If Fridays are the best day of the week (mood wise) and traders are happy and prone to take chances, but lock in profits to be safe. And Mondays are the worst day of the week (mood wise), back to work, the grind–but some energized from the weekend all studied up and ready to go–would not Wednesday morning then be the mid point in terms of mood? Facing the long tiring day–won't be over the hump till next morning, knee deep in the work week, probably surly or strained.

Tired, stressed and stuck in the middle–how to take advantage?

Victor Niederhoffer writes:

One would count.

Kim Zussman adds:

The weekly cycle in happiness appears to suggest livejournal bloggers don't like work or school. Wednesday is the maximum distance from the weekend, and happiness peaks on Saturday.

I would argue lots of adults are TGIM'ers.

Even without looking at the market, in the old days you could often tell if it's up or down by looking at spec-posts:

Permabull/permabear post ratio and tone.

Adam Robinson comments:

A lot, a lotta work has been done quantifying moods using corpus linguistics. Here's one interesting paper on time of day/day of week mood cycles.

Phil McDonnell replies:

Gallup Daily Poll has done a decent start to confirm that the phenomenon of weekly mood swings is quite real. The linked daily graph of US mood makes it quite clear that there is a weekly cycle. The next step is counting in the market as the Chair suggests. 

J.P Highland writes:

My Friday attitude toward trading depends on how the previous 4 days were. If justice was found I play it safe looking not to finish in foul mood and have a sour weekend. If things went bad I become overly aggressive looking to bring my PnL back to green but usually the outcome is bad.

Victor Niederhoffer comments:

This is right out of Bacon I believe with the 8th and 9th race in those days, now the 17th and 18th on the card, being people like us trying to get even by playing the long shots.



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.



J RobinsonWhat can we learn from baseball that is applicable to markets?

In looking at how to hit for Aubrey, I focus on posing and gaining potential energy by moving the back foot back or lifting the right foot up before hitting the ball. Also holding the head directly at pitcher, and the trigger point. Also following through the ball with the bat following it on a line before snapping up. I don't know anything about baseball but all this seems applicable.

Please augment. We have quite a few experts on baseball who read this site and the All-American also.

James Lackey replies:

They don't teach you to lift your foot up anymore when you bat. You use a wide stance, and you pivot your back foot towards the pitcher and snap your hips. Some teach you to pivot your back foot on the ball of the foot, with you front foot on its heel while swinging, and you end the swing with your feet pointing to the pitcher. My son's 11-12 year old hitting coach had a hard time retraining my kid. He cut a 1" piece of PVC pipe the length of his shoulders made him stand over it and do a zillion swings to get his front foot down before he could snap his hips. We were all taught to keep your elbow up, use a narrow stance and step into the pitcher.

J.P Highland comments:

Being able to choose the pitchers we want to face gives us a great advantage over baseball hitters. The Nymex's pitching rotation is my favorite. They like to intimidate batters with lightning fastballs but their stuff suits my swing, as opposed to the tough off-speed pitches ES has mastered that have victimized me so often.

James Lackey adds:

My kid was born with a cannon. I knew it at age four when he threw me a hardball. By 10 he could throw from the fence to the catcher. He was a good pitcher at 12, but his coach would always yell at him over the top when he lost control.

Now what I do not quite get is that his football coach yells at him at practice to quit throwing a baseball. It's how quick you release to give the defenders a chance to attack. My son explained to me how it works, but I still do not get the mechanics.

The only good thing to report is I have never been his football or baseball coach only dirt bikes. So naturally he loves team sports.

Tim Melvin writes:

I'm not a much of a pitcher as I have a noodle for an arm and always have, but in the excellent baseball book featuring John Smoltz and Mike Mussina we learn that speed, location and deception are the keys to successful pitching over time. I am not just talking about power speed either. The Nolan Ryans are the one off Soros and Buffets of the baseball world. The ability to vary speed and move the ball around are the key to long term success.

I shall leave you all to draw you own market conclusions as there are many that leap to my mind.

Scott Brooks comments:

Good pitching isn't about overpowering batters and striking them out, it's about throwing the ball so that the batters make bad contact, and then letting your fielders do their job.

Stefan Jovanovich writes:

 Albert Pujols does both old and new school. He has his right foot turned 45 degrees towards the pitcher, the right knee bent slightly, the hands held back and high (at the top of the strike zone), the right shoulder held above the left, with the bat vertical. When he unloads, the left foot and hips do a quarter turn, the right shoulder drops slightly as he throws the bat at the ball, and the bat stays level to the ground for the full travel across the plate. In 4 days against the Giants he made one bad swing: when Matt Cain threw him a 1-2 slider down and away. He absolutely ate Barry Zito alive even though Zito now has game back and had no trouble at all with the rest of the Cardinal lineup. Theoretically, you could throw him changeups and curves down and away; but, when Lincecum tried it, by the 2nd at-bat, Pujols was hitting doubles down the line in right. It was like watching the Yankees try to pitch Williams inside (with his long arms and height, he should have been vulnerable) and watching him take the ball early and park it in Ruth's pavilion. Yo-Yo Ma with a pine bow.

Pitt T. Maner suggests:

This article which I quote from was interesting in light of an optical illusion I had seen a few days earlier on the internet. Many years ago I had read stories of knuckleballers who had pitches where even they themselves were not sure of the ball's pathway to the catcher's (often oversized) mitt.  This story has a bit of that mysterious, "unhittable" pitch reminiscent of Plimpton's April Fool's hoax:

"DiFelice grips the ball across the seams, like a four-seam fastball, and tilts it so his middle finger rests along the red stitching. He squeezes the ball with his middle finger, raises his index finger and throws it as he would a fastball. The result is confounding: The ball spins like a fastball and moves like a slider, and the optical illusion it plays on hitters allows him to get away with throwing an 82-mph pitch the batter knows is coming."

And here is the optical illusion (best illusion of the year in fact).

How would you learn to hit such things? Would you need to learn to selectively ignore information coming from your eyes?

Phil McDonnell writes:

Lifting the front foot high does not inherently add energy to the swing. If you think about it lifting a foot straight up adds potential energy only in an up and down direction. The point of a baseball swing is to drive the ball in the horizontal direction. Any energy from the foot lift is orthogonal to the intended swing and does not add any power.

The real reason for the foot lift is that it enforces a good weight shift. When the foot is lifted all of your weight is on the back foot by necessity. This allows the weight to start on the back foot and shift to the front foot. The weight shift adds power to the swing by starting the twisting motion of the body and the hips. Fundamentally the power is generated by the centrifugal motion of the bat. The center of that motion is the twisting of the hips and body.

There is another subtle but important aspect to batting. That is the need to have a good follow through. The key is the hands. If you do an imaginary swing with your hands you will see that when you fully extend your left hand in a follow through that your right hand cannot stretch out nearly as far as the left (for righties).

This compels two types of follow through motions. The first kind is simply to break the hands. The follow through continues with only the left hand still holding the bat as the right hand is released. Reverse for lefties.

The other type of follow through involves a roll of the wrist. Basically the right wrist rolls over the left as the bat passes to the left of the body. The object of either finish is to keep the bat moving even after it is in contact with the ball.

The one follow through technique that is bad is to keep both hands on the bat without a roll. If you try it you will see that you get a hitch in your swing just about when the bat handle passes your body.

One little known, but good exercise is to simply swing a light bat 50-100 times with your left hand only. The left hand is an important hand for guiding the bat. The left tricep is the important muscle for this motion. This exercise is best started pre-season because it often leaves the tricep sore after the first few times.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

Jeff Watson adds:

 With much ado regarding the merits of different pitching styles, and the physics of different type of curves, knuckelballs, fastballs, and sliders, I'm surprised that nobody has brought up the pitches of Gaylord Perry and Joe Niekro. Perry allegedly did wonders with a spitball, and when the heat came to tough for him to bear, he replaced spit with Vaseline. Perry was constantly hounded by umpires his whole career, and had to develop different methods for hiding his illegal substances after the 1968 ruling regarding wiping the mouth before a pitch. The spitball was one of those pitchers that made the ball seemingly disobey the laws of physics, and was hard to hit. Perry and pitchers of his ilk had deceptive moves down to a science, and whether they threw a spitball or not, the batter was never sure. The market has shown similar characteristics in the past and present, where following the rules is winked at. Certain reports are released early by officials to their friends, and nobody really says anything. Naked short selling was allowed until it was apparent that there would be a possibility of the whole financial sector going to zero. The market players just had too much of an advantage over the public and the rules had to change, much like they did in 1968, and much like little things like the height of the hill being modified from time to time. Even after the rules are changed, in baseball and the markets, people still try to cheat. Niekro was caught red-handed by the umpire after he was searched for an emery board, and it flew out of his hand onto the field. That was one of the classic moments of baseball.

Stefan Jovanovich responds:

 Niekro used a piece of emery board to scuff the ball so he could get a better break on his curve. That was what he was throwing away when he was caught. Perry used perspiration from the back of his neck to load the ball so his sinker would have more drop. (He would take off his cap and run his pitching hand over the back of his head and down to adjust the top of his jersey). Baseball, being like the SEC, had and still has elaborate rules that are utterly useless in terms of actual cheating on the mound. For example, the pitcher cannot go to his mouth while standing on the mound (automatic ball to the batter; balk if there are men on base); but he can still walk off the mound and lick his fingers all he wants. However, since saliva doesn't work nearly as well as sweat (which is much heavier because of the salts and dries more slowly), the anti-spit rule itself is pointless. The spit ball was outlawed was the one where the spit the pitchers used was loaded with chewing tobacco.

The idea that pitchers used vaseline is a media urban legend. There is no question that the stuff could be useful; but you would need a towel boy with soap and a basin of water that you could go to between pitches so you could clean off your hands. However, since the batters - who are always looking for an explanation for their inevitable failures - never figured this out (not being particularly concerned about hygiene), Perry and Early Winn and others always made a great pretense of using it. Perry still does; but you can hardly fail to notice the twinkle in his eye whenever he gives his seemingly evasive answer to the latest interviewer.

In my next life I want to hit against the pitchers on Dr. Phil's team. Everything he wrote is wrong. The knuckleball wobbles because it has no gyroscopic balance. It has no gyroscopic balance because it has no spin. The pitch is thrown with the ball held by the nails so that when it leaves the hand there is no friction with the skin. The trick is in holding the ball with the nail of the thumb; that is the part of the grip that defeats most people. (This is why nuckleball pitchers are fussier than manicurists about their nails; they want them trimmed so that they perfectly fit the curve of the ball.) The pitch is called a knuckle ball because when you have the proper grip the knuckles all stick out on the pitcher's hand. That also makes it instantly noticeable so there is no deception whatsoever about what the pitcher is throwing. If the ball has any rotation at all — even the magic reversible one from the "sail effect of the seams" that Dr. Phil has discovered, then the pitcher is in for a world of hurt because the pitch becomes a batting practice fastball (think Tim Wakefield pitching relief against the Yankees in the playoffs). All the other pitches Dr. Phil mentioned — the palm ball, fork ball, split finger — do have spin; they have to because the pitcher has to control their location. The knuckleball and the true 95+ mph fastball are the only two pitches where the pitcher can say "here, hit it" and not worry about where he or she throws it. (Some day some bright woman is going to learn how to throw a knuckler!) What the palm ball, fork ball, split finger all do is change the velocity. By holding the ball against the palm or jamming it down between your fingers, you lose some of the whip from your release. The circle change has the same effect; by holding the ball with all 4 fingers, you lose speed while keeping the same arm action. The cut fastball that Pitt posted about earlier is different; it is like the screwball. You are throwing the pitch with the same speed as a fastball but with a different rotation.

Phil McDonnell remarks:

 Curve balls really do curve. There are many proofs of this but the simplest is the center field TV camera where the resolution is too poor to show the spin, but the curvature is obvious. If the viewer cannot see the spin then it is difficult to explain how it can be an optical illusion.

Basically the curvature comes from the spin of the ball. The easy way to remember is that the direction that the front of the ball is spinning is the direction of curvature. A pitch that is thrown with a right to left spin will curve to the left. A pitch that is thrown with a down and to the left spin will break low and away.

The spin exerts a small orthogonal force on the ball as it speeds toward the plate. This force is governed by Newton's equation:

Force = Mass * Acceleration

Note that the last term is the acceleration not the speed of the sideways movement. The ball actually curves at a faster and faster rate. Thus the most deceptive part of the curve occurs right at the point where the batter swings.

The knuckle ball is a bit different. The idea of a knuckle ball is no spin. What happens is that the seams act as little sails that catch the passing air causing curvature in one direction or another. Naturally the seams also cause a very slight rotation of the ball until the another seam comes around. The effect is that the ball begins to curve one direction and then as the seam changes it actually begins to curve in a new direction. From the batter's perspective the ball can appear to wobble. Other times it can fly off in one direction or another in a strongly curving manner. Even the pitcher does know what it will do. The knuckle ball is not the only grip that results in no spin. Others can be the fork ball AKA split finger fast ball and the palm ball.

Another deceptive use of these no spin pitches is that they can be thrown just like the pitcher's fast ball. If the batter has previously timed the pitcher's fast ball then he will likely start his swing based on that timing only to be fooled by a ball arriving slower than expected. So even if he is not deceived by the wobbles of the ball he may be swinging too early or need to hold up his swing and lose critical power.

In many ways these change up style pitches are reminiscent of the deceptive action of the seemingly dead market last Friday which suddenly exploded to life in the last seven minutes of the trading session.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

George Parkanyi comments:

In pick-up ball where it's pretty easy to hit, I choose the direction I want to go by adjusting my back foot. If I want to hit to the opposite field because I'm being played to pull the ball, then I'll drop my back foot further away from the plate, which turns my torso to slightly lag my swing and "point" the direction of my "power" through to the opposite field. If I want to hit to center I line up parallel to the plate, and if I want to pull the ball, I move my back foot closer in toward the plate. If you connect well with the ball, it will go in the direction of your set-up. Against a professional pitch, I think I'd be happy just to touch the ball — perhaps even just to see it.

Dean Davis writes:

The most critical thing you can teach Aubrey is to avoid moving your head forward (toward pitcher) in the process of moving from a loaded position to the striking the ball. This is often the result of a hip shift which moves weight to the pitcher side of center (this destroys a hitter's power). The timing of hitting a baseball is difficult enough without ceding an advantage to the pitcher by destroying his stereo-vision by moving your head forward.

If you can get him to solidly place his stride foot slightly closed (closer to the near edge of the plate than the back foot), before he starts his swing (done by merely rotating the back heel low to the ground until pointing away from the pitcher), you will avoid him having to relearn the swing when he gets to a select/traveling/high school team later in life.

The Texas Rangers pitchers are taught to throw the circle change where they are attempting to "throw the O" (the circled index finger & thumb) at the target (pushing the index finger down to close the O at release). This means that their middle three fingers are are pointing at one of the dugouts as the shoulders are square to the target. That exaggerates the screwball spin and drop. Index finger should lay across the seam.

I teach my pitchers (age 11 & up with longer fingers) to have the same grip (floating the the middle finger off the ball if possible, substituting the ring finger for stability), throw it like a fast ball (the hand is more behind the ball when coming over the top) and emphasize the index finger pressure through release. They get the same screw ball action and drop as the major leaguers (to a lesser degree). When thrown by a righty to a righty (or lefty to lefty), it is a devastating "out" pitch (thrown on a X-2 count). My pitchers love to see the hitter "corkscrew" into the ground trying to make any contact.

Here is an interesting interview with Mike Basich (gave up record breaking HR to B Bonds) about how pitchers cheat (he names names!)

Steve Leslie contributes:

A great lesson that one learns from baseball pertaining to the markets is in the area of hitting. There are many different types of hitters those who are contact hitters for example and those who are home run sluggers.

Many consider Ty Cobb the greatest hitter in the game. He had a lifetime batting average of .367 over 24 seasons. This is the highest career batting average in the major leagues. He also had 724 doubles 295 triples and 117 homer runs. Through that whole period of time he had but 357 strikeouts. He also stole 892 bases. With the exception of his first season in the majors he never batted below .300 and his peak performance was in 1911 with 248 hits and a .420 average. He also held the batting title 12 times with 9 in a row. Ty Cobb forcused on what he did best which was hit the ball, put it in play and as a result of this dedication maintained a productive career that lasted a quarter of a century.

After his retirement, Cobb was a very wealthy man having been advised by executives and others in the Detroit area how to properly invest his money. He went on to invest in stocks and was a major stock holder in the Coca Cola company.

The lessons for the investor is that success in the markets is a lifetime pursuit. It is showing up for work every day and dedicating onself to the task at hand and utilizing the particular skills and they have been blessed with. Ty Cobb had a very productive and successful career because he concentrated on what he did best and he did it very well. Year in and year out .

Phil McDonnell admits:

Yes, I did pitch for Cal in the PAC-10. We actually won the conference when I played although only slightly due to my minor contribution. Since that time I coached about 50 kids in Little League. Of those, five players were drafted into the Major Leagues for a total signing bonus of about $5 million. Somehow that does not seem random to me.

The wonderful thing about the markets and baseball is that everyone thinks they know all about it. There are many ways to skin the cat. Perhaps I can arrange some batting practice against one of my ex-players next time they visit the A's or the Giants.

With respect to the back foot weight shift, we can do a simple thought experiment. Lift your back foot into the air and try to swing. Did that swing feel powerful? The fact is the weight shift from back to front occurs whether you are conscious of it or not.

The fingernail ball is something I have never taught. However I have never had to pull my starter for a broken cuticle, nor have I ever needed to smuggle an emery board out to the mound for emergency fingernail repair. I have coached the circle change. It is an excellent and easy to learn off speed pitch. My technique is to circle the two fingers in an OK sign, the the three remaining fingers are used to throw a weak pitch. The spin is the spin characteristic of a screwball (curves to the right). But the pitch does not curve because the spin is too weak and the speed is too slow. It is simply an off speed pitch.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

Stephan Jovanovich replies:

Heck, Dr. Phil, with my eyesight I couldn't tell you from one of your former prodigies, let alone see the ball. I stopped playing ball at 18, after I went to the Phillies organization pow-wow and met the three catchers they already had in the system and compared the sizes of their hands to mine. The only talented pitcher I ever caught blew out his arm in AA in Odessa; he was from Guatemala, and he had the same stuff Mike Cuellar had. He would have been a marvel. I know enough about the bonus baby mania baseball went through to be unimpressed by the "about $5 million"; it is one of those factoids that is like Clinton's 100,000 new cops - wonderfully round and purposely vague. Hell, even with my puny hands and Molina family footspeed, I was offered $10,000. If you want to post your stats and the stats of your magic kids, I will be more than happy to eat crow and buy you and your camp followers each a bottle of bourbon. Until then, let's call it a draw. You still don't know anything about hitting, but there are few people who do. As for pitching, I would still recommend to the List that they send their kids to Dean's camp, even if his players have never been offered a stick of chewing gum by a scout. He knows far more about this than you or I do, and he lacks your cocoa puffed ego and my bad temper. Neither is a good temperament for teaching people. But - last shot - the most important reason to trust DD (listen up, Lack!) is that he clearly has no interest in any of the kiss-ass rituals that have turned so much of "organized" baseball at the junior level into a game of "my daddy knows your daddy" (out here in the Bay Area it has become even worse than it is in soccer).

Phil McDonnell suggests:

Lifting the front foot high does not inherently add energy to the swing. If you think about it lifting a foot straight up adds potential energy only in an up and down direction. The point of a baseball swing is to drive the ball in the horizontal direction. Any energy from the foot lift is orthogonal to the intended swing and does not add any power.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

Charles Pennington demurs:

Potential energy does not have a "direction". Why do batters start with the bat held up high? That's potential energy that ends up contributing to the kinetic energy of the swing, when the bat is low.

Let me add that the pitcher lifts his front foot in an effort to throw the ball fast in the horizontal direction.

Stefan Jovanovich notes:

Randy Johnson did it — at age 45. He became only the sixth left-hander in baseball history to win 300 games in a career. And, like Teddy baseball's final game and last home run (at his last at-bat), it happened while the world was looking elsewhere — before a tiny crowd on a rain-sodden field. Pure Brueghel.



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."



This is the fourth close within one point of the close five sessions ago, and those proceeding four sessions have all closed within three points of that close as well — maybe one for the record books. After a 3.5% gain, one may expect some consolidation – though is this taking it a bit far.

J.P. Highland adds:

The way the overnight session traded and the sustained action above 1380 made me think the S&P would have a good move and maybe test the early Feb highs… but the 9:30 open was a little disappointing and the following breakout attempt ran out of gas way too fast.

Nothing left but to keep hustling.



ChairWhat must not be gainsaid is that the rise of 22 points in S&P futures from 3:30pm to 4:00pm on February 22 from 1334 to 1356 was the greatest rise in history. The rise of 24 points from 3:00pm to 4:00pm from 1332 to 1356 was the second greatest in history, failing by only a point to match the Société Générale rally on 01/17. It was beautiful the way the market set up exactly the same way it did the Friday before all the money was made by frontrunning and running stops associated with the $7 billion loss. Also beautiful was the way the move from 1327 to 1357 (low to high) on Friday basically recapitulated in half an hour the entire range of the last two weeks. That's what a classical symphony is supposed to do at the end of the piece, recapitulate all the themes, bring them together and close with a bang. Also of note was the sentinel function of the bonds in the entire mass, staying down nicely even while the market at the two week lows. It was all guaranteed to happen.

J.P. Highland adds:

Natural gas also had a nice day, settling above $9 for the first since February 2006. It's been quite a run since December 2007 when it was trading below $7. Nearby months are selling at discount, but open interest is decreasing.

Jeff Watson noticed:

While the S&P rallied today at the close, there was also great volatility in the wheat market. The nearby months in Minneapolis did a mongoose/cobra dance today, and the mongoose won.  There aren't any shorts in Minneapolis wheat who are making money right now. 

Kim Zussman studies:

In relation to the joyful pop near Friday's close, I was wondering how to design an experiment in which subjects obsess about short-term gratification in a system with long-term utility.

(ES on Friday from open to 1130 PST was -18, and from 1130-cl was +25.25. Over recent 100 days, when op-1130 < -10, 1130-cl average= -1.5, T=-0.7)

During recent 100 days , lucky longs celebrated some or all of the following:


Yet during the entire period, the net change was -217.

The mean O-C was a dull -2, but certainly there was much along the way to self-flagellate or congratulate over, depending on the spin of the wheel:KZ2

Lon Evans queries:

In regards to "It was all guaranteed to happen": Why so?

Note that the AmBac information was released towards the end of a Friday's afternoon session, replete with low volume and high volatility. Note, as well, that the news was released as the S&P was tumbling dangerously close to the dreaded 1320 level. Take also into account that no (pesky) details were included in the given information. Finally, acknowledge that the Bush administration is actively involved in the bail-out considerations (which suggest but another timely release of disinformation from a cabal that would rather climb a greased pole to tell the lie, than stand on the ground to tell the truth).

Without the mentioned announcement, was Friday's reversal "guaranteed?"

Let's consider another scenario. Friday closes at 1324, after bouncing off 1320. We awake on Monday to Asia's having sold off heavily in a tidal wave of red. Spitzer, again, rattles his saber in demanding that the rating agencies come clean with timely and honest evaluations of the monolines' status. And a credible evaluation of accelerating inflation hits the wires.

Given the above scenario, would a Monday's close below 1320 have been a reasonable possibility?

Where is the science in your predictive model? It seems to me that all you've done is demand that a arbitrary result validate a biased opinion. Other than betting upon an "inevitable" inevitable, I don't understand that your system of analysis is any more logical than that of a friend who utilizes tarot cards to guide his investment strategy.

No one can argue that Friday was very profitable for the quick-witted daytrader (full disclosure: I was among the less acute, managing to cover my short with only a couple handle loss, and just as my limit was so close I could smell it). But having cut my teeth on a day-trading floor during the dot-com boom/bust, I'm as aware as any what an accumulation of the quick-witted can impel given the intraday scenario, particularly a Friday scenario.

Will the calvary route the savages, succor the wagon train, and unite the dashing captain with the demure beauty? Only the details will tell. Should this boil down to a Federal bail-out, I'll cover my puts and look to go long. Should it be but a bickering viper's nest of plutocrats and the over-privileged, I sit tight. Either way, there is little science involved in my decision. I'm only interested in what target the guy with biggest stick swings at.

Sushil Kedia observes:

On Thursday, the Indian futures index CNX Nifty produced exactly the same pattern. Meandering lower the whole day and going up in a straight line in the last 30 minutes to finish at the high of the day.

Shorts got squeezed for sure as the futures discount of 30 points got compressed to just about 5 points. Chartists gruntled with joy oh a hammer and the Index jumped from the 5080 area to 5200.

However, the next morning the market opens with a large down gap at 5130 explained primarily by the overnight move in the US, stays throughout the day at the downgap as the resistance for the day dipping in between by a percent from the open some 20 times. The market saw the move on Friday as a dead /dyeing man's heart beat really going nowhere.

One wonders if there is a global trading pump that is on microcosmic level driving the same algorithm in every market?

The rare downgap opening after the move such as on Thursday in India could well be explained with the higher significance of the larger market called US the night after. However, if Asia did still trade lower on Monday would that call for the traders in the US to be ready for a lower market on Monday there despite the move of Friday?



TeslaI went to a presentation by Martin Eberhard, co-founder and President of Tesla Motors, on Wednesday. I've seen one of the eight cars built and it is slick: 0 to 60 in 3.86 seconds with no shifting. And Eberhard is a slick presenter. Arnold Schwarzenegger has ordered a car.
But they have a huge mountain to scale with gargantuan problems, not the least of which is the distribution and service. They have taken the unprecedented step of making a completely new car that is to be status symbol and new technology at once. It is a complete design from bumpers and fenders to suspension and the electronically controlled antilock breaks. I think they have bitten off too much. Battery technology is the latest lithium, but with stacks and stacks of cells, it is a huge battery. It takes all night to charge from a 220 electric dryer but does go for 250 miles. The electricity is cheap at pennies per mile. The car is expensive at over $100K. Divide that by 100,000 miles of useful life and you have capital costs of $1/mile.
Great breakthroughs in technology, but the take-out is a rich Asian car company with lots of dollars. Reminds me of Tucker Car that after WWII developed the best technology but was squashed by the big guys.

Alan Millhone adds:

Nice to see something new and innovative in the automotive area! My first car was a 1964 Mustang fastback that was raven black with a white interior, 289 H.P. and a Hurst shifter and Hurst mags. I ordered it from the factory for $3,105! I still have the original owner's manual, bill of sale and a sterling Mustang tie-tack (still on the card). The car is gone, but the memories of taking possession of that car at the dealership will stay with me like it was yesterday. America has always had a love for the automobile and I hope the Tesla will have its own following.

J.P. Highland remarks:

For $100,000 I would rather buy a Porsche Cayman and a Toyota Tundra, one for the fun and the other to be my workhorse.



 I've found in my 45 years of business experience, as a rule, starting with Tyco's toy racecars (by far the fastest) was that the company with the superior speed or design or popular fancy was always overtaken by a competitor who came up with a comparable or better product. As a complete layman, I wonder how long it will be before someone comes out with a better phone than Apple, and whether this makes the profits form the iPhone ephemeral. Please excuse my ignorance in this field.

George Zachar comments:

Technology acceptance is heavily influenced by network effects and compatibility issues that make the diffusion of digital products take a different trajectory from their non-digital predecessors. 

John Floyd adds:

"Leapfrogging" is a real danger. It is also evident in the way Japan evolved in car manufacturing in the 1960s and 1970s. I can remember driving in my uncle's "nouveau Datsun" as a five-year-old and hearing him tell me about the benefits in terms of cost, fuel efficiency, luxury, etc.

From a stock performance perspective I would imagine tests exist and can be done to look at stock performance post introduction of a new product for a variety of markets and products, Apple obviously included. What seems likely difficult to quantify is the "wow" factor: the market's potential to extrapolate huge multiples going forward based on various forms of growth, as happened in cases like the Internet stocks. 

Henrik Andersson writes:

It seems like Apple is holding on to their market share for portable music players even though it might not have a superior technology. I can envision the same happening for the phone, which I think would be very suitable for WiMax in the US rather than 3G. 

James Lackey writes:

There are so many elegant angles to the iPhone. When you look at the products vs. cycles, prices and innovation, many examples of car production vs. tech can be used. Examples include the furious competition, lower prices, and leaps of innovation.

The iPhone may be a leap of innovation. Of course others will adapt and prices will fall. What is uncertain is how much innovation and cost will trickle down to the sedan market of cell phones. Perhaps that equation, how the mass market accepts it and is willing to pay for the new bells and whistles, will set the pricing and production of future iPhones. Will the iPhone be a sporty two-seater high performance vehicle or just another used sedan at 50% off current retail in five years? 

Barry Gitarts writes: 

I think your questions apply to the smart phones which have been on the market for years from companies like RIMM or PALM and the iPhone is the answer.

To paraphrase Steve Jobs, people are used to thinking that something is wrong with them, when the real problem is the phone they are using. But Apple is not an iPod or iPhone story, it is a Steve Jobs story. Just look at how Apple did when Jobs was at the helm and then when he left and then when he came back. Is there any doubt he is the man responsible for the value creation reflected in Apple stock?

When I watch Jobs talk about his products, his passion and dedication reminds me of Howard Hughes and Airliners as portrayed in The Aviator. While there is no doubt that new technology will come out that will give the old technology a run for its money, how does one know the new technology will not be developed by those who developed the old one? 

J.P. Highland writes:

It won't be about someone producing a better phone, but someone being capable of delivering a cooler phone. The IPod might not be the best mp3 player in the market, but there's something irrational about it. People love it and will keep buying unless the meme fades. But so far people are in love with Apple and the success of the IPod has permeated to the iPhone and the PowerBooks are doing well. 



This is in honor of the widely agreed upon birthday of William Shakespeare — baptized 26 April 1564, died 23 April 1616. Nobody really is positive when Shakespeare was born, however, tradition held that babies back then were baptized three days following their birth. If this is true, then it also follows that he died on the same day as he was born, 52 years apart.

Every year I read a Shakespeare play, see one performed, or view one on DVD. I have a few favorites, but the magnitude, variety, and volume of his works is magnificent and astounding.

J. P. Highland adds:

It is a curious coincidence that Miguel de Cervantes, the most celebrated figure in Spanish literature, also died on April 23, 1616. Though he was not as prolific as Shakespeare, Don Quixote might be the best book ever written.

David Lamb recalls:

When I was in one of my darkest days of trading last year, I went to my old friend William Shakespeare, and felt this quote was really written for me:

Wise men ne'er sit and wail their woes, But presently prevent the ways to wail. To fear the foe, since fear oppresseth strength, Gives, in your weakness, strength unto your foe, And so your follies fight against yourself. Fear, and be slain; no worse can come to fight; And fight and die is death destroying death; Where fearing dying pays death servile breath. (King Richard II, Act 3: Scene 2) 



 I'm only 34 but I have been involved in sales for 16 years, when I started selling ads in a magazine. At some point I managed a sales force of fifty and I found the most successful salespeople to be hard working single mothers who needed to work hard to raise their kids. The best salespeople I know come from the lower classes, driven by the desire to have a better life. I can't recall a single good salesman coming from the upper levels of society.

Mark Goulston adds:

People who play in competitive team sports are sought-after for sales positions because of their ability to "take the hit," face, and deal with a reality in their face that produces an unambiguous score.

James Sogi extends:

 The benefit of sports to a child, which leads to success in life, is the ability to face, accept, and overcome loss. A sporting loss is not life-threatening or career-ending, and the sportsman learns to overcome adversity in a controlled setting. Furthermore, he learns the rewards of effort, ultimate effort, training, discipline and competition. He learns, perhaps the hard way, that he cannot succeed without extra effort, hard work. These are over and above the benefits of health and fun and camaraderie from sports. These are lifelong lessons. 

David Lamb writes:

Many Wall Street firms hire ex-athletes, who are sought-after due to their competitive nature, their ability to take a "hit", and their desire to excel.

Steve Ellison replies:

It is not a Wall Street firm, but tech giant EMC that has built an outstanding sales force by seeking out athletes. I know a manager there who was a college hockey player. He says that he would give preference in hiring to anybody who was a student-athlete because it takes excellent time management and organization to be able to compete at the collegiate level while completing a college education.

Russ Sears adds:

Quote of the day from the sports page describing the Duke lacrosse team's motto for this season: "Succisa Virescit," Latin for "Cut it down, and it will grow back stronger."

To compete, in sports, in sales, in business, even in life and perhaps eternity, it is not enough to learn to "take a hit." Even the losers who barely survive will learn to take a hit.

To thrive you must learn to embrace the pain, to accept that success has a price. This will take you beyond the masses. The runt playing football or basketball for the love of the game will learn this.

To be a champion, you must find your niche; find that pain that makes you stronger. You must learn what exists inside you that, when it is cut down, makes you grow back stronger. You must learn to reinvent yourself until your dreams run parallel to your ability. You must learn to evolve.

Many great successes do make great salesmen. They don't make great salesmen, however, by just selling anything. They must sell something they believe in, on their own terms, not somebody else's.



 Tel Aviv had ignored its amazing seacoast for decades. Then real estaters suddenly realized the city faced away from the coast, and poof, the construction was on, redirecting the direction of the entire coastal area, and making a tasty spot for coffee during the day, and romance at night. Nice hotels. The most literate crowd in the region — 98% literacy, more than the US, actually.

Ari Oliver adds:

I was in Tel Aviv about two years ago. I was amazed at the number of second hand bookstores. It seemed like they were on every second block. It's amazing what books you can get. Obviously it is indicative of a strong intellectual climate.

J. P. Highland writes:

I'm currently in Israel, where I plan to stay for the next two weeks. This morning while visiting the Western Wall I heard a blast and screaming coming from the other side of the wall where the mosque is located. Everyone ran to take cover while I found a safe spot next to the CNN crew.

Israelis are digging next to a mosque and some Muslims are convinced that this is a plan to destroy their sacred place. Now everything seems to be OK. Fortunately, my hotel is next to the U.S. Consulate in case things go terribly wrong.

I've been in Israel for only 24 hours but I'm highly impressed with the country. Infrastructure in Tel Aviv is impressive, people are nice and well-educated and food is great. A lot of construction seems to be taking place. 

Marion Dreyfus replies:

Israel has the highest per capita literacy level, much higher, in fact, than that of the U.S. Large clumps of the U.S. have little truck with book-learning, whereas in Israel, few can be so far from civilization that books are not a really proximal commodity, and preferred in many instances to the next choice. The Israel Philharmonic is, this week, 70 years old, which — doing the math –pre-existed the very birth of the State of Israel. Theatre and music are also highly attended, democratically priced and appreciated.

It is a truism that Israel is technologically advanced far beyond its age and size. In a recent science exposition I attended at the Science & Industry Library in NYC, there was a globe with countries represented in proportion to the patents sought and achieved. Israel was as large as Germany and Japan on this 'globe' of science interest. To some extent, Israel has no choice. Lacking easy access to raw materials, Israel thrives on intellect, or perishes.



Last week I got infected by the C.F.A. Meme, the Meme is telling me that if I want to achieve something in this life then I must have the C.F.A. certification. I decided to follow the Meme blindly, and ordered the materials to study for the December exam.The company from which I got the materials also offers an every Tuesday video chat with the guy that prepared the whole course, in which he answers questions. Yesterday’s best question was, ‘Why are you such a jerk?’

Everything was going fine until the last minute when our mentor made the following comment, “I would suggest you guys read Barron’s Magazine, which is a must read publication in this industry, and especially Mr. Alan Abelson’s column, which I’ve been reading for decades”.

It frightens me to think how many C.F.A.s that have been prepared by this guy have followed his advice and became Abelson’s fans, which means that the cult of the bear keeps growing.

Rick Ackerman mentions:

Keep an eye on those housing stats, J. P., since they are the most powerful recruitment tool the cult of the bear has possessed since the Dust Bowl. This forum’s Roger Arnold — no cultist in my book — makes them go down like a soufflĂ©.

Regarding Alan Abelson, whom I have worked with, he is the last, and the very best of a dying breed of hard-hitting journalists. Maybe a little too hard-hitting, since his relentless devotion to unpopular facts probably cost him his managing editorship job in the wake of the ‘mild’ recession of 1990-91.

Andrea Ravano adds:

It is things like this that mean there are more cheap stocks for us to buy. Is the fact of opposing views not a great opportunity for careful speculators?!


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