Father's day, no nothing. I'm forgiving, seeing all he has gone through, but, needless to say, a bit saddened. 



 I have been reading the autobiography of Marion Davies lately and she has a quote from Hearst that "make sure that the youth like it, and the rest will take care of itself." I am wondering if youth oriented stocks, Google et. al., perform better than others or whether the ratio of price to age of average employees or executives might be a better indicator than P/E. I would be interested in other youth oriented stocks, other than the toy companies, or readers' thoughts on this trickle-up theory. In particular, Hearst didn't like "kissing" in movies, as kids 12 and under hated it, and he especially didn't like it when Marion was involved in such activities in any way, though from a reading of the book, with her giving up her career ultimately so she could take care of the great man, she seems to have been perfect in her role.

Russell Sears replies:

Today I ran a 20k run (12 miles) with an young hopeful marathoner, Jerry Faulkner. He was taking an easy day and I was running hard. He had recently switched coaches an his new coach has him running much higher distances per week, longer hard days, an only picking key dates to race. Much more like I used to do.

After hearing him talk about his training and his coach, it dawned on me why you are seeing a surge of young USA guys finally having a chance at medaling… it's the availability of coaches now. For guys like him, a recent college grad with potential, but an unproven record, living on a shoestring, 20 years ago few coaches were available… When I was starting, comp race entries and free or cheap shoes where available from local specialty running store for the local champs. Now the coaches are seeing the benefit of comping a young local kid with potential, since coaching is bigger business than just schools and colleges. Becoming a personal trainer has gone beyond just the weight lifting guys, obsessed with making a living with what they love. The new coach sees helping the young guys out as their way of staying connected to the action in the sport as well as generating a buzz about their business.

But much credit must be given to the youth of today also… 25 years ago, I would not have thought of inviting a deteriorating 45 year old on a 12 miler… Plus they are much more aggressively seeking those coaching/mentoring relationships than I ever did… Part of why thrived after undergrad school was because I enjoyed calling my own shots in training. But experimenting without supervision often caused me to learn my lessons the hard way… blowing up.

So it may be both: "if the youth like it" is necessary for success but "the rest" have to be part of the potential of the company also.

My hypothesis  is: take the standard deviation of the ages of officers of a company, or the board of a company. I would suggest the CEO if both the CEO/president or chairman of the board age counts twice. Regress this with the standard dev against 3 or 5 year returns and see if they are correlated.

Steve Ellison adds:

This credo appears to be a central operating principle of the advertising industry. Just this week, I received a phone call from a man conducting a survey about television. The first question he asked was my age. It was also the last question he asked. When I responded that I was 46, he said, "Thank you very much for your time." I was not surprised. I already knew that I was an "undesirable demographic".

Sam Humbert complements:

And it's a timeworn idea in ladies' retailing that women will buy clothing aimed at the demographic ten years younger.. Probably there's a Zeno's Paradox in there somewhere.

Steve Leslie extends:

Vic has brilliantly raised a magnificent subject to discuss and debate and I hope that the thread continues onward and upward. As with all stocks, timing is important. With respect to "concept stocks," buys and sells are critical to a speculator's financial success. These are not grind 'em out stocks that move 8-10% a year. You have to be ready to buy and ready to sell. I know it sounds like a cliche but it is imperative here to remember. Even the great Apple was overpriced at $220 but offered value at $120. A good exercise is to examine Apple vs Microsoft and look to the esprit de corp or their raison d'etre for insights. The great thing about Apple is that Jobs came in and had the vision to discern what the consumer wanted. He went outside the box with the iPod. It was the same with the computer, the Apple brand always had the slickest, fastest, coolest best stuff around. But they were not content to sit on the computer. They were looking for more innovative concepts and other worlds to conquer. He listened to what his legion was telling him. Part of the struggle with Microsoft's stock having gone nowhere in five years is that they are now sitting on their dominance with the operating system. Although very profitable, throwing off massive cash, their stock is not embraced like Apple's. They could have done the same or similar things as Apple but did not transcend the culture. An insight into their mindset is their recent attempts to purcase Yahoo. I am totally flummoxed why this deal has not been done. Who's to blame: Yang, Ballmer, Wall Street, the lawyers? The deal may ultimately be done but at what cost? And at what price? Final suggestion: One company that merits study is Garmin, the leader in GPS hardware and software. Much too early to purchase in my view, but that view could change.



When I was a kid, I was always looking for an easy way to make money. My dad used to point out laborers working in the hot sun, explaining that "Those guys were the ones who didn't care about their grades." As always, my dad was 100% correct, and I didn't want to end up like that, preferring to make money in an easier manner.

Since I liked to play games as a kid, I tried to get as good as I could at whatever game I could master, then play it for cash. I found limited success, but after awhile, my friends avoided playing against me like the plague. During high school, I used to spend a lot of time playing poker in various places that would be considered to be shady, but those games were out of the orbit of my friends and presented opportunities to make money. I played a pretty tight- mechanical game those days, and observed the sharp type of guys, and how they operated. It was in those games, from those guys, that I discovered the beauty of proposition bets. A proposition bet is one of those "I'll bet you that….." followed by what would seem to be an impossible outcome, and a guaranteed win for anyone who would take the bet. Of course, the person taking the bet would be opening his wallet right after he lost. I watched those guys making different prop bets, then filed them away for further use. Since I was rather studious, I went down to the library and found volumes upon volumes of ideas for proposition bets. By the time I was in college, I had a repertoire of at least a thousand different bets, plus variations on each of those bets. I had so many bets tucked away in my brain, and also in my journal, that I could come up with a bet in almost any situation. My immediate friends stopped betting with me after awhile, and I had to find places where greedy people congregated, such as the track, poker games, bars, and the exchange. People would take my silly bets and be surprised that I could really tie a cigarette in a knot without breaking it. They would be amazed that Jackie Robinson wasn't the first black baseball player in the majors, and they would literally fall flat on their face when they found out that George Washington wasn't the first president of the US. The best people to pitch the proposition bets to were the greedy, gamblers, sportsmen, and speculators, as they would think they had an edge when in reality they had no edge at all. Gamblers were great, as I devised little card games that looked like a certain loss for me, when I really had a 4% edge. I'd play those card games with a freeze out condition, guaranteeing my 4% grind. If I lost on those games, I paid with a smile. Some of my little card games like "Face-up poker" offered me a 100% edge. Sportsmen were great, especially when they found out that I could tee off with a driver, and make that golf ball go a mile on a flat surface(OK, I did that one the day the lake froze over with sheet ice which happens to have the lowest coefficient of friction in nature). Speculators took my bets with glee, as they didn't think I could really throw a pumpkin across the trading floor…after market hours, of course. I made a lot of money off of those bets over the years, and the people I considered to be suckers were paying my bills I would allow myself to be the victim of a prop bet (after getting the price as low as I could), and would use that bet later and eventually make a profit.

The market offers a thousand prop bets a day, with millions of suckers waiting to be fleeced. A few months ago, a fraternity brother of mine who's a broker called me offering me a great investment priced at 98. I hit the offer, and later in the day saw the great investment (I won't say what it was, it was so bad), offered at 90. Even though I was angry, a little voice in my head told me that I shouldn't have whacked him so hard in college betting him that he couldn't fold a sheet of newspaper in half 11 times in a row. I made 20 bucks on that silly bet in college, and lost a thousand times more on that slam dunk investment. I guess that suckers come in all shapes, sizes, and colors and that at one time or another, we're all suckers.

Nowadays, I don't do prop bets, but will bring them out at a party and show them for free. People will be amazed at my cleverness, and be mildly entertained. I do see that gleam in some eyes that tell me that someone's going to get fooled or taken for a lot of cash the next day.

Steve Leslie adds:

As far as winning money. There is a great line from the movie Rounders. Matt Damon quotes Canada Bill Jones one of the great characters in the world of gambling. "Some people think it a crime to take money from people, I consider it a crime not to."

Some other famous quotes from Bill Jones were:

"A fool and his money should have never gotten together in the first place."

"A Smith and Wesson beats four of a kind."

There also is the old story of Canada Bill playing in a crooked faro game in New Orleans. It was in the back room of a barbershop. One of his associates, George Devol found him there and saw immediately that the dealer was cheating using a "two-card" (rigged) box. He begged Bill to quit the game. "Can't you see this game is crooked?" Devol asked. "Sure I know it, George," sighed Bill with resignation, "but it's the only game in town."

Let me say this about poker. Nobody and I mean nobody ever helped me learn anything about how to play the game. Everything I learned I paid for. I remember a line that an oldtimer used on me that resonates to this day. I was in a pot against the wizened and very seasoned veteran and I put in a healthy raise prior to the last card to come out. After a bit of hesitation my opponent made the call. The last card came and I bet he raised and I called. He turned over the winners. I knew he beat me on the last card. I responded with "How in the world did you make that call with the last card coming?" He looked at me and said "you paid to see my cards, lessons cost extra."

From that moment on, I learned that if I was ever going to get any better it was up to me and nobody was going to give me a get out of jail card free.

After 30 years of buying and selling stocks I have learned one inviolable lesson that the same rule holds true today as it did so many years ago. "Either learn how to play the game or bring more money."



Greg NormanGreg Norman was a guest on Fast Money on CNBC today and he gave an interesting perspective about his company and how it relates to the economy. Greg Norman is as tenacious a businessman and head of a diverse company today, as he was when he played golf on the PGA tour and around the world. He once held the world's #1 ranking for 331 weeks and won over 88 tournaments worldwide as well as two major championships. He does not play as often as he once did but still manages to be competitive on the Champions Tour, placing in the top five in recent major championships. He has recently divorced in a private and, by some accounts expensive, divorce and has become engaged to Chris Evert, former world's number #1 ranked tennis player.

It is notable that his company can be perceived as economically sensitive and a good indicator because of the lines that they serve. His company services the high-end market most notably clothing, golf course design, real estate development and fine wines. His turf business was the turf of choice for Superbowls XXXIII in Miami and XXXV in Tampa as well as Turner Field in Atlanta.

He mentioned that golf course expansion in the United States has effectively come to a standstill. Golf courses are closing  at roughly the same rate as they are being built. This is a trend that began several years ago. Rounds of golf have effectively been flat. There are approximately 27 million people who play golf annually in the U.S. This number has also been flat. He attributes this to the decline in the residential real estate market where a golf course is the centerpiece of a development community and in light of the softness these past few years.

He also went on to say that where the United States market has been challenging – eighty-five percent of the profits for his company have come from overseas.

With respect to golf course design, they are actively working in Vietnam, particularly in and around Saigon.

Other areas that look promising are South America — Brazil and Argentina – and there is great zeal for the game there. South Africa has not been as well received due to demographics. Looking forward, India is a country that they are excited about and positioning themselves for to be actively involved in.



Since 2001 Morningstar has been rating stocks based on a Buffett-esque philosophy, including the usual Buffettisms like "moat" and "margin of safety".

In February they published a report card on how their ratings have been doing:

Here are the reported returns for their top ranked stocks*, along with the returns for the equal-weight S&P:

Mstar *The percentage returns for Morningstar are based on buying when a stock gets the highest rating, 5, and then selling when it falls to an "average" rating of 3.

A regression of Morningstar returns vs S&P Equal Weight returns gives:

(Morningstar return)=(-5.6%)+1.35*(S&P Equal Weight return)

In short, Morningstar was beaten by the S&P Equal Weight index in terms of both absolute return and risk-adjusted return.

I do like Morningstar. Their product is a really convenient and cheap way to get snapshot information on both stocks and mutual funds. I'm also impressed that they were honest and didn't try to bury this report, and that they compared upfront their returns with the S&P Equal Weight (rather than Cap-Weighted) Index. That is the appropriate benchmark for them because when they calculate their own performance, they weight their own picks equally, rather than by capitalization.

Still, it's yet another proof both that stockpicking is not easy, and that chanting Buffettisms (or even trying to apply them using a team of professional analysts) doesn't necessarily help.

Steve Leslie writes:

As I recall, Morningstar's 5 star rating system for mutual funds is backward-looking. They take the last three year returns and then break it into a quintile rating system. You are correct in that poorly performing funds can be victims of the style they employ rather than a reflection of their management skills and prospects going forward. Back in the 90s the 5 star funds were Van Waggoner, Aim, Janus and some of the really highly charged mutual funds everybody wanted these because of their raw numbers. Nobody wanted anything to do with value funds. The tables soon flipped and the high fliers fared very poorly in the bear market crash through 2003. Value funds took over, and then international funds. Interesting fact is that 80% of funds purchased are through a brokerage firm. Most likely due to the work involved in finding a mutual fund, evaluating it, and purchasing it. When I was a broker, we used Thomson Financial research as our database to evaluate funds. Schwab and Ibbotson have some pretty good mutualfund programs and tools as does Lipper. Kiplinger's Magazine is a good source to find quality mutual funds.

Sam Marx offers:

I like Morningstar because in all of their stock reviews they include a calculation of the stock's intrinsic value and indicate what type of moat the stock has.

Morningstar, however, is still in the last century when it comes to downloading their lists, such as screened items, portfolios, ranked stocks, etc., to Excel. Except for one very limited item no downloading to Excel is available.

Morningstar's attempt to cover options is very sparse.

Meanwhile their main competitor, Value Line, is excellent when it comes to covering options and downloading their lists to Excel. Value Line, however, needs an upgrade of the contents of their screen lists.



Crew RaceProper preparation: Went to a boat race at St. Andrews recently and saw the senior crew rinsing and washing their boat one hour before game time. They said it adds a small fraction to their time and gives them pride. The importance of getting everything in place and order for your trading day, with every little thing, and every little extra and everything prideful is underlined. John Wooden's first meeting with his players where he teaches them how to wash their hands, and put on their socks, comes to mind.

Playing for keeps: Federer is having the worst start of a season ever, not getting into a final in his last six tournaments. Before he started competing for real, he played a series of exhibition matches with Sampras, and each went three sets into extras. He obviously was fooling around, trying to keep it interesting and this kind of "customer's game" is hard to extinguish — even the memory of it is odious for competition. How many times does a market player put on a reaching trade, for the fun of it, or just take a roll of a dice with a small edge after a series of big wins, and how often does he end up like Federer this year?

Pat EwingHall of Fame: Patrick Ewing was inducted into the Hall of Fame yesterday, and certainly Doc Greenspan would have been a better choice. His grotesque and sullen disposition, his outside game that prevented any rebounds, and the general aura that he created for the team during his last eight years there must have had much carryover effect on why the Knicks are still the world's worst. Sort of like the residue of the bridge player on the take-no-prisoners brokerage house that recently saw a 90% decline in stock price.

Success factors: The Memphis-Kansas game illustrates a myriad of truths about markets. First, the little things that were done wrong made the difference between success and failure. A Memphis player argued with the referee and saw Kansas score an easy basket while he procrastinated. How often does one argue with the floor, or the counterparty and lose much more than he would have by calling it a day? If litigation is involved, know that the legal costs in the typical court case are far greater than your net expectation.

KansasLittle things: The game decided by little things and letting up with Memphis ahead by nine with two minutes to go. It reminds me of days like today where the market was way up as of 1:00 or 2:00 or 3:00 and everything was grand for the bulls, the sun was shining, the water was beautiful (a la Memoirs of a Superfluous Man) and then one minute after the close, the market had dropped 2% from its three month high, a 20 day high, which, incidentally, took the longest to realize of any in the last eight years. One also notes that Chalmers seems to be the best thief in recent memory, and his four steals meant the difference between success and failure. Specialization in one market, one part of the day is often sufficient to give one the victory.

Steve Leslie adds:

I am reminded of the saying "G-d is in the details." This is generally attributed to Gustave Flaubert, who is often quoted as saying, "Le bon D-eu est dans le detail." Others have used this quote, such as Michelangelo and Le Corbusier. Paradoxically it is quoted by the architect Ludwig Mies Van de Rohe as "The Devil is in the details." Interestingly Mies and R. Buckminster Fuller are credited with the saying "Less is More." If one wants to get a healthy dose of attention to detail, watch a pit crew at a Formula One race. It is true poetry in motion. They can fuel a car and change tires in less than eight seconds.

Rodger Bastien comments:

I would agree that the difference in the Memphis-Kansas game was preparedness. The sequence leading up to the three-pointer by Chalmers that sent the game into overtime was badly mishandled by Memphis coach John Calipari and he knew it. You can't afford to overlook anything lest it cost you the game and it was evident that he didn't make it clear to his kids just what to do in that situation (which was clearly to foul to prevent the three-pointer). What's more, an immediate timeout should have been called with two seconds remaining in regulation — again, coach's fault. Reminds me of the poor judgment I too often demonstrate in fast market conditions…

Tim Hesselsweet suggests:

Be aggressive. The passive play of Derrick Rose, who advanced the ball beyond midcourt then promptly passed and ran to stand in the corner, diminished one crucial source of leverage for Memphis. Rose destroyed Texas's 1st-team All-America PG Augustin in the regional final and took advantage of UCLA's guards by penetrating to either score or draw additional defenders and find open teammates for easy baskets.

Alan Millhone notes:

Sean KempSaw on the news a current NBA player has 10 children by eight women and has not paid his support payments to any of them. Not a good example for any young athlete who aspires to greatness in basketball or anything else ! This player might get into the "Hall of Shame."

Nigel Davies assays:

There are two different forms of preparation here; technical preparation and psychological preparation via ritual. Washing the boat is technical whereas John Wooden's hand/sock washing would have been mainly ritual, which is not to underestimate its importance. Rituals provide valuable triggers to enter a particular state of mind.

At the chessboard both are used. For example one might study an opponent's games and/or prepare a particular variation (technical) before going to the board at a prescribed time (e.g. five or 10 minutes before the start), carefully filling out the score sheet, cleaning one's glasses or some such (all mainly ritual).

Good preparation includes proper consideration of both of these. And one of the main strengths of experienced players is that they often have their preparation routine well worked out.

J.P. Highland offers:

JuventusEuropean soccer is played in a way that guarantees the cream always comes on top at the end of the season. The winner is the team that obtains more points after a long 38 game season. The only problem with this system is that it leaves almost no chance for surprises. Real Madrid and Barcelona have won most championships in Spain, so have Juventus and Milan in Italy and Manchester United and Liverpool in England.

American sports are more socialistic, impose salary caps, revenue sharing, give a chance to bad teams to draft before winners and have a playoff system that gives a higher probability of having a winner th product of randomness by inviting underdog teams that are graciously called wild cards that can later become champions like the New York Giants.

Speculation is closer to the European system. You can get lucky some days and reap a good reward but in the long run the lack of sound money management and a strict trading plan will put you out of business.

Clive Burlin recounts:

I took an introductory flying lesson recently. I was shocked at how much checking gets done before you roll down the runway. While the instructor was going around the plane checking the propeller, flaps, gas, tail, etc., I was thinking to myself "you know, if you did half the amount of prep before putting on a trade, maybe your results would be a bit better." This thought was totally reinforced once inside the cockpit where the pilot sat with this long check-list seemingly checking every button and switch there was. A few more checks before take-off and we were barrelling down the runway.

Scott Brooks recalls:

Some years ago, I was listening to an interview of several NBA players and the focus was on Patrick Ewing. One thing all the players agreed on was that Ewing was cheap. He never picked up any tabs. Don't know if it's true or not, but I found it interesting that the biggest personal matter that they all agreed on, and spent a inordinate amount of time talking about, was his "cheapness."



CanaAs a very serious collector of art, I see people buy art for the purpose of investment all the time. I'm asked to give my opinion on the worth of a particular piece of art a few times a month. When the public sees headlines touting record price for Van Gogh, Renoir or Matisse, they rush out to buy art for investment. Some major companies have also put the shareholders at "art market risk" by owning large collections of art for investment purposes. The cottage industry of consultants that has sprung up dealing with the art investment field is full of swindlers, thieves, liars and cheats. The consultants, dealers, and auction houses are the ones who profit, not the average collector. Even some reputable dealers have been known to sell fakes, such as works by Dali, which are 99% fake (except for his signature). While it is possible to make some money in the art market, it is very improbable for the collector to profit. A collector should stick to buying art he loves, has beauty, wants to display forever, and is willing to bequeath to a relative or museum upon death. The art hanging on our walls and in our collections is owned by history, and we are merely the caretakers of the art. Incidently, despite the spin by Sotheby's and others, the mid-range market for good Impressionist art is rather soft. There are also some good prices to be found in the Old Masters. I used to tell my lovely wife that the price of good mid-range art fluctuates inversely with the number of margin calls on the Street.

Sam Marx remarks:

PollockI believe a lot of modern art is a fraud. Jackson Pollock's splatter paintings — how can anyone take them seriously? Yet they are sold for millions of dollars. A painting (not a Pollock) hung in the Museum of Modern Art in NYC for a number of years before it was discovered to be upside down.

Marion Dreyfus critiques:

Your grasp of modern art is not strong; if you know the continuum of the field's development, you would not say that. It marks a yahoo sensibility, alas. There are fraudulent practitioners, but Pollock is not one. Suffice to say there are less well researched and annotated and revered artists around to pick on. In general, if you are going to pick on frauds and fakes, better to pick on a very current artist whose chops are not yet firmly implanted in the historical record and universally accepted.

Just as there are 'collectors' without an ounce of sophitication in what they are amassing, there are quick-buck artists eager to make use of the investing/collecting sensibility when they adjudge the market to be a bunch of gullible wallets circling for a kill.

And though it sounds foolish, because much of modern art is nonrepresentational, if the artist is not present while the museum hangs the piece, it is forgivable if the canvas is not the way the artist intended: The average viewer could not tell which side was intended to be down, which up, so one ought not hold the museum guilty for such an understandable error.

Sam Marx retorts:

What makes Pollock’s work worth millions? One critic called Pollock's work colorful "wallpaper designs." I don't believe Pollock precisely measured the hole he created in the bottom of the paint can and a slight change in the hole size in the can of paint that he was dripping from would've resulted in a very different painting. If you don't have a precise control over what you're doing, I have doubts about it as a masterpiece.

Michael Bonderer assays:

RothkoSam, easy boy! Kindly try to put Pollock specifically, and the Abstract Expressionists of the budding NY School Artists more generally, in the context of post Hiroshima/Nagasaki, post WW II ethos and emerging Cold War ethos of the late 40s and early 50s, to understand their aesthetic and important place in global art and their brilliance. Particularly interesting would be for you to trace Pollock's pre-Abstract Exprisionist work to see how he as an artist developed and emerged as a leading Abstract Expressionist. As the atom's understanding came to mass consciousness, you will see bio-morphic imagery present in many artists' work, including Pollock's. This gave rise to the 'explosive canvas' of Pollock and others and the magnificient 'color-field' work of Rothko, as they all came to grips and a better understanding of where we as a society were going on a certain level from 1945 to the present. Collecting and investing in art is an aesthetic and a lifestyle, and to do it well you really have to immerse yourself, e.g., Paris in the 20s and 30s, NYC in the late 40s, 50s and 60s, LA and SF Bay area in the 50s and 60s and 70s and the LA Chicano art of the 70s and 80s and now Shanghai today with its phenomenal present day contemporary pieces and artists. Sam, I kindly direct you to the Art Tab on Costco's web site!

Lon Evans adds:

Should this be 1910, Sam, you’d be offering to pass on any available Van Gogh.

Adam Robinson offers:

Cana Alas, what's not strong is modern art's grasp on what moves the human heart.

If anyone wants to take up the affirmative position that modern art resonates with the human soul and psyche anywhere near as much as does any Old Master painting, I'll take up the negative banner onto the debate field with gleeful alacrity.

As a rule of thumb, in any field of human production, whether art or literature or essay writing or science, I lay it down as axiomatic that the time and consideration that ought to be accorded to the appreciation and evaluation of human products is proportional to the time and consideration that went into their creation.

Some might argue that talent or brainpower ought to figure in to the calculus of merit, also, so for those who like to quantify things, let's say,

PT x BP/T = k x CAT (production time of creation times the creator's brain power/talent equals some positive constant times the claim on an audience's time)

Show me a piece of art — or an idea even — that took two years of a human being's life to conjure and produce, and another that took two days, and the assuming the talent of the creator's to be the same, I'll give the later maybe 1% as much of my time weighing and appreciating as I will the former.

Michael Bonderer explains:

Tang ZhigangAnd therein lies the adventure and challenge. To effectively emmerse oneself into the Shanghai art and media cognoscenti and find the Shanghai Pollock and Rothko and Diebenkorn. Scour the streets and allys and lofts for the work-product of the Tiananmen-inspired dissidents and new-found 21st Century Shanghai sensabilities. Maybe even find the Costco art-mill progenitor and take him out for tea and latte and pick his brain. He may be nothing more then a knuckle dragger, but then again, he may point you to a street that is having a new showing Friday night.

Jeff Watson responds:

There are some prefectly dreadful works from the Old Masters out there. Just go to the Prado or Louvre, and you'll see plenty of examples. While I'm not a fan of most modern art, I do like some of it, and have one piece in my collection. Good art is good art, in any genre, be it music, literature, or theater, and the heart will respond to to what's good. Some have pre-existing opinions on the merits of a certain genre, and it could cause them to miss out on something beautiful. Pre-existing opinions have cost me a lot of money in the market over the years, and this has taught me to sample everything, and keep an open mind.

Steve Leslie ponders:

Why is it that a painting of a nude is considered artform when a photograph can be considered pornography? As an addendum, do I need Freudian therapy if I am a fan of Robert Mapplethorpe?

Why would someone spend millions for a stolen work of art yet know in advance that he may never reveal it for public viewing?

Along the lines of burglary, How can billions of dollars worth of artwork be stolen every year and vanish for decades?

What happened to all the artwork that the Germans plundered from France, Italy, Denmark and other places during World War II and has not been seen since?

Where does someone draw the line between art and garbage? Along those lines what, defines Dali as a genius and not mildly psychotic?

Was Andy Warhol an accomplished artist because he drew for Campbell’s soup labels or in spite of it?

Who else thinks that Frank Frazetta is genius personified?

Are dogs playing poker classified as modern art, especially with the Phoenix-like rise in popularity of the game?

Do velvet Elvis paintings increase in value?

Alston Mabry postscribes:

I enjoy using artwork as wallpaper on my computers. Two very good sources are Mark Harden's Artchive and WebMuseum. It is crucial to get a good scan, that has decent color saturation and sharpness. For example, Hopper's Cape Cod Afternoon from WebMuseum, in which the colors are very rich, and you can actually see the grain of the canvas.



ColonelI attended YUM's (KFC parent) investor presentation six months ago, they spent 55 minutes out of an hour talking about their China growth strategy. it seems that with the exception of Chipotle and Qdoba, that fast food growth story will be coming from outside of the US. KFC, since it serves chicken — the universal all-religions-unite meat — should do well overseas. I hope its stock will get knoced down with the rest of the market on the fears of the US recession, it may provide a great opportunity to pick a truly global fast food chain.

David Lamb adds:

Down here in Panama there is the Multiplaza, an upscale shopping mall with a large food court. On any given day when I walk into this food court I'll see two very large lines. One is for Lenos and the other is for KFC. The Panamanians absolutely love KFC.

Steve Leslie extends:

Geographically speaking, look at what is going on in Asia and the Americas. Colombia is actually reforming itself from a banana republic steeped in corruption and drug warlords towards democracy and capitalism. Vietnam is evolving from a primal war-torn country to progressivism. Even isolated communist North Korea seems to want to partake in the benefits of free market capitalism. I heard during a most recent trip to the U.S. many members of the Cuba national soccer team asked for asylum. Bi-lingualism is a very sought after commodity. English/Spanish and English/Chinese are in great demand. The best thing a parent or grandparent can do for children is direct them toward a second language esp. at a very young age. All studies indicate that the earlier a child learns a language the faster he will grasp it and the longer he will retain it.



21I worked the East Coast blackjack circuit back in the 90s from Atlantic City through the Bahamas and Mississippi, not on the level of the MIT team profiled in the new film "21"  but I had full comps — RFB, show tickets and air. Mostly on the weekends. I did it for the comps and the travel. I read the books, Ed Thorp's Beat the Dealer, and Stanford Wong's Professional Blackjack. My bible became Million Dollar Blackjack by Ken Uston, perhaps the greatest blackjack player ever. Back then the game was beatable and you could still get single and double deck games in Mississippi. Played at the highest level and flawlessly and if the rules were fair — dealer stands on any 17 and player can double down on any two cards — the player had a 1.5% advantage over the house. Believe me, played alone it is a lonely grind. Uston perfected the counting strategy to three levels and organized teams working through the 70s and early 80s. Ultimately, he was barred virtually everywhere, and the teams were very hard to keep together. It has been nearly 10 years since I seriously played blackjack. I am not sure the game can be beaten today.



Jim Lorie

(Photo above: the late Professor James H. Lorie (1922-2005). An obituary appeared on this web site in August 2005.)

My experience with "false gestures" reached its climax at its inception as I accompanied Jim Lorie when he showed prospective University of Chicago professors to the Hyde Park neighborhood. He'd stop at The Unique Deli and conspicuously leave the keys in the car. The prospect would say "I thought it would be very dangerous here" and Jim would say "it's so safe here that I don't even have to worry about the car."

A highlight of my observation of false gestures came when I saw a distinguished Objectivist scholar, always dressed in formal suit and tie, stoop to play with a child at a lecture he gave where all the questions had to be submitted in writing in advance and I couldn't even ask him about the identical twins. The gesture was so false, so contrived, he was so obviously uncomfortable with kids that it was a laugh.

A third experience was watching a Japanese movie where the blond American proprietress of a Japanese wine shop spoke in Japanese to all the Japanese customers. It was so hilarious, so out of whack, that you understood immediately why Japanese think that any American who tries to speak their language, no matter how good his accent and grammar, is an utter charlatan.

A recent experience came when I asked an attorney whether it is good to look at the jury when testifying or look directly at the questioner. He said " the juries hate it when you look at them because they know you're treating them like sheep" and they really don't believe you're that much more sagacious and truthful and a man of the people than they.

I wonder what the significance of false gestures in the market is. It's almost a Googlewhack with just nine out of context, unrelated conjunctions of "stock market" and "false gestures." The move on Monday that's reversed on Tuesday comes to mind, or the move from 2:30 to 3:00, like today, up 1% on the Bear Stearns increase rumour immediately followed by down 2% on the Oracle shortfall of 1/3 of 1% on revenues. Yes, but the real ones are part of the "I'm the greatest" bag. They come when companies fudge the real reasons for their shortfall of earnings or insiders fudge their real reason for selling out – "it was just estate and family matters."

The whole subject calls for quantification and further examples in all fields related to investments.

Jeff Watson adds:

False gestures are the mother of all deceptions. From political campaigns to fire and brimstone preachers, all use false gestures to achieve their ends. The wheat market players have been known to use false gestures in the form of buying up three or four whole trainloads of wheat well before the futures market opening. When the cash board shows a smaller than expected amount of cash wheat coming to market, it can cause the futures market to move up, mostly retail driven. A savvy purchaser of the small cash position can sell a lot of wheat in the futures market at a higher price and also resell the cash position at a premium. Sometimes it works, sometimes it doesn't.

John White writes:

 On many occasions the market has been referred to as “the market mistress.” I find this to be an apt moniker because she shares many qualities with women. She’s complex, mysterious, seductive, and just when you think you’ve got her figured out, she surprises you. With that in mind I thought some observations from last night’s carousing with a friend (in celebration of a birthday) might shed some light.

One only need sit in a singles bar for an hour or two to observe hundreds of false gestures. Looking back on the mating rituals from an anthropological standpoint, it seems to me that the market (women) falls for, then identifies, and finally renders obsolete false gestures. Pick up lines are useless. Sending a drink across the bar is passé. “Do you come here often?” usually elicits a mocking laugh. Fortunately for market participants (men) there seems to be an unending supply of original false gestures due to everchanging cycles. Pick up lines are now a contest to see who can come up with the most outrageous and are obviously a joke. I have sent a drink across the bar, but it was a glass of water. The response was a playful tossing of ice back across the bar and a subsequent invitation for a conversation. When it comes to these false gestures, the key to success seems to be originality and timing. An original and unexpected false gesture can move the market drastically.

My final observation is that even the successful false gesture is merely a crutch. If there is no substance to back it up, the market reverses. It is useful for getting a date (trading), but not for getting a girlfriend/wife (investing).

Steve Leslie explains:

The classic false gesture in poker is the check-raise. Example: you are in a hold-em game and the flop hits your hand and you get a set. You are the first to act. Rather than bet the hand you check. An aggressive player behind you, who might have the top pair comes out swinging and forces the action by putting in a sizable bet. Now you come back at him, and reraise. Properly constructed and carried off, it is the most powerful and profitable play. I find that the player who has been reraised usually knows at this point that he is beat but just can't get away from the hand, and calls the reraise and you take down the pot.

Mike Humbert replies:

Whenever I listen to someone telling me how easy something like this is, e.g., winning at poker, picking winning stocks, etc., this scene from "Get Shorty" always comes to mind. BO CATLETT is Delroy Lindo; CHILI is John Travolta.

BO CATLETT: You know what I'm thinkin'? (leans forward) You wanna make the girl older. I don't like the ending. We could do that, you and me, sit down and write the script over where it needs it.

Chili fips through the movie script a moment . . .

CHILI: You know how to write one of these?

BO CATLETT: There's nothin' to know. You have an idea, you write down what you wanna say. Then you get somebody to add in the commas and sh*t where they belong, if you aren't positive yourself. Maybe fix up the spelling where you have some tricky words… although I've seen scripts where I know words weren't spelled right and there was hardly any commas in it at all. So I don't think it's too important. Anyway, you come to the last page you write in 'Fade out' and that's the end, you're done.

CHILI: That's all there is to it, huh?

BO CATLETT: That's all.

Chili sits forward, stabs out his cigarette, exhales into Bo Catlett's face . . .

CHILI: Then what the f*ck do I need you for?

Eric Blumenschein writes:

False gestures in speculation are not the same as in poker. In poker, you can see the card holders. The equivalent in trading would be six traders sitting in a circle at their screens and you six are the only traders of that particular instrument. Now imagine watching the other five and your screen. Watching price break a new low and looking around to see if anyone is squirming or sweating while others are looking back at you. In trading you don't see the other card holders. It is more like trying to play poker in a dark room around a huge table with only a match to see your hand and the flop is the Fed. So how do you play the game now? The commitment of traders model alone is not enough. I could go bankrupt waiting for them to break the trend. I can't see the game they are in? Are they hedging another kind of trade? What table are they at? What is the flop they are looking for: Housing Starts, Industrial Production, inverted yield curve? Does that make their hand? Now imagine in poker the dealer lays down six different flops to play and after each bet he may or may not make changes in a few cards in the different flops. Would you call that game poker?



Bull DurhamThe 1988 film Bull Durham, a favorite of mine, is simple yet highly entertaining, combining a series of twists and turns weaving comedy, passion, pathos into a finely crafted work.

Veteran minor-league catcher Crash Davis is assigned to the Class A Durham Bulls to handle the team's star rookie, wild pitcher "Nuke" LaLoosh. Team groupie Annie Savoy romances both players, creating a comic triangle.Kevin Costner plays Crash Davis, an aging career minor league catcher whose claim to fame is that he played in "The Show" for a few weeks and he is on pace to hit the most home runs in the minor leagues.Tim Robbins plays Ebbie Calvin "Nuke" Laloosh a Louisiana yokel who derives his nickname from the fact that he has a million dollar arm but is completely wild and unpredictable. He also has much to learn in an out of the game of baseball. Davis' job is to ensure that "Nuke" gets the training he needs so he gets to make it to the major leagues.Susan Sarandon plays Annie Savoy. Annie is groupie for the team who selects one player at the beginning of the season that she will remain attached to. She is a fan of Edith Piaf and teaches English at a local community college. For this season, she has selected "Nuke".

There is a memorable scene when Annie confronts Crash in his room complaining of the fact that as a result of "Nukes" learning process and Crash's mentoring, it is completely disrupting their love life.

She storms into Crash's home hysterically and during the height of the exchange quotes a passage from one of William Blakes most famous books, The Marriage of Heaven and Hell. From out of nowhere she blurts out " the road of excess leads to the palace of wisdom! William Blake!" Crash "William Blake?" Annie "William Blake!"

For some reason, this stands out in my mind and in many ways gives us an insight into the world of Annie and Crash at the same time. It also reveals ultimately where Annie's love truly lies.

I encourage everyone who is a fan of the game to watch Bull Durham and the series on WGN. I promise you will not be disappointed.



Obama comes at a time of dispair and disillusion and offers hope. There are two formulas for politics,

1. Hate+Fear =Power
2. Hope+Benefits =Votes

Obama is working both of these, the first more subtly, but he understands the dynamics. The ghost of Gene Burdick is alive and well.

Craig Bowles adds:

There are similarities to JFK. Young, good looking guy coming in after housing had a demographics boom that pushed it up right through the recession. Hope the rest of the story doesn't follow the same line.

Steve Leslie offers:

The most recent Gallup polls support this as Obama has opened up a 10 point edge over the Junior Senator from New York. All of this from a candidate who was not even on the political radar screen even nine months ago. Comparing and contrasting their policies, there is very little difference between the two.

Therefore there is something else going on here. It is almost like playing the game of Clue. Was it Professor Plum in the kitchen with the hammer or Miss Scarlett in the anteroom with the gun?

Obama may just be a more likable person or perceived as such. We can only offer conjecture as to this.

He could be seen as more trustworthy. He does not claim to have invented the Internet, been a decorated war hero, or named after a famous mountain climber who landed in war torn Bosnia like Rambo under intense fire.

He may be the repudiation of 20 years of a direct stranglehold of the Executive Branch of the Government by two families. Perhaps the American people feel that a new path should now be taken over traditional politics and now is the time.

It could be that his speeches include hope and opportunity and strike a chord with those who feel that they have been disenfranchised for too long and that their voices will be heard through him.

In all likelihood, it is a melange of the aforementioned. Whatever the reasons, he is very much a frontrunner and he stands a very real likelihood of winning his party’s support and backing at the convention in Denver in August.



DaHRiFDisasters and Heroic Rescues of Florida by E. Lynn Wright recounts the stories of 22 disasters in Florida starting with the Sinking of the Plate Fleet in 1710 and ending with wildfires in 1998 and a constellation of four hurricanes — Charlie, Francis , Ivan and Jeanne — in 2004. Florida is particularly prone to natural disasters because of its geographical position between the Gulf of Mexico and the Atlantic Ocean and its 12,000 miles of rivers and streams. However, the extent and prevalence of the disasters that have visited it seems to go over and above its geographic and geologic characteristics involving what seems to me a manifestation of the kind of character, promotion, and hopefulness that is engendered by warm weather, and extensive beachfront and recreational activity.

The author believes that a common characteristic of all these disasters is carelessness, ignorance, negligence, and greed. I would add that an aura of utopian thinking that nothing could go wrong as well as a lack of appreciation that the same disaster can strike twice,and a failure to appreciate that many seemingly improbably events are linked and that their conjunction is much more likely than normal multiplication of independent probabilities might suggest.

Take the Veterans Rescue Train Wipe Out of 1935 as an example, where 600 veterans imported to build a highway paralleling the Flagler East Coast Railway were drowned by a tidal wave hurricane in a rescue train. There was the utopian idea of creating work by building a public structure with inexperienced workers without local knowledge at the heart, faulty weather forecasts of a tropical disturbance that turned out to be 200 mile an hour winds, the event occurring on Labor Day, when the holiday caused hours of delay in gathering workers to get the train to the Ismeralda rescue site, usually reliable equipment that this time turned out to need repairs, a torn cable that held them to a standstill, a crane that got entangled with the train that took another hour away, and then finally a 20 foot tidal wave that did them in.

Many of the disasters seem to have signaled the beginning of real estate disasters shortly thereafter. For example the Great Citrus Freeze of 1895 came when central Florida and Daytona were in a boom stage with the orange crops adding revenues to the vacation homes and farms in the area. Developers Deland and Stetson were so sure of the boom that they guaranteed all the real estate buyers their money back. But a freeze came on Christmas Day in 1894 and ruined the citrus crops, and then when the growers relaxed, as they at least still had the trees and had lost only their income for the year. But two months later they were visited with an even worse freeze that destroyed all the fruits and seems to have cast a pall on the area. As the Tampa Time put it, "The Beauty is all gone from Florida. Everything is dead."

Similar declines in real estate followed the Capsize of the Prince Valdemar in 1926 in Miami, which seems to have had a direct causal link with the real estate bust in Florida in 1927 and then the stock market crash in 1929, and subsequent Depression. The chain of events is eerily similar to those playing out today, at least to the extent that the real estate bust caused the stock market crash. Perhaps the flooding of New Orleans will be seen as playing a similar role in the recent chain to that of the closing of the Miami Port caused by the Prince Valdemar.

The 22 disasters that are recounted in this book provides a good caution for all investors. Utopian visions have time and time again been dashed. Disasters that seem totally impossible occur with astonishing frequency.

Sam Marx explains:

HurricaneI lived through hurricanes Jeanne and Francis, that were 2-3 weeks apart and made landfall within eight miles of each other. This was a highly improbable event. The hurricanes were Category 2 when they passed over my house, but may have been a low Category 3 (130 mph) when they made landfall.

Because of the new building requirements of 1992, (Andrew was the motivator), the damage to my house was minor.  Most of the damage was to the trees. Records indicate that the last Category 3 in this area occurred over 50 years ago in Jupiter, 20 miles south and none ever recorded north of here in the last 90 years.

The heavy damage occurs on beachfront property, which Florida Governor Charlie Crist now wants to be paid for by all US taxpayers. I live 14 miles from the shore, and with the hurricane history of the area and the new building code I feel safe, but who knows. You take the great weather with the hurricanes.

The safest type of construction is a round house made of poured reinforced concrete with reinforced glass windows on raised ground. The roof is the most critical part of a house in a hurricane and it should be firmly secured to the reinforcing rods in the poured concrete.

Jeff Watson adds:

Sam makes some excellent points about the new building codes that are required in Florida. On my key, just south of Sarasota, there is strong evidence of the new codes that are being enacted. Builders are tearing down the existing homes and building new McMansions, employing much reinforced concrete, and adding elevation. From a visual perception, it is obvious that 200+ mph winds are factored into the designs. The new housing on this key is built on such a grand scale that it has changed the whole vibe of the place. Meanwhile, our 1926 cypress wood Conch House stands out as the lone reminder of what once was. Our cottage has survived many hurricanes, tropical storms, and fires without missing a beat. The designers did a good job on our cottage 80 years ago. The floors were built with a slight peak in the middle of the rooms, to allow storm surge water to run out of the house. Living at the beach, one must appreciate the grand forces of nature, the temporary aspect of existence, and man's insignificance in the whole scheme of things.

John Tierney marvels:

SurgeVic wrote "Disasters that seem totally impossible occur with astonishing frequency," and someone added "All of this drags down property values in storm prone areas of the USA."

Why is this surprising? By definition, a storm-prone area should have lower property values and higher insurance premia. Storms in areas that have been historically prone to them are neither unusual nor disastrous. "Disaster" is a term we apply to occurrences that result in the loss of human life and, increasingly, the loss of wealth. More properly, these are natural and inevitable phenomena — they are, if you will, part of an unbreakable cycle.The cycle may be ever-changing but it is certain that these periodic maladjustments will continue to occur. And those who are uninsured, under-insured, or who paid too dear a price will be hurt — again and again and again.

As it is in nature, so it is in the market. Bad times are inevitable and as fat tails occur with greater frequency than our probability tables would estimate, we must learn to expect the unexpected. We must also realize that government intervention cannot alter the unalterable. On the contrary, intrusive government in its paternalistic actions, encourages re-building where any building, except by those willing to assume all the risks, is inappropriate; and, in the markets, continued Federal action (reaction?), has encouraged the same groups and individuals to rebuild their castles on sandy soil.

Without this insurance, these occurrences would be just as unexpectedly frequent, but less harmful to the general population: the ultimate guarantors of poor fiscal policy. As Davy Crockett, a noted Tennessean, stated of his fellow  Congressmen: “Money with them is nothing but trash when it is to come out of the people. But it is the one great thing for which most of them are striving, and many of them sacrifice honor, integrity, and justice to obtain it.”

Steve Leslie writes:

HurricaneI moved to Florida 25 years ago and have lived in the same town since. I live on the Space Coast, equidistant between Jacksonville and Miami and 60 miles southeast of Orlando.When I first moved here, our city had swinging bridges that spanned the intracoastal waterway. They have long since been replaced with modern bridges. US1, a major thoroughfare, was two lanes and now is six lanes and cannot be expanded further. Most of the beachfront property has been developed and great restrictions have been imposed to slow down further building directly on the beach.

Commercialization on A1A is unmistakable and is beginning to look more like Daytona Beach than the sleepy town of Indialantic it once was. Beach erosion is a real problem and threatens property that has been around for decades. Laws have been passed to reduce lighting on the beach to avoid confusing loggerhead turtles who come ashore to lay their eggs.Wetlands have been exploited by real estate developers, and the challenge is to protect wildlife and retard the erosion of the Florida wetlands. The Florida panther, crocodile and alligator have been threatened species as are many other wildlife. Clams which used to thrive in the intracoastal have long since disappeared.

Probably the most profound real estate phenomenon in Brevard County is the largest manufactured home community in the state. Over 5,500 people who live in manufactured homes there. Many more manufactured home communities dot the county. This is a striking point considering the fact that Florida is particularly known for its hurricanes and unpredictable weather, especially lightning and tornadoes.

Florida is now the fourth-largest state in terms of population. Along with this come remarkable challenges. By all accounts, the trend will continue and populations will rise especially in the Latino community. Despite of what many think, not everyone in Florida is rich. There are vast pockets of poverty, especially in the Miami, Jacksonville and Tampa, that will continue to expand.

Yes, lessons have been learned, new building codes have been imposed, insurance laws tightened, yet it is like the horizon that one never reaches, it merely continues onward. There is a human cost to all thus that just can't be quantified. Yet I live here and this is my home and I will probably stay for some time. I hope I will adapt with the times and not become an anachronism.

Ken Smith extends:

LightningLightning strikes are another hazard in Florida. Discovery Channel once aired a story on a lightning belt in Florida. Government and university research people have placed structures in that belt to study lightning.

I am always excited by lightning storms, thunderstorms. I thought Florida would be ideal for living under them. Once my wife and I sat in our car — rubber wheels supporting us — on a lake in Glacier National Park, and watched a terrible, terrific, astounding display of lightning. Stayed until the little woman got nervous. I understand a vehicle should have a strap hanging from car frame to ground, although I have not researched this necessity.

The most spectacular storms I've witnessed were out in the deep ocean where only lone sailors are blessed with these visions. To see these lightning strikes accompanied by thunderous blasts of sound in the sky and 100 foot waves crashing into your home on the sea, these are ultimate experiences.

Dylan Distasio responds:

I've always loved lightning storms myself also. I remember watching a spectacular one when I was out in Arizona crackle across the wide open horizon.

Another time, I was actually caught in one while camping with my brother on a peak along the Appalachian Trail in Massachusetts, which while breathtaking, was also terrifying.

By the way, you should be fine in a car hit by lightning without a strap (or rubber tires for that matter). A car basically behaves as a Faraday cage where the charge is spread along the outer surface. I remember learning that in a physics class at some point, although I wouldn't want to test it out myself.



CovelThe Complete Turtle Trader: The Legend, the Lessons, the Results: Michael W. Covel, Collins, 2007

Mr Covel needs no introduction to DailySpec readers — he's remarked at length about Chair on his site, and vice versa. A few asides: GM Davies (!) is quoted at length on pg 99 [with attribution to DailySpec]… On pg 102 there's a discussion of quasi-Turtle Lucy Wyatt, who years later found her way to Chair's trading room, and shared some colorful stories about the proclivities of the trend-following greats… The Turtle trading "philosophy" and rules are discussed at length [as they are on the web also]; hint: buy twenty-day highs…

A smattering of highlights (with minor elisions), to give the flavor:

p  17/ Dennis told Willis, "If you're buying wheat and it's strong and the beans are two lower and the wheat is five higher, why don't you sell the soybeans instead of selling the wheat you bought?" It was a very sophisticated insight. In fact, buying "strength" and selling "weakness" short still befuddles investors.

p  18/ Dennis's attributing his height and weight as the reason he was successful is not the full story. There was more to becoming a millionaire by 25 than being "six foot something" and three hundred pounds plus. Even with excess weight, his peers described him as having cat-quick reflexes on the trading floor.

p  27/ Dennis knew the Turtles were "dumb stumps" and that the only reason they bought into everything was because he had made $200m. If he said "On Monday, you will buy the S&P when it's up exactly 35 ticks no matter what," all the Turtles would have gone over a cliff to follow orders. One Turtle said that when a guy has made $200m and he says "You can walk on water," people are going to say "Okay, I can walk on water."

p  45/ To those who saw them up close, Dennis had the capacity to make an observation in an instant that would take someone else weeks of painstaking math to figure out. Even Eckhardt marveled at Dennis's knack to intuitively see "it."

p  48/ One Turtle gushed in awe that Dennis still had the "balls" to execute that trade "when they were dumb, deaf and broke": "They were going the wrong way and for Dennis to just totally cover and totally reverse was amazing."

p 102/ All one Turtle could remember about Lucy Wyatt was that she was always doing her nails. Mike Cavalo said that Wyatt had been Eckhardt's girlfriend.

p 102/ Everyone knew Mondale was Dennis's guy. Dennis started going around the table asking everyone who he was voting for. One by one they all said "Mondale." They were his guests, and he was one of the richest guys around. However, when it was Gordon's turn he said "Gary Hart." Gordon knew he had just upset the trading king of Chicago.

Rich Dennisp 126/ Keefer, who thought Dennis deserved a Nobel Prize for his real-world work in harnessing volatility in his trading models, lamented the allocations aspect of the program: "You've got somebody that's got an awesome trading system and he's following really rigidly good protocols about trend trading, and then he just literally blows it up on asset allocation."

p 129/ It was over. Dennis sent a fax telling the Turtles that the program had been scuttled. Dennis, who was managing money for clients, too, had two public funds with Michael Milken's Drexel Burnham Lambert. They closed down with big losses.

p 130/ Dennis himself simply declared he was retiring. He announced he would move full time into political causes. He wanted to take the wind out of what he thought were efforts to make "liberal" a dirty word.

p 131/ Lawsuits soon followed as former clients in the Drexel funds argued that Dennis had deviated from his own rules. Eventually, US District Judge Milton Pollack agreed to a settlement in which nearly 6,000 investors shared $2.5m and got half of Dennis's trading profits over the next three years. Under the settlement, Dennis and his firms did not admit any wrongdoing.

p 133/ In the book "Market Wizards," author Jack Schwager softened the blow to Dennis's tough times by entitling his chapter "A Legend Retires." Schwager's Dennis chapter became a cult classic.

p 150/ Dennis staged another remarkable comeback. It would take him through most of the 1990s. Many investors were gun-shy about another Dennis comeback. In an effort to allay client fears, he assured everyone that his infamous discretion, his inability to not personally interfere with his own rules, had been eliminated. He said the computer was his new friend.

p 151/ In some ways, Dennis was a technophobe in the middle of the Internet revolution. He always said he could not program.

p 151/ Within a few years, Dennis was out of the game again. On September 29, 2000, Dennis Trading Group ceased trading and liquidated customer accounts. Burt Kozloff, an investor in Dennis's current fund, laid out the painful truth: "Dennis Trading Group was -50% down in June."

p 152/ While it was no solace for Richard Dennis, the moment when clients pulled funds from him in the fall of 2000 was a bottom for trend-following traders. Dennis's clients had panicked at the bottom and paid dearly.

Michael Covel clarifies: 

I did not have the opportunity to speak with Lucy Wyatt for my book, but I have talked with her extensively since its release. "Quasi" seems an incorrect description. She was a Turtle.

Dean Parisian recounts:

X Shaped DeskI was a salesman at Drexel Burnham Lambert in the 1980s and had clients in those RJD funds. The prospectuses put together for the RJD partnerships are to this day, the absolute finest, nicest, best-crafted marketing pieces produced. If ever there was a glossy, colorful marketing brochure this was it! One thing I will take with me to my grave stands out. In one of the calls that Richard Dennis gave to the Drexel brokers as to why his funds were being hammered and shuttered, he said, "the markets were behaving irrationally." Memory tells me they were designed to liquidate at a 50% drawdown and it wasn't more than a few weeks later that the markets he traded the funds in had reversed and skyrocketed upward. Only the lawyers made out big but it was the most equitable general partner / limited partner arrangement we had ever seen. Just another reminder to any brokers pitching partnerships to never forget the old saying, "on day one of a partnership the generals have all the experience and limiteds have all the money, on day two the generals have all the money and the limiteds are left with the experience."

Jim Sogi offers:

Jim SogiThe Complete Turtle Trader by Michael W.Covel is an interesting tale of volatility in the trading and careers of Richard Dennis and his Turtle traders in the thin style of popular financial journalism. Vic and Laurel, Covel and the Turtle traders have had disagreements over the issue of trend following, however, I believe that there is more to the Turtle and Eckhart/Dennis systems than Covel discloses. He seems to have oversimplified the Turtle systems down to the two simple trendfollowing systems S1 and S2, systems that have been disclosed and sold years ago.

I discount those two specific breakout systems — they have not worked in the recent past on equity indices. See Linda Raschke's Turtle Soup pattern. Whether they worked in the mid 1980s I have not tested. Covel's failure to note the systems' failure in equity indices in the recent past and the implication that these systems might still be effective is very unfortunate for poor readers who might be mislead to lose more than they have any right to as a result.

There are more similarities between the Eckhardt/Dennis systems and Vic and Laurel's ideas than many who follow this dispute seem to understand. The similarities of Richard's and Vic's careers are more notable than their differences. Both came from modest backgrounds. Both undertook to give back to the community and to other traders. Both saw huge successes and notable drawdowns. I am struck by the launch to success enjoyed by those mentored by both Richard and Vic.

Richard Dennis used the scientific method, using empirical data and tests of hypothesis with computer models to create trading systems. Reading between the lines, it is apparent that the remaining successful Turtles use other systems and appropriate testing to create trades. Covel misses the significance of this most important point. The Turtles' money management alone might have proven a key element. Unless a system is profitable, money management merely postpones the eventual ruin. However the statistical analysis of money management is a necessary part of proper trading as our friend Dr. McDonnell shows in his excellent book

Steve Leslie writes: 

This encompasses so many things that have been discussed on this site for the years that I have been visiting it. My top ten list of what I learned from Mike Covel's book:

10) Those who are willing can be taught almost anything.
9) Great people want to help others achieve great success.
8) Success in business requires tremendous concentration. Outside distractions must be avoided.
7) Sometimes it is best to leave politics to politicians.
6) Everyone fails at some point in his life. The true winners rebuild after their failures.
5) To put on a trade when everything is going against you requires character and commitment.
4) Rules are rules. Stick to them.
3) Adapt with the times. Be willing to be malleable.
2) Always leave yourself outs. Never commit everything to one position or to one person.

And the number one lesson:

1) The market is bigger, stronger and badder than you. Always respect it for the beast it is.



ShootistI remember John Wayne played J.B. Books in the movie "The Shootist." Ironically, the Duke played a role of a gunslinger dying of cancer. A boy in the movie had read all of J.B.'s legendary gunfights and commented to him how fast on the draw he musta been in his prime. J.B. answered to the young man that it wasn't a matter of how fast, "It's a matter of being willin'".

The funny thing is I feel that I'm more prepared to face the markets than ever before in my life. I realize those words in the movie also couldn't be more true, it doesn't matter how "quick to the draw" I am, it's a matter of bein' willin'! I wonder how many feel like me that their wills are being tested like never before?

I get the joke.

Steve Leslie adds:

This was the Duke's last movie, as he succumbed to cancer himself shortly thereafter. Ron Howard was the young reporter and the gunfighters who met him in the saloon for the final shootout were Richard Boone, who played Paladin of Have Gun will travel. His trademark was a chesspiece, the Knight, and it appeared on his calling card. Hugh O'Brien played Wyatt Earp in the 60s.This was also one of the rare movies that John Wayne actually died in. There were seven others:

The Cowboys (Killed by Bruce Dern)
The Alamo (Killed by Santa Anna's army)
The Sea Chase (Lost at sea)
Sands Of Iwo Jima (Killed by enemy sniper)
Wake of the Red Witch (Killed by giant squid)
Reap the Wild Wind (Drowned)

Special note: The Man Who Shot Liberty Valance, Jimmy Stewart, who played Rance Stoddard, visited his grave so we can assume that he died in the movie but not sure how.

All in all The Duke had starring roles in 142 movies. I'm a huge fan of the Duke.



Chick fil AWatched the market soar today as the Fed cut rates by 3/4%. Now the news tonight is full of political commentary by the pundits. This country is in serious trouble and the press is engulfed in picking apart someone's speech that he made today. Be ready for real estate to plummet and for some big builders to fall this summer as the subprime mess further unfolds .
The economy should be what everyone is addressing as it is affecting all of us and our cost of living. Yes our next President will have some input on what direction the USA goes, but our weak dollar, fuel costs, food increases across the board (especially eggs, milk, bread) should be our biggest concern.
I know one company that is bullish on our local economy: Chick-fil-A. They have been in our local mall for 12 years and are currently demolishing a closed Ponderosa and will begin constructing a free standing all-brick unit, with inside playground and drive-thru, that will employ 60-90 workers. People have to eat. My best friend owns the mall unit and will own/manage this one as well and it will be closed on Sunday. Chick-fil-A is an interesting story — owned in total by one family.

Steve Leslie writes:

Chick-fil-A is a real American story. I liken it to Dave Thomas, the founder of Wendy's. Entrepreneurs should read Truett Cathy's autobiography as well as some of his other books. He is a devout Baptist philanthropist and just a wonderful man and a great American. My stepson worked as a camp counselor in Georgia for the Cathy foundation. I can't say enough as to what an inspiring figure and icon he is.

On the business front, I recently saw an interview with Dan Cathy, Truett's son, who now runs the organization and he mentioned not surprisingly that they are aggressively expanding into China and Asia. On a marketing note, I think this is pure genius — a cow holding a placard with their slogan "Eat Mo Chikin."

Dan Costin adds:

Went through South Carolina a couple of weeks ago, subsisted on Chick-fil-A and Maurice Bessinger's barbeque. Both manage to antagonize various portions of the population (Maurice likes to display literature about alternative interpretations of Civil War outcomes in his stores, and flies a big Confederate flag) but you just leave your own values at the door and go in to enjoy the good food. Not unlike visiting foreign countries with different belief systems.



I had a friend in high school who had a habit of answering a question with the negative form of the same question.

"Who was at the party?"

"Who wasn't at the party?"

In this spirit, it seems appropriate to ask what markets are not making new highs. The following markets made new highs on Friday (some have already printed a Monday new high as well as of 9:40 EST):



10-year bond

Crude oil





The euro, pound, and natural gas narrowly missed new highs on Friday after making new highs on Thursday. Only the despised U.S. stock market is below the midpoint of its 20-day range.

Steve Leslie wonders:

Commodities in general are making a huge run. I am hearing now the drumbeats that portend $150/barrel oil, and higher commodities in general, most notable foodstuffs. On the other ledger, the U.S. dollar is making new lows, the Federal Reserve is lowering rates further and the stock market is caught in a band. Is this a natural coupling or are we heading into dangerous waters of a stagnant economy and higher inflation? If this is the case, is there much of anything the Federal Reserve can do to change the course of this ship and bolster the greenback and stem inflation, other than raise rates?



DrinkIn most pursuits it's a bad idea to burn bridges. Trading is an obvious example, if one keeps making all or nothing bets then sooner or later it's going to be nothing. Chess is like this too, the professional way of playing being to avoid leaving one's position so brittle that a failed attack means you are lost. This is why Bent Larsen liked to push his rook's pawns; an advance of this pawn rarely compromises one's position beyond hope.

There are also times that bridge burning can be good, when the bridge leads somewhere to which you never want to return. A good example is in throwing out old clothes after losing weight when retreat is no longer an option. Another is to announce to acquaintances that one is giving up the thing that lies on the other side of the bridge. Take your pick between booze, cigarettes and blondes, the statement makes it harder to go back because of the loss of face. One must, of course, mind losing face for this to work.

And this brings me nicely to the point of this email, I'm about to burn one of my own bridges with an announcement: A wonderful 30 year relationship I've had with (moderate amounts of) alcohol has recently come to an end. And I'm now left wondering why I didn't do this earlier.

Scott Brooks replies:

I've had a similiar experience.
When I first got into this business it was recommended that I read Tom Hopkins book "How to Master the Art of Selling". It was a very old-school book on selling (but hey, 20 years ago everything was old-school), but it did have some pretty profound advice that I decided to follow.
I'm going from memory here, but what Hopkins basically said was, "Remove all people and all things from your life that don't add value."

Then I made several decisions that I believe had an important impact on my life.

1. I stopped hanging around with a group of friends that were hoodoos
2. I gave up drinking altogether. I was never a heavy drinker, but not giving it up was symbolic to me in that it I believed it seperated me from the vast majority of people
3. I reaffirmed my commitment to not use four-letter words.
By far and away, giving up the hoodoo's was the best thing I ever did. But quiting drink and not using four-letter words is a constant reminder to myself (since most around me cuss or drink) that I hold myself to different standards, that are solely my own.
Now, I'm certainly not proselytizing my way of life to anyone reading this, nor do I look down on others that make choices that are different than mine.

Steve Leslie writes: 

To Nigel, I say, congratulations on your decision and I hope it has meaning for you beyond the physical benefits you will likely experiences.

The Outlaw Josey Wales said it best, “A man’s gotta know his limitations.”

I applaud Nigel for making a public and personal decision. I emphasize the word personal.

I agree that moderate drinking, consumption of fine food, recreational gambling, enjoying a fine cigar, or trading futures, in most cases is probably not very destructive. When it is a chronic condition when it might become a problem.

Even helping out those in need and advising others can be a noble pursuit.

Many of us are aware when this crosses the line and becomes destructive to our own lives.

For those who might not have the gift of discernment or may be too soft-hearted or gullible, it can be very helpful to have at your disposal an inner circle of advisors. It also is important to distinguish as to whom one includes in this circle. Napoleon Hill in his excellent book “Think and Grow Rich” discusses this in great detail. Others such as Tony Robbins, Zig Ziglar and Jim Rohn have also expounded the validity of such a strategy. It would serve us all well to visit Hill’s book and review his profound wisdom.

Nigel Davies replies:

Steve makes a good point that such decisions are personal. It wasn’t meant as a criticism of other peoples’ choice to drink either moderately or immoderately. In fact one of my all time favourite quotes is by former World Chess Champion Mikhail Tal, who on learning that the Soviet authorities were going to clamp down on vodka drinking exclaimed: “The State against vodka? I’m on the side of vodka!” It was vodka that killed him, by the way, though without the vodka he might not have been able to tolerate life in the USSR.

My purpose in going public was really just to keep myself in line; making a public declaration like this really binds you to the decision. And I made the choice to quit after starting not to feel too good the morning after even moderate consumption. This sudden intolerance could be a result of having taken up Zhan Zhuang (’standing like a tree’) some months back — I’ve been advised by that such practices can produce this kind of effect. Whatever the reason I can say that I now feel better than I have done in years. And it will be a sad day if I ever build a bridge to go back. 

Jeff Watson recounts:

I used to be guilty of not burning bridges, and it cost me dearly.  I got a reputation for being a shoulder to cry on, and found myself inserted into the problems and drama of others.  This took a physical and emotional toll on myself and my family, and I finally had to cry, "No Mas!"  About 15 years ago, I made a concerted effort to to free my life of all of this flotsam and jetsam, and the result of doing so has simplified everything in my life. I got away from negative people, the ones who suck the very lifeblood from your soul.  However, I do like to listen to hoodoos, encouraging them to give their views in great detail.  Hoodoos are great fade indicators, and I look forward to their views  like the Israelites devoured the manna from heaven.  I listen to them with a jaundiced ear, and never allow them to convince me that their views are right.  I learn a lot from them, and consider them a great source of what not to do and what to fade.  I've burned a few bridges in the past by not doing business with friends, not co-signing on loans, and not financing ill prepared business ventures.  Although I've disappointed a few people with my "Scrooge" like approach, life has been better for myself and my family, and that's what really counts.  The only bridge I never burned was that of my favorite charity.  Although it sucks up a lot of time and money, and I would personally be better off distancing myself, whenever they need something, I always answer their siren's call.

Chris James adds:

I used to have a lot of married friends who would often try to drag me into their fights to be on the man’s side or the women’s side. When I was younger I use to bite and take one side or the other only to deeply regret it later after they made up. The one I had sided against was not to pleasant to me for a long time.

This is probably a common experience for a lot of people…

Solved it with a one liner. No couple who hears it has ever bothered me again. “Listen, You guys don’t invite me when you make love so consider me dis-invited when you make trouble!”

Eric Falkenstein cautions:

I think in ridding oneself of people who don’t add value, it is important to take the long view. If you are the kind of person who only deigns to return calls or hang out with people in a position to do you favors, right now, you are all too common. You would be an unreliable friend or colleague, because when adversity hits, you can’t be counted on. Further, there are many behind you that engage in mercenary friendships, so you aren’t needed–a fun replacement who values my friendship for the favors I can bestow him is simple. Such a person would be constantly trying to get into asymmetric relationships, always the lower-status guy trying to get the better of his ‘friend’.

No one likes these people, for obvious reasons. Thus, relationships should be addressed with a long view, in terms of intellectual, business, or social growth. To the extent their interests are base, unenlightened, or self-destructive, you need to avoid them.



MLKOn that dark weekend in the 1320 area Kerviel's trades started to unwind and drove the market down in some thin weekend markets. After the 50 Billion sale was done, the market recovered, and thus was an example of what Harris calls trade volatility. The idea is that the 1320 area was the so called fundamental support and the outside influence drove it temporarily down. The last test of that area confirmed that hypothesis at 1320.25. The question going forward is whether the same holds true.

As to your theory about the casinos giving out statistics to lead gamblers the wrong way, when disclosing the statistics, the gambit is that having the true information leads the gamblers to a wrong conclusion falsely believing the odds are tilting in their favor or that the table is not fair, when in fact the table is fair and the odds are not tilted in the gambler's favor. The markets can do the converse gambit and that theory is worth considering which might work as follows: Statistics are cited or historically develop to show how fair the system is, how normal the distribution is, when behind the scenes dark secrets such as Kerviel's evils, government announcements known only to the few before the market announcements and other overweight influences skew the scales of distribution and justice. This is one of the mechanisms causing outliers that come with greater frequency and theory would predict. Physic's evil genie in the gas chamber. That being said, that prior weekend's posts from the public bragging about their short profits were very telling, as are many reports of mass liquidations from the market lows on main street. As Bacon said, "always copper the public's bets."

Steve Leslie writes:

White FlagI have long since given up on trading options, futures and commodities. I just cannot find an edge in these markets that is profitable in the long run. It is akin, albeit on a much smaller level, to Vic and Laurel's disclosing that they do not trade the bond markets anymore. I understand my limitations. I also have given up on looking for significant or absolute lows or highs. Instead I look for the "tweens." This is the area after a stock has broken out of a long base and has begun an advance. Or I look for an exit after a stock has outperformed for a period of time and appears "tired." This works for me and I am content to play in this world. Sometimes I leave plenty on the table for the next guy and that is OK. Revisiting gaming and markets, I am not sure the comparisons that can be drawn. I think most gamblers understand the rules of games are fair, and "cheating" by manipulating a wheel or not using all 52 cards does not happen. Furthermore they know the inherent statistics are against the player's winning in the long run,and they apply to all who partake without passion or prejudice. I am not so sure that in trading markets or investing in equities that they are as fair or equitable. Certainly insider information, manipulation of information and trading occurs constantly. Some in this arena have a decided advantage, and the speculator should always be cognizant of such. In the long run, these abuses tend to be smoothed out. However it is the short run that can kill you if you are not careful.



 It's common among fish and butterflies to have false eyes, usually directly opposite from the placement of the real eyes.

There appear to be three reasons for this. The eyes often mimic dangerous prey like snakes and scare off potential predators. The eyes also serve to fool predators who focus on the eyes of the prey and try to approach from the opposite direction so as not to be seen. The false eyes allow the butterfly or fish to escape in exactly the opposite direction from what is expected, after getting a good look at the killer. Finally, sexual selection seems to be involved with the false eyes being a conspicuous mark of health and attraction to the opposite sex, thereby increasing reproductive potential.

There is hardly any form of deception that is not grist for the deceivers in the market. The situation calls for testing and generalizations. The false eyes in the market often occur at the opening in Japan or Europe where the open in these countries at 19 GMT or 3 GMT to an inordinate extent are opposite from the eyes of the open in New York. I found some 330 occasions each during the last 10 years where the direction of the open in Europe was opposite the direction in New York, e.g. down in New York but up in Europe, or up in Europe but down in New York. I found that the false eyes were the ones in US, with the direction in Europe correct in the next few hours after the US open to a significant extent. The tendency while significant has waned recently in the constant coevolution of those trying not to be deceived unduly by frequent false signals.

As an aside, I saw some nice examples of false eyes at the Mandalay Bay aquarium, a commercial venture, which like so many such compared to those run by zoological societies and other non-profits gives the customer an infinitely more educational and enjoyable experience and thus is so much more popular. How many more people have been exposed to nature refuges and wildernesses at Disney than all other refuges? As Mark Penn notes, it's best to always conclude that people are smart and act in their own interests. The greater patronage at places like Mandalay, Disney, and Naples Zoo compared to their non-profit making rivals shows what people value.

Other false eyes in the market would have to include those who are always talking about the next bear market, or recession. They've been doing it since 1980, and they got one in the naughties. Eventually their eyes will see correctly again.

The study of false eyes led me to a review of false eyes in Go. A good summary of the game, talks about strategic moves in Go. They can be "to make eyes", "To hinder the formation of eyes". To create "False eyes" along with the intention to threaten or attack neighboring forces, to oppose junction, to escape Hama (Territory ) et al. I would like to call on some experts in Go to contribute to what strategies in the Game of Go have to teach us about markets as this appears to be one area out of the many thousands of connections and areas of overlap in games, nature or other pursuits which we have not yet explored.

Steve Leslie remarks: 

At the risk of being jejune or appearing insipid, retaining an iconoclastic perspective is not necessarily a bad thing. This would have proven valuable especially during uncharacteristically robust times, e.g. late 1999 with respect to the markets and late 2007 with respect to such stocks as Google, Apple and Research in Motion. A case can also be made that when things appear most dour or data at their bleakest, e.g. 1982, that a change in momentum might be in the not so distant future. When something is least clear is where opportunities abound. To "think outside the box" is to think for oneself and outside the pervasive wisdom at the moment and not to side with the party politic. Beware of lemmings and pied pipers! 

Pitt Maner III adds:

Go looks to be a very challenging game at the highest levels, for humans and especially for computer programs.

"The superiority of humans over computers in Go might also be explained in more humanistic terms. Go challenges computer algorithms because it requires broad pattern matching skills and a relatively intuitive approach, while chess favors an algorithmic solution because the focus is more localized (on the capture of a single piece) and the approach is more logical.

This discussion of the application of Monte Carlo techniques to Go might have parallels in the markets and be suggestive of other ideas.  Here also is a Wired interview with the Go programmer, Remi Coulom

From Coulom's website :

The game of Go is a difficult and exciting challenge for artificial intelligence research. Today, the best Go-playing programs are still far from the strength of the human masters. Nevertheless, machines have made very spectacular progress in the recent years thanks to the emergence of a new technique called Monte-Carlo tree search. In this lecture, I will explain the principle of Monte-Carlo tree search, and how it was used to build a strong program, Crazy Stone. 

Alston Mabry goes over some basics:

The objective of Go is to take and defend territory on the board, and capture the opponent's stones and territory. A stone, or group of contiguous stones, is captured if it is surrounded by enemy stones (or the edge of the board). An "eye" is an empty space inside of a group that gives it "life". However, one eye is not enough — if a group is surrounded, the last enemy stone can be placed in a single eye to capture the group. Life for the group can be secured against all attack only by having two internal eyes.

A "false eye" is an empty space, inside a group, that is "false" because some part of the eye's wall could actually be captured, thus destroying the eye.

Go is very much a game of risk and reward. Each move is both offense and defense. A defensive move meant to secure life for a group may create a strong formation from which to launch attacks. And the reverse: An aggressive move to claim territory may panic the enemy, but then as he defends, he may create a solid formation which threatens the aggressor. Now the aggressor must backpedal and play defensively to protect his outpost.

In Japanese the back and forth of risk and reward is captured in the word "sente". A player "has sente" if each of his moves forces a response from his opponent. In a tight game, sente passes back and forth between the players.

There is sente at the opening of the game, or "fuseki", when players are usually staking out territory and claiming corners. These are broad, strategic moves. And then there is sente in close, tactical situations, where the life of a group is threatened, and each threat forces a response.



VNThe bears pretended to go away last week when the S&P went up 5%. They left a 1 day decline of 18 points on Monday as a gift to bulls to buy, but when they did they were hit with a immediate 5% decline the next two days. Its very similar to the Trojan Horse left by the Greeks and one wonders if it's a general tendency that can be quantified. e.g. is there an inordinate tendency to visit the previous 20 day low?

One of the most non-economic things to a businessman is the inordinate tendency that analysts put on sales increases. One of the first things that good businesses do is winnow their customers down so that only the most profitable are there. The wealth of a business is increased when profits go up, not when sales go up. Any business can increase sales by selling low margin goods at a small profit. But the good businesses try to sell their products to the customers that have the greatest desire for it, as that way they can reduce the consumers surplus and increase profits. There must be some very flawed studies relating to biased data files that showed in the past that sales increases add additional information that the earnings changes don't reveal, and this has probably caused countless investors to sell stocks when profits increase and sales decrease or in the case of Cisco, or Microsoft, and countless others, the forecasted sales increase is not up to expectations. It must make treasurers who are business people very jaundiced concerning the rationality of investors when they run their business well, increase profits, in tough conditions, and find that their stock is killed when the sales level is below expectations. Any closely held business would think it magnificent to increase profits on reduced sales.

Perhaps the signaling effect of sales increases is mistaken for good business sense. I would hypothesize that companies that beat earnings forecasts but miss sales forecasts and go down in price perform substantially better than the averages.

Tarred by the same brush. How many times can the market do down irrationally when this or that indicator, this or that official, signals that the economy is not growing as fast as it has in the past x years.Forget about the fact that each months figures are generally reversed or revised in the next announcement,and that the figures generally are meaningless because of special seasonal adjustments, and assumptions, and political tinkering in many cases, and that sometimes bad sales for a retailer and many others is much better than good sales because it means they got rid of all the good stuff in the previous month. Suppose the worst is true, and the rate of growth slowed from  3% to 0% or -1%. ? The recession would be brief, the bounce would come, and what difference does it make if the economy goes down  1%, then up 4% two years versus up 3% each year. Stocks are supposed to be valued based on an infinite stream of discounted earnings. That's not affected by one years change in the path. Nor are recessions a good time to sell stocks as the same way when the market turns down when the news is recessionary, the market will look for any silver lining for a change in direction when the economy is in the doldrums.

The Nikkei which closes at 0115 gmt continues to forecast the US market with reasonable accuracy . The most recent was the 5% decline on 2 06 in Japan which forecasted the subsequent 2% decline in the US on 2 06. The Nikkei closed at 13080 on wed morning in the us. It is trading at 13060 as I write, up from a 13005 open.

Dan Grossman wonders:

DVGPerhaps modern tech businesses like Microsoft and Cisco have such high gross margins that sales are always profitable and it is never good to have sales growing at less than forecast by management or predicted by analysts.

You and I are used to old-time businesses with low margins and high overheads that have variable aspects. In these businesses it would sometimes be valuable to get rid of less profitable customers. But perhaps in the software business with 70 and 80% margins,  no customer is worth getting rid of.

Steve Leslie comments:

I have always thought that earnings can be anything you want them to be, based on accounting choices such as depreciation rules, depletion, inventories, not to mention shell accounts (ENRON), outright fraud, and other sophisticated techniques and methods. However sales are what they are. You either sold a product or you did not. It is a more objective indicator.

Price to Sales Ratio (PSR) is just one useful measure. I am sure there are a host of others that the fundamentalist can use to extract information out of a company’s cash flow statement and balance sheet.

I like to use services such as IBD and research companies such as Zack’s and Value Line to provide valuable information and I go from there.



Leather JacketBo Keely wrote me once when I made a comment about an expensive leather jacket that I intended to wear to my trip to his little village in the desert.  Keely admonished me, saying upscale dress was a good way to get mugged when traveling.

Of course if you are traveling first class, staying in five-star hotels, using limos to shuttle between airport and hotel, taxi to shuttle from event to event, then the journey is safe.  But I can't travel first class, I stay in motels not hotels, I walk around to avoid taxi charges, I  use public transportation systems.

So I took Keely's advice — put the leather jacket back on the closet hanger.  I have two fine leather jackets — except one is pigskin, made in China. I do not like pig, did not think of what animal the jacket skin might be when I bought it on sale — just thought of the price, was a steal; except it is pig.

The other jacket is tailored, fits like an Eisenhower. Maybe off a Kentucky Derby animal. Bought it at Nordstrom 30 years ago and it's a grand style to wear.  Only thing about it is I wore it to an AA meeting once and a recovering female alcoholic commented "Jesus, we don't need another leather jacket in this group."  I guess she was making a statement about gay dress, seeing the style for gays at that time was to dress in leather.

Steve Leslie remarks:

In the movie American Gangster there is a scene where Denzel Washington, who plays the gangster Frank Lucas, wears a mink coat with a mink hat to Madison Square Garden for a heavyweight boxing match. Detective Richie Roberts, played by Russell Crowe, takes pictures of people in the front rows around the ring. This helps Crowe in identifying Denzel as the drug kingpin that he is looking for. Up to this point, Denzel had always kept a low profile, thus allowing him to fly beneath the radar of the police. This one gaffe ultimately leads to a subsequent investigation, arrest and conviction. 

Riz Din adds:

In addition to its functional role, clothing clearly acts as a signaling mechanism. Another place where it is may be better to dress down is when taking one's car to the garage for repairs; dressing smartly signals a wealthy person who probably doesn't know his manifold sprocket from his flux capacitor.

Bruno Ombreux extends:

This is a very European attitude. In France, there is a saying: "pour vivre heureux, vivons cachés." That is: to live happily, live stealthly. I had a great aunt which had a lot of money. She dressed so poorly that one day she went to place Vendôme to one of those luxury jewelers with the intention of buying some trinkets. She was denied entrance by the bouncer: "Sorry Madam, we don't think you can afford the merchandise in this place".

In England, really old blue-blooded money consider it a lack of taste to display wealth. They'll go as far as having domestics wear their new clothes so that the clothes acquire quickly the aged patina that makes them wearable to the wealthy.



Resistance/SupportThe concepts of support, resistance and pivot points became such widely accepted market concepts that one is amazed how every market book mentions them freely as if the reader is supposed to know what they mean and how they should be traded.

In Alchemy of Finance, even the philosophic palindrome mentions them in his real time experiment and how he trades them. Same with, dare I say all the immortals including Paul Tudor Jones among others.

Now, I will not debate the validity of these concepts nor will I question the wisdom of the immortals here but I have a very genuine question about applying these ideas to indices.

You hear all the time that the (pick your index), let's say S&P500 hit a major support (pivot) point that should be watched very closely and if broken will signal the beginning of the bear market. A statement one hears frequently nowadays.

Now, if you consider that the S&P is made up of 500 companies, these 500 companies have each their own support and resistance levels that are tradeable in the same manner as the index, doesn't that mean that the S&P500 index resistance and support levels really reflect nothing and only represent arbitrary numbers that reflect where its components are at, and that the main premise of pivots, support and resistance levels on the index is a faulty concept?

In other words, if we take the extreme case where all the 500 companies are trading at a support level, this doesn't necessarily mean by definition that the representative index is trading at a support level on the chart. It can be trading at one arbitrary point on the chart with no significance to a chartist. Yet, this point is indirectly significant since it represents a colllective support (all the 500 companies are at a support level).

The other extreme case is where none of the companies is trading at a support level but the S&P is trading at what chartists call a support. In this case, what is the significance of the support level of the index (or the pivot point), if all the components of the index are trading in the more fluid level of no support.

For the sake of public disclosure I do not believe in support or resistance levels but am trying to get educated on how the other side thinks so one is well prepared to react or even change one's mind in extreme situations.

Larry Williams chimes in:

I am a doubter of support and resistance, but I am a user or short term highs and lows as they can be mechanically constructed and tested.

And, furthermore, even something that does not work (in my book that would be Support/Resistance, Fibonacci, etc.) may be of value if it forces a trader to use those points as stops or targets. At least you have an approach and something that says get out; limit your losses, or well enough; take profits. Yes, even if they are meaningless they can be of value if they add some form of discipline.

Steve Leslie offers:

I agree that the indices are fluid and not static. Individual stocks are added and subtracted all the time. Therefore it is quite difficult to draw conclusions based exclusively on this and across time. This is akin to comparing athletes across different generations. However two points can be made. First, they can be a good indicator of the general mood or tenor of the particular market that one is studying. The psychology if you will. And the psychology of the market is very critical to performance. Second, If one studies the overall market, one should study the various submarkets as well. The S&P 500, S&P 400, Transports, Utilities, Russell 1000, Russell 2000, NASDAQ, Value Line, Wilshire, etc. A composite can develop. A pastiche. Remember that as in all things, trading is a business of imperfect knowledge and imperfect information. Therefore nothing is absolute. Better to err on the side of caution at times and try not to extract too much from something that can not provide it. As we know, even the very exceptional traders have tough times and lose money. The key to trading is money management.

Eric Blumenschein writes:

The S&P financial contracts are traded for different reasons then the component companies that make up the S&P Index. I know it is obvious but it has not been stated yet. Certainly there are correlating movements some of the time and with some companies and often a lot of the time with a lot of the companies, but in the absence of a definable edge which may already be in use in some blackbox algorithm, it's all just noise. I suppose an edge worthy to explore for me as a daytrader is to know what percentage of the 500 companies currently register on some intraday interval, either above or below their previous day close. That may or may not be relevant to a trade I would take on the S&P eminis. It may make a difference to equally weight each of the 500 companies or slant the weighting to the largest ones or perhaps the smallest ones. If I was a position trader then perhaps there should be separate percentages to defensive issues vs speculative ones. That may or may not be valuable. 



DawnLet me start out by saying: 2007 was the worst year in my investing career in terms of performance relative to the market. But I am very positive about the future. Maybe I'm not smart enough to see all the bad news coming down the pike and all the gloom and doom it portends. But I can't help myself — maybe I'm cursed with a never ending positive attitude.
An article I was reading today mentioned that the loss of jobs last month was the worst since August of 2003. When one looks at the S&P on that date, you find that it was at 990. Today it sits at 1424. If you had bought into that "news" and held the S&P through today, you would have gotten an 8.2% return on your money, not including dividends.
Another bright side of increased unemployment is that employers have the opportunity to hire better employees. As a small businessman, I can tell you that as much as everyone likes hearing about low unemployment, there are problems associated with it. It's hard to hire good help when it's an employee's market. Potential employees can really ramp up their asking price and make it difficult for the small guys and "up and comers" to hire good people.
Another positive by-product of higher unemployment is that it releases trapped assets. Just as the death of a deer releases assets into ecosystem by feeding predators, scavengers, and fertilizing the ground at the point of death, as well as making more food available to other deer in the area (deer that are healthier and have more life and vitality ahead of them), releasing employees from the shackels of their current employment frees them up to succeed elsewhere.

Here's how. An employee can get stuck in a rut at a job. Eventually, a lot of employees change their work habits so that they do just enough to not get fired, and the employers pay them just enough so they don't quit. Not exactly a recipe for success! Further, sometimes, employees get complacent in their jobs and develop a fear of leaving and trying out their new great ideas. Most people have a modicum of creativity in them, and most people have, in their lifetime, at least one good/great idea that could not only make the world a better place, but could enrich their lives too!
But because they are complacent in their jobs and have developed a certain lifestyle as a result of their income, they are fearful to strike out on their own and make a go of it. They are fearful that they could lose what they've worked so hard to get.
Maybe they're fearful that they'll lose their home — which leads us to the subprime situation. Many people have lost their homes in the last year, and according to reports I've been reading, many more are likely to lose theirs this year.
What a great opportunity!

This economic contraction will force these people to use the power of their minds to create the money that they need get back what they had before. You see, once someone has a taste of a higher standard of living, he wants to keep it! Many of these people are going to now be forced to start their own businesses and implement those good/great ideas!
Many of them will use this opportunity to go back to school to further their education and better themselves to get that higher paying job! Many will take jobs at small businesses that they may viewed as too risky to work for in the past. And as we all know, small businesses offer greater freedom of thought and opportunities to be creative than do rigid established corporations.

The greatest wealth is created during the bad times. It's easy to make money and create wealth when things are going well. Think about all the wealth that was created just 10 short years ago with the dotcom explosion. Where are all those people today?
Economic contraction is creating opportunities for each of us to create real wealth for ourselves.

Does it bother me that 2007 was my worst year? Sure. But only for a minute! I can't afford to waste time having a pity party. I have to use the power of my mind to figure out what I could have done differently and falsify my previous belief structure and figure out how to create wealth for my clients and me. As a result, I have been spending money like crazy, dipping deep into my nest egg to improve myself, and hiring good people, even offering equity positions to some of these people in the different companies that I own. You see, I want to surrond myself with great people who will see the world differently than I, help me see where I — and now 'we' — can do better for my — now 'our' — clients. To create wealth for them, for me, and for my new employees and partners.

Maybe I'm crazy for doing this. Maybe spending my modest nest egg and giving away equity positions will break me. If that happens, I will be disappointed. But only for a little while.
You see, I'm not worried about losing it all (I've already had that happen to me in my life). I got it all once, I remember how I got it, and I'm more than capable of getting it all back!
The world is full of opportunity. Every contraction is filled with opportunity. 2008 will be a good year!

Steve Leslie writes:

Employment numbers can be misleading.

1) Backward looking and unstable.
2) Seasonal.
3) What does it truly measure, i.e, who is unemployed?

Someone once said “it is a recession when your neighbor is unemployed; it is a depression when you are.”

The unemployment rate is at 5%. Oldtimers will remember that 5% used to be a magical number that meant the job market was at full employment.

Thirty year mortgages are 5.5-6.0% for those who can get them. This number used to be very desirable.

The Fed has a scheduled meeting this month. Of course they do not have to wait until then to act.

This is the worst start to the year since 1932. The worst start of the S&P since 2000. NASDAQ had a terrible six days in a row.

A bad week by any measure for longs. One monkey does not close the show, however. Long way to go, over 360 days left in the year.

When fear sets in, time gets compressed.



"It is not your money until you sell it" is one of the few tried and true maxims that have withstood the test of time. The other one I have found useful is, "there are great companies and great stocks, and they are not necessarily coincident in time."

The values on brokerage statements or mutual fund reports are a snapshot in time. More importantly, they are merely numbers, although they do reflect real dollars. Until they are converted to dollars the prices are truly ephemeral and deceptive. As investors, we need to be reminded of this.

In July 2007 I sold some shares of Merrill Lynch at $93 per share. This price was right near the all-time high for the stock. I had held the shares long term, therefore there was no reason to continue holding it any longer for tax reasons. Long-term tax is the lowest tax that an individual can hope to pay. I made a conscious decision to sell the shares. In retrospect, I am very happy with my decision. The stock is in the $52 range six months later.

In late 1999, share prices for MSFT, CSCO, ORCL were astronomical. Cisco was priced at $80, Oracle at $45 and Microsoft at $60. These three carried the NASDAQ market for the balance of 1999 and since then the share prices have totally collapsed. Seven years later and they have yet to even come close to their prices back then. JDS Uniphase was priced at approximately $140 per share, falling precipitously to under a $1.

Fast forward to today and the three major stocks that have carried the NASDAQ through 2007 are Google, Apple and Research in Motion. Each is at an all-time high. Without the Big Three, the NASDAQ index would be far lower.

When we step up to a table game, be it blackjack, roulette, poker or baccarat, we immediately convert our dollars into chips. That is for several reasons. The first is convenience. It is far easier to bet chips than it is to bet money. Once the money is converted to chips we tend to lose sight of the fact that we are wagering real money. Psychologically, it becomes play money. In fact, a common phrase in a casino is "I am just passing chips around." Now when we are finished with our gaming session, if we want to cash in our chips, the cashier is invariable located at the far back of the casino. After we cash our chips into money again, we now have to pass by all the gaming tables and roulette machines before we get to the restaurants, the performing hall, or our room. This allows us plenty of opportunity to spend those dollars on other games of chance.

Yes whether one trades stocks, bonds, futures, or forex, one needs to always keep in mind is the price is good for only that point in time and that until you sell those shares or contracts, it is not your money.



CBOTI probably have enough info gleaned from old-time pit traders to write a large book. I loved to hear the stories and teachings those old guys had to share, and sought out as much of it as they were willing to tell me. However, much of that information is anecdotal and it would be hard to apply the scientific method to most of it. I did learn a whole bag of tricks for extracting extra cash while trading in the pit, but most of the tricks are either mechanical in nature, or educated guesses (such as estimating how much wheat is for sale in the pit at any given time).

I did learn one slam-dunk way of pulling out money out of the pit. I worked hard at identifying new, inexperienced traders who were certain losers, and fading all their trades. This technique worked out very well for me. However, identifying certain losers is a skill in itself and takes time to develop. Pit traders can have a special insight/feel for the market, but only the net winners have that feel. A majority of those who step up to the plate to trade don't make money, and fade into oblivion.

Steve Leslie responds:

In poker, the professionals are sharks; they prey on the weak, in poker vernacular, the dead money. That is why they are called fishes or pigeons. Professionals avoid tangling with each other — it is far easier to exploit the weakness of the youthful or inexperienced rather than the wizened veteran. Therefore the professional uses time to his advantage by patiently waiting for the amateur to venture out into the waters and make a mistake. It is similar to the Highlander television show from some years back. For the Highlander to gain more power, he must kill his adversary by taking off his head. Same in poker, by destroying your opponent you assume his chips and as a result, his power.

Larry Williams extends:

While the gummint guys say, and rightfully so, "Past performance is no assurance of future success" there is one exception to this I have found and isolated: Advisors, funds, newsletters, etc., that have not done well in the past will not do well in the future. Jeff's pit wisdom does spill over to outside the pits as well.

Phil McDonnell adds:

I performed an analysis a year ago that showed that among mutual funds the worst performers were predictably among the worst in the next time period as well. The results were statistically significant for the worst group. However among the best performing funds there was no correlation. Superior performance did not persist probably because many people  mimic the trading styles of the most successful traders of the last time period. It is a bit like the generals who are always fighting the last war.

Steve Leslie writes:

Ken HeebnerI hope this complements Dr. McDonnell's work since I am sure he did some deep research on this. With respect to his comments a few points can be made.

First, I assume that he is talking about open-ended mutual funds. There are significant differences between open-ended funds and close-ended funds. And even open-ended funds who no longer accept new accounts but only money from existing shareholders. This is a very complex field, evaluating performance of mutual funds because there are so many variables that exist in the arena. Fund managers change, inflow of capital, hot markets such as large cap growth, value, international, etc. With respect to performance my first question would be how performance was measured. Was it against an index or against a peer group? For example if a fund were a midcap growth fund, was the evaluation against other midcap funds or against the Russell 1000, S&P, etc. In short, were these absolute performance or relative performance comparisons?

When I was a broker, I know that if a fund had exceptional performance the prior year, the sales rep for the company would come in and push performance. Then the brokers would take the literature and push it to the clients. Money would flow into the fund, making it more difficult for the manager to manage. Therefore the fund was a victim of its own success and performance would suffer. The most startling examples of this were in the late 1990s and 2000 when tech funds had great absolute numbers. Every sales rep who came into the office was pushing these funds. Dramatic amounts of money would flow into the funds thus putting tremendous pressure on the managers. All the clients wanted to buy were the hot funds. Nobody would buy value funds, which over the next several years would have been the proper investment.

Next is, what style does the manager employ, growth vs value, largecap vs midcap vs smallcap vs international? One year may be too short a time to evaluate superior performance of mutual funds — 3, 5, 10 year numbers are much better barometers of perfomance. Trends in the market can last longer than just one year. For example over the last 3-4 years international funds have had their day in the sun. I am confident the worm will turn and they will begin to tire. The next hot sector may be largecap U.S. growth, or other sectors. The jury is out on this. In fact, the Morningstar five-star ratings system is based on 3 year past performance. I believe the highest-rated Morningstar funds for the past three years tend to be worse absolute performers the next three. Conversely, the worst performers the last three years, the one stars, can be the best performance group. Once again the dynamics are in place for things to change.

Finally there are some fund managers who have withstood the test of time. Ralph Wanger, Kenneth Heebner, Bob Olstein, Bill Miller, to name a few, all have had stellar long term results but even they have had bad years.

Ken Smith remarks:

Performance in youth does not predict performance in aged. Performance in pre-marital bed does not predict marriage results. Performance in school does not predict performance at work. And so on.

Dr. McDonnell worked on performance of top mutual funds, found we can't predict future from present results.  I have looked at charts for many years, in fact I began at age 22.  Now just short of age 79.  Of course there was a hiatus when charts were not available.  Overall my experience determined a squiggle on a chart from five years ago will not correlate with a squiggle I will find when the market opens next year.

Marion Dreyfus agrees:

What Ken says in regard to former performance not being valid for future success should be received doctrine, and yet seems not to be. In terms of financial investments, people extrapolate out as if the law is concrete: If it returned 8% in the past 10 years, it will continue to run that way in the future. We take a lifetime to unlearn easy mistakes.



Dr. StrangeloveOr, how I learned to stop worrying and love the market.

The really old people on this site (myself included), will realize that this is a reference to the classic satire film Dr. Strangelove, one of the great cult movies of all time. It presents a scenario as to how simple it could be to effectively start a nuclear war. The storyline is about a Lt. Colonel who goes insane and orders a nuclear attack on the Soviet Union. Only the President of the United States (impeccably played by Peter Sellers) can avert the tragedy. Is this comedy? Is it drama? Stanley Kubrick, who directed the movie, leaves it up to the audience to decide, by marvelously weaving a tapestry of twists and turns that, in the end, leaves the audience wondering: can something like this really happen?

I mention the movie because I am fascinated by the human condition and moreover I marvel at the predictability and unpredictability of man and his impact on the markets. What does this have to do with the speculator? I think this has everything to do with the speculator.

While watching CNBC this morning, I noticed that the staff and producers are reaching into their bag of tricks to fill in air time on a truncated day due in part to the market's being attenuated by closing at 1PM and traders having other thoughts on their minds with visions of sugarplums dancing in their heads. Many have already left their stations and either have taken the week off or might even have taken the rest of the year off.

The show is bringing on the same old tired guests with the same old stories and banging the same old drums. Seemingly anyone who can fog a mirror is invited to appear. Original thought is all but absent. Where is the best place to invest for 2008? What year end strategies should be practiced at this time? On and on goes the same old tired wheel and its grinds and it grinds.

How might the speculator take advantage of this.

First and foremost, I would begin by putting in the effort during this slow time to evaluate the effectiveness of whatever investment strategies you utilized this past year. Now is the time to be brutally candid with yourself and determine where you had your greatest successes where you failed and where you might improve. Most importantly, how did such strategies and methodologies translate in money over the year. How can the successful strategies be replicated and which ones need to be abandoned.

If done properly, this will take some time. It is not a 15 minute exercise. Many of us will not do this as it is far easier to avoid pain than it is to seek pleasure. Or as Al Pacino said in "Scent of a Woman", for me I knew there were two paths that I could take the easy path and the hard path and I chose the easy path because the other one was just too damn hard.

Bear Bryant said The price of success is high. That is why many are not successful. They just do not want to put in the extra effort. They want the success, they just don't want to work for it.

Secondly, if you have not already done so, start your business plan for the next year. Remember there is no time like the present to do this. Also remember that most speculators do not do this. The successful ones do. I believe that the number one reason why people are not successful in investing is that they do not take the time to work on their craft. And many more wait too long to put their plan into place.

Someone also said successful people hate doing the same things that unsuccessful people hate doing but they do it anyway. And if it is worth doing at all, it is worth doing well.

It is an interesting phenomenon that Health Clubs experience their greatest membership increase during the month of January. They also witness the largest attendance to be on the first day of the week. By the end of the week, many health clubs are like ghost towns. The ones who experience the largest results and the ones who treat December like January and Sunday like Monday.

Donald Trump regularly states that the main reason that he was able to survive through the late 1980's and early 1990's and ultimately prosper in the latter years is that he never gave up. He kept pushing onward long after the writers stopped writing about his demise. Say what you will about Trump and love him or hate him, he does have some qualities that can be studied and embraced. Tenacity could very well be one of them.

Thirdly, the speculator understands that in order to be successful that they need to learn to respond to the markets and not react. It is better to respond than react. When a physician prescribes medicine for you, if the results are positive he states that you are responding to the medication, if the results are negative, you are reacting to it. Anticipate and then adjust. Aye there's the rub!

Finally, the speculator understands that there is no quick fix to anything. That investing is a journey rather than a destination and in essence they never arrive the evolve. Markets are to be played by the year and not the day. Work each day with focus and clarity and the year will take care of itself. The highs and lows will ultimately be flattened out and the median will become defined and hopefully, they will experience some joy along the way to make the journey worthwhile.

I hope that this holiday season is one of enjoyment and pleasure and the New Year brings you everything that you hope and dream for.



Lou HoltzOne person I have admired over the years is Lou Holtz.

Louis Leo Holtz (born on January 6, 1937 in Follansbee, West Virginia) is an author, television commentator, motivational speaker, and former NCAA football and NFL head coach. Holtz is the only coach in NCAA history to lead six different programs to bowl games and the only coach to guide four different programs to final top 20 rankings. He is also a multiple winner of Coach of the Year honors.

Many remember him as head coach of one of the most storied college programs, The University of Notre Dame. There he took over a program in 1986 that was mired in mediocrity after suffering for five long years under the guidance of the very forgettable Gerry Faust. By his third year he led the Irish to an undefeated season and a national title. Between 1988 and 1993, Holtz's teams posted an overall 64-9-1 docket. He also took the Irish to bowl games for nine consecutive seasons, still a Notre Dame record despite consistently having one of the most difficult schedules in the country.

Prior to Notre Dame, Lou developed a reputation of being a turnaround specialist, dramatically changing around such programs as North Carolina State, Arkansas, and Minnesota. After a brief retirement in 1999 he assumed the head coaching duties at South Carolina, which had just completed a 1-10 record. Holtz went winless in his first campaign but in his second year his team went to the Outback Bowl and defeated Ohio State. The next season the team went back to the Outback Bowl and defeated Ohio State again.

He is consistently sought after as a motivational speaker and is a sports commentator on ESPN.

I had the pleasure of meeting Lou in Orlando when he was a guest speaker at a sales conference some years back after his retirement from Notre Dame. His enthusiasm was overwhelming and his speech was polished and compelling and despite his diminutive size of 5'9" and 150 lbs he is a commanding presence and personality. His speeches are a blend of Mark Twain and Will Rogers, and once you have been around the man you won't soon forget him or his message.

There are many great quips that I could quote but I will share one particular one that I think is quite appropriate for one who speculates in the financial markets.

"In life things are never as good as you think they are nor as bad, they are usually somewhere in between."



HGHGiven the remarkable performance of older players like Clemens and Pettitt, has anyone pointed out that perhaps one of the main thrusts of investigation should be whether there would be a beneficial effect for all of us in using moderate replacement quantities of substances like steroids and HGH that decline significantly with age?

I for one would like to know more and would appreciate article citations, book recommendations, and information on physicians specializing in the field.

Chris Cooper replies:

Such beneficial effects are apparent to anybody with an open mind. Nevertheless, the idea that a performance-enhancing drug might actually make you healthier is the kind of message that is not acceptable to the mainstream.  Aging is not "normal", it is a disease, and should be attacked like any other disease, with an eye to minimizing the deleterious effects.

What you are referring to is often called hormone replacement therapy (HRT).  The approach is to use drugs and nutrients to bring the body's hormonal balance back to what it was when you were a young man.  Is it surprising that if you achieve this, you actually feel much more like a young man?  Why does our culture consider this to be undesirable?  My goal is not simply to be healthy as it is commonly defined, but to strive for optimal health, a very different concept.

A good book to start with was written by my doctor Philip Lee Miller, called Life Extension Revolution: The New Science of Growing Older without Aging. Dr. Miller is in the SF Bay area. Also I've heard good things about the Kronos Centre in Phoenix.

Janice Dorn writes:

One of the contributors to my just-released book is a world-renowned authority on optimal health.  I took nine years of my life, and traveled 1.5 million miles outside of the United States to every country in the world (some many times) in search of life extension and radical wellness methods. Needless to say, it was an incredible journey, and it continues to this day.

Caveat Emptor. There are many charlatans out there, and we are in largely-uncharted waters. It is a passion for me, and I believe that the goal in this area of life is to delay, avoid and eventually reverse death.

Jim Sogi suggests:

SurfPerhaps a better way is hard effort. I still get out and surf 20 foot waves last week and take time to surf at least four times a week and train when there is no surf. No pill will keep you in shape without effort. Just the thought of a pill is enough to kill the will to motivate effort required to maintain and build strength, flexibility and stamina. It's like technical analysis, it offers an easy way without the work, and will lead to more harm than good. I see many men really going downhill. They don't stay active. Laird Hamilton says, "Keep Moving!" That is the best way to stay fit. I compete with the young guys everyday in a competitive lineup in the water for waves. I can't outperform them, but have other strengths which give advantage.  It's hard work. It takes hours everyday to stay moderately fit, and more to build strength. That's the problem, most don't and won't take the time and effort to maintain and build strength and gradually lose it. Strength from a pill won't help without the agility, flexibility and stamina that are the other components of fitness. Don't worry about the pill, just get out and spend the hours everyday to stay fit.

Chris Cooper responds:

BodybuilderYes, a better way is hard effort. I have gotten more benefit from the sports that I train for than I have from the drugs that I take. The drugs are an incremental benefit, though, and I am certain that I am better off with them than without them. And you may find, as I do, that instead of being de-motivating, they actually increase one's desire to participate.As an example, suppose you are taking testosterone. If you are not exercising, it will do little to build muscle. You still get the other benefits, such as general feeling of wellbeing, increased libido, increased optimism. It enables you to build muscle faster, because that only happens if you put in the effort. It's not magic, you still have to do the work — but testosterone also makes it possible for older men to train as hard as they did when they were younger, because your body will recover more like it used to. 

Larry Williams opines:

The flap about HGH in baseball is pure propaganda, based on my personal extensive testing of it. I concluded it was expensive and of little, if any help, in waging the war against old man age — a view that is now also backed up by science.

Ken Smith responds:

Studies are studies and not reports from individuals. I am an individual. The studies cited older people. I am an older people. My individual report differs from the studies as reported.

I can tell you resistence exercise will promote better body tissue and that the same exercise will tear tendons, ligiments, induce on-going pain. There came a time when the benefits diminished and the pain increased.

I am reminded of a story told by an author about his last visit with his grandmother. She was quite old, in her 90s As they conversed during her feeble days, on one of those days, her last it turned out, she asked him for a small glass of wine, told him there was a time for everything, sipped the wine, closed her eyes and passed on to the next dimension.

Russ Humbert remarks:

I would not be so quick to rule it out Growth Hormone for enhancement. The Chinese women seemed to have had much success with using it for distance running in the mid 90s. Several of the women were running times better than the men. However, they also ran extreme high mileage and were practically starved while setting several women's world records before their coaches where caught transporting drugs through customs before an international competition. Several of the stars went insane under such a regiment. 

Charles Pennington enquires:

Dr AliI'm open-minded about this, and I went as far as to buy the book written by Chris's physician, who seems like a reasonable guy. But the Life Extension directory of doctors isn't re-assuring. There is just one doctor listed in Manhattan, Dr. Majid Ali, whose website is Fatigue.net. Featured there are "Hydrogen Peroxide Baths and Foot Soaks" "The Oxygen View of Pain Management," "Bowel Detox," "Water Therapy," and "Dr. Ali's Castor-cise."

I also checked for a practitioner nearby in Connecticut. Doctor Warren Levin, in Wilton CT, is at Medical-Library.net. The general garishness of the site, the endless list of specialties — "Magnetic Field Therapy," "Juice Fasting Therapy," "Auriculotherapy" — and even the Ron Paul promotion (Ron Paul == more permissive environment for quacktitioners [which is fine]) all leave me skeptical.

I wonder if Chris's physician could recommend someone in Manhattan who has a more rigorous, scientific approach than these guys.

Chris Cooper replies:

Perhaps these links will be more productive:

American Academy of Anti-Aging Medicine

The American College for Advancement in Medicine

Steve Leslie extends:

Philip MorrisI think back to the 1960s when the medical profession and the tobacco industry discounted the evidentiary link between lung cancer and smoking as anecdotal. And for 40 years after that the tobacco industry still fights in courts as to smoking and COPD, lung disease, heart disease and emphysema — long after they have paid billions of dollars to settle various class action lawsuits and agreements with attorneys generals throughout the country and have watched 450,000 American citizens die every year from smoking related illnesses.

I watched my father wither away and die as a result of a lifetime of smoking cigarettes.

Now some want to debate that the beneficial effects of steriods and HGH in adults outweigh the anecdotal risk. And I think of those in professional wrestling such as Chris Benoitk who committed multiple murders of his family and then suicide, professional footballers such as Lyle Alzado, dead from brain cancer, professional baseball players such as Ken Caminiti, dead and an avowed steroid abuser, high school boys by the tens of thousands who experiment and take steroids and commit ‘roid rage and suicide, and the untold thousands of recreational users who develop enlarged hearts and forms of cancer such as prostate cancer while juicing just to get bigger muscles.

Chris Cooper clarifies:

Chris BenoitThere is no medically documented connection between suicide and anabolic steroids. The medical data also say, "Supraphysiological doses of testosterone, when administered to normal men in a controlled setting, do not increase angry behavior." 'Roid rage is a convenient media myth. Steroids may very well cause changes in feelings, but that is far from causing major behavioral changes like those suggested above.

Take Chris Benoit as an example. When doctors examined his brain they found that it resembled the brain of an 85 year-old Alzheimer's patient. It had suffered so much trauma and had so much dead tissue that normal function was not a possibility — while dangerous personality, behavior, and temperament changes were more than probable. During his time as a professional wrestler with the WWE, Benoit had subjected his body to head trauma hundreds of times, most notably with his signature "Flying Head Butt" as well as dozens of other highly flashy (and dangerous) moves.

Steroids are being unjustly demonized, just as marijuana was in Reefer Madness, followed by equivalent media behaviour regarding LSD, Ecstasy, and many other drugs. Certainly steroids have their downside, and just as with recreational drugs, should certainly not be used by minors. But perspective is not allowed in times like these, where fear is inflamed to further the objectives of those who will benefit. 

Steve Leslie continues: 

Taylor HootenI dispute Mr. Cooper’s assertion that the is no medical documentation connecting steroids and suicide or rage. That is ridiculous. At a Senate Caucus hearing Don Hooten testified that his son Taylor, while in high school, began using and abusing steroids and committed suicide.

Mr. Cooper furthermore claims that Chris Benoit murdered his family and then committed suicide because of years of suffering numerous concussions and possible dementia. Did he personally perform an autopsy on Mr. Benoit? Has he examined the autopsy report? Where does he draw his conclusions from? In short, what specific research does he quote? Furthermore, what are Mr. Cooper's qualifications in forensic pathology and/or psychiatry?

Mr. Cooper further argues that it is some sort of a myth, steroid usage and its association with massive mood swings and subsequent rage. He then compares steroids to marijuana and says that it is being demonized by an uninformed public. Not to stop there he equates such unfair demonizations with LSD and ecstacy and “other drugs.”

He diminishes the risks to an absurd level and I am severely shocked and alarmed.

Chris Cooper responds:

Don Hooten runs the Taylor Hooten Foundation, established after his son committed suicide. Now Mr. Hooten runs around the country telling everybody that it was because of steroids, when there is no evidence pointing to that. According to Steriod.com,

There had been no active anabolic steroids in Taylor's body for two months prior to his suicide (according to a report on the THF website) At 17, when he killed himself, his hormone levels had likely returned to completely normal, and only metabolites of nandrolone (not active compound) were still detectable.

And no, I didn't personally perform the autopsy. But here is a quote from the doctors who did, via SportsLegacy.org,

SLI's tests showed that Chris Benoit's brain had large amounts of abnormal Tau protein in the form of Neurofibrillary Tangles (NFTs) and Neuropil Threads (NTs). Multiple NFTs and NTs were distributed in all regions of the brain including the neocortex, the limbic cortex, subcortical ganglia and brainstem ganglia, and were accompanied by loss of brain cells, a condition for which no other neuropathological evidence for any chronic or acute disorder could be found.

Gordon Haave adds:

QuoteIt is silly to say that one can't quote the work of someone else. That is, one can't comment on an autopsy unless one performed it himself. If we took such an approach all of the time, there would be nothing to write about.

Furthermore, in the interest of scientific inquiry, providing anecdotal stories to a statement about a lack of research does not prove anything. I have no dog in this fight, but I admire people who challenge orthodoxy.



As some of you may remember, my son David has wanted to open a trading portfolio for some time. I told him that he could as soon as he saved up $1,000. Well, he accomplished that pretty quickly and opened an account.

He was lucky enough to have a few different readers of this web site give him some advice and guidance and proceeded to make some purchases.

He initially bought WFR and made a tidy little profit. Then he sold out and reinvested in BIIB. He proceeded to make a killing! First BIIB shot up for a tidy profit… then came the buyout rumors and the stock shot through the roof!

As his father, I was a bit concerned. As much as I wanted him to make money, I didn't want him to think that it was that easy. The good news is that he kept his head about him and didn't allow his ego to expand in proportion to his gains (well, most of the time).

It made for very interesting conversation in the dug out of his Little League games and at Boy Scout events. It was fun watching him talk about his gains to his 11, 12, and 13 year old teammates and their inquiring about how they too could make that much money… not normal conversation for that age group (at least not here in the Midwest).

Well, today it happened. As many of you may know, BIIB announced that it was going to go it alone and not be bought out and the stock plummeted 27% (as of this writing, 11:14 am Central time).

He was busy doing school work upstairs when I went to break the news to him. He already knew. He said, "that really stinks, I should have sold out when I had such huge profits. But I'm not worried about it, I still have a small profit and will make it back. But next time I'll take profits, sooner!"

Although he has a lot to learn (heck, don't we all… I know I sure do), I was very proud of his "matter of fact" attitude about the losses.

This loss was a great lesson for him to experience at such a young age and when the money he lost (actually, he really only lost most of his profits) isn't that painful to him. It's not the gains that make us what we are, it's the losses that separate the men from the boys! And today, David took a great step towards manhood by handling this loss with dignity and a positive attitude! I am proud of him!

Ironically, when I went to see him and tell him about the loss, he was doing his daily homeschool reading session…..and he was reading Bill O'Neil's book "How to Make Money in Stocks" (for the second time). I'll get him to read "Practical Speculation" soon and then "Education of a Speculator" sometime after that. In homeschool each week the kids do a section of Paul Heyne's book "The Economic way of Thinking" or Henry Hazlitt's book "Economics in One Lesson".

He just turned 13 and is more interested in sports and his Xbox 360 at this time … and I think he's started to notice girls too …so we'll have to deal with that added distraction next to compete with his studies!

Steve Leslie writes:

I have been a mentor to David and his schoolteacher and I can tell you the lad is enjoying his childhood. His father is a wonderful man and the boy is extremely well-rounded. David is bright, articulate, an outdoorsman, an athlete and a genuinely nice boy who wants to learn about stocks and investing. He has a thirst for knowledge and a desire for growth as a boy into manhood. 

Marlowe Cassetti suggests:

You might encourage your son to look at ETF investing where he can get an appreciation for broader market themes, while reducing company specific risk. I know it is hard not to become enamored with individual stocks, but this example can be a learning experience. I have published an article on Seeking Alpha on this topic that mentions BIIB. 



KudlowLast evening, I had the pleasure of tuning in Kudlow and Company. I was reminded very quickly why this is the best financial news show. Unlike the wags you see on other networks, such as Neil Cavuto, Brenda Buttner and friends on Bulls and Bears, Lou Dobbs and the other talking heads, the producers at Kudlow and Company really give you your money's worth by displaying some of the top people in business, investments, politics and finance. Moreover, they are unfettered and are free to present their thoughts and opinions and it is up to the viewer to decide what is relevant to his own financial future.

Last evening, Bill Seidman was on to discuss the current financial crisis in real estate and its relationship to the S&L crisis and the commercial real estate crisis in the 90s that he presided over. In addition, Fritz Meyer of AIM Investments, Mark Skousen and Gary Shilling were on board for a investment roundtable discussion on the outlook for the economy and the Federal Reserve decision on interest rates. Equal time was given to Robert Reich and the Wall Street Journal's Steve Moore to debate the likelihood of a recession and Reich was his usual argumentative self.

Larry Kudlow is a devout Republican, outspoken supporter of the Republican candidates and staunch conservative but it does not prevent him from offering equal time to the other side of the aisle to present its case and views. It is a tough, hard-hitting one hour and one that a serious investors should attend regularly. It can be seen on CNBC at 7PM est.



OpenI spent the last year and a half opening up a business in Florida and I sold it this week to an individual who happened to be looking for the exact same venture. Thankfully, a savior, as the business was foundering and he was a bright star in an otherwise cloudy night.

I learned a great deal from my undertaking as it has been an extremely difficult and arduous journey. Anyone who has opened a business can appreciate the trials and travails. Unfortunately, there is no book entitled Opening and Running a Business for Dummies. I can honestly say that it is very similar to the old saw about owning a boat.

The happiest moment in a man's life is buying a boat and the second happiest moment is selling it.

I will list some points that are critical in understanding opening and then running a business.

Understand completely the business you are going to run. Do your homework not once, not twice, but continuously. Learn everything you possibly can about the business and do not rely exclusively on advice from outsiders. In short, be a complete expert in the critical aspects of the business. Do not expect transfer of knowledge to take place. Don't ever expect those on the outside to help you. They have their own problems.

Love the business you are opening. If you are not prepared to be 100% in love with it, it will not love you back. If you cannot laugh and enjoy the journey, it will soon consume and destroy you.

Understand the business as it relates to the economy and the target market you are looking to attract. For example, if it is in retail or entertainment be prepared for the changing tastes of the public. What will you be left with if the public leaves you? Or what will you have if not enough of the public embraces your business? Don't assume that just because you ate in a restaurant, you know how to own and run one. Underestimate, don't overestimate, your particular skills. You are not as smart as you think you are.

Do not overestimate how the public will view the business. In 99% of cases, you need the buying public far more than they need you.

Realize that competition will be fierce for the dollars you are seeking to maintain your business. If the model makes sense then accept the fact that someone else is either doing it or planning to do it. And they will do it in your backyard sooner or later. You will feel at times that a pack of wolves has descended upon you and are tearing at you from every conceivable angle.

Have an inner circle of advisers you can rely on.

I recommend an attorney and an accountant as business partners and someone with experience in banking and finance. Have a team in place and make sure that they are all committed to the success of the business. There is nothing more valuable than an attorney as a business partner. It is much less expensive to have an attorney as a partner than on retainer. Plus he will do the work for the business ahead of other work that he has to do. For this, there is no adequate substitute.

I remember a stockbroker who invested in opening a bank. His business partners were an attorney, a banker, a doctor, a builder/contractor, a real estate mogul, a politician, an accountant and some other well heeled investors.

There may be 50 ways to mess up a business. If you anticipate a tenth of them you are a genius.

Try to lay the foundation before, not after, you open your doors.

Be prepared to be married to the business for the complete tenure. Be very careful as to whom you marry, and remember, it is much easier to get married than it is to get divorced. And a lot less expensive.

You will be on call 24/7. If someone decides to get sick, not show up for work, or quit on you on Monday morning, guess what, you just assumed his/her workload. If the toilet backs up then you will suddenly become a plumber. Be ready to give up your hobbies.

You can never be too rich or too well capitalized. You can never have too much money burning a hole in your pocket.

You will underestimate how much money you will need to get started by a lot. And you will underestimate how much working capital you will need. In short, you will soon find that you have underestimated a lot. Be prepared for this brutal lesson. Cash — there is no substitute.

It will probably take much longer for a start-up to get up and running than you anticipated. Be prepared for this sad fact.

Be prepared to lose a lot of friends due to time constraints. As a corollary to this, be sure that you have a solid home foundation and an understanding family. You won't be able to attend all of your children's functions. You have only so much energy and all of it will be needed for the survival of the business. Plus you will need a place to go to de-stress. If you cannot go home then you will be forced to go somewhere else.

Watch your health. You might find yourself neglectful with respect to eating habits and exercise.

Murphy's Law will apply. And it will apply when you least need it to apply. Don't ever ask what else can go wrong because there is always something else.

Respect a business for what it is. Don't expect it to be all fun and games, if it were it would be called vacation and not work!



HurricaneI live in Florida. I own a house in Melbourne and a rental townhouse in Jacksonville which was built in a planned community by Centex homes.

My ex- is a mortgage loan officer with a regional bank here in Melbourne. I have other friends who are in the real estate business and in businesses that support real estate such as mortgage brokers, title companies, construction, and banking.

Here is my view of the local real estate market. In Florida the real estate crisis is very real. Foreclosures are a serious problem and people are being forced to walk away from their homes because they cannot afford the mortgage payments. There have been several homes in my area foreclosed on. This is one contributing factor why a vast number of existing homes are not being sold, and also why the homes that have been built over the last several years are vacant.

Individuals did the unthinkable and took out ARMs three years ago when they were very low, and thus are being refinanced yearly at higher and higher rates. This is contributing to the foreclosure rate and also is putting a tremendous strain on those who are attempting to remain in their homes and keep up with higher mortgage payments.

Taxes have gone up due to revaluations on real estate that have increased over the last several years. My townhouse in Jacksonville has seen two real estate hikes and both have been very difficult on me.

Insurance is a big problem in Florida. Many companies such as State Farm, Allstate and Nationwide have canceled homeowners thus forcing them to get higher insurance from other carriers. In places such as on the coastal areas many of us have resorted to the state insurance company to insure our homes.

Real estate prices have plummeted this year and the liquidity has dried up. There are four homes for sale on my street alone and they are all in a row. Those who want to buy a home may not be able to, due to tighter credit constraints by banks and mortgage companies. Down payment requirements have gone up and the speculators have disappeared. Inventory levels are high due to overbuilding. It will take years for this problem to go away. Those who want to sell their homes are slowly coming to the realization that this issue is going to be around for some time to come. It just will not be corrected overnight.

Buyers who are searching take the attitude that homes will be worth less in six months, so why buy now? Fear is definitely there and lethargy is ubiquitous.

The homes that are being sold are the higher end homes, $1,000,000 and up and the lower end homes below $250,000. The middle market is suffering.

Work in the real estate world is nonexistent. Brokers are whining that homes are not being sold. Listings are way down. Construction workers are out of work. Improvements such as shingles are way down because much of those improvements occurred after the hurricanes of the last three years.

I lived in Florida in the late 1980s when the commercial real estate market collapsed and I recall vividly how brutal that was. However, that affected only a small segment of society, not Middle America. This is far different. There is no way to compare the two events. This is affecting Mr. and Mrs. America and people are very concerned. I don't wish to overstate but I can say with great confidence that it is a very real problem where I live.

Affected the least are those who have lived in their homes five years or more and have seen their home's value retreat to the level of 2000. They are protected from tax increases with their homestead exemption protecting them to some degree. They still have to suffer through the insurance crisis that was touched off by the spate of hurricanes over the last three years. But is not nearly as ominous as those who bought their homes three years ago and are now upside-down, meaning that their home has declined in value and their mortgage and insurance has gone up.

I believe that if it is happening in Florida it is happening in other parts of the country with the exception to Charlotte and New York City.

The threat is very real to this economy and the Federal Reserve is aware as to how dangerous this is and how pervasive it is. Furthermore they are aware of how this could trickle down through the economy, affecting so many segments — entertainment, travel, retail, auto, consumer durables and other industries. The threat of a recession is also very real if this persists and once the genie is let out of the bottle it is very difficult to get it back in.

Let us hope that it does not come to this and we slowly and methodically work our way out of this mess.



Polaris SLBMThe comment that "we need intelligence about a coming attack and then we will be able to stop it" shows everything that is wrong in current strategic thinking and why "Homeland Security" as envisioned by the government won't work… sure there is a policing function to counter-terrorism but you will never be able to "police" the terrorists completely away.

Enemies are always at the gates and they are planning "devastating" attacks on us 24/7. Our enemies are constantly sharpening their pencils. We lived under the threat of devastating attack from the Soviets for decades.

Historically what has prevented these attacks more than anything else is not analysis and timely intervention or "policing"… rather it has been simple game theory, the concept of deterrence, that is… a credible threat of retaliation in kind or the threat of overwhelming retaliatory force. You are unlikely to punch someone if you think that they will get up and punch you even harder.

To the extent that we allow that to slip, we will only make the world more dangerous for ourselves.

We see this "credible threat effect" in the back and forth in the financial markets everyday, what stops moves in the market is the credible "threat" of uncommitted capital to step in and take an opposite position. How many times have we sat watching the green and red ticks thinking "how extended is this". We always know that if we do something stupid, such as attack in the wrong way, the market mistress can really kick us hard in a sensitive spot.

Steve Leslie writes:

Tom's either/or scenario on deterrence to terrorism is flawed thinking.

The war on terrorism is an extremely complex endeavor and cannot be distilled into one simplified strategy as a solution. 

There is no one strategy that works with terrorism. It is true that some terrorists' view is that they will not attack if retaliation will involve broad onslaughts as were seen in Afghanistan and Iraq. Perhaps this is the view that Iran is taking right now. 

Then again there are zealots and maniacs who think nothing of strapping a bomb to their bodies or filling a vehicle with explosives and driving into a crowded marketplace.  No direct or implied threat will stop them from doing this. Look at Northern Ireland and the English.  They fought their war of terrorism for over 20 years.

It is impossible for Western culture to understand a philosophy of suicide/terrorism.  This is an extremely bizzare worldview.

Think back on Timothy McVeigh. He blew up a federal building in Oklahoma City and killed hundreds of people.  For what?  No amount of implied deterrence stopped him. 

How about the Unabomber, Ted Kazinski.  He sent out mailbombs to people to kill and dismember them.  The FBI hunted him for years before finally catching him. This never stopped him from his insane mission. 

Now, it would be nice to say that all you have to do is this, but this is not the world that we live in and the sand is ever shifting.

Terrorism is a risk of doing commerce in the world.  It is now a fact of life and will never leave.



GoogleToday Google crossed the $700 level. I heard an announcer comment that it is up 30% in a month. In a year and a half it has doubled and since its IPO it has increased in value 10 times.Apple is now approaching the $200 level. In two months it has gone from 135 to 195. In a year and a half it has gone from 55 to 195. Now here is the rhetorical question from the balcony: how many of us own either stock?

There have been plenty of opportunities to have owned either or both. Vic and Laurel commented, when Google was at 350, that they were aboard. They practically hammered the computer keys extolling the virtues of Google and its competitive advantage. My question is: if you don't own it, why not? Better yet: if you have never owned it, why not?

For the record, I currently do not own either stock. I have in the past, but chose to trade rather than hold. I suggest that for those who do not have these two in their portfolios there be a bit of soul searching and analysis and that the lessons learned here be used in the future to identify the next great stock or stocks. A meal for a lifetime.I hope that my portfolio currently has at least one or two that will mimic these two great stocks. Time will tell.




HumbleI had a wonderful conversation the other evening with Rudolph Hauser. What an exceptional man. A true treasure of a person. He was introduced to me through Janice Dorn, a profound friend to whom I would entrust my life.

To date I have had the honor of being able to call Janice Dorn, Stefan Jovanovich, Scott Brooks, Rudolph Hauser, Laurence Glazier, and of course Vic and Laurel, friends.

Stefan is a gentleman above all and a true family man who loves his wife and daughter and who is cut from fine cloth. Scott has a heart of gold, and Laurence is a true British gentleman. I have also corresponded with Jim Sogi, Kevin Depew, Larry Williams, John Bollinger,  Alan Milhone, Pam Van Giessen, Marion Dreyfus and others.

I thank Vic and Laurel for the introductions through Daily Speculations.

Ken Smith extends:

I was just speaking with my spouse about an issue and I expressed concern about being able to solve something. She replied I would work it out because "You are smart."  I told her I am the only person who knows how much I don't know.  She thinks I am disparaging myself, but I speak truth.



John BollingerJohn Bollinger and I recently had a very enlightening and far-ranging breakfast discussion in Seattle. He was in town to deliver a talk at the Charles Schwab presentation during lunch that day. If you ever get a chance to hear him speak I would encourage it. He is very good.

During our conversation John said he had been trying to convince Vic and Laurel that what they did was really Technical Analysis. As John defines it, TA is using prices (and other market data) to predict future price moves. That definition is data domain oriented. Vic and Laurel do use prices in their work, so by definition they fall under the TA rubric.

However, their definition of what they call counting is really more process oriented. It is more a question of how one analyzes data and tests one's hypotheses that drives their counting definition. It is the application of the scientific method to finance. Counting is a methodology which applies to anything which can be quantified or classified.

Perhaps most importantly, counting looks to repeatable observations and analyses. What one observer sees and analyzes looks the same to another counter. Observations are objectively repeatable. By contrast, TA allows chart interpretations. A pattern which one trained analyst sees on a chart may not be interpreted the same way by another. TA allows subjective non-repeatable interpretation whereas counting does not.

Counting requires some sort of significance testing. To my knowledge there is no TA testing software which includes any sort of significance testing. In fact the only time a standard deviation is normally used in TA is in the calculation of John's own Bollinger Bands.

Another difference between John's TA definition and counting is that counting does not restrict itself to the price, volume and open interest domain. It could include data on corporate fundamentals, politics, volcanos, earthquakes and anything else. Thus a data domain definition of counting does not apply. Only a methodology driven specification accurately defines what counting is all about.

John Bollinger is correct in many ways. There is much overlap between his definition and what many counters practice. Most counters do look at price data because it is high-frequency and thus offers more profit potential. But the essential difference remains. TA is defined by its data domain and counting by its methodology. That is the quintessential distinction.

Steve Ellison responds:

John Bollinger's book has many concepts that are countable and testable, including an innovative point and figure method and a taxonomy of price patterns. Bollinger Bands themselves are relative definitions of high and low at points in time based on a defined lookback period. They rigorously use only data that would have been known at the time, which is very important in counting correctly.

The concept of a relative definition is very powerful. I have used it to develop other prospective relative measures. For example, I calculate percentiles of price changes using defined lookback periods.  Yesterday's 2% increase in gold was in the 97th percentile of the past year's daily changes.

The adaptive box sizing of the Bollinger Box point and figure method is another potent concept that opens many avenues of analysis. I have experimented with variations on box sizing. For example, one might, using logarithms, define a series of price points such that each successive point is 1.01 times the previous point. A tabulation of the moves between price points appears as a series of logarithmically equal jumps, which allows one to use the binomial distribution to look for non-randomness.

Steve Leslie extends:

After 29 years of investing in stocks, bonds, futures, commodities, real estate and collectibles I have come to this distinction between Technical Analysis and counting: counting is more science than art, and TA is more art than science.

I only trade stocks now and I use TA to confirm before establishing a position in a stock. I find it far easier to have an accomodative Federal Reserve with respect to interest rates, and invest during a bull market than to try and outwit the market and swim against the stream like a salmon returning to its breeding ground. People forget that most salmon never reach their hallowed spawning grounds, becoming victims to fishermen, bears and heart attacks from exhaustion.

I choose to have the wind at my back rather than in my face when I sail. Therefore the first thing I do when considering investing in a stock is to perform due diligence and conduct basic fundamental analysis.
I consider elements such as EPS growth, sales growth, and rely upon the excellent services of IBD and Zacks filters for such information.

Then when I look at a chart I am looking for an entry point for a stock. I use a variety of methods such as moving averages, relative strength volume breakouts, island formations gap ups, flags and pennants, Elliott Wave, point and figure.

The third leg of the stool is money management. Building a position in a stock, often called pyramiding, is a wonderful technique to use and also to use trailing stops to shave off a position to insure profits along the way.

The likelihood for success increases dramatically when one finds a company that has good financial strength, good EPS growth, is in the right industry group and is in the midst of a bullish stock market.

The techniques I mentioned are entirely useless in trading commodities and futures. Counting is the weapon of choice here and one which I have zero knowledge. Vic and Laurel are world class experts in this arena, and in my mind most excellent mentors, with a magnificent wealth of wisdom and insight.

To make money, one does not need to know everything about the markets to be successful but rather the goal is to become proficient in one area and focus on this. To be the Master and Commander. Look at it this way, physicians are very highly compensated professionals, and the highest are the specialists such as cardiologists, thoracic surgeons, and neurosurgeons. And in law, specialists reign supreme, from tax law, M&A, civil and criminal litigators and the like. The general practitioners are the lowest on this food chain. 



 What's right with the world? Paul Potts is rewarded for a true talent after years of struggle.

What's wrong with the world? Lauren Upton is rewarded almost immediately from the womb based on physical appearance, but receives her just deserts when forced to demonstrate more than that one "talent."

James Lackey replies:

Why is born smart different than born beautiful? If one is born smart and works to refine his natural talent into ability, we call that hard work. But if a beautiful girl works to refine her natural ability, beauty, we chime in with "what is wrong with this world?"

Michael Brush remarks:

The poor girl, give her a break. Have you ever spoken before a large crowd? I have. It is terrifying. This young lady had an audience of several million and she is only 17. It may be fun, but it is heartless to ridicule her for being nervous. I'd like to see you try speaking on national TV for the first time.

David Lamb replies:

If Paul Potts had her looks, or if Miss Teen had Paul Potts's looks, would their stories be the same? My point was that pageants look at skin first, than talent. And, perhaps, Potts didn't get much of a chance in the opera ring due to his looks, or lack of refinement. What is right about the world is that a show like that was able to place a person like Potts on center stage, in front of millions, to have them accept him or not, after he demonstrated his talent. There aren't many venues in this world that offer such an opportunity.

On the other hand, place a plain girl into a Miss Teen pageant and she won't even make it past the first interview, even though she may be able to give the correct answers without a moment's hesitation.

Steve Leslie remarks:

What is wrong with this world is people who get a sordid pleasure and a wicked delight out of tearing others down. Schadenfreude. Who try to start a controversy where there is none.

What is right with this world is those who exercise their inalienable right to pursue their own interests.

We are told by the greatest of teachers that he who is without sin may cast the first stone. And that he who is exalted shall be abased.



 On a detour on the way home from New York I ended up in Napa playing golf. It is an interesting game and filled with market lessons and insights into human nature.

Despite our veneer of self control, golf exposes the truth of the matter, that we really have little or no control of many actions at the peripheries happening in real time at high speed. Only lengthy training and discipline and years of work allow some semblance of consistency. How true this is of market endeavors, especially beginning with the lack of consistency and lack of control, and the process of how this changes as the years and "mastery" or at least journeyman skills develop.

In golf there is a constant battle of over-correcting. One shot is too long. The next shot is too short. Correct left, too far; correct right, over-shoot. Putt short, overshoot. Constantly hysterias of overshooting combined with an emotional overlay of frustration, anger, and exertion. Perhaps it doesn't sound like fun, but in fact the process is enjoyable.

Markets seem to exhibit the same tendency to over-shoot, on a minute to minute basis, on a daily basis, and on drops like the current one, and the prior midsummer run up. All a processes of overshooting and over corrections. It seems a natural process innate to the human condition. Thursday's drop off, clearly an overreaction, followed by the inevitable over-reaction back up.

Another curious phenomenon occurred on the links amid the vineyards. Some holes looked long and the water big from the tee. Shooting big resulted in overshoot. Walking down the hole "clicked" into proper perspective and scale, and the lake seemed smaller, the tee closer. It was a sudden shift in mental framework and perspective, which could be linked to volatility as the perceived framework clicked back to a proper perspective. The same shift of scale and perspective seems to happen with some regularity in the markets.

It is interesting how quantitative models can lead to new qualitative insights in the natural world. This is the scientific process Vic has shown to be fruitful in the market. One of the weekend's discussions was about Einstein's mind experiments; the elevator and the pinhole and light leading to an understanding of the special relativity and the bending of light. So simple but so profound. Such mind experiments lead to testable hypotheses and many market insights.

Russell Sears writes:

There is an old memory trick where you place the word/phrase/date at points on a familiar journey. It is then easy to pick them up as you travel that journey in your mind. Survival often depends on being able to get home or back to the family, hence most people remember location/directions instinctively and have higher portion of memory circuitry assigned to this task.

What I realized after I started running was that I generally remember the perspective and order of things the way out much better than the way back. And after having run a trail a time or two, and then not run it for awhile, I was much more likely to get lost on the way back since I assumed it was known and did not pay proper attention to landscape changes.

So for me the real test remembering a list is if I can "pick-up" the list going backwards towards "home" and/or switch the "season" of the trail from the mental season I had remembered the list. 

Steve Leslie comments: 

Due to the complexity of the game of golf there is a list of points to mention.

  1. Golf can never be mastered nor is there such a thing as a perfect round of golf.
  2. Golf has innumerable variables which can come into play such as trees, weather, grass, wind, bushes, water hazards, sand traps, etc.
  3. It is not always the hazards you detect that can ruin your round but the hazards that you did not account for.
  4. Most of the hazards in golf are in front of the green or alongside it but rarely behind it.
  5. People have died on the golf course due to lightning strikes, heart attacks, assaults and accidents.
  6. The better the equipment used the better the likelihood of success.
  7. The greatest who play the game are humbled and abased by its brutality.
  8. A golfer can shoot a low score on one day and implode the next. Or a golfer can make a birdie and on the next hole post a bogey or worse.
  9. Golfers are constantly comparing themselves to others by scores.
  10. Golfers remember their good holes and rounds and forget the really bad ones.
  11. There is a certain camaraderie in the game.
  12. Professional golfers do not get paid if they do not make the cut and there are no guarantees.
  13. It is absolutely essential to learn the rules of the game.
  14. It is virtually impossible to learn to play the game of golf at any level of success without professional instruction.
  15. And finally, the best golfers take the most lessons, have a mentor or are lifetime students of the game.
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