J SogiIf you look at a guitar string in slow motion, you will see the vibrations of the string around an axis. As the player frets the notes, the locus of vibration changes. On a more micro level, a graph of the sound waves themselves display a variation around an axis. When playing in a musical group in improvisation the player must use his ear to determine the correct key. The improvisations vary above and below the correct key in pleasing intervals, and eventually resolve back to the tonic key.

Such a model seems useful in current markets with the prices fluctuating around a tonic "key". We have discussed the 1250 key before, but as the music and market progresses it important to be in the correct, but ever changing key. Determining the range of variation or intervals is important to playing the rights notes in sync with the other musicians. In a Wykoffian fashion, the market appears to have jumped up an octave. Classical composers used similar techniques in building up a theme, jumping to higher and higher levels, in a repeating pattern. The quantifications are quite simple to measure but much of the process is in ear trainging, and timing. Timing is another, but quite important element in playing music and markets.



UptrendI submit four hypothesizes in defense of trendfollowing. I hope these thoughts provoke a discussion that is broadly useful.

1) In hindsight, all profitable investments can be characterized as either trendfollowing or positive carry. It’s simply a function of timeframe and definition. If Anatoly Veltman “catches a falling knife” in Crude, and it bounces, he had a successful trendfollowing trade in an hourly context. When Vic and Laurel state that stocks have an upward bias over time, they are making a trendfollowing statement in a multi-year timeframe. When Warren Buffet buys Coke and holds it for 30 years, it’s multi-decade trendfollowing. When Bear Stearns buys a zillion dollars of mortgage backed securities on repo, it is positive carry. (Prior to the margin call, that is.) The inherent superiority of trendfollowing systems over positive carry, intuitive, and countertrend systems is the average person’s ability to define risk a priori by using statistically appropriate stops and then the ability to “get lucky” by not limiting potential profits.

2) The rationale and methodology that one uses to enter a trendfollowing trade is not particularly important so long as it’s consistent, fundamentally sound, and applied with discipline (so as to allow getting "lucky") in the relevant timeframe. Whether you use a simple moving average or some fancy neural network matters less than the ability to survive repeated mistakes: Humility and Survivability. (I readily admit that a portion of my assets sit in an S&P500 index fund, because the trendfollowing time horizon for that money is decades. And the “stop-loss” for my S&P500 fund is zero on the S&P!)

3) Diversification across timeframes is just as important as diversification across asset classes. Again, the methodology that one uses at each timeframe is less important than the consistency of the approach. I’ve noticed that many of the very best trades are multi-week; perhaps because the attention span of many market participants is just a few days?

4) Lastly (and acknowledging the contradiction with everything else above) if you begin to fade a market when it is two or three sigmasaway from its recent mean price (in the relevant timeframe) and you pursue a geometric (Martingale) strategy, there is 100% certainty of profit. Unfortunately one can do this only in a size which is tiny, or eventually face the gambler’s ruin dilemma.

Hence my contention that all successful investors are either trendfollowers or geniuses. But both must use a consistent methodology that fits their temperament and Weltanschauung.

Robert Mahan replies:

Your definition of trendfollowing is much too broad. It seems to include every trade which goes the direction of the market. When most people say “trendfollowing” they mean a strategy based strictly on price momentum. Buffett's buying and holding Coke for 30 years isn’t the same thing. He might have held Coke had it gone down for 30 years on the basis that the “value” was getting constantly more attractive. I will grant that going long equities due to the belief in a perpetual upward bias is surely a form of trendfollowing.Trendfollowing can’t work as a long-term strategy unless the market trends more often than would be expected by a random walk. Does it?

As you say, you can always “get lucky” trendfollowing. You are less likely to get lucky with a lot of short term trading, because the vig will erode your “luck." But to paraphrase an old quote, getting lucky is hard work. 



 Last week I took a tour of Skagway Alaska (home port of the Klondike Gold Rush), and Seattle Washington. What struck me about the two towns was the boom to bust cycle still seems to be replaying itself 110 years later.

Skagway, now population of 800, became a boom town of about 10,000 in 1897,  when gold was found in Yukon in 1896.  The trip up that mountain into Canada was the stuff of legends, as was the city of Jack London fame.  Canada mounties required nearly a ton of supplies to be allowed entry into Canada.  Of course a railway was built to help.  Knowing time was of importance, the tracks were only 3 feet wide versus regular 4 and it was designed to have special engines built for the tracks and mountains.  It only took 2 years to build, but by 1899 the rush was over.

Likewise viewing the skyline of Seattle, full of cranes, and taking a tour of the city with Starbucks, WaMu, Amazon, Boeing and MicroSoft all seeming to have hit their peak.  Several of these were part of the cranes problem, and Starbucks didn't have a crane but a new big hole in the ground for a new headquarters planned before their cutbacks. I couldn't help but wonder if the rush of cranes in the skyline to build the multiple new skyscrapers isn't equivalent to the rush to  build a train track in the 21 century. However, the difference is perhaps the investor and the markets bear the brunt of the boom to bust cycle nowadays, and they do so much better and more efficiently than the inflows/outflows of population, eliminating many hardships that where suffered by the average individual 110 years ago from such a blow to a town.   Is this similar to the forest crowding out the saplings and the rush to new heights bringing risk of catching stronger winds and more lighting strikes?   Perhaps another simile, besides a record height, being hubris. Too many cranes in a cramped space signal too much competition  for space and a boom to bust transition. Dooming the economics of the buildings in that area, taller and bigger or not. Are there studies on such phenomena? 

Alan Millhone reports:

Last week in Vegas we stayed at the Vegas Club on the 16th. floor. End of our hall way was an exit onto the fire escape and a platform and railing that revealed a terrific view during the day and at night. During the day there are cranes everywhere and close to our hotel was a crane being used for the addition to the Golden Nugget Hotel/Casino. One evening they were pouring ready-mix concrete (over $100.00 per cubic yard in my area !) and the trucks were lined up far as one's eye could see ! (Ed.: approx. 12 cubic yards per truck).



J Sogi
GM Nigel writes that Musashi preferred wooden weaponry because he found them more reliable. I'm glad he mentioned Musashi — who describes three strategies:

  1. Attack.
  2. Retreat.
  3. Attack while retreating.

The third is very interesting and useful when outnumbered or fighting a larger but slower foe. Running fast, the opponents stretch their line in chase, then quickly stopping for a quick reversal and attacking a few then continuing on with the retreat. Timing is critical, but it throws the opponent off balance. It gives the fighter the chance to pick his spot, rather than be cornered where the opponent is strongest. You see this often in the Samurai movies where the protagonist runs, then turns and slashes a few, and runs on. Its often good to use the cover of darkness to aid the strategy or timed when the opponents guard is down or balance is off.



LobsterI visited a few lobstering towns lately and found that woe prevailed. During the boom of  2004-2006, many lobstermen expanded their equipment and territory and operations. Many new boats were completed. Most were financed with readily available bank debt. There was a great deal of searching for lobsters and the catch went down considerably as did the price, about 20% each. The cost of fuel ate into the already meager profits, and bank credit is no longer available. Thus, a recession in the lobster business, and all activities in towns associated with it. With restaurant business, e.g., down about 25% and many more tag sales and real estate vacancies and for-sale signs. Thus, the lobster business encapsulates what is happening to many other businesses that depended on cheap credit and stable fuel prices. Of course, now that crude has fallen 20% in a few weeks, the situation can reverse, and homeostasis can exert its pervasive pull.

Jeff Watson says:

The Florida commercial fishermen are also in dire straits. Legislation banning gill netting, limits of catches, government regulations, and high fuel costs have contributed to their hardship. The mullet roe market is as volatile as pork bellies, and other markets are in sharp decline. Rising costs and taxes of waterfront property has caused many fish buyers to close shop. Ever adaptable, many fishermen have managed to cling precariously to their trade, much like oysters on a piling. Although many have had to resort to running square grouper, many other fishermen have taken to crabbing as a way to stay connected to the water. Fishing is a way of life, a noble calling, and is unlikely to go away completely.



K ZussmanUsing DJIA historical weekly closes since 1930, I checked for dates when weekly closes were a new 500 week high (i.e., approx. 10 years). Plotting these vs date shows two periods when 500W highs clustered (50-65 and 82-99), and two gaps in which 500W highs rarely (or never) occur (65-82, 99-06).

This is all retrospective but it is possibly supportive of the theory that bull and bear market durations are comparable to investment-lifespan (eg. memory of living investors).



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.



A VeltmanA fascinating game is on today in Crude futures, with algorithmic black boxes sniffing out sell-stops below 121.61, which will mark a new low for summer 2008! Such a game would have not just short-term implications. Yes, it would be enticing to keep shorting until the stops are triggered, thus allowing a later profitable cover. But also, a long-term "chart damage" would be created once the first lower low is marked on this year's chart. The implication of that would play out some time in August when programs would then gear up to be "sellers on a rally," only because of this little "trend change" indication.

George Parkanyi suggests:

I don't know, Anatoly, that's reading in a lot. Even Freud once replied testily that "a cigar is sometimes just a cigar". But I'd love for your scenario to play out, so I can take another profit from my oil short position.

Anatoly Veltman explains:

CFTC's Commitment Of Traders (C.O.T.) report as of 7/22 settlement, published near Friday's close, confirmed our suspicions. For the first time this year, both Large and Small Specs rolled over from Net Long to Net Short in crude! The speculative push is on: to try and trigger sell-stops near $121.61 June low. One should be aware of fragility of such a plan: 1. Crude has fallen two weeks straight on reduced Open Interest (from 1.35m to 1.22m), i.e. over 100,000 Longs already got out and do not have a resting stop-loss order below. 2. Price has entered the area of natural support: 38.2% retracement of 2008 advance and 100-day moving average.

Thus, whether Specs succeed and trigger remaining sell-stops or not - the ensuing rush to resume buying activity should not keep us waiting for too long.

Rocky Humbert analyzes:

In my many years of commodity speculation, the most important lesson which I have learned is humility. The second most important lesson is to look beyond the obvious. And the third most important lesson is that price action leads the fundamental news. In this case, I suggest Anatoly look to all of Nat Gas, Coal, RBOB and Heating Oil crack spreads, and the shape of the yield curve, for far more interesting market information than whether a particular price point triggers some short term or long term stops.

  1. Nat Gas has given back its entire rally since January without so much as a minor bounce. This would equate to Crude moving to 90$/bbl without any meaningful bounce. Coal has also taken out the price equivalent of Anatoly's stop level on the downside.
  2. The gasoline (RBOB) crack spread has been negative or near zero for some weeks now. This is unprecendented for the summer driving season and shows the extent of true end user demand destruction. Refineries will obviously reduce their runs rather than process crude at a negative crack spread. Crude is a completely useless commodity. It's the products that really matter!
  3. The heating oil crack spread, in contrast, remains extraordinarily wide. Some attribute this to Chinese hoarding post snowstorm/earthquake and pre-Olympics. So the gasoline and heating oil crack spreads are giving us contradictory signals. While I'm open-minded on the outcome (although short right now), if I see the heating oil crack start declining, I'll know for sure that it's game, set and match for this phase of the crude bull market, and I'll aggressively press my shorts.
  4. The Crude yield curve recently moved to contango from backwardation. Producers are now motivated to build even more inventories, and this is a self-reinforcing feedback loop. When the crude curve goes into contango, it is predictive of declining prices in the spot contract for the following three to six months.
  5. The price volatility of crude is around 40% now. So, as a pure probability statement, one can easily envision a 40% decline from the "high" and we'd still be in a "secular" bull market! More importantly, given 40% volatility, one would expect daily swings of around $7 per barrel — just as random noise.
  6. I am unaware of any rigorously backtested studies which show that the COT open interest is predictive in crude. They are only a coincident indicator of trend. Perhaps Anatoly has different studies available that he can share?
  7. Lastly, and most importantly, many commodities do trend for good economic reasons. I suspect even Vic and Laurel will concede this point. One can ridicule the trendfollowers but I reckon the good ones have been long crude from $90 and started exiting when we broke through $135.

Right now the entire energy complex appears to be breaking down after a remarkable multi-month and multi year-bull market. If you are buying the dip for a quickie bounce — good luck! But if you hold your positions for weeks or months, as I do — it's frivolous to declare your entire market view based on whether one particular price prints. Markets are far wiser than that.

Anatoly Veltman replies:

Rocky, your observations are very useful. I'm glad to further discussion on short-to-intermediate term Oil - moreover, your view is coincident to Ahmedinajad's "unjustly over-priced!":

  1. What if NatGas next "bounced" big?
  2. Demand destruction and "importance" of only products — agreed.
  3. So short crude based on RBOB; not yet short a second unit based on HO?
  4. The "contango bear indicator" has been obvious throughout NYMEX history; has it been tested over the recent years, since Crude futures (and ETF based on them) became an asset class?
  5. My Elliott Wave log-scale chart allows correction to $50, before Wave 5 ensues.
  6. I am against C.O.T./O.I. techniques' mechanical application. Only a trader with sophisticated understanding of how it confirms/overrules a trading idea should use that coincidental data.
  7. $135 broke one up-trendline — agreed. What put you into a long over $90 through $147.27 — everyone could learn from a detailed explanation!

Rocky Humbert adds:

Anatoly, point by point: 

  1. And what if it didn’t? They call Natgas the “widow maker” for a reason!
  2. Glad we agree.
  3. Philosophically yes. But real life is rarely so easy.
  4. There’s only been one episode where CL swung from backwardation to contango since ETF’s came on the scene. That was Dec 2004 to Dec 2005. And although the nominal price went nowhere, longs lost money net of the roll cost. So, not enough data. But, putting on my bond hat for a second, positive carry really does matter.
  5. Cool. Then let’s stop chatting, you need to call your broker and go limit short.
  6. OK. I think the upstairs/offshore mkts plus the ETF’s have made these stats less useful. Also note that some people think that aggressively buying a heavily shorted STOCK is a way to squeeze shorts and make money. Other people believe that the shorts are smarter than the longs in individual stocks. In all events, I avoid using tools which are open to interpretation. I’m just not smart enough to figure them out.
  7. There are still Donchian systems out there. BUT …. even a blind squirrel sometimes finds a nut too. As a college math book might say, “the proof is left to the reader.” Hence you can decide whether it’s a blind squirrel or a useful system. Vic, Laurel and many readers of DailySpec are philosophically opposed to static systems … and I’d rather remain coy rather than risk being pilloried or laughed at. Let’s leave it at that please.



DuncanI just finished Better: A Surgeon's Notes on Performance by Atul Gawande, mentioned by James Sogi. The five points the author makes at the end of the book are good recommendations. These are: Ask unscripted questions, Don't complain, Count Something, Write Something, Change. The balance of the book is also very good. His theme is ways to improve performance in various fields, but specifically medicine. Diligence, ingenuity and doing right (sounds ethics) are the pillars of his approach. These are all good ideas, but the interesting part of the book is in the details and the examples he presents.

He starts with with diligence, and presents a case of infections in hospitals. Each year 2 million patients acquire and infection like Staph or Enterococcus while in the hospital. Ninety thousand will die of the infection. I found this staggering. The main cause of this is the doctors themselves through patient contact and not executing a very simple procedure, washing their hands. There are reasons for this, time being the biggest. To properly wash ones hands it takes about a minute. If a doctor sees 30 patients in an hours, that is 30 minutes an hour just washing hands. The best hospitals have come up with solutions for this, including antiseptic jells, greater use of gloves, greater awareness of the problem, better access to washing areas. But it comes ultimately back to the doctors to be diligent in such a simple area. It reminds me of the Coach Wooden's simple advice to players about how to tie their shoes before games.

Another chapter focuses on the eradication of Polio. This is a great success story, but diligence continues. When a half dozen cases are found in places like India, the World Health Organization and others, mobilize a staff to inoculate 4 million children. It takes them 3 days. There are great costs, but millions of children have been spared the horrors of polio through this diligence.

The chapter on ingenuity discusses the comparative advances in specific areas of disease prevention. I found the chapter on cystic fibrosis compelling. Using a rating system patients can identify the best hospitals for treatment. The top hospital nationally is in Minneapolis and has survival/longevity rates well above their peers. They achieve this by designing, testing and implementing aggressive treatments well before peers accept this as the standard. The director here invented tools like a duel stereo stethoscope to better identify lung sounds and a mechanized chest-thumping vest to allow better clearing of fluids. The entire treatment regime is carefully monitored and adapted to patients. It shows results. Life expectancy with CF nationally is around 33 years, at Minneapolis it is 47.

The chapters on doing good (ethics) deal in the gray areas of medicine. He looks at issues like compensation, involvement in state executions, and where to draw the line on fighting for an apparently terminal patient. I would recommend the book to all. There are definitely ideas to improve trading, but also the book is a glimpse into the medical field and the challenges they face as they try to improve and save lives.

Arman Agdaian remarks:

How to get better? In order to get better in anything you have to be humbled and punished many times over to never repeat the same mistakes. In my years of brokering and trading in the commodity markets, I will be the first to admit, I have learned you have to be willing to be wrong to be right. Life is about the sweet and the sour. How do you know how sweet something is if you never been soured?



J SogiOne of the elements of posture is focus. In a fighting stance, the eyes should look ahead in line with the head. The eyes should not focus too sharply on a specific thing, such as the opponent's fists or head. The focus should be soft, and there should be a general awareness of the surroundings and behind, below and above. Specific focus on the opponent's hands leaves opening to the opponent for feints and deception, or telegraphs to the opponent the plan of attack to the head. It also leaves open side swipes and diverts alertness to attacks from left field.

In the counting approach to trading, with statistics and math, there is a tendency to focus too sharply due to the illusion of precision. It is better to keep awareness of things outside the area of focus or research to avoid blindsiding. Some examples of things to watch for are the increased margin required by brokers, news, regulatory changes.



 There's a hurricane spinning out in the Gulf, and the waves have been good in front of my house. They were good enough for my 6' glassy rule to come into effect that says "If the waves are 6' and glassy, drop everything, no trading, and go surfing." Ignoring the markets today, I spent the day in childish glee that only surfing can provide. Earlier this morning, I called my local surf shop about piece of equipment, and had to listen to their surf report before speaking to an employee. The report was dated today, and said that there were ankle high waves in the Gulf, and not worth a go out. I joked with the owner, and he admitted that he usually misleads when he posts surf reports, his reason being that the number of waves are finite, and he doesn't want to increase the crowd factor from in-landers. While I respect the nobility of his intention, I wonder how often the financial press plays the same game of deliberate misdirection regarding market matters, for less than noble reasons. Since I live at the beach and pay a premium for doing so, I don't need to call a report to determine surf conditions, and get the first crack at the good waves. Living at the beach allows one access to the inside market on waves, and the locals usually get the cream. An exchange member on a floor that has active trading is much like a surfer that lives at the beach, in that he gets the first crack at the inside market, after paying the appropriate price of a membership.

As Sogi-san has said to me before, and I concur, "Many a lesson for trading in the waves as well."

Jim Sogi replies:

J SogiToday a new swell was supposed to arrive, so I headed down to the beach. When I got there the waves were small and junky. I timed it so that I would be out when high tide started coming in. Often, contrary to popular belief, the tide does not slowly seep in, it rushes in in the form of several big waves. So out there surfing junky waves all of a sudden big waves start rushing in all at once from a combination of the tide pushing in and a new swell. The big waves rush in.

It felt like that today (7/22) in the market as the new bullish swell rushed in in the afternoon all at once. Often the big up moves happen in a short time, and you got to be out there or you will miss it. Another little market lesson from surfing.

I hope you had a good session. My rule is go out no matter how junky the waves are. Then you'll be in shape for when they are epic. A lot of older guys like to wait until it's six foot and glassy, but when it is they are so out of shape they get worked. Got to surf the junk to get the goods. How many times is it junky and you're out there by yourself and all of a sudden it gets really good for an hour, then it goes away? Showing up is half the battle.



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.



J SogiIrrational behavior should be distinguished from the set of behaviors that are not based on rationality. Many of the issues GM Nigel has been raising recently in the areas of Eastern use of non rational methods such as Tao, Zen, etc. tapping into larger areas of the mind than cognitive thought are not based on rationality but should not be classified as irrational. There is great power in these methods. The Western idea of intuition could also be included. Recent work cited in Ariely's book Predictably Irrational shows that even those processes considered rational have hidden processes embedded in them that make their results decidedly irrational.



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.



I often say you can't appreciate one market without taking into consideration the backdrop of impacts and effects of other markets. No better illustration of that than last week's action. Here are some indicia:

TA-25 / VIX tableThus, Tel Aviv 25 broke 1000 and VIX broke 30, both for the first times since Mar 16, a nice four month anniversary.

Oil had its greatest one week drop in history, down $16 from from $145 to $129. Its previous record decline was $9.60 in the week ending Nov 30, 2007.

The S&P had its first up week of the previous seven, after spending the longest time in the last 25 years without a reasonable X day maximum.

Bunds, down 1.27 points on Friday 7/18, had their second greatest decline in history, exceeded only in Dec 2001. Corn dropped 20%, and most other grains and metals fell at least 10% on the week.

In short, there was a complete changing of the guard, and fulfillment of long frustrated dreams across the board. What other highlights did I miss?

Vince Fulco looks at the foreign policy scene:

Speaking qualitatively, if we change the term "frustrated dreams" to "frustrated pursuits", the extreme hardening of Iranian and Western positions the last few weeks with the then bolt from the blue US actions to meet in Geneva over the weekend and establish some base level of diplomatic representation within the country constitute a promising, albeit fragile reversal of trend.

Paul Marino adds:

Much as Vic and Laurel believe Fed members and the like have access to the information three days or so before reports are released, someone, somewhere knew the US would sit down at the table with Iran, albeit briefly and deadlocked. Oil knew of this well ahead of time. 



Leopard/ CrocAstonishing photos of a leopard making short work of a croc from The Telegraph, UK [hat-tip to Riz Din]

This is a perfect example of making sure you fight on your home terrain. The outcome would have been different had this altercation taken place in the water.

The lesson: become good at something and learn to dominate it. Stick with what your good at and don't try to compete, when competing means laying it all on the line, in an area outside of your expertise.

This applies not only to the wild, but to the markets as well.

I suppose it's ok to go outside of your area of expertise, but make sure you've had plenty of practice in a non-life or death situations or non-laying it all on the line situations.



Wright BrosDecember 17th, 1903 was when the Wright brothers had their first successful flight at Kitty Hawk, NC. I know this because of the fascinating 30-minute lecture and following 30-minute film at the Wright brothers Memorial Park, three miles from where we are vacationing in Kitty Hawk.

Without really looking into it, I had always assumed that the invention of powered flight was kind of a hit-and-miss thing, much like Edison ploddingly trying a thousand things inventing his light bulb, but not so. The Wrights were really bright guys who, though their main business was running a bicycle shop in Dayton, Ohio, truly proved to be both scientists and engineers. These guys were amazing. They carefully planned and calculated all of their moves, starting with segmenting the four main problems of controlled flight - pitch, roll, yaw, and thrust - solving each separately then putting it all together in the Wright Flyer of 1903.

Not only did they research and work out the theory, but they did exhaustive modeling and testing; starting with kites, scaling up to gliders and then finally the powered machine. They developed their own test and measuring tools, including a wind tunnel to test wing designs, and worked out how to measuring lift and drag using a tension scale, compass, and basic trigonometry (to optimize the wing shape).

All the elements first came together in their 1902 glider, which they tested successfully. The only thing left was to add power for thrust.

Again, they had to invent the necessary elements. When no car company would build them the type of engine they needed, they improvised their own simple but ingenious four-piston engine cast in aluminum. They then also had the insight to design their propeller to act like a wing, and optimized the shape so accurately that they were within a few % of what you would optimize with modern technology. Orville, hacked, carved, shaped and polished the propellers himself. The one engine powered two propellers, which were driven by essentially bicycle chains mounted through bicycle frame tubing.

They accomplished the whole thing in a well thought out systematic and truly scientific way, having to invent most of what they needed as they solved one problem after another. I found it to be so much the more impressive because of that - their methodology.

The lesson for traders or investors designing a system is to observe from different perspectives to gain insight, segment problems into more manageable components, transfer ideas from other disciplines or seemingly unrelated areas, try to establish some theoretical basis for why what you are attempting should work, build models, test, and optimize. Also, you need to be persistent, adaptable, and resourceful.



LitchfieldYears ago I knew well a doctor who lived up in Litchfield County CT. It's surely one of the more picturesque areas in that part of the country, but since the general store was the social center of the town, not the easiest place around for a young (read: randy) woman such as she to stalk her prospective prey.

So she would troll the New York Magazine personals, arrange her NYC assignations, then invariably seek sanctuary in my Westside apartment when those evenings' proceedings would go awry. Apparently false advertising runs rampant in that game.

Not one to be easily dissuaded, she modified her tactics a bit by trading up to the presumably more princely personals found in The New York Review of Books. Of which, the Wikipedia profile pretty much says it all: "…Esquire has called it 'the premier literary-intellectual magazine in the English language." And, "…what Tom Wolfe has called 'the chief theoretical organ of radical chic'."

It's got lit cred.

According to the lady doc, though, its personals also had some of the most pedantic poseurs ever to slither down Riverside Drive. Turns out there is some sort of cluster of them up there in Morningside Heigths. Check out some of these cats. The self-descriptions read like the composite of a singles scene sociopath:

"…Contributes to the community, sits on boards…Very creative, but sadly no green thumb—buys plants and apologizes to them…Cambridge-based scholar, slim, pretty, fit, interested in tennis, travel, stargazing…thinks deeply, politically liberal…Interested in social change…Actively enjoys trekking in Nepal, tapas in Barcelona, snuggling at home, The Economist, Mozart sonatas…seeks arts-loving, progressive travel companion for Rockport, Napa, Machu Picchu, Paris…Especially interested in food, engaged in political action…Passionate brunette—long legs, slender good figure, classic features very Ava Gardner-esque, with irreverent and intellectual twist…Embraces life’s possibilities, insatiably curious about the world, calm, unafraid of fun, projects a whimsical, articulate sweetness…Willing, attuned, gives the moment her all. Drawn to history (European, Japanese, Russian), gestures of simple caring…Described as having depths…Without cliches…"

Alas, the lovely lass is married now — though not to the London metals trader I introduced her to. But back in the day (mid-80s-mid-90s), the office she worked at outside of New Haven was quite a well-stocked pond. Unless it was a total anomaly, it was where I learned that female doctors tend to be equally as forthright in their dealings with guys as they were straightforward in their studies. Nothing elliptical there on either count.



Pull towardNever in my life do I experience such a force, an intense unbelievable drive to right my wrongs in the quickest form possible by doing something completely and utterly insane, as when my account suffers as a result of a poor trading decision, outside of my trading plan. In line with James Sogi's piece "Mistakes were made" and its reference to Cognitive Dissonance, and how a chain of events can spiral out of control, I believe it's not the initial mistake, and not adhering to your trading plan, that causes the major issues in remaining profitable and being successful. It is the subsequent immense urge that wants to right these wrongs, and drive you into oblivion.

The human seems to be at its weakest at this time, or maybe the natural competitiveness to stay on a righteous path and motor forward is the primitive instinct. However what I do know is that it takes every bit of my will power to fight this urge, and it only loosens its grip when I have a success and have the account moving back in the right direction.

This could explain why a lot of people do a lot of stupid things, as they meander through life without any discipline plan or focus: we need these to take stock and have something to measure against, when all goes pear shaped. Without a game plan, we are all doomed.

Riz Din adds:

On the occasion when trading off-plan blows a massive hole in one's account, I have experienced another base sensation that reminds me of some personal accounts of gruesome shark attacks. The adrenaline rush is so strong that these people sometimes feel no pain during the worst of it. It's nature's anaesthetic. One man describes a feeling of almost beautiful serenity, knowing his time was up as he bobbed about helplessly in the water, but feeling no great pain. This chap was apparently saved by dolphins and went on to have hundred of stitches. If you live, the pain comes later. 



BullIn Damn Yankees the hero leads the hapless Washington Senators out of their losing streak by trading his soul to become the much need long ball hitter they need. If I were to play that role with my friends on this site, and all those who read the column, I would remind them that when things look really, really bad, that is the time to buy. I would remind them of the Rothschilds' advice, both the founders and John, that the time to buy is when things look hopeless and there's blood on the street. Such a situation occurred this week, with oil looking as if it would never go down, and the Fannie-Freddy duo looking like imminent bankrupts. Everything fell in place, with all major indexes including Tel Aviv, falling below round numbers, and truly disruptive moves following the Bernanke testimony, to 1201 on the S&P, both within the day and the next morning in England, to say nothing of a 2% drop in one hour from 3:00 to the close on Tuesday night. You have to hand it to that diabolical evil hand, the weak could not even bear to look any more, let alone hold or add to their positions. We've gone pretty much the longest in history without a reasonable multi-day maximum or a couple of up days in a row. How much more of a silver platter do you need, and how many Lolas must you resist to come back to the Lorie, Dimson, triumphal kind of view?

Alan Millhone concurs:

BellYesterday was something to behold, and for all Americans to build upon, with oil dropping $10 and the DJIA up almost 300, its best rise in three months.

There is still some more dust to settle, for instance IndyMac, but all will shake out in due time and we will get back to business in the US.

The late great GM of Checkers Tom Wiswell once told me he liked to eliminate the negative and accentuate the positive. His admonition holds true in all facets of our lives.

Vince Fulco wryly notes:

Perhaps this is what is needed to maintain the overnight lows earlier in the week:

Pakistani Investors Stone Karachi Exchange as Stocks Plunge : The Karachi Stock Exchange 100 Index fell for a 15th day, the longest losing streak in at least 18 years, prompting hundreds of investors to walk out of the trading hall, throw stones at the building and shout slogans against regulators.

But how do you stone a distributed set of server farms and fiber optic communication links?

Sam Marx remains cautious:

Martin Zweig concluded from his studies that bear markets quite often end with a violent move upside. We had a good move yesterday but, in my opinion, it needs more of a move on the upside in the next day or two to be considered violent. Four things came together this week to cause this 276 point upmove: the SEC made shorting financial stocks more difficult, the Dow was slightly below 11,000, Sen. Obama's campaign took a number of hits, because of changes in some of his positions, with much of the criticism coming from his closest followers (the New Yorker cover did not help either) and President Bush took a stronger stand in favor of offshore drilling. A short squeeze will occur if this rally continues.

On the subject of the Yankees, the last All-Star Game was played in the 85 year old Yankee Stadium yesterday. The stadium will be torn down this year and last week Tab Hunter, the star of Damn Yankees, was 77. Time moves on.



UPDATE 2-Nigeria locals blow up Eni oil pipeline, output shut…oil rallies $1.5 [news headline]

As I sit and watch Crude rally a buck and a half off the back of the headline above, I wonder what will be the attention span to traders on this headline, how long will it hold their focus (Can this even be measured… does it vary market to market? Can information like this be collected, grouped and categorised for further study? ) before their mind moves elsewhere and either the massive long position that has been built up within trend for the last 6 months + looks to continue yesterday's liquidation, or whether the bulls will resume seizing control at any opportunity.



No market is immune from potential fraud, criminal activity, or outright fakery. Whether it be in the equities, commodities, currencies, financial, or art markets, one should remain skeptical about what is offered for sale, and know your market. I consider myself to be rather knowledgeable about several different markets, including the art market. Although I don't claim great expertise in the art market, I do know how to avoid paying retail in most cases, and have a good eye for art. Since I'm not an insider in the art market, I have to rely on the expertise of others, trust the provenance being offered, and trust the dealer's due diligence. Sometimes, even those safeguards fail. I recently had my entire collection checked out and verified for insurance purposes, and one of the pieces was determined to be a fake, a forgery. This opinion was confirmed by a third and fourth party, and the insurance company dropped the coverage on the piece. The rest of my mid-sized collection passed with flying colors, and the company only raised my premium by 30%. The dealer I bought the work from went out of business in the 90's, so I'm out of luck getting any restitution. Although I can get tax treatment on the loss, I'm feeling the sting, and am just glad the fake was only a minor piece in my collection. Whereas losing trades are a cost of doing business, and don't rile me much, I was always of the opinion that beautiful art would never be a losing proposition. The fake that was hanging on my wall is beautiful, but it's still a fake, and therefore a losing proposition. The mistress of the market can offer objects that appear to be very enticing and beautiful on the surface, but scratch that surface, and the ugliness of deceit, dishonesty, and criminality will be evident. Whether it be the art market, used cars, the grains, stocks, bonds, or anything… one can be assured that there are participants that are less than honest, that have absolutely no conscience when they rip you off. Frankly, I'd prefer to be mugged in a back alley than be swindled in the purchase of fake art. Since my art is so beautiful and completely moves my heart, there's something very tawdry about the idea of that a fake invaded my personal space.



NigelHaving recently abandoned the barbaric practice of shaving in the morning I've been looking into the history of facial hair. It seems that the killer blow was dealt by Gillette in 1903 when they started making razors with replaceable blades that could easily be used by anyone at home. This certainly made shaving easier and more convenient (not to mention safer), and when you add in a modern obsession with youth the clean-shaven look was bound to win out. But will this continue into the future? Who knows.

The impact Gillette had on beards got me thinking about what higher energy costs and ever greater wonders on the technology front might do. I think there may be many different effects, not least of which will be to make home based working a lot easier and commuting a lot more difficult to justify. So perhaps a new paradigm will govern the property market with people wanting to live in either the city (no commute) or genuinely pleasant places whilst 'commuter towns' will become an anachronism.

What does this mean in practical terms; bullish on York, bearish on Milton Keynes. And the coming viability of working remotely via tech might also explain the relative strength of the Naz, despite the fact that conventional wisdom would have us believe it should lead any decline.

Misan Thrope adds, somewhat off topic:

Shaving a 'barbaric act'? Until I recently I thought a 'barbarian' was someone who did not shave (from the Latin Barba = Beard).  However it seems that there is some controversy on this point and some say barbarian derives from the term ba-ba-ba which the Greeks used to caricature those who spoke any foreign (i.e. non Greek) language. You learn something new from Daily Speculations every day.

Riz Din remarks:

I have spent most of my life in Milton Keynes and am living in the town at present. It is a strange place, made up of extremely straight roads intersected by endless roundabouts. In my childhood, I would often venture to Birmingham or London to see my family, and for a long time, I thought these places were very strange, what with there bendy roads and the like. Over time, I realized it was Milton Keynes that was strange. Fortunately, the town managed to avoid the tidal wave of ugly concrete buildings that swept across the country in the 70s and so is relatively easy on the eye. It is still a somewhat sterile place though, and because the 'new city' was created by top-down city planners, it lacks any sense of organic evolution. Personally, I think it is a fine place to grow up as a child, or to retire if you want the quieter life with all the conveniences. For one's middle years, it isn't so much fun - the proximity to London maintains my sanity. That said, Milton Keynes is growing, and growing. Some people clearly like it. Technology reduces barriers and makes remote working possible, but the impact on the workplace has been less marked than many expected. It still pays to be in the thick of it.

P.S. I was disappointed to learn that the name Milton Keynes has nothing to do with the great economist and investor.



 "Mistakes Were Made, (but not by me)" by Carol Tavris and Elliot Aronson is the best of the recent books about cognitive biases. It succeeds by convincingly extending the theory to the broader social issues of politics, divorce, criminal justice, and war. Ariely's book "Predictably Irrational" described the quaint academic experiments but did not extend the theory well to broader issues. Aronson answers Dr. Taleb's Black Swan issue of process vs jump by describing the process of how an initially honest cop or politician or executive starts honest, but ends up as a criminal (or society ends up in war and genocide) in a series of small steps down a pyramid of self deception, cognitive bias, and end up unknown to them, in a manner mysterious to them, at the bottom of slippery slope of deception. This process is the unrecognized missing element in the Black Swan, which upon retrospect when at the bottom of the slope appears in the mental narrative as a catastrophic anomaly but which in fact was a step by step process.

Cognitive dissonance causes great pain. The thinking goes: There is no way a good person like me could do something so stupid? That causes a chain of alteration of memory, selective cherry picking of evidence agreeing with a preconceived result, self justification, even false memories, shifting of blame and justification. The result is war, divorce, wrongful conviction of innocent people, prejudice, mistaken governmental policies, plain bad decisions. We have all seen people place blame on others for their own faults. This is the heart of many, many failures. The simple recognition of this phenomenon is critical to its avoidance.

As traders we are uniquely confronted with cognitive dissonance and cannot easily escape the reality of our mistakes as the stats make clear what our weaknesses and mistake are. Trading has been the main tool in my life to face up to my personal weaknesses and to try do something about them and has been worth way more than the money gained. The difficult issue for me is to realize when I am right and to press the attack, rather than to worry maybe I'm wrong. It's a tough call in balance.

I recommend this book most highly of all the recent books.



Just came home from Columbus, OH Airport and outside of Athens, OH on Route 33 a roadside billboard ad caught my attention. The large billboard featured a stately home covered with a red brick veneer and a steep roof (likely 12 on 12) and black dimensional shingles. The company advertising is Schumacher Homes and the home featured (my estimate) would be around 5,000 ft2. Now for their ad: They are offering to make your house payments for a full year! Now, all of us know there ain't no free lunch and somebody will have to pay for the year's worth of mortgage payments, right? Most likely scenario will be that the payments for the first year will be built into the mortgage and either will lengthen the loan or make the payments higher when they ' kick in' after the first year. It is creative advertising — flawed though the concept may be.

Vitaliy Katsenelson adds:

I saw a Jeep commercial advertising $3 per gallon gas for a year (limited to 12k miles) if you buy a new car. I guess automakers are using similar tactics to try to sell gas-guzzlers.

Jeff Watson recalls:

I remember telling my wife that the real estate market was hitting a top when I saw signs everywhere, offering mortgages for 130% value with no income verification.

Adam Nelson explains:

I think these sorts of gimmicks are a way for the builder to offer a discount without lowering the house price (which would thereby officially lower the price of the houses they sold to your neighbors as well). Because appraisals are made in part via property records or MLS sales figures which don’t include discounts structured as something given in addition to the house, the builder hopes to preserve the valuation of the other houses by giving this kind of sneaky discount.



Horse StanceThe concept of a stance is critical to all aspects of life, as pointed out by Nigel Davies and Jeff Watson. Your stance is more than just a physical posture, or manner of walking and approaching the physical world as it reflects the inner self and affects your interaction. You can see it in others and can tell much about them from their stance, the way they carry and comport themselves. A strong stance enables strong feelings, and practicing strong stance encourages a strong inner self. In fighting a balanced stance is preferred in neutral situations over a strong stance. A balanced stance is evenly balanced between advance and retreat, attack and defensive movement.

In trading stance is of utmost importance. At multi year lows and on the bull moves it is very important to maintain a strong stance. In the Red Queen trade down, a balanced stance is required despite the fast pace. At highs, a defensive stance should be used.



 I recently read "The Age of Abundance: How Prosperity Transformed America's Politics and Culture", by Brink Lindsey, a vice president at the Cato Institute.

Lindsey's thesis is that the mass affluence that began in the United States at the end of World War II was a watershed event with far-reaching implications (the book is U.S.-centric, but Canada and Western Europe quickly followed the U.S. into mass affluence). With basic material needs largely met, many Americans shifted attention to pursuing higher-level needs in Maslow's hierarchy. The generation born after the war, the Baby Boomers, never knew the bad old days of scarcity and had radically different priorities from their parents.

As this era of abundance unfolded, practices and institutions that stood in the way of self-fulfillment came under "sustained and furious assault". The civil rights movement fought racism. Women fought discrimination in hiring and promotion. Sexual taboos were overturned. Alternative lifestyles proliferated.

People's reactions to these sweeping societal changes increasingly determined their political allegiances. "On the left were arrayed those elements of American society most open to the new possibilities of mass affluence and most eager to explore them … At the same time, however, many on the left harbored a deep antagonism toward the institutions of capitalism and middle-class life that had created all those glittering new possibilities. On the right, meanwhile, were the stalwart defenders of capitalism and middle-class mores. But included in their number were the people most repelled by and hostile to the social and cultural ferment that capitalism and middle-class mores were producing."

Lindsey believes the most important story is that the majority of Americans who are not passionate political partisans have been gradually forging a "libertarian synthesis" that allows for individualized pursuits of self-fulfillment while supporting capitalism, rule of law, and intact families—a balance of personal freedom and personal responsibility. "Most Americans … embrace the traditional, Middle American values of patriotism, law and order, the work ethic, and commitment to family life. At the same time, however, they hold attitudes on race and sex that are dramatically more liberal than those that held sway a generation or two ago." Lindsey argues that this synthesis, as yet unrecognized by the major U.S. political parties, is the basis of the social order of the 21st century.

The book has a copyright date of 2007, but appears to have been written before the 2006 congressional elections. I found myself wondering how well the apparent sharp left turn in American politics since then fits Lindsey's hypothesis. As the Collab noted the other day, there is an anti-market cacophony in the air these days. It feels like the mirror image of the late 1970s, when Keynesian economics was so thoroughly discredited that President Carter felt compelled to support deregulation and appoint Paul Volcker as Chairman of the Federal Reserve Bank. Now, "your own men", as Mr. Zachar would say, such as Ben Bernanke and Henry Paulson are advocating increased regulation.

Michael Bonderer adds:

Relatedly, check out the good piece in Time magazine by Nathan Thornburgh on the Libertarians' freedom agenda and how it's transforming America's political landscape and the potential for the "Naderization" of McCain in a few states.



I find the paper Simulating Collective Misbeliefs in the Journal of Artificial Societies Simulation interesting.

Notable how it predicts a tendency for cults to grow based on the beliefs of dead individuals.

I think the same techniques may be applied to look at trading systems and trends, as shared beliefs can become self-fulfilling prophecies, sometimes weakened when a bubble bursts. In life it is equally hard to distinguish between consensus belief and reality. Even time and space are human concepts, although when people look for aliens they scan with their telescopes the vast reaches of outer space.

Sushil Kedia adds:

Wonderful. May I be permitted to generalize Mr. Glazier's statement further that everything that mankind debates as within the possible and not within the possible is again a matter of the human cognitive faculties. Recognition is subjugate to cognition. Observation, testing, conclusion is but a chain in the ever improving cognitive processes.

What would the list suggest be a good way to read, learn and think about the history and or the evolution of human cognition? What may be the must read sequence of works in that area?

"Cogito, Ergo Sum" - Rene desCartes



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.



They used to tell me I was building a dream - and so I followed the mob,

When there was earth to grade, or nails to drive, I'd borrow for the job.

They used to tell me I was building a dream, with peace and glory we led,

Why should I now be standing in line, foreclosure just ahead?

Once I built a credit-line, made it run, buying time.

Once I built a credit-line; now it's done. Brother, can we spare sub-prime?

Once I built a McMansion, up to the sun, stucco, sticks..sublime;

Once I built a tower, now it's done. Brother, can we spare sub-prime?

Once in khaki shorts, gee we looked swell,

Full of that Yankee Doodly Dum,

7.5 million ARM's,

Who'd a thought it dumb!

Say, don't you remember, they called me Mort; Mort I paid - all the time.

Why don't you remember, I'm your pal? Buddy, can we spare sub-prime?

"Brother, Can You Spare a Dime", lyrics by Yip Harburg, music by Jay Gorney (1931)

George Parkanyi adds:

I have another entry!

Sung to the tune of the Beatles’ Yellow Submarine …

In the town, where I was born,
Lived a man, who failed to see
The basic flaw, of going long
Asset-backed securities.

And so he bought, a mighty tranche
Of CDOs he thought secure
From triple A, it slowly dawns
That what he bought, but cow manure

all together now …

We all hold a ton of hollow sub-prime liens,
Hollow sub-prime liens
Hollow sub-prime liens

We all hold a ton of hollow sub-prime liens,
Hollow sub-prime liens
Hollow sub-prime liens

Now we watch, quite nervously
A fast imploding S&P
And we wonder, do we still have
A functioning economy

We all hold a ton of hollow sub-prime liens,
Hollow sub-prime liens
Hollow sub-prime liens

We all hold a ton of hollow sub-prime liens,
Hollow sub-prime liens
Hollow sub-prime liens

(repeat and fade)



T. Boone Pickens is promoting wind and solar power on his web site and in ads.  Is he trying to become a politician? Not likely, he is a consummate businessman.  (A reader).

 Solar electric plant in the US currently costs $9 per noon Watt (Sharpusa.com), and in the US each Watt of noon capacity that is installed in an ideal way, (proper angle, proper azimuth, never shaded) yields about 1,000 Watt-hours of electricity per year (American Society of Heating and Refrigeration Engineers Journal) after conversion to AC. The average US price for 1,000 Watt-Hours of electricity, which the utilities call a KiloWatt-Hour, is just under 9 cents (US Energy Information Administration Website).

Divide $9 by 9 cents to get the "simple payback" in years, not including maintenance, equipment replacement, changes in the price and value of money, etc. for investing in solar electric generation.

Wind in the US is Federally subsidized at $80 per MegaWatt-Hour, which is a less straightforward way of saying 8 cents per KiloWatt-Hour - almost the full retail price of the electricity. However, depending on the location, the unsubsidized economics are reportedly attractive in some cases.

Businessman or politician? I don't know. I think it depends on what he might actually know about the economics of solar and wind, which is hard to figure out at a distance.



PoltavaToday is the 299th anniversary of the Battle of Poltava. In a single afternoon Charles XII of Sweden lost his empire and the political map of Europe was permanently redrawn. Until then (June 27th 1709 under the Old Style calendar, July 8th under the New) Sweden had controlled the Baltic and much of northern Germany, and the Swedish Army had been respected and feared for 3/4ths of a century as the preeminent military force on the continent, in the same way the Wehrmacht was from the Franco-Prussian war to the end of WW II. Then everything changed - in an event that was as important for European and world history as Stalingrad. The Swedish army was routed, Charles fled to the Ottoman Empire for refuge (he stayed five years!), and the Russians became the dominant power in Eastern and Northern Europe. For the next 280+ years the Russians were feared, scorned and courted but never ignored. Perhaps the Russians think that $150 oil is an adequate replacement for the Red Army (the Washington Post certainly does), but I doubt it. What, if anything, they can do to recover their lost glory is problematic - as the Swedes found out (look up Hats' Russian War and Gustav III's Russian War if you want to read the sad and stupid end of the story).

Paolo Pezzutti adds:

On a recent trip to Stockholm I visited the Vasa Museum. The Vasa was a ship built for King Gustavus Adolphus of Sweden from 1626 to 1628. At the time Sweden was fighting the thirty Years' war and the king was impatient to see the ship contributing to the war efforts after unfortunate and multiple ships losses due to storms and lost battles.  The ship had to support the expansionism of the Swedish kingdom and it was supposed to be a powerful and feared ship.  But her destiny was not glorious and the ship sank during her maiden voyage in august 1628.  It was left laying under the sea for centuries when finally in 1959, after being located, it was raised to be displayed in a museum only in 1990 in all her beauty and perfection (but not from the engineering perspective though).

There are several reasons why the ship sank that were investigated. The ship had not enough ballast.  The project was changed to accomodate the king's requests. A line of guns was added contributing to instability.  What is interesting is that it seems that a stability trial was held with little or no success, but that no action was taken at that point.  Several lessons learned in my mind:

- As usual in these sort of projects, changes to the original requirements and specifications during the development may have a bad impact on timelines, costs and performance of the ship.

- Changes came from the top level. Most of the times, the less competent technically, but the most influential politically.  No one dared to stop this.

- After the stability trials, no one wanted to face the king to say that the project was failed. The staff followed blindly instructions without willing to be accountable for the technical choices made.

- There were also financial implications of the failed project development that nobody probably wanted to cope with and responsibility was left to the top management.

Eventually, there was an investigation and nobody was found responsible for the disaster in which 30 to 50 people died.  The sinking was explained as an act of God.  Nice and modern story of power, bureaucracy, economic interests, accountability and motivation versus fighting capabilities, technical competencies, professional expertise, and life of men and women at stake.



TaurusThere have been a number of absurd studies over the transom lately. VIX has to go above 29% for a market bottom because that's what it's done at the bottom of other market declines. Equally ridiculous is that the average market decline when it's gone down at least 20% is 27%. What these studies fail to note is the expectation from a given level as of a closing price. They are flawed because of retrospection and perfect knowledge as well.

Lawrence Schulman writes:

I don't think those studies are absurd at all. The four big selloffs we had last August, November, January, and March had VIX going above 29. Right now the market has taken out the previous lows. So I think it is wise for anyone to have some cash on the sidelines since the probablity would favor another large VIX spike. As far as the average bear market's being down 27% from the top, I would have told an investor: when the market is down 20% from its bull market high — which happened this week — the likelihood is the market would not stop going down once it hit the 20% pullback. And on Friday the market was down 22% from its bull market high.

Andrew Goodwin remarks:

Seems absurb that a bell will ring at a market low, which was to be announced, according to multiple pundits, by a VIX move above 30. The markets normally confound attempts at bottom fishing by the masses. Those looking to the contrarian idea that an indicator so scrutinized by the public could not possibly work, and even citing the Heisenberg principle, were taken aback when the tool worked this time. This time was different because the smart money contrarians outsmarted themselves by looking for deception. The VIX lady really did sing at the end and it didn't convince all.



One way to think of sell-offs is as an attempt to locate and test fixed stops of different kinds. The BSC affair was one; when it was learned that a "too big to fail" failing financial (actually too big to let fail) was handled by the Fed and another financial. Similar tests occurred in January, in order to find out how much Ben cared about the stock market.

Both tests occurred around the level the SP500 is at now, and there could be attempts to bring it lower to find out what happens should other financials go under (eg, WM, WB, LEH ) - with or without government intervention. Or to bring in an "orthogonal" test of an asset related to other systemic problems, such as GM.



S BForget the term bear market. Forget any term or way of thinking about something that gives anyone a negative visceral reaction to it. Forget statistical tests, forget averages, forget range bound, forget highs, forget lows, forget tradeable.

None of that mattered when I played poker and the odds screamed to me that I had an XX% of winning this hand (notice only two X's….which implies the odds are somewhere south of 100%). Even if the odds were 99% in my favor to win as long as the next card was not the 2 of clubs, those odds/statistics/calculations are meaningless IF THE NEXT CARD IS THE TWO OF CLUBS!!!!

When you're portfolio is valued at a million dollars, and you are drawing a sum of money off that principal to live, then along comes 2000, 2001, 2002, thru early 2003…..when the SnP is down 50% and the NAZ is down nearly 80%…..when you've seen the value of your portfolio melt down 50 - 80% in terms of return MINUS your monthly check to live on, you are royally  s[quished]!

Lets say you were withdrawing $50k/year off your portfolio for those 3.25 years. You've now got somewhere south (maybe even WAY SOUTH) of $350,000. You're in trouble. It doesn't matter if the market reverts back to the mean, you can not maintain your lifestyle and your portfolio will likely never recover unless you stop taking money from it and give it many years to recover……while you're back at work so you can feed yourself and pay your bills.

It doesn't matter what the statistics say, you are screwed! It doesn't matter if you call it a bear market, a glitch, an expected random event, or if you call it Christmas Eve…..you are s[quished].

Once you start eating your seed corn, your chances of recover begin to diminish in an inverse (and exponential?) manner.



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. 



There is the meme going round that somehow a "bear" market is different. That bear markets are the opposite of the hot hand. That because for multiyear periods in 29-43 and in 68-82 the S&P index gave zero returns, that this is "proof" that bear markets are not random. That Bear markets are different, they have such strong momentum we must throw out the zero correlation results that apply to "normal times".

That such a couple of strings of bad luck is "proof" that we should throw out the random walk theory. In fact a certain contributor to this web site has written a book on these "secular range bound bear markets"

If I understand his summary correctly, he is basically suggesting that we abandon randomness and predict a long secular bear, reverting to economic arguments, because 4 "secular range bound bear" existed for more than 5 years and 1 "depression" lasting from 1929-33, and then returning by 1943 in about the last 120 years of the Dow. His suggestion is that we ignore the dividend returns and go with the P/E. This of course, despite no correlation to change in P/E and change in Index. Hence forget the numbers, go with the economics. Of course I am not suggesting that the P/E or economics over these "secular bears" where not bad. Sure, due to the outlook of Labor Unions, Japan eating our lunch in manufacturing, high capital gains and tax on the rich that drove the P/E down in 1968-1982, to very low levels… But this is all in hindsight.
This of course has the media in a frenzy, those without the numerical literacy buy the story hook-line and sinker.   Even many, that should know better, have bought into the argument calling for an "inevitable depression".

If anyone remembers the first e-mail I sent to this web site was just about such "hot-hands" in basketball. My response to the coaches was that randomness is much more clumpy than we think.

It would appear to me that the burden of proof goes to those claiming these streaks are proof of inevitable structural failings continuing (having "momentum") i.e. to the "secular bears" camp, not those claiming "bear markets don't exist except in hindsight."

But what does a simulation say simply using randomness: how abnormal are these "secular bears". My simple simulation using 9% drift per year and 20% volatility with log normal distribution using 500 separate 120 year periods, suggests that it is pretty close to average. Slightly above average, but nothing close to "proof" of a "secular bear" that is anything but random fluctuation. (The 9% drift assumes 2% dividend each year which over the last 100 years was probably too generous to the bears camp. I did use Excel random generator, which I understand has some problems. So someone may want to use code with a "real" r.n. generator to verify the results).

My results average of 3 "secular bears" per 120 year period, but  many 6, 7, 8 separate (separate by at least 1 year with new high) periods. Average max length without new high 11 years, but many  15/16 and 17 year periods.   Of course if you allow 1 year new high before going range bound ( like the 2000-? secular bear)   this  extends such "streaks".

So  it would seem to me that what we have seen is only slightly above average.   Which I would suggest the meme has more to do with  psychology and "bear baiting" than economic inevitability.

Now this is not to suggest that understanding the new new meme on why USA is doomed is not worth  while short term as I suggest this will catch many on the wrong foot short term. Just expect it: when the random news goes the bear way the short term swings will be big. Nor is this to suggest that some poor fool with a 5-10 investment time horizon and low tolerance for risk, whose advisers don't understand the risk, should be 100% + in equity, thinking 10% drift means risk free 5-10 years out.

Indeed: Et tu counters?



At times like this it pays to remember why to buy a portofolio of stocks for long run is on average excellent idea :

1. Mean Drift of 3-5% p.a. because of mathematical properties of portfolios composed of shares in USD.

2. Mean Drift of 5% p.a. because the system is "self-adjustedly" skewed; politicians, bankers, companies, media & the entire economy benefits when the market is up.

3. Mean Drift of 5% p.a. as entrepreneurs demand and will get it over risk.

4. Mean Drift of 4-6% p.a., statistics by Dimson, Marsh and Staunton over 100 years and different countries.

However, that was the easy part; it is more difficult for one to sit on his hands, and not override what is backtested and what shall work.

Riz Din runs some numbers:

If you invest $5000 each year in the stock market and earn a rate of return of 7%, after thirty years the total investment is worth half a million. Stay invested for a further ten years and it doubles to just over a million. It doubles again to two million after 50 years. To ensure good returns, it makes sense to invest in one's health and increase the probability of having an abnormally long investment horizon. Also, shooting for a long time horizon may give one the ability to see a playful cub where others see a grizzly ravaging the market.

Alex Forshaw objects:

But after approximating a realistic rate of inflation (3-5%), that number becomes much less impressive.

Other amusing implicit assumptions include

1) zero information costs on the part of the retail investor;

2) zero "oops" moments e.g. auction-rate securities portfolios which end up yielding -20 percent because a bank says so;

3) zero capital gains/ income tax;

4) forex fluctuations masking the enormity of market volatility; and

5) zero probability of not-even-very-extreme events, such as having to liquidate a large portion of your holdings immediately because of a family sickness, job change, etc.



A real-estate agent shared some data on the local housing market over the past year, including listing price, sale price, days on market, and selling agent commission. He posed this question:

Commissions are paid by the seller to the listing agent and the selling agent (the agent that brings the buyer). Selling agent commissions range from 2.5% - 3%. The seller selects which commission rate he wishes to pay. Which yields the best result for the seller? My hunch is the higher commission (for many reasons), but I would like to see if the data supports my hunch.

To look at results for the seller, I was interested in DOM (Days on Market), and how much below the listing price the actual sale transacted - a variable I called "discount":

discount = [(listing price)-(sale price)] / (listing price)

In the data I noticed that there were other commissions besides 2.5 and 3.0%. When including these outliers, the analysis was messy - so since there weren't many I threw out all but exactly 2.5% and 3.0% selling agent commission data. Here is a test comparing the mean DOM for sales commission of 2.5 and 3.0%:

Two-Sample T-Test and CI: DOM_1, Commission 1_1

Two-sample T for DOM_1

Commission 1_1 N Mean StDev SE Mean
0.025             398 90.4   73.3    3.7       T=2.08
0.030             164 78.5   56.3    4.4

Those paying sales commission of 2.5% stayed on market an average of 90 days, whereas those who paid 3% stayed on 78, and the difference was statistically significant. Evidently the agent worked harder!

However the discount (drop in price from listing to selling) went the other way:

Two-Sample T-Test and CI: Disc_1, Commission 1_1

Two-sample T for Disc_1

Commission N    Mean StDev SE Mean
0.025       398 0.0453 0.0467 0.0023 T=-1.34
0.030       164 0.0513 0.0488 0.0038

The sellers paying the higher commission also had to take about 0.5% more discount from listing to selling price (though not quite statistically significant). This, of course, is made worse for the seller because the commission was also higher by 0.5% - so you could say that the net was really 1% worse including the higher commission.

Taken together it looks like the higher commission for selling agent incentivizes him to close the sale faster, though at a slightly worse price for the seller.

Capitalism works!



 Tyler Cowen gave an interesting talk at the NY Junto about the economics of worry, what you should worry about and what you shouldn't. He touched on his bearish views for the stock market, and felt Dow 8000 was a good goal because of the conjunction of the real estate and commodity crises, and various psychological anomalies. I kept wanting to say "Et tu, Tyler?" because I don't believe in bear markets, and always believe it's right to buy, especially at times like this.

John De Palma adds:

I greatly enjoyed the lecture on Thursday. It was the best talk I've attended this year.

1) He attributed part of the origin of the subprime problem to a calculation error where the perceived default rate could have been 1% in securities when the true probability of default was 4%. (Somewhat relatedly, Richard Clarida wrote in an October PIMCO commentary, "The proximate cause of this 'hard day's Knight' was the more or less simultaneous realization by millions of global investors that their underlying assumption about the distribution of returns on a wide "variety of asset-backed securities" was fundamentally flawed.")

I also think a rational bubble was a source. The Keynesian beauty pageant as an asset pricing model could be consistent with buying and selling of assets at values that adhere to an overall market convention that is inconsistent with how each market participant would appraise the asset if unable to flip it to another participant. (Keynes BTW compared investment to "a game of Snap, of Old Maid, of Musical Chairs"). In my view the bursting rational bubble would just be a breakdown in the pricing convention.

If a bond fund manager gets evaluated by Morningstar ratings and receives capital inflows on the basis of a narrow trailing 2 or 3 year performance, then the incentives to harbor blowup risk in a portfolio is such that the manager marginally setting prices in the market could be apathetic about whether he privately believes that default rate is 1% or 4%.

It conjures up an interesting thought experiment: Can credit risk be underpriced and yet everyone in the market thinks bonds are overvalued? Or the parallel inquiry from a rational bubble section of my senior thesis in college: Can eToys be worth $10 billion when mutual fund managers collectively think it is worth $1-$2 billion? (I surveyed fund managers, many of whom owned the stock, and the average response was the latter figure at a time when the market cap was multiples higher.)

2) I liked how Cowen's view of the macroeconomy was nuanced instead of a one dimensional scapegoating of an overly accomodative Fed, over (or under) regulation, etc. that is so popular. I find scary the compulsion towards narrative fallacies, attribution errors, and cramming world events into a preexisting ideological view.

3) His metaphor comparing subprime securities to poisoned water seemed apt. Bill Gross chose a "Where's Waldo" metaphor to eloquently make the same point in some of his commentaries during the financial crisis– ("…While market analysts can guesstimate how many Waldos might actually show their face over the next few years - 100 to 200 billion dollars worth is a reasonable estimate - no one really knows where they are hidden…"). In analyzing earlier crises Mohamed El-Erian has also related the lemons problem to EM debt pricing.

4) Cowen spoke about how the inequality of happiness in Denmark is similar to the U.S. despite a lower income inequality there. My takeaway from Daniel Gilbert's book was happiness set points and the power of habituation. Couldn't the inequality of happiness just converge upon some distribution regardless of the level of income inequality if there haven't been recent changes?

Also, I think in Gilbert's book there is an assertion about how the most realistic people (i.e. least susceptible to cognitive biases) are ones that are classified as mildly clinically depressed. Similarly, if people generally worry too much (which seemed to be your contention even if there are certain things people worry insufficiently about), then maybe some self delusion would be useful to avoid excess sensitivity to perceived threats.

5) In general comments on income inequality he mentioned how the rate of inflation varied by income right now. This is a bit of a non sequitur, but it's a topic I've been thinking about in the context of the Fed's fervent interest in inflation expectations. Surveys show how expectations differ by region and even gender in normal conditions. People's expectations have a consistent upward bias and overweight more frequent purchases. If the Fed is so obsessed with controlling these expectations than perhaps we need separate monetary policies by region, gender, and income so that we can reset an expectations-augmented Phillips curve to a price stability point. Since we of course don't, then maybe the Fed and market participants shouldn't look at these surveys to the second decimal place and pretend that the fate of the economy depends on 1.8% vs 2.2% inflation.

6) He made a point on health care about how people are blindly deferential to not properly incentivized doctors reminded me of this good column that David Leonhardt wrote in November– ("… Economists sometimes refer to this situation as an "expert service problem," because the same expert who is diagnosing the flaw is the one who will be paid to fix it. In most of these cases, consumers aren't sophisticated enough to make an independent judgment. That's why they went to the expert. The problem, of course, extends well beyond the car business. Anytime you call a plumber or roofer to your home or anytime you visit a doctor or dentist, you're at risk of having an expert service problem…If anything, Professor Hubbard argues that the expert service problem is more serious in medicine than in auto repair, because most people are less willing to question a doctor than to question a mechanic. Any effort to reform American medicine has to grapple with these conflicts of interest…").

7) Cowen commented that a catastrophe isn't more likely because markets don't price the prospect more aggressively now than in the past. However, in an article he linked to on his blog, Peter Thiel said the pricing is distorted because no one would be around to collect the insurance payout in the event of the catastrophe– ("…The catastrophe is so large that no functioning market or government remains: This is the only case where one would incur catastrophic "losses," although nobody might be left to collect them…" ) Similarly, there was recent speculation that a market on a Large Hadron Collider-motivated catastrophe would break down because of the inability to collect a payout in an apocalyptic event. ("…Unfortunately this is one kind of question where an Idea Futures market would not work too well, because people who correctly bet that the reactor will destroy the earth may not be able to collect their winnings. This would cause the market to under-estimate the risks…")



BullThe Tel Aviv 25 index is perilously close to the round number of 1000 but down a relatively subdued 1% from its Thursday close. The role of round numbers like this should be considered, as well as the attraction of round percentage declines such as 20%. Almost all European markets are down 20% to 24% this year: Germany -22%, France -24%, Spain -22%, Switzerland -20%, Italy -24%, Ireland -29%, Netherlands -22%, Belgium -27%. Only England and Denmark are down in the teens.

In this context I speculate it would be worthwhile to look at holidays as being inordinately associated with turning points, especially when they try to throw you off the first day following.



 The biggest political story today is the global ascendancy of state economic power and the fading of the free market as the world's big economic idea. Even here in New York City, former center of the financial universe, the subprime mess has supposedly discredited the philosophy that less regulation is better. This is all rot; the anti-free market trend will mainly serve, as it always has, to help ambitious would-be power-wielders to reach their career goals. Lack of regulation didn't do the financial system in. Plenty of blame has to go to the regulators themselves. A series of power grabs and subsequent attempts to control unintended consequences led to even more unintended consequences, until the threads were too tangled to follow.

Begin, for the sake of beginning somewhere, with Greenspan's attempts to be a hero for all seasons by turning the spigot off and on, again and again, and proceed to the subsequent heavyhanded attempts to eliminate all risk from pension fund portfolios after the Nasdaq crash and earnings fraud at Enron/WorldCom. Pension funds couldn't invest in stocks the way they had been doing — too risky! What could they do to meet their payout obligations? Wall Street had a wonderful new invention –top-rated mortgage and asset-backed securities. Unfortunately, they weren't exactly risk-free. Was lack of regulation the problem? No. And neither was the desire to get rich. The problem is that the bright minds of Wall Street can come up with contorted solutions when they have to satisfy their customers while dealing with regulations designed to eliminate risk. Unfortunately the whole debacle may become the excuse for a massive power shift to the federal government. Larry Summers had a piece in the FT last week calling for the government to save the economy with infrastructure spending. Sure, let's get the Army Corps of Engineers back to work redesigning natural waterways so they never work properly again. Back in the '80s, Reagan was attacked for his supposed simplemindedness, but in the '90s, his basic ideas had become the consensus. So much that as VP, Al Gore's main hobbyhorse was cost-cutting. Nowadays, it's hip in Manhattan to trash the free market. Our leadership abdication comes at a bad time, because the money nowadays is in the hands of people who care nothing for economic freedom. Nobody is aspiring to avoid the Road to Serfdom. China's free market is largely an illusion; prices for commodities are set by the government, not the market, the currency is still not freely convertible, the government still has a tight grip on far too much. The aspiring Mideast financial centers are being thrown up with royal-family money and control. Russia–
let's not even go there; the replacement of democratic aspirations with a systemic corruption is too sad to contemplate. Fortunately nobody can block people who want to be free forever. But there is no political freedom without economic freedom. Those pseudo-Socialist Realist posters of Obama that look like Che give me the shivers.

I am indebted to the brilliant Louis-Vincent Gave for some of the ideas set forth here, but any errors, misunderstandings or misapplications are mine alone.

Stefan Jovanovich replies:

Laurel should take heart. My niece, who hopes to join the regulatory clerisy by becoming a member of the California Bar, has just publicly declared Obama the savior. She has been infallibly wrong about American politics for almost two decades now, and the more emphatic she is (Bilbray doesn't stand a chance was her last vocal pronouncement) the more reason there is to take the other side of the trade. Money chases freedom; that is why it has been flowing west in this country for nearly two centuries. What has changed in California in the past two decades is that the desire for economic regulation has overcome the "Don't Tread on Me" spirit that allowed us to be the world's greatest collection of fruits and nuts. But, that is also changing. The Democratic candidates lining up to replace the Governator (who is term limited out in 2010) make lots of noises about how terrible things are, but they are careful to limit their tax-raising rhetoric to "closing loopholes". None has said a word about tax rate increases. Gavin Newsome, San Francisco's mayor, revived gay marriage as an issue after the California Supreme Court rewrote our State's constitution because it is a safe issue for the Democratic primary and not one that arouses any great passion among Independent voters. It also avoids the question of where the bureaucracy is going to get the money. The voters have already made it clear that the answer will not be from new taxes, even on the rich. The Sons and Daughters of Liberty are still alive and kicking and asking for lower tax assessments on their real estate.

George $oros wrote:

Because financial markets do not tend towards equilibrium they cannot be left to their own devices. Periodic crises bring forth regulatory reforms.  That is how central banking and the regulation of financial markets have evolved. […T]he reflexive interplay between financial markets and the financial authorities is an ongoing process. The important thing to realize is that both market participants and financial authorities act on the basis of imperfect understanding; that is what makes the interaction between them reflexive. […]

[Some people] blame market failures on the fallibility of the regulators and they are half right: both markets and regulators are fallible. […] The fact that regulators are fallible does not prove that markets are perfect.  It merely justifies reexamining and improving the market environment.



A MillhoneIn my area there has been a shoe repair shop in the same location for decades. Originally it was named 'Meintels'. They retired and it was taken over by a family named 'Haddad', who have operated it for 30 years. Since high school I have always worn Florsheim shoes and boots and like to keep same polished and use heel and top 'taps'. In years past they were metal and now are of a hardened plastic material. Over the years when taking my footwear to Haddads the owner would give me a tag and tell me to come back the following Thursday for pick-up.

Now things have changed … The other day and recently when I take my shoes there they do my work, polishing, etc. while I wait. The owner tells me they have lost 'market share' due to throw-away shoes made of rubber soles, etc. Haddads is the last remaining shoe repair shop left in my area. " Gus's " was the other and it is now closed.

Sitting there waiting I observed everything in the store; the old glass display cases, various colors and lengths of shoe laces, many colors of Kiwi shoe polish, etc. Two products brought back memories of a time past in my life… CADET shoe enamel and BRASSO brass/metal polish. In the 1960's I went to Fork Union Military Academy in Fork Union, Va. While there we had to keep our shoes to a high mirror shine ('spit shine') and our dress uniforms had a brass buckle that had to be kept tarnish free with the use of BRASSO. Military school was another time in my life and perhaps another story sometime.



 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.



 Better: A Surgeon's Notes on Performance by Atul Gawande is another great Riz recommendation about performance in the medical profession, but which applies to all professions. Gawande asks of a profession that seems to eschew empirical performance criteria, what does it take to be good where failure is so easy, so effortless. Like trading, medicine involves risk and responsibility. There are three elements for success: Diligence,morality, and ingenuity. The first and third are especially important for traders. Diligence seems easy, but it is central to performance and fiendishly hard. Even the simplest things for a trader like sitting and doing nothing becomes almost impossible at times. Doing the right thing trading day in and day out while the devils try to derail your plans takes Herculean effort which few can muster everyday, every hour. The balance also seems that an overly structured diligence might stifle ingenuity.

What is diligence for traders? It could be simple mechanical things like back up computers, feed, power. It could be simple sleep. It could be checking the data, the data entry, and the studies. Checking the announcement calendar to see what time market moving announcement might mar the tape like this morning's 20 point lobogola. The list goes on and I ask for supplement from others.



I'm not quite sure how to quantify the following, but  I wonder to what extent Crude Oil and other commodities ETFs  (In particular Agricultural) are putting upside pressure on cash and futures markets. In my younger days few were the players in these markets, but today's easily accessible commodities markets could mean more investors are hedging their positions via etfs. In turn the banks that manage the etfs are compelled to hedge the funds by "covering" purchases and sales of the investors. As an old banker once told me (a real banker of the old school, not one of these clowns that have managed to disrupt the world financial markets) as I was reporting to him some excellent stats on money inflows in US mutual funds : "Imagine what will happen when instead of inflows we will face outflows". It was then late 1999.



A MurrayAndy Murray's centre court, 'Rocky' style comeback against Gasquet has given the audience something to remember for a long, long time. It was the finest piece of tennis from a British player in years. Only a couple of years ago, I remember Murray's game being absolutely horrible to watch. Because he doesn't try to hide his emotions one bit, you could read Murray's face and demeanour and pinpoint the exact pivotal moment in the game when he would break down and effectively lose the game. The story would usually involve a good start, the opponent outperforming Murray on a series of shots, Murray getting frustrated, Murray complaining on all the contentious shots as if the world was against him, and finally Murray losing. He had no mental maturity.

What really struck me in Murray's game against Gasquet was not just that he came back from two sets down to win, but that even when Murray was firmly against the ropes, he kept his composure firmly in check and played with a winner's confidence even though he was losing. This is a quality I adore. In tennis, golf, and other such games, the mental part of the game is a crucial part of the winning puzzle. I imagine some traders will succeed with little confidence, simply because the role of luck is arguably a lot higher in trading than in many sports. However, on balance, I believe a confident attitude of the sort seen in sportsmen competing at their best but from a losing position is a valuable and honourable trait, well worth trying to develop in onself.

Murray is up against Nadal tomorrow, which is a lucky career move. Since Andy Murray is probably the only person who thinks he can beat Nadal, this means that if Murray loses to Rafa, there should be no collective sigh from the British public of the sort we used to get when Tim Henman used to lose to potentially conquerable opponents.



Andy Murray's defeat against Nadal today reminded me of the final battle scene in film 'The Last Samurai', and of dying with honour.

It was evident early on that Murray hadn't fully recovered from his four hour marathon battle against Gasquet. His tiredness showed through and he was not his usual dynamic self. In contrast, Nadal was firing on all cylinders and then some. He just didn't let Murray into the game. Nadal's grass court play has come leaps and bounds this year and - from the perspective of my armchair - he doesn't have an obvious weakness that can be readily exploited. His backhand shots can't be differentiated from his forehand shots, and he certainly can't be relied on to trip himself up. Indeed, I think Nadal produced a mere ten unforced errors in the entire three sets. We are not there yet, but it looks like the championship is shaping up for another Nadal-Federer face-off, which will be a true test of finesse versus physicality. I think Nadal has what it takes at least to make Roger Federer produce a bead of sweat, something I haven't seen from him so far in this competition.

Getting back to Murray's defeat, I believe there are a few things we can take away from this. In the middle of the match, Murray won a point but it was called wrongly 'out' by a line judge. The umpire immediately over-ruled and the point was called 'let' and played again. Murray complained about the poor line call, but he got straight back to business. In the bad old days, this would have sent Murray into a spiral of agitation, where he would project blame externally and allow this negativity to feed on itself. Not this time. I was impressed. The world is not against us. We accept responsibility not only for our actions, but also for events that are outside of our control. It is not personal. We get on with it.

Leading on from this, because Murray succeeded in keeping his mental game in check, there was very little psychological noise, or interference, in the match, and Murray will be able to watch the tape and compare his true game against Nadal's. He will be able to see the weaknesses in his game play far more clearly, which will give him something to work on in future. It's simply more productive. Okay, so Murray may never be 'the' best, but he will certainly get closer to achieving 'his' best, which is what it is all about. In the world of amateur trading, many traders who produce losses believe these losses are not due to their trading game/strategy, but that they are a result of psychological weaknesses. Their self-talk says, 'I can still pick 'em, I just need to cut my losses earlier'. Personally, I believe most people are fooling themselves by thinking that the person (mental approach) is weak, when it is their trading game (strategy) that is weak, and they really have no edge in the business of trading. The idea that 'I should have held on for longer', or 'if only I had sold these stocks more quickly' is false, because it is working backwards, a bit like saying 'if only I had picked the right lottery numbers'. If you have a strictly quantitative, or automated trading approach, there is no need to try and disentangle the psychological element from one's trading strategy because it isn't a feature. However, because I use a qualitative approach, I wanted to try and separate my mental game from my trading game. For a long time, I would jot down a 'behavioural score' when I opened and closed a trade. It's was a simple 'marks out ten' scoring system, with a low score for doubling up, lowering stops, etc, and a high score for trading rationally, with a well thought out plan. Over time, I realised that the correlation between profits and a high behavioural score was surprisingly weak, but the point was not the correlation, but that a low score had a higher chance of producing those, rare, extreme losses. The simple act of keeping a behavioural score has led to greater self-control, and I now believe I have a clearer image of my true game. I relate to Murray in that being 'my best' is a far cry from being 'the best'. There is no 'I should have been less greedy', or any other such excuse. My game is simply not strong enough. But that's okay, because the journey has been one of self-discovery, and it has been a success of sorts, irrespective of my what the ledger says!



Today was a perfect Market Mistress kind of day. New lows for the year at the open. Requiting of bear market. Retreat below the open to scare out the complacent. Oil at the high to make everyone bearish. VIX above 25 intraday. Bad news all over. Beginning of month exactly the same as January 1, 2008 but this time completely opposite. Also opposite from June 1. Down a googol at end of day yesterday and up that same googol today. Total bearish news all around. Many other things.



 This weekend we went to the southern part of the island where the lava is flowing into the sea. We launched the boat through moderate breakers and headed south to where the lava was flowing. The lava poured into the sea creating a huge cloud of steam a thousand feet tall that billowed up in mushroom formations sending off small tornadoes from the heat. The ocean was literally boiling and the heat from the lava spread out hundreds of feet or more. Explosions of molten lava send red glowing cascades of molten lava through the air. The strangest thing were football size chunks of lava floating in the ocean. One of the guys had welding gloves and picked up the floating lava chunk, broke it open revealing red hot molten lava inside the chunk! It was crazy and beyond belief. Its not at all what you would think could occur, floating lava. Go figure. But there it was. There are things in nature that defy belief. Almost like today's market. Mind boggling.



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?


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