V KThere is a tremendous misconception that leveraged (double, triple, long or short) ETFs are to be used as long-term investments. On the surface they make a lot of sense. You want to hedge your stock portfolio, for instance, you buy a double short ETF of the market SDS (double short of S&P 500) or QID (double short of Nasdaq 100) and for each 1% decline of the market you make 2%. It does sound like a great deal. Leveraged ETFs have been sold as panacea to this market volatility, but panacea they are not. If used as investment (not trading) vehicles they may cause a lot of harm to your portfolio even if you were “right” on their use. They should not be used as a long term investment, but only for short-term trading (i.e. days not months).

Daily compounding (recalculation) will cause their returns to deviate substantially from the underlying index. The math is too complex and too boring (an article by Morningstar explains it well), but instead let me demonstrate by this very real example (chart here).

Let's suppose that six months ago you had a great insight that financial stocks would decline. You figured to get bigger bang for the buck you’ll buy a double short of Dow Jones Financial Index (a simple plain vanilla long ETF for this index goes by symbol IYF). The index and thus IYF declined almost 20% in six months thus you’d expect your double short (SKF) would be up about 40%. However, if you look at the chart  you’ll see that it declined almost 60% instead, as much as double long ETF (UYG) of the same underlying index.

Note that over the short term (days) these ETFs seem to work. This is one of those investments where you have to make sure that you nail the timing perfectly, otherwise you are in trouble.

Marlowe Cassetti comments:

I have been both an ETF junkie as well as a mechanical trading system developer. Why not combine the two? I have found trading systems that operate on a basket of ETFs tend to suffer from the inclusion of the leveraged ETFs into the basket. This leads me to infer that the leveraged act more randomly then their cohorts. With that knowledge I was confronted with my system picking UltraUltra-Short Estate ProShares (SRS). I held my nose and bought it anyway and turned a nice 8% profit in two days, all the time watching it with high anxiety.



 We're a few weeks into baseball season, so it must be time to start talking football.

Yesterday, the Jets announced they'd released a retired Brett Favre. Before he was traded from the Packers to the Jets a year ago, Favre had made it abundantly clear he wanted to play for the Packers' NFC North Division rival, the hated Minnesota Vikings.

The very last thing the Packers wanted was for Favre to come 'home' and compete against them at the hallowed Lambeau where he had made his unparalleled career. Thus, the trade included the condition that should the Jets trade Favre to an NFC North team, the Jets would have to give up 3, count 'em….THREE….first round draft picks. That is indeed an incentive not to trade.

…..BUT…..Favre plays one year, then retires [for good] a second time. However, now that the Jets have released Favre, they are no longer obligated under the terms of the trade contract. No matter what Favre does now, the Jets are in the clear. Some would argue that the Jets released him because they picked up one of the top two quarterbacks in last weekend's draft and/or they were just cleaning up their books in the wake of Favre's retirement. The former is true, however, I offer the following….

The release was at Favre's request. Favre insists he's retired, as does his agent and 'sources close to Favre', but….he's insisted that before, only one year ago. If he is retired and intends to stay that way, why bother asking for his release? Preparedness? Hmmmmm.

Moving on, next to Tampa, Buffalo, Cleveland and a couple of west coast teams that shall remain nameless to protect innocent specs in the Bay Area, the Minnesota Vikings have arguably the worst QB corps in the NFL in Tavares Jackson and Sage Rosenfels. Jackson can run, but has no arm and his decision-making is suspect. Rosenfels can pass, but was merely adequate as a placeholder in Houston. Put together in one body, they would make a somewhat fair arena league QB.

Could the Vikes use a quarterback? Say "uh huh". Did they covet Favre last year as much as he wanted to play in The Cities? Oh, yeah. Is there anything Favre would like more than taking a big healthy dump on Ted Thompson, the Packers' GM who from the day he arrived in Green Bay made it clear it was his team and he wasn't putting up with the prima donna stuff? "No", that's exactly what Favre wants. He wants to come back to Lambeau to the cheers of an adoring crowd just to show Thompson he was wrong in not letting Favre come back after he had retired and the Packers had moved on. His chance to do that is to sign with the Vikes.

So, I'm putting my money on an announcement in the not too distant future that Mr. Greatest QB of All Time has signed with the Vikings and will play this coming season. There, prediction on the table. If I'm wrong, I'll say so, but I doubt that's going to be necessary.

He'll play for the Vikes, alright. But, unfortunately, what this aging yahoo from the delta doesn't get just yet is that when the Packers moved on with Aaron Rodgers, their outstanding, patient, out-performing, unassuming, level-headed, charming, team-player of a young quarterback, so did the fans. They're wearing #12 now, not #4. Only the hilljacks around here still do that. Make no mistake about it, when, not if, Favre sets foot in Lambeau wearing a Viking uniform, among the boo's there will be a fair amount of respectful cheers. And then, the entire stadium will cheer wildly and enjoy nothing more than watching their one-time hero being crushed beneath a sea of green and gold.

It seems, like verbal contracts, hero worship is worth the paper it's written on.



 With onset of the Swine Flu, I have gotten more than a few questions about preparedness, most of it centering around having a food supply. How does one go about getting a food supply? There are several options and I've listed a few below.

The Church of Jesus Christ of Latter-Day Saints has pretty much everything that you need and has the whole process down to a science. Here is what I googled to find the "Bishop's Storehouse and Cannery" in my area:

"LDS Bishop's storehouse and Cannery of *(name of your area)"

You have to go and can your own food. We've done it as a family on a few different occasions. It's a good family bonding experience and I highly recommend it. Taking part in the preparation of your own food (even down to the canning portion) is wholesome fun family activity and our kids mention from time to time "hey, I canned that food." When the food eventually appears on the table, it's kind of a pride of ownership thing.

Here are some other options to buy things directly. (Of course, "Sams" and "Costco" are options too).

Emergency Essentials

Walton Feed

Healthy Harvest

What I recommend is that if you are interested in building a food supply, you read the resources available at providentliving.

Remember, that just as important as a food supply is, you also need a water supply, too.

At the very least, have on hand what is known as a 72 hour kit. This is everything you need to survive for 3 days (which you can easily stretch for a much longer period of time than that. Again, water is THE KEY).

Then you can build up to 2 - 3 months supply of food. The above resources can get you to this level quickly and fairly inexpensively. Why do I say inexpensively? Well, on the surface it may seem expensive to buy 3 months of food, but if you learn how to use it, what you end up doing is eating it, and just rotating in new food.

Over time (or immediately if you have the financial wherewithal), you build up your supply of dry foods that can be stored, literally, for decades.

I can't even begin to describe the peace of mind you have knowing that you and your family could survive for long periods of time on your food supply.



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

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

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

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

Alan Millhone comments:

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

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



 The chair asks: What fable of Aesop best explains the tendency to seek short term gain in speculation as the expense of the long term. Such situation often occur when it looks like the next 1/2 hour ( or day) will be very bad for your position but the next 8 hours (or week) will be very good. What to do? Be an ant or a grasshopper dancing and fiddling.

John Tierney, President of the Old Duck and Speculators Association replies:

In a field one summer’s day a Grasshopper was hopping about, chirping and singing to its heart’s content. An Ant passed by, bearing along with great toil an ear of corn he was taking to the nest.

“Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?”

“I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.”

“Why bother about winter?” said the Grasshopper; “we have got plenty of food at present.” But the Ant went on its way and continued its toil. When the winter came the Grasshopper had no food, and found itself dying of hunger, while it saw the ants distributing every day corn and grain from the stores they had collected in the summer. Then the Grasshopper knew:


The REAL rest of the story:

I'm am ant. Always have been. Worked full time. Saved. Rented. Invested. Worked part-time, too. Saved more. Cars: '63 VW, '75 Civic, '87 Duster, '99 Saturn. All used, all stick, all good mileage. Vacationed in tents. Finally bought home. Paid off mortgage early. Never borrowed against it.

Others (grasshoppers) borrowed. Nice homes, big mortgages, big tax write-offs. Nice cars. Bank financing, tax write-offs on interest. Later, larger homes. Larger mortgages. Larger tax write-offs. Exotic vacations. On charge cards. Debt is good. Debt is smart. Some worked in financial fields. Neither sowed nor reaped. Middle men. Collected sowing fees. Collected reaping fees.

Early 80s: banks lent much to S. American countries. Countries go broke. Late 80s, early 90s: SLs borrow short expensively; lend long cheaply - go broke. Early 90s: bank bond holdings tank. Banks broke. Suspend accounting rules. Banks saved. 98: Nobel-winning geniuses bet on Russia. Russia goes broke. Geniuses go broke.

Consortium of investment banks saves day . 03-08: same banks make leveraged bet on real estate debt. Others (grasshoppers) can't pay. Banks go broke. Savers (ants) are losers. Low interest on savings. Less than rate of inflation. No return on loans for second homes and interest-only mortgages.

Much money lent and lost. All money comes from savers (ants). Banks and others (grasshoppers) lost other people's (ant's) money. Savers (ants) lost. Others (grasshoppers) gather to save system? Who needs saving? Grasshoppers. Who still has funds? Ants. Wonder what will happen?

On each occasion a pitiful remnant of ants were seduced by easy money and joined grasshopper parade. All have now joined 12 step program. First lesson is from Einstein: "Insanity is doing the same thing over and over again and expecting different results."

Ants looking for ways to withdraw from system. Grasshoppers trying same old thing and using government decrees to force ants into cooperation. If this effort fails only funds additional available will be from red ants. Good luck.

Russ Sears adds:

The problem with going for the short term gain is that they often are zero sum games, you against the world. Whereas long term gains often have more of a mutual benefit to them. Because of this if a long term outlook is opposed to its short term counterpart, the short term expected gain, generally has a much higher risks that is often ignored. (going long stock versus short term short position for example) Likewise if the short term gain appears too good to be true, it probably is. You are probably missing the true risks.

From nature, I recall from visiting Yellowstone, the obligatory warning of leaving food in the cars.

The bears will smell the food in an empty car. The bear will easily tear the car apart. He will leverage his size and get a quick easy delicious high calorie meal. Soon Yogi the bear will be hunting cars with food rather than foraging . And if left unchecked other bears will soon emulate his apparent windfall.

From Yogi's and his bear friend's point of view its a low risk, easy high gain meal. Of course Yogi is oblivious to real long term risks, people. He has totally underestimated, peoples ability and motivation to end his life. As more and more bears partake, the higher the risks becomes.

It's tempting to say, "Yogi's nothing but a dumb bear going on instinct. An investor would never get blind sided by unforseen risks"

But you must wonder WWYD (What Would Yogi Do?) in the mortgage bubble. If after all so many wolves as intermediaries left their marks on MBS's (mortgage backed securities). Would Yogi's instincts ever let him touch an MBS or worse a MBS CDO or CDO square, let alone leverage them up?




 Perspective is a fascinating thing. And the different ways in which we may grind our lenses of perspective (Spinoza may agree) can produce hints of subtle shifts in views, or reveal startling insights of vastly different panorama.

Time (or at least one of its facsimiles, that is, the numbered sequencing of events), is one element which can alter or color our lenses while looking at the same object. I read J. M. Coetzee’s Waiting for the Barbarians before Buzzati’s The Tartar Steppe; and thus may never be able to see from the eyes of a young Drogo (with his conflicting hopes and fears of anticipating yet dreading the barbarian hordes just beyond the steppe), without the spectre of Coetzee’s jaded and weary old Magistrate hanging heavily, and with the latter’s resigned knowledge that the darkest enemy lies not yonder, but within.

[Coetzee’s Waiting for the Barbarians, in a way picks up where The Tartar Steppe ends; with the old Magistrate more or less having come to terms with his own existence (with hints of a younger Drogo-past), after spending his entire career guarding his frontier town against the ‘unimaginable’ barbarians. The enemy finally arrives, but from within (the empire), forcing an excursion from the mundane but familiar routine into the dreaded frontier-lands.

The battle with the barbarians may finally be joined, but is it in the way as had always been imagined — dignified imperialists defending their rightful lands from the menacing barbarian horde? Or as self-righteous barbarians once again disappropriating the lands of a diminishing indigenous people, to feed the appetite of an always-expanding empire…]

As a trader, my first objective is profit and success and indeed, am perhaps no different from earlier profit-seekers adventuring across oceans and continents in the name of “God, gold and glory”. But there may be cause for some self-examination, and a tempering of appetites will not hurt.



 When first reading an article on the upcoming SEC hosted short selling round table series, I considered how the Iquitos female/male birthright ratio analysis smacks of a similar (or parallel) rules-based phenomenon.

The article provides a PDF link to a recent Credit Suisse report, highlighting that “according to Credit Suisse’s data, a 10 percent circuit breaker would have been triggered 26.6 times per day for Standard & Poor’s 500 stocks last September, and 80.4 times per day in October. In November and December, it would have triggered 48.8 and 25.0 times per day, respectively. That compares to the first eight months of 2008 when the average number of times per day that an S&P 500 stock dropped 10 percent ranged from 0.8 to 7.7.”

The Theory of Quantitative Relativity (or QR) indicates that, in both instances (the Peru local’s skewed birth right and SEC shortselling regulatory regime), there are rules-based ecologies currently effecting (or causing what some observers argue to be) those cited systemic anomalies.

Is low blood sugar a deviation, in that the relative norm may represent higher ratio’s, thereby sustaining nominal birthright trending? Or have ecological considerations within the eco-system itself altered the quantifiable balance of related (human procreation) indictors and functions?

Does naked shortselling constitute market trending or become merely implicative of relative space and time reporting of market deviations, so generated by systemic imbalances that result from ecological assimilations of exchange standards and procedures by public and private actors?

In both instances, there appears to be a focus on quantifying input that may or may not have a metacircular correlation with the highlighted result (be it birthright or long/short ratio). Determinative, however, would be to understand the conditions precedent for the numeric outcomes… for instance…

“In his panel comments, Direct Edge’s O’Brien also discussed the circuit breakers in the SEC’s proposal. He noted that in the market turmoil since last fall, stocks have risen and fallen by 10 percent frequently. That means, he said, a circuit breaker could be triggered often, leading to potential changes in trading behavior in stocks that decline significantly.”

This citation of rules-based correlations resulting with state-input-output assimilation may be considered the basis for understanding how program trading and portfolio management systems operate within any give electronic exchange market of financial instruments.

Is the issue that only one male is birthed for every seven females? What of the impending social and economic correlations resulting from that assimilating demographic? For instance, would males from other towns (passively or actively) relocate? What governmental action may result from this systemic condition, and what governmental action may have caused it?

QR states that a determinative consideration here is that rules-based constructs (e.g., social order or market exchange) are relative to ecological trending from the standpoint that lines enter spaces that constitute parametric (or geometric) correlations. Such nonlinear correlations are the product(s) of either selective rules (e.g., laws of supply and demand within an agri-economic artifice or circuit-breaker regulation governing stock market exchanges) or the construct itself, such as the Peruvian governing authority or the SEC.

To merely conduct statistical modeling that determines cause and effect without outcome orientation – of those (at least primary) conditions precedent central to the ecological – is a failure to assimilate correlations that are ecological, therefore outcome determinative. Linear projections, so based on quantification of discrete data sets, become operatives of state-input-output functioning.

In that divergence of linear trending thereby is determinative for risk management (and mitigation a la hedging), those spatial (parametric, geometric) domains thereby define randomness and knowledge of the very conditions precedent that affect (if not effect) both preceding and subsequent linear outcomes. Thus, in the design of state machine logic, one concludes that state-input-state functioning (or state transition) is the metacircular outcome for quantifying any given numeric hierarchy of a given ecology.

Rules and numbers: when does the servant become the master?



 The following is only one data point, but it reflects not just our views but also our experience. Once, we were in a building that was great until the new owners "zombied" it. They borrowed the maximum and tried to force tenants out to get higher rents. They eliminated maintenance along with other services and eventually half the building got up and left within 90 days. We didn't sue even though all leases were broken, as there wasn't anything left in the their corporation. The building has been 50% empty for the last three years we have heard. The owners were foreign, with very little equity, and little interest in doing much management.

Our present owners, also foreign, bought the current building 18 months ago. A Berkshire Hathaway division left this month, emptying 10% of the building. During our lease negotiations, the present owners held firm on raising the rent (I assume to make up for a lost tenant). The new lease we just signed today is half what our existing cost is per square foot, in a better building and better location. Prospective "zombies" could be easily identified based on how they handled the negotiation. We were amazed how many wouldn't acknowledge existing market conditions. For our non-West Coast friends, our town of Pasadena is also the headquarters of IndyMac and their newly downsized mortgage servicing operation (total space about 1.5 million sq ft) with a third of that space across the street from us. We'd suggest not renewing your lease, if the building you are in was purchased during the 2003-2007 time frame.

There will be many zombie buildings which will not have excess cash flow for maintenance and services, and will be desperate for new loans over the next 24 months. Given the lack of financing we anticipate for commercial properties, these loans will be forced to extend at the upcoming maturity date — usually at a penalty interest rate. This dynamic may mean the current commercial real estate down-cycle may be longer than the 1990s. Then it was regionally concentrated, now it is global. California residential properties in the $300,000 price points are beginning to get multiple offers, as they can be FHA financed with 3% down. We are also seeing money going into partnerships to buy these in bulk from banks. That is a good sign that the low end appears to be stabilizing.

P.S. - Wyndam (hotels) was just lowered to "junk" rating by Moody's based on profit pressures, according to Dow Jones.



BaseOne of Tom Wiswell's favorite things to say was "make sure you have a strong base of operations." I find this true in all aspects of life. In the market, it would involve the preparation for the investment or speculation. Certainly having all the equipment and getting in on time. And having the proper capital and vig relations. Certainly not being distracted. Tom liked to say afterwards "checkers is a game of architecture." The importance of a proper foundation in a building, a proper base relative to the tower, and proper communication between the various departments of the building is also clear. I have been thinking of this subject in conjunction with a note I am going to send to Aubrey on his third birthday. It is important to have a good base of operations in whatever you do. Always prepare in advance. Don't rush. Plan what you're going to do. Don't act in haste. Make sure you take in the proper foods. That you get a proper sleep. That you don't run around too much distracting yourself from the important essential goals to survive and prosper. Have a proper financial foundation. Be prepared for adversity. Put things aside in case things don't go as planned. Move forward when healthy. Develop your talents. Get proper mentors.

The thought leads me to suggest something controversial. I am a very weak chess player and my thoughts on it must be taken with many grains of salt. However, i took lessons from Art Bisguier for about 20 years, and I have seen Adam Robinson and Dr. Vic play many games as well as watched many games in Brighton Beach where they played every day. I think from my observations that checkers provides many more life lessons than chess because the rules are less specialized. Moving forward or backward, except when a opposing man is in front of you where you jump, is a very binary kind of thing from which all kinds of ultimate outcomes arise including its proximity to computers, electrical relays, and logic circuits which are also on/off or 0/1 systems. Thus, I would recommend  checkers as more helpful to kids as a game to prepare for life than chess.

Nigel Davies comments: 

I've found myself that the number of rules in chess has diminished with my level of understanding, and I tentatively suggest that this might be applied to all fields.

Douglas Roberts Dimick adds: 

The Art of War, Sun Tzu

Chapter 1 — Laying Plans explores the five key elements that define a successful outcome (the Way, seasons, terrain, leadership, and management). By thinking, assessing and comparing these points you can calculate a victory, deviation from them will ensure failure. Remember that war is a very grave matter of state.

As for state, so to for money…

All battles are won before they are fought.

Anatoly Veltman comments:

 I can speak from personal experience: Aubrey's received an essential for a 3 y.o. memo!

My parents handed me over to a personal checkers coach when I was 5, and I was taught basic framework. Master trainer in charge of Odessa Women's Team took over - within the next year, I've traveled the Soviet Union (without parents) as part of the Women's Team. My paradise ended when other teams filed protest over "unfair advantage". I proceeded to score enough wins in Men's tournaments to qualify for "Master of Sports" title by 12 - youngest in Soviet history of any sport. They exempted me from statutory "age 13" requirement, when I've scored double the required points… And curiously: I was not a "natural". Topping eventually over a million registered competitors in my sport for three straight years in Play-off finals - admittedly, I never felt as the gifted one. For instance: the blind-folded record on 100-square board was 10 simultaneous; but I could never complete more than 2-3 games at a time.

What gave me edge over competition was iron discipline and preparation. At 6, they taught me to sit straight and down-the-middle. At 10, they trained my peripheral vision, so I could gaze the entire 100-square board and successfully transition from the 64-square game. Consequently, I could count 30 moves ahead on 100-square board, without touching the pieces. My coach kept me away from alcohol, smoking and all-night bridge sessions. In course of Round-Robin, I'd review each opponent's favorite openings, prepare surprise divergence and win on time-clock alone. Others in my age category often felt defeated, just taking a sit in front of me. My first trades happened to be in Comex gold, and it surprised me how many of "big punters" were totally oblivious to basic idiosyncrasies. It took me only a couple of 50-lot orders, which remained "unable-on-10" - to figure out that physical arbitrageurs were seeking out 40-lot = 10 400oz bars! It took me a forfeit of a million-dollar unrealized profit in Silver on April 27, 1987 to figure out that Comex notice/delivery rules were skewed in favor of Shorts (over the next two years, I made a client $5m profit based on this quirk alone)… It always amazed me that even largest speculative funds neglected 80-lot Yen futures increments = exactly a billion yen; and worst of all neglected two-banking-day settlement duration. That translated into significant Yen and Gold carry on Wednesday evenings year-round (and a real kicker in front of long weekends and numerous Japan holidays!) Since Nov 1997 split, trading 4 or 40-lot bigSP makes much more sense given new $25/point denomination than 5 or 50; but 90% of the participants neglect that too… Dark pools and market-maker wigs have been a "wet dream" of high-frequency trading outfits for years, translating into billions of nearly risk-free profits for them. Yet, schools and teams of "stock day-traders" continue entering the industry in record numbers to this day…



Security minister Lord West of Spithead placed a bet on Labour to lose the upcoming General Election, it has been reported. The Press Association.

This would probably be funny if I didn't have to live here; on the one hand we are being lectured on the financial impropriety of 'Wall Street', and on the other it seems we have a minister indulging in a form of insider trading.





Is the problem incentives? Naa, it's regs… let the Dr's become specialists and advance the medical arts and profit in the free markets… let the Nurses diagnose and prescribe for the flu (bird, pigs, or other wise) under the utility regime, as all deserve cheap common care… Yep its step here is a quick script…. or as usual say "yep your arm is broken, not cracked…. go see the orthopedic Mr Lack and see if he wants to do surgery or not".

In some states, NPs admit and follow their patients in hospitals. Some NPs work in emergency rooms evaluating, diagnosing and treating patients with lacerations and fractures. In 10 states, NPs can open their own clinics and offices, in 27 states they are required to work in collaboration with physicians, and in 11 states they are required to work under supervision of a physician. The American Academy of Nurse Practitioners defines Nurse Practitioners as licensed independent practitioners who practice in ambulatory, acute and long term care as primary and/or specialty care providers. They provide nursing and medical services to individuals, families, and groups according to their area of practice/specialty. In addition to diagnosing and managing acute episodic and chronic illness, they also emphasize health promotion and disease prevention, incorporating teaching and counseling of individuals, families, and groups as a major part of their practice.

Stefan Jovanovich writes:

What? Have people licensed to practice medicine who actually know how to treat illnesses and wounds? NEVER! Our medical expert, Eddie the Eagle, who wants to join Lack's ortho practice, has kept her parents entertained during her too infrequent visits home with the stories she has heard from the surgical residents. The best from this last visit was the one about the fate of the patient who stopped breathing just after being delivered to the ER. The two residents on duty were, by mischance, both on their way to becoming Gurus of Public Health (no doubt you will see them at a podium some day assuring the TV cameras that TwineFlu is not yet a pandemic). The crisis was averted when one of the Residents ran out to the ambulance in the parking lot and got the EMTs so that someone could actually revive the poor sod.



Italy has reached 60 million residents,

were 50 million in 1959,

50 years ago.



Enclosed picture of the price movement of Fast Retailing, largest weightage stock on the Nikkei 225, broke under what may be called the dreaded Diamond pattern since there is no place where a diamond has been defined except for the statements that it is powerful, it is rare and it forms a formidable top and that it looks like a pattern similar to a rhombus (explained by the usage of a few such pictures)

If however, this drop under the latest line and outside this said pattern does make me money I do not mind calling it the "A Japanese Kite with a Long Whipping Tail". After all, the Japanese have a very expressive language and all the patterns from there are described in vivid detail and so what if it is not yet a pattern as man times quoted as a diamond, it would still be as rare as that as a pattern. When enough data of such occurrences come some may be able to test it. Until then, let me add to the library of patterns The Japanese Kite with a Long Whipping Tail. Yes it should begin with The and not A.

I think with one look, you should get to see the Long Whipping Tail. No? Try once more you would get it easily. Remember, it's a rare pattern since I saw it the first time myself.



How to Build a Better Vocabulary by Nurnberg & Rosenblum is the sort of book I want my daughters to steal and grab away from me so that they adopt it now while they are half the same age compared to the age at which I found a certain zealous attachment to this book.

So, with the recently started summer vacations of the schools me and my wife brought over a new Scrabble Board. The two of us have been playing a few rounds every day creating much WWF style mental teasing at the wins and losses. In the resultant spike of competitive spirits the daughters have started playing the game of Scrabble for far many more hours of the days and the evenings.

In some days we are hoping that the competitive spirits would have soared to a point betwixt the two daughters that they would come to improvising and get at beating Dad at his own game. That's when I intend to leave the very old copy of this book which I used in the ever-competitive MBA entrance tests in India for the vocabulary sections of the exam under a pillow. I am hoping that a surreptitious caught red-handed look on the face would just be the finale of my act at selling the best book on the subject to my daughters at the age where they could gain most by beginning to build a system of continuously enriching their vocabulary.

Across the years, I have yet to discover a better system of building as rich and as utilitarian a vocabulary as this one book has in between its covers. It's a system that it helps with its readers acquire rather than just a focus on memorisation of word lists.

The closing sentence at the preface of the book says it all what lies ahead in the pages, "I love you" is all you would still need to say when you need to despite a vocabulary of the sort you are going to build with this book.

Commonsense, systematic approach to building a knowledge structure on the origin of words, outstanding ways on classifying and connecting with the origin, usage, context and meanings of words are just some of the things I would say in praise here. The rest of the weight of the recommendation would have already been gauged from my sales plan. Think of getting a Scrabble, this book and your own ingenious plan for this summer. Kids would grow up richer with access to more words and stronger with a richer power of expression, over course.

Adam Robinson comments:

Word Power Made Easy by Norman Lewis is the best vocabulary book out there, bar none, even better than mine (though I took a more scientific approach to which words to include, whereas the inimitable Lewis chose words that lent themselves to easy etymological analysis).

An excellent, excellent game, for children and adults, is Rush Hour, which has graduated challenges so can be done by 6 year old (or an Aubrey-esque 3 year old, no doubt!!), or a 60 year old. What I love about the game is that to advance one must be willing to move backwards. Reculer pour mieux sauter, for those who speak French (a good martial proverb in any event).



Lots of these markets looking for round numbers… eurodollar at 98.99, HSI @ 14800, AS51 at 3700, S & P at 850… fascinating!

Some great lobagolas in Australian SPI (XPM9 Index) from Friday cash close to now…dropped with dollar:yen from 13:30 local on Friday, then vaulted 80 points into the US session.

Today it's come roaring back the other way along with its Asian macro/equity brethren. The graph and data from 13:00 local on Friday to now makes for some great trade ideas vs NKM, HSI, JPY etc.



In Iquitos, Peru , the female to male birthrate is 7 to 1 but no one has been able to figure out why. Meals are a buck, hotel 4-, internet .60 per hour, a porcelain crown 100-, and i just took a two hr. private taxi tour for 10-. Twenty interesting resident gringo expats, and the tourists are starting to pour in with the onset of dry season. However, i´m jumping a boat to Brazil and refusing all invitations from cannibals to dinner.

 Douglas Dimick comments:

Rules-Based Relativity of Ecological Numeric Hierarchies

When first reading an article on the upcoming SEC hosted short selling round table series, one may consider how the Inquitos female/male birthright ratio analysis smacks of a similar (or parallel) rules-based phenomenon.


The article provides a PDF link to a recent Credit Suisse report, highlighting that…

“According to Credit Suisse’s data, a 10 percent circuit breaker would have been triggered 26.6 times per day for Standard & Poor’s 500 stocks last September, and 80.4 times per day in October. In November and December, it would have triggered 48.8 and 25.0 times per day, respectively. That compares to the first eight months of 2008 when the average number of times per day that an S&P 500 stock dropped 10 percent ranged from 0.8 to 7.7.”

The Theory of Quantitative Relativity (or QR) indicates that, in both instances (the Peru local’s skewed birth right and SEC shortselling regulatory regime), there are rules-based ecologies currently effecting (or causing what some observers argue to be) those cited systemic anomalies.

Is low blood sugar a deviation, in that the relative norm may represent higher ratio’s, thereby sustaining nominal birthright trending? Or have ecological considerations within the eco-system itself altered the quantifiable balance of related (human procreation) indictors and functions?

Does naked shortselling constitute market trending or become merely implicative of relative space and time reporting of market deviations, so generated by systemic imbalances that result from ecological assimilations of exchange standards and procedures by public and private actors?

In both instances, there appears to be a focus on quantifying input that may or may not have a metacircular correlation with the highlighted result (be it birthright or long/short ratio). Determinative, however, would be to understand the conditions precedent for the numeric outcomes… for instance…

“In his panel comments, Direct Edge’s O’Brien also discussed the circuit breakers in the SEC’s proposal. He noted that in the market turmoil since last fall, stocks have risen and fallen by 10 percent frequently. That means, he said, a circuit breaker could be triggered often, leading to potential changes in trading behavior in stocks that decline significantly.”

This citation of rules-based correlations resulting with state-input-output assimilation may be considered the basis for understanding how program trading and portfolio management systems operate within any give electronic exchange market of financial instruments.

Is the issue that only one male is birthed for every seven females? What of the impending social and economic correlations resulting from that assimilating demographic? For instance, would males from other towns (passively or actively) relocate? What governmental action may result from this systemic condition, and what governmental action may have caused it?

QR states that a determinative consideration here is that rules-based constructs (e.g., social order or market exchange) are relative to ecological trending from the standpoint that lines enter spaces that constitute parametric (or geometric) correlations. Such nonlinear correlations are the product(s) of either selective rules (e.g., laws of supply and demand within an agri-economic artifice or circuit-breaker regulation governing stock market exchanges) or the construct itself, such as the Peruvian governing authority or the SEC.

To merely conduct statistical modeling that determines cause and effect without outcome orientation – of those (at least primary) conditions precedent central to the ecological – is a failure to assimilate correlations that are ecological, therefore outcome determinative. Linear projections, so based on quantification of discrete data sets, become operatives of state-input-output functioning.

In that divergence of linear trending thereby is determinative for risk management (and mitigation a la hedging), those spatial (parametric, geometric) domains thereby define randomness and knowledge of the very conditions precedent that affect (if not effect) both preceding and subsequent linear outcomes. Thus, in the design of state machine logic, one concludes that state-input-state functioning (or state transition) is the metacircular outcome for quantifying any given numeric hierarchy of a given ecology.

Rules and numbers: when does the servant become the master?



If Tuco was the to look ugly being the short-seller into the action of last week and Blondie the good profit taker, they both by now have broken off their partnership to make good off the bounties of Tuco. In the process the two have met up with a horse carriage loaded with dead bodies and have learnt from the only survivor Bill Carson that he and a few others have buried gold in a cemetery. Tuco could only find where the Cemetery is and Blondie could find the name on the grave. Angel Eyes, the Bad man who always finishes a task if paid is now out to look for Tuco & Blondie.

Thus for the road ahead in the week next and the one after I want to remember what Tuco and Blondie said to each other in the movie:

TUCO: There are two kinds of people in the world, my friend. Those with a rope around their neck and the people who have the job of doing the cutting. Listen, the neck at the end of the rope is mine! I run the risks. So the next time, I want more than half.

BLONDIE: You may run the risks, my friend, but I do the cutting. If we cut down my percentage… cigar? Liable to interfere with my aim.

TUCO: But if you miss you had better miss very well. Whoever double-crosses me and leaves me alive, he understands nothing about Tuco. Nothing!

Blondie also said, "You never had a rope around your neck. Well, I'm going to tell you something. When that rope starts to pull tight, you can feel the Devil bite your ass."

Closer to the Climax of the entire drama, when at the cemetery with the gold:

ANGEL EYES: Two can dig a lot quicker than one. Dig. (To Blondie) You're not diggin'.

BLONDIE: (Lights his cigar. Angel Eyes cocks his gun.) If you shoot me, you won't see a cent of that money.


BLONDIE: I'll tell you why… (kicks lid off coffin, revealing only Arch Stanton's skeleton) Cause there's nothing in there.

TUCO: (Raises shovel to strike Blondie) Why you son-of-a….!

BLONDIE: You thought I'd trust you? Two hundred thousand dollars is a lot of money. We're gonna have to earn it.

So for the fortnight ahead, I would go back and watch this movie once more for the useful lessons in speculation it has to offer at every turn. By their very name we know the Bad ain't the ones who would get the gold. So, between the ex-partnership of the Ugly and the Good and the collective crisis brought upon them by the Bad to forge back into a strongest kind of team, we know there is a cemetery and there is gold & the road to the riches is not movin' in a straight line cause it never did.

Good movie, old classic, works most of the time. Take a look. Oh Ya, the Angel(s) in the marts have the Eyes on them, this time round for sure. Am I saying the Profit taker was Good and that the road to the cemetery would go back through the horse carriage yet again? Why don't you watch this movie over the weekend and see if Good took the Profits or not ultimately?

Before Hans or some others tell me that this ain't such an exceptional movie when you look at the box office collections of recent years all I got to offer humbly is that either you adjust the present to history or the history to present if either is possible to do with workable accuracy & then we are both doing fine.



Enclosed humble .gif of Samsung Electronics, the largest market cap stock on the KOSPI200 Index with a 16% weightage, shows a drop of 6% on Friday while the Index itself closed marginally higher.

Would observations from other major equity indices in this world suggest that moves of dissonance such as these are another kind of pilot fish. The first right of passage to the leader for reversing ahead while the smaller within the shoal are still lead into the way prevalent?



On the topic of the role of individuals in history, I read a pretty interesting book called Ubiquity recently (reviewed on my blog ) that addresses this issue as part of its investigation into critical systems (earthquakes, forest fires, markets, etc). Towards the end, the author compares the roles of individuals in history to the grains of sand that cause mini avalanches on a sand pile:

'… the largest avalanches are far and away the most influential in terms of the effects they have on the pile. … how should some historian explain these movements?

Our historian will be sorely tempted to identify certain individual grains as having been massively influential. After all, colleagues will point out that in 1942, an individual grain of immense courage named Granular Columbus triggered an avalanche that ultimately carried grains all the way from the East to the West, and so altered the face of the world and its future. … For each great event, they can identify some extraordinary grain that touched it off, and perhaps a few others that kept it going at crucial stages. And these grains, they might conclude, are the real agents of history.

Despite being tempted to agree, our historian (a subtle observer of individual character) will have noticed that in the sand world every grain is identical to every other, so there really can be no question of any one being a Great Grain. … By understanding that the pile is always on the edge of radical change, our historian comes to realise that there are always places in the pile at which the falling of a single grain can trigger world-changing effects. These grains are only special, however, because they happened to fall in the right place at the right time. In a critical world, there are necessarily a few great roles and some grains by necessity fall into them.

Might the same be true of human history? There is no denying that some people, by virtue of their personality or intelligence, are more influential than others. And yet it is at least a theoretical possibility that our world exists in something very much like a critical state. In such a world, even if human being were identical in their abilities, a few would nevertheless find themselves in situations in which their ordinary actions would have truly staggering consequences. They might not even be aware of it, as the potential for their actions to propagate might only become apparent as history unfolded. Such individuals might come to be known as great men or great women, as creators of vast social movements of tremendous import. Many of them might indeed be exceptional. But this need not imply that their greatness accounts for the greatness of the events they sparked off.

Just as it is almost irresistibly tempting to seek great causes behind the great earthquakes or the mass extinctions, it is also tempting to see great persons behind the great events in history. But the sand-pile historian comes down firmly against the ‘great grain’ theory of history … Our historian might agree with Georg Wilhel Friedrich Hegel, who concluded that:

‘The great man of the age is one who can out into words the will of his age, tell his age what its will is, and accomplish it. What he does is the heart and essence of his age; he actualises his age.’

Rudolf Hauser comments:

For a fire to start one needs something that will burn and oxygen. Without either there will be no fire. With them there will still not be a fire without a spark, or more precisely enough heat to start the process. It is the same with history. No individual can change the course of history if the necessary conditions are not present. Sometimes a fire is more difficult to start and it takes greater skill on the part of someone trying to light it than when conditions are more favorable. The same with history. Sometimes a very unique person can make changes happen if conditions are only slightly favorable to such changes. At other times, conditions are so clear that almost anyone can push history in a certain direction. In short, individuals do matter in the direction history takes but more will be likely to push history in a particular direction at times so that the individual who does so matters little and at other times it takes a unique person to do so. Even if change seems inevitable, the exact direction events take can depend on individuals.

Jeff Watson writes:

Sometimes, wrong or false ideas get put into the mainstream and become accepted as fact. Consider the old axiom that fire always needs oxygen or an oxidizer to occur. Nothing could be further from the truth. There are examples of fire occurring in the absence of oxygen, such as lithium burning in the presence of a pure nitrogen atmosphere at high temperatures, forming lithium nitride. I consider this reaction to be fire as there's a visible flame, but some might dispute the fact that it is really a fire because of the lack of an oxygen component. Since it is ingrained in our heads from an early age that combustion requires four components (oxygen, fuel, heat, and chemical interaction to start a chain reaction), many will scratch their heads with disbelief at the idea of fire without oxygen. People who scoffed at the truths of Copernicus, Galileo Galilei, and Newton and were found to be proven wrong. Some market participants hold similar wrong ideas that get put into the mainstream. The benefit of the economic policies promulgated by John Maynard Keynes comes to mind. It will take time to get the mainstream to prove these ideas wrong, much like it took generations for the ideas of Copernicus to become accepted.

Stefan Jovanovich responds:

Riz Din mentioned Columbus. He became important in late 19th century American eyes because Italian-Americans (but, interestingly, not the descendants of his bosses, the Spanish) celebrated his discovery of the West Indies as a holiday. Before then he was no more important a figure than Vespucci and far, far less important to Americans own view of themselves than the Pilgrims. To his contemporaries the Genoese sea captain was simply one of the literally hundreds of explorers who were doing VC start-ups - looking for ways to break the Ottoman-Venetian monopoly on the spice and silk trade. When other explorers found what Columbus did not - gold and then silver - the focus of Europeans shifted somewhat from East to West; but it was not really until the sugar boom (the one commodity that could not be profitably grown in Asia) that our New World became as important as the Indies. And, even then, North America was very, very unimportant. It is always helpful (and properly humbling to us Americans who think we are truly the center of everything) to remember that after what we Inglese call the French and Indian War, the French peace treaty negotiators thought that keeping Guadalupe was more important than retaining Canada and for half a century thereafter the Brits thought they had gotten the worse part of the deal.

That is the most plausible story of what the Europeans did. But that, or any other story of how Europeans dealt with America, cannot tell us anything about the relative causal importance of individuals. The story is not an equation or an scientific test; there is no empirical answer. After enjoying and wasting half a century reading millions of words of written "history" and dragging my dear wife to old buildings, museums, and shrines, I have come to the same conclusion Hayek came to about "macroeconomics". The idea of "history" is an interesting construct, but it is an aggregationist illusion. Human action does not have a course or a moral or a lesson or a burning point; it is not a river, a sermon, a lecture or a fire. A good history is a plausible story about the past that is honest about the known records, is properly skeptical about our human capacity to tell stories that say "hooray for our side", and views the events from all sides. Not surprisingly, for every good history there are a hundred bad ones. What the bad ones all have in common is the same thing that Hayek found so dispiriting about Keynes as much as he enjoyed and respected the man: the ease with which inconvenient facts can be discarded in favor of a causal theory.

The book Guns, Germs and Steel is the most notorious recent example of really rotten history, but just about everything on PBS will do. But, to be fair, if you mute the narrations and turn off the closed captioning, the photographs have considerable interest. Or, they did, until documentaries decided to become awful dramas of "reenactment". If you want examples of the other kind of history, J.S. Holliday's history of the California gold rush, The World Rushed In, remains a classic; and his later work, Rush for Riches, is an even better story.



 "Il deserto dei Tartari" is a novel from the Italian writer Dino Buzzati. The whole life of Giovanni Drogo is described, since as a 21 year old newly appointed lieutenant he arrives at the Fortress, full of ambitions and with a whole life in front of him. The Fortress dominates the desert from where the Tartars are supposed to arrive, as they did many many years before. But it's a long time they do not show up anymore and the Fortress has now lost all its strategic importance. They are lost and forgotten by the rest of the world. Nevertheless soldiers assigned to the Fortress eagerly wait for the enemy to come, to do their duty as soldiers, to defend the reign and to become heroes. So they train everyday over and over, strictly following procedures and orders. Hoping for the enemies to arrive and defeat them is the only thing they live for. They have dedicated their whole life to this and to defeat the enemy is the only payback. Giovanni Drogo as well is deceived by the Fortress and by the hope of the glory to come, and he will spend there the best years of his youth and then his whole life. Most important, there is the awareness of not being able to come back to his old world, as he no more belongs to it. Waiting for the enemy, months and years pass by, until the final hoax. In the end the enemy arrives but Giovanni Drogo is now too old and sick to fight and he is sent back home and he will die on the way back, realizing that his mission was to confront death with dignity.

There are traders who train themselves and then go and fight where the real war is, continuously training on the field. They do not wait for the enemy (the good trades), they confront him every day. Someone wins and someone loses, as in every war. Others are living in the Fortress. They wait, full of hopes, for the enemy and then the glory (the money) to come. Duly training and verifying that they are prepared for that moment. But the time goes by inexorably. And every time the enemy arrives, they are not in the condition to fight it, deceived by the Fortress.

 Don Chu comments:

 Perspective is a fascinating thing. And the different ways in which we may grind our lenses of perspective (Spinoza may agree) can produce hints of subtle shifts in views, or reveal startling insights of vastly different panorama.

Time (or at least one of its facsimiles, that is, the numbered sequencing of events), is one element which can alter or colour our lenses while looking at the same object. I read J. M. Coetzee’s “Waiting for the Barbarians” before Buzzati’s “The Tartar Steppe”; and thus may never be able to see from the eyes of a young Drogo (with his conflicting hopes and fears of anticipating yet dreading the barbarian hordes just beyond the steppe), without the spectre of Coetzee’s jaded and weary old Magistrate hanging heavily, and with the latter’s resigned knowledge that the darkest enemy lies not yonder, but within.

[Coetzee’s “Waiting for the Barbarians”, in a way picks up where “The Tartar Steppe” ends; with the old Magistrate more or less having come to terms with his own existence (with hints of a younger Drogo-past), after spending his entire career guarding his frontier town against the ‘unimaginable’ barbarians. The enemy finally arrives, but from within (the empire), forcing an excursion from the mundane but familiar routine into the dreaded frontier-lands.

The battle with the barbarians may finally be joined, but is it in the way as had always been imagined — dignified imperialists defending their rightful lands from the menacing barbarian horde? Or as self-righteous barbarians once again disappropriating the lands of a diminishing indigenous people, to feed the appetite of an always-expanding empire…]

As a trader, my first objective is profit and success and indeed, am perhaps no different from earlier profit-seekers adventuring across oceans and continents in the name of “God, gold and glory”. But there may be cause for some self-examination, and a tempering of appetites will not hurt.



The race to build the tallest skyscraper on earth is at a complete standstill . Positive indicator for the equity markets?



Hello Everyone: All my windows open at home today and then I hear in my opinion the worst noise of Summer…  Power mowers cutting yards in my neighborhood! I see that Black and Decker has a new 24 volt mower on the market that touts it will cut an acre (not sure how tall the grass is for that claim). Seems like years ago a mower named " Flymo " (anyone remember ? ) came onto the U.S. market and then vanished. How much more quiet and reduced noise and air pollution would be achievable if a powerful enough electric mower was developed. I remember seeing a few electric mowers that you had to drag along a power cord, but I never saw too many of them. My Father growing up told me that his brother cut a very large yard with a " power by arm strong " old type multi-bladed mower for fifty cents. When his brother got married my dad took over that same yard and dad said for the same fifty cents and with the same mower !! Regards: Alan



Amusing story on p 1 of today's WSJ of the steps taken by the small town of Tuscarora, NV to repel the annual invasion of hordes of Mormon Crickets. A new weapon added to the standard arsenal is hard rock music blaring from boom boxes.



Along the Popcorn Pathway


Directed by Duncan Jones' Reviewed by Marion DS Dreyfus

Starring Matt Berry, Robin Chalk, Dominique McElligott, Sam Rockwell, Kaya Scodelario, Kevin Spacey, Malcolm Stewart, Benedict Wong

After the sci-fi stylings of "Silent Running," the (1980?) Bruce Dern favorite of a solo human caretaker on a faraway planetoid, "Moon" is a workmanlike little entertainment that, for only $5 million (basically bubkes, in today's hyper-inflated film making costs), and 33 days' shooting, delivers suspense, human interest, not a few slams at the rapacious mega-corporation. In "Moon," we are in the near future, living off a huge and fecund form of energy, Helium-3, mined and delivered to Earth by a solo caretaker on base Sarang, to the ever-thirsty earthlings. Lunar Industries, which, while a 'green' company, still manages to exploit its worker(s), lie, finagle their Comm-Sat so messages are endlessly delayed, meaning only tapes are sent, not live. (This is getting a tad old, guys: Maybe the next slew of films can slam ne'er-do-wells, slackers, people who grow air ferns?)

With Sam Rockwell as Sam Bell, sole supervisor of mining, coping and transmitting, is GERTY, played by a creepy Kevin Spacey (when isn't he creepy?) a sentient anthropomorphic voice-helper robot: We are in the turf of HAL, from "2001." Rockwell is an attractive, sturdy, empathic actor, one who has been largely wasted in vehicles beneath major filmdom's attentions, chiefly the negligible "Choke." He manages to people the film (in several roles) as well as Tom Hanks did in his bravura island "Cast Away" (2000) stint.

After his 3-year contract is all but up, why can't the talented, lonely base-manager rejoin his Earth wife, Tess, and his 3-year-old daughter, Eve? His health declines, he sustains a near-fatal accident in his lunar rover, and he suddenly notices another guy in the base station, one who looks uncannily like himself.

Our very first love was sci-fi, after comic books, so this film harkens back to our first heartthrob. "Moon" brings a futuristic sensibility into the pragmatic utilitarian. The evil corp. Lunar is an absentee ogre, but plays its role inconspicuously throughout. The moonscapes we see are nicely done-especially on such an asteroid's budget-but more interesting for viewers are the clearly puzzling aspects of his new technical reality; Bell, unassisted by GERTY or the new guy, tries to figure out what's going on, whom to trust, and why that other guy is on the scene. If escape is your hatch, when the lights go down, "Moon" gives the liftoff you expect, ensconced in that dark seat.

marion d s dreyfus 20(c)09



 If you are going through Oklahoma on I 35 take the Guthrie exit 157, go about 3 miles west on 33 or Noble Ave until you hit the light at Division road. Stables BBQ is on the SW corner, no big sign but they don't need one.

You'll want to go for the southern ambiance, the hospitality and of course the food.

It comes complete with everything you would expect from a southern BBQ joint that the locals keep as a treasured secret. The building is old brick glass front storefront type, built around when Guthrie was still Oklahoma State Capital. The decor is an eclectic mixture of memorabilia. Signs of many old familiar products and long forgotten brands, along with  local road signs, old 10 cents soda bottle machines, also a few display cases of modern day collectible products that is worth touring. The old building, signs, and collectibles have an authentic decay just enough to put-off those too refined.

As you step inside you'll hear a cassette tape of the various old country rock artists, Johnny Cash one night to Patsy Cline the next. The young greeter will seat you with a sweet southern drawl "How you all doing tonight?" as only those young southern girls can. But don't expect the cowboy hats and boots as these small town girls from a poor town want to say they are with it. Tell Ashley, with the pink purple hair, I sent you there if she is working that night. Still the waitresses are polite and sweet, expect to hear a "be with you in a minute sir" a few times.

The guest will be of all sorts. You will be seated with a tea toting grandma on one side, the big burly biker on the next, the the family or extended family on the other end and perhaps a mechanic or ranch hand with the boots and chew to prove it nearby.

While the BBQ Brisket is my favorite, the ribs are good too. Order a half order for 2 meals and a full if you want to take 2/3rd home with you. Now the real reason to go there however, is the home made onion rings fresh from the fryer. Start with them while they are still hot but I warn you they'll fill you before you can even get to the BBQ. Take it from a midwest born kid, skip the beans that come with the meal and substitute the "corn nuggets" (bite size fried corn bread and with whole corn inside them). Wash it all down with your favorite beer or sweet tea.

If you are really hungry, or just want to sample everything, go on a Friday night with their all you can eat buffet [5.4MB pic]. If you go at lunch, you might want to tour the old western historic brick buildings nearby with many small town entrepreneurs with a passion for their shop's specialty. Stop at "Mom's" 2 blocks down on Division Road, for a piece of pie you won't forget.



Doing Nothing As Learned from My Kenyan and Mathematician Friends.

I have said it many times that the reason the Africans are better than the American runners, is they know how to rest to recover. Americans will sometimes try to simulate Kenyan training methods and conditions in Colorado. But the Americans that have been successful at doing so incorporate one key ingredient: lots of Kenyans. Its not that the Kenyans train harder, or that their high altitude environment is superior to Colorado, or American effort. No, they bring an attitude. Bob Kennedy, the first USA or “European” tern to break 13 minute barrier in the 5k, was one of the first to train with them. He would describe their method as doing nothing but running. They would lie around all day, eat and run. No chores but washing their few clothes in the creek on Saturdays.

It has been said that their culture values being lazy. Their culture allows them to accept “doing nothing” most of the time. But I would disagree. If you know them and have made friends with them, they value socializing a great deal. They will work extremely hard, running 3 times a day and often run through injury and hardship that would make most westerners nauseated on hearing or seeing the gritty details.

The Kenyans I’ve known are great friends. They work very hard at it; at a level most westerners would find exhausting.

I first became good at running in grad school, where I was hanging on academically by the skin of my teeth at Virginia Tech. I was studying my hardest, and running just as hard, putting in 100+ mile weeks for months on end.

Many of my more exclusively athletic focused and more gifted running friends, in college, would put in harder workouts, but couldn’t achieve the volume or consistency that I was able to.

Since I was a math student amongst Phys’ Ed majors, my peers would ask how I could work so hard on my studies. To them math was a major effort.

But on the reverse side, many of my math friends put me to shame in their studies. Almost all in my class had a much better undergrad math curriculum than I did, most had more talent also. But only half the class made it to their second year.

Most, especially those that did not continue to their second year would rarely if ever put forth any physical effort. Many would ask how in the world I could run 100+ miles a week and study. Many of the professors were proud of my track accomplishments, proving by exception a math geek could excel in sports. A few Profs, however, would ridicule my dedication to running and use my borderline grades as evidence that I was not willing to put in the hard work and question my dedication to math and grad school.

There were of course even worse math professors, ones the university did not even trust near students, due to their social difficulties and their unbalanced mental state.

Those professors, however, that I admired once I got to know them did have some physically demanding hobby or pastime. The mental demands of their positions required many restful moments; they let their mind do nothing while their bodies worked hard. These professors not only related well with the students, in my opinion, their published works were much more interesting than the esoteric works, extremely complex but of trivial worth,  of the more imbalanced professors .

As Mr. Sogi suggest the key to winning often is doing nothing. But the best of them have really mastered the art of defining what “nothing” is.

Nigel Davies comments:

Interesting post Russ. Coincidentally I'm currently thinking about these issues myself and am in the midst of a book by the interesting authoress, Chin-Ning Chu entited 'Do Less, Achieve More'. My sense is that our Western 'work ethic' often leads us to need to appear busy, even when activity is likely to be unproductive. And there would seem to be many applications of this same concept in all walks of life.

Michele Pezzutti responds:

"My sense is that our Western 'work ethic' often leads us to need to appear busy, even when activity is likely to be unproductive. "

I agree on your comment. However, some cultures are less prone to it, especially in the north of Europe. In a phase between two project I was managing, activity was quite low as we were completing tails of the old one and waiting for the new one to reach full speed. I did not feel at ease in this situation. But my manager at that time gave me the following advice: "Recover your energy during these periods because soon you'll need a lot of energy again". And he meant it.



 Time Series Analysis with Applications in R, by Jonathan D. Cryer‏ and Kung-Sik Chan, was advertised to have the R code for its examples, but didn't. It has a few snippets for a few charts and an Introduction to R in the appendix. Kind of a rip off. I don't especially recommend it for those looking for some R code. There are the infuriating questions at the end of the chapter. I know you are supposed to work them out understand the material but I want a reference book. I'm not in college any more. I want the answers. It's more suited for entry-level college statistics.

There was an interesting chapter on trends in which they distinguish between stochastic and deterministic trends. Stochastic trends such as a random walk, have apparent "trends" merely as an artifact of the strong positive correlation between the series values at nearby time points and the increasing variance in the process as time goes by. This answers my question of why the time series charts line up. They distinguish deterministic trends, for example, the upward trend in temperature as summer approaches. There is a reason, a model for the trend, the tilt of the earth towards the sun causing higher temperatures.

Vince Fulco comments:

I've become partial to The R Book by Michael Crawley. A solid intermediate text with a walkthrough of various practical stats concepts. Best in electronic format at 950 pages.

James Sogi  writes:

Quick study of Spus shows historical variance increases in the afternoons which is in line with Cryes theory of appearance of trends in random walk and autocorrelation of near time series points in stochastic trend and increase in variance. This ties together with the thread on apparent trends in spu series. Interesting how there's always a fresh way of looking at the same old stuff.

On a different subject, Soros says in his update to his recent book Reflections on the Crash of 2008 that it is wrong to model equities on the same basis as natural models like we often do here, like Lotka-Volterra etc, as human reflexivity and self perception leads to bigger trends, panics, booms, etc than natural phenomenon which is not self aware. He's not sure how to model reflexivity and is afraid of locking in a model to a fixed algo.

A counter example in nature would be study of stampedes, lemmings, migrations, panics, temperature spikes clusters, hurricanes and extreme events, earthquakes, and other outlier type natural behavior or other discontinuous or extreme type data. We'll have the 2008-9 data in our series going forward, so the model might adjust itself, and if not the model, the data will be there. Question is will means revert. For self protection we must err on side of different lower kurtosis plus fatter tails described more as Pearson Type Vii or Student t or Cauchy type distribution. Got a bit of negative skew in there now too.

-9 | 96
-8 |
-7 | 0
-6 | 833
-5 | 74433
-4 | 98753300
-3 | 98443210
-2 | 998877666553322200
-1 | 99877777766655555444432222222111111000
-0 | 97777765432111110
0 | 0011122222334444455556666666667777888999
1 | 0001112233336667889999
2 | 012233446677
3 | 01112233344447
4 | 011139
5 | 4468
6 |
7 |
8 |
9 |
10 | 4
11 |
12 | 6

Like the expert distinguished prof, the Palindrome experienced systemic breakdown as a young man in Hungary. This must be a life changing experience. For everyone who lived through 2008 it also will be a life changing experience, though not on the same scale as Budapest 1943 or in Lebanon, or the Balkans, Malay, China, Russia, Africa.



ConesPerhaps the best block for food in the US is Bleecker Street between 6th and 7th Aves. About 25 restaurants highlighted by Cones, which has the best banana ice cream in the world, as well as the best rated ice cream in New York. Making up the other side of the pair of pants is Bleecker Street Pizza on 7th, rated the best pizza in New York, and Joe's Pizza on 6th and Bleecker, which others say is best. I found the cheesecake at Rocco's the best I've had in New York, and I like Amy's Bread for a good chocolate chip cookie and nice whole wheat breads. I also like Murray's Cheese for their advertising and very nice cheddars. Grom, the second best ice cream in New York. John's Pizza has been there for 90 years and Faicco's has very good Italian specialties, a total beautiful experience. Comparable to Arthur Avenue in the Bronx — doesn't have the Botanical Gardens but does have two very nice chess houses and you can buy your honey some good dresses at Reese's.



The last two real estate cycles took a decade each to play out. This one should not be much different. The last banking S/L crisis took a decade to shake out. This one is worse. In the 70's it took a decade for people to look at stocks again. I fear the same will happen this time. Wall Street itself has been gutted and the investment banks gone, the jobs are gone, many of the funds are gone. The stimulus will not necessarily trigger hyper inflation of consumer prices as some believe will happen as predicted by the expectations numbers. This is not to say there will not be many opportunities, because in each of the instances fortunes were built. The tactics and strategies will need to change. They have already in the equity market. I don't know them, but understand that the debt markets are very different, and are changing rapidly still. A big picture is necessary even for short term traders to avoid trouble.



"Catching Fire: How Cooking Made Us Human"‏ is a forthcoming book by anthropologist Dr. Richard Wrangham that discusses the theory that the discovery of cooking by early hominids led to the development of larger brains and smaller guts… a good explanation of the love for BBQ!

Dr. Wrangham has been interviewed by 1) Publisher's Weekly and 2) The New York Times . Here are excerpts:

1) The Original Joy of Cooking: PW Talks with Author Richard Wrangham, by Will Boisvert — Publishers Weekly, 4/6/2009

On behalf of sushi haters like me, tell our readers how nature has fitted humans to eat cooked food.

Biologically, we are not well-adapted to raw foods. Our teeth and stomachs are small compared to those of chimpanzees or gorillas, because we don’t eat huge quantities of tough, high-fiber raw foods. Our large intestines are relatively small because we don’t have to retain and ferment raw food for hours. Humans don’t thrive on raw food—they lose weight, and women’s fertility is severely compromised.

How does cooking let us get more out of food?

Cooking increases the energy we get from starches because uncooked starch granules often pass through our bodies unused. Heat also denatures proteins, opening them up to digestive enzymes. Cooking softens foods and makes them easier to digest, so the energy costs of digestion fall. We use 10% of the calories we eat to digest our meals; some animals use much more, but we use little because we cook.

When did our ancestors start cooking, and how did it change them?

Small teeth and guts appeared around 1.8 million years ago, with Homo erectus, so cooking probably began then. Cooking enabled this species to evolve larger brains, which are energetically costly: if you have a small gut thanks to a cooked diet, the energy spared from maintaining the gut can fuel the brain instead. Cooking also changed the way we use our time. Apes eating raw food spend half their day just chewing. Humans spend under an hour a day chewing, freeing us for creative and social activities.

What inspired the first hominid chef?

Once our ancestors tamed fire, it probably wouldn’t have been long before a bit of food accidentally dropped into the fire; they would have plucked it out and immediately realized that it had been improved by cooking. We can say that because chimpanzees prefer cooked food; the tongue detects textures, like viscosity and grittiness, that enable an animal to discern the soft foods that are good for it.

How did cooking affect the relationship between the sexes?

In every society, the typical evening meal is cooked by a woman for a man. This is an ancient exchange: women give men food, men protect women’s food from being stolen. Women had to do the same thing every day: produce the evening meal. Men could hunt, go on war expeditions, lie under a tree and gamble—and still find dinner waiting. Because of cooking, women ended up chained to domestic responsibilities; men did not.

2) And from the NY Times:

Q. Your critics say you have a nice theory, but no proof. They say that there’s no evidence of fireplaces 1.8 million years ago. How do you answer them?
A. Yes, there are those who say we need archaeological proof that we made fires 1.8 million years ago. And yes, thus far, none have been found. There is evidence from Israel showing the control of fire at about 800,000 years ago. I’d love to see older archaeological signals. At some point, we’ll get them.



One of hardest things to do is nothing. To rest. It goes against everything. The urge to do something can result in disaster. Especially the urge to catch up say when price passes you by or you miss a fill.

Victor Niederhoffer writes:

In reading Deep Survival ( which one has eschewed for many reasons), one comes across the chapter on panics. The conflict between trying to achieve a goal, of food shelter and a mate, (always there) , and being lost causes great discombobulation. Great foolish activities leads to people refusing to survive when it was so close. One finds the same conflict between lost and goal in markets. For example, one has a target. You put your limit in. The algorithm boys move in front of you. The price moves away. You are lost. You have a goal. There is a tendency to panic, to die when it would have been so easy to go down the previous path, or use your tools. A terribly poignant and applicable sensation.

Chris Cooper responds:

Those lessons about paying attention are reiterated in depth in a book I recently finished, "Traffic: Why We Drive the Way We Do" . It is full of counter-intuitive evidence regarding driving and safety. Especially noted is that seemingly unsafe situations can be safe simply because people pay attention.

Dan Grossman replies:

I agree with Chris, Traffic is a great book. Both for understanding driving/road safety and for other aspects of life.

Book was the only advice in my life that changed the way I drive. For example, now realizing statistically how dangerous changing lanes is (what a high percentage of accidents are caused by it), I change lanes far less frequently.

Also makes one appreciate how less safe red light cameras (now common in NYC) are: More accidents caused by stopping short at red lights to avoid camera tickets, than by finishing scooting through.

Alan Millhone writes:

Hello Mr. Sogi. I had an old friend that told me , " if you miss one deal there is usually another around the corner somewhere ". Regards, Alan

Legacy Daily comments:

So true… I don't know which is a bigger regret: the buyer's/seller's remorse or the regret of chasing a price to get a fill then seeing the market go back to the original order level. The price frequency distribution helps (not always) against my wrong instincts so the new routine is to remember the eye exercise program in those moments. :)

1. Blink ten times by closing the eyes as if falling asleep (very slowly). This help re-wet the eyes.

2. Look away from the computer and gaze at a distant object outside or down the hallway. Looking far away relaxes the focusing muscles inside the eye to reduce fatigue.

3. Look far away at an object for 10-15 seconds, then gaze at something up close for 10-15 seconds. Then look back at the distant object repeating the cycle 10 times.

4. Take a break, stand up, move about and stretch the arms, legs, back, neck and shoulders.

Kevin Eilian writes:

Wisewellian - that which effects your move the least effects your opponents the most (courtesy of chair).



Alba the Carmelite is half-way to the final $136 monthly payment on a gun in layaway. I saw her yesterday, with a moon face reflecting inner peace.

'I'm calm, of course, because the die is cast.'

Now seventy-five, nut brown and no taller than a rifle, Alba was born in Nicaragua to a wealthy family with a chain of hardware stores and cotton plantations around the world. At nine Albacita announced that 'numbers were dancers in her head' so her father sent her with hats of coins into Managua's barrios to give to the poor. One day she made a side trip to a convent and asked to become a nun but the sister replied,'You're too young.' She instead went off to school in Pennsylvania to learn English, French and earn a CPA degree, returned to Nicaragua and asked to join a nunnery but was told, 'You must run the family business'. Shortly her father was murdered in Europe, and Alba gave away the family fortune whisking her mother to San Francisco, California to ask a convent to accept her but was scolded, 'Take care of your aging mother.' After a decade as a San Francisco CPA her mother passed and Alba trudged up the nunnery steps to implore, 'Now I may be a nun.' 'No, you are too old.' 'f you, sisters!' Alba yelled, stepped in a rust bucket Chevy van and drove south into the desert and Sand Valley, my home.

Except Alba is the toughest in the valley (population ten) because she lives without propane for heat or cooking, no electric, wind or solar, no vehicle… just a rattle camper and claptrap trailer turned over to twenty rescued cats and five dogs as the owner sleeps under the stars.

The desert property was a cool April 90F and strangely quiet yesterday. Alba padded up in blue slippers, white socks puffed with garlic to ward off rattlers, short brown dress hung like a burlap sack, fishnet for an air pocket between gray curls and a red baseball cap that reads, 'Cien Anos' (One Hundred Years). She removed one white mitten with her teeth like a cat and pulled the other black one off to hug me.

'One year ago the man took away all my friends, the animals.'


'Animal Control.'

'Where were you?'

'In jail.'

'For what?'

'Assault and battery  !'

The story slowly unwound. Animal Control drove into Sand Valley, wheeled onto Alba's forty acres of sand and cactus, raised a chin to her demand to leave and intoned, 'Get those dogs spayed or you go to jail.' 'You,' replied Alba tapping a long index fingernail once as high as she could reach on his chest, 'Can't arrest me because you're not a sheriff.' But he called the sheriff who cuffed her so hard that her wrists bled like J.sus all the way to El Centro.

She was incarcerated for ten days for assault and battery.

On the court date she dragged ankle and wrist chains clanging against a metal walker across the linoleum to a shocked judge. 'Call the public defender!' he cried. 'I'll defend her!' interjected the prosecutor. Alba rose to a full 4'8'' and overruled them all saying, 'I'll defend myself with the truth!'

'Take the chains off the lady!' ordered the judge. Alba rubbed the circulation back and presented her version.

'Case dismissed!' ruled the judge. 'Get her a ride home.'

In the ten days absence the Animal Control man had robbed the animals. He left three dead cats in a box in the trailer that Alba lifted out, crisp after one year, one at a time and placed gently in my lap. 'This is Richard the Lion hearted,' patting its skull as black hair scattered like confetti, 'This is Felipe,' as the tail vertebrae snapped and the calico with a fixed grin dropped next to the other, 'And this is poor Chaquita,' lifting a Persian by the scruff and spilling tears.

The old lady's new moon face relaxed as two fresh pups jumped up and down demanding attention, and Alba knows the man will return when they come of age to spay and the gun is out of layaway.



A MI was at my friends home the other day and he said his little grandson came over and had a handful of assorted foreign coins he was playing with (little boy is five). My friend got to looking at the coins and one stood out and it was a Gold Sovereign of King George in uncirculated condition! Then my friend took from his pocket and placed in my outstretched hand another coin and by its feel knew it was Gold. It was a 20 Franc Gold coin from France. My friend is keeping the coins for now and wrote down the story and will give the note and the coins back to his son at a later date. The little boy never missed the two shiny little coins from the pile of other coins he had. I found the story interesting and told my friend how easy it would have been to have dropped the coins in the yard between their two homes. Maybe there are more in their yards !



We surely are in the twilight zone when capital constrained firms such as Citi can generate fictitious profits from their own debt's going down, among other favorable and highly questionable 'adjustments'. But isn't this part of the US system's ongoing accounting legerdemain? Social Security obligations growing? Ignore them. Cost of Iraq war? Keep it out of the annual budget process. And on the consumer side, incomes stagnant for years? Come up with new mortgage product allowing Joe Sixpack (or Winecooler) making 60K to afford a house' worth' 400K. Or crank up the credit card lending and hope that more stringent bankruptcy laws keep them toeing the line of self-imposed economic slavery. To paraphrase an old line, this is no way to run a debtor nation increasingly at the mercy of foreign investors.

Vitality N. Katsenelson concurred:

If you thought banks like Citigroup made money in the first quarter, think again. Its business just deteriorated and its bonds declined so much, but ironically that was one of the biggest moneymakers for Citi. They were able to record a decline in the value of their bonds as a source of revenues, which was almost double their reported profits. The lesson is: if you screw up, screw up big, drive your bond prices into the ground and voila', your profitability increases. Seriously, that is what happened to Citi last quarter.



If you call gold a “weird asset class”, as I did, you’re bound to receive a ton of angry emails and comments. Gold is kind of like a religion, you either believe in it or you don’t. Nonbelievers are calm and rational for the most part. The believers are “a bit nutty”, as James Montier put it. They all recite identical arguments, using the same choice of words, in the similar order as they were scripted. In fact their arguments do sound very much like gold commercials that run all day long on CNBC and radio. Vitaliy Katsenelson

It must be admitted that Vitaliy's bearish argument, one which has been made on this site repeatedly since 2001, will eventually prevail. In the meantime measure it against the performance of any other asset class in that same time frame and you'll find the results are, indeed, a "bit nutty." For everything there is a season.



There is a simple rule one can apply when looking at long term assets like houses or core stock holdings. If you are a seller, imagine you have cash and no house. What is the most you would be willing to pay for that house? That price should equal your selling price. Subtracting transactions fees, this is your personal clearing price. In reverse if you are a buyer, imagine you owned a house and ask yourself: what would be the least I would sell this house for? That should be your buying price. The beauty is everyone has different answers to these questions and this is what allows trade to take place. "Armchair Economist" by Steven Landsburg is a good resource for these questions.



Tyler BrûléFor those that haven't read an issue of Monocle, the new May issue makes a wonderful introduction to the magazine. The cover story is of the Danish navy on pirate patrols off the coast of Somalia but the issue is also extensively filled with stories on Belarus, Hobart in Tasmania, Tunis, and Dubai's conservative neighboring emirate of Sharjah amongst many other broad features that range from the economy to design and fashion to the personal transport of Congo's president. At $10 an issue, it's quite expensive for a magazine but I would continue to find good value in the issues for double that price. Monocle's editor Tyler Brûlé writes the Fast Lane column for the weekend FT and previously started Wallpaper magazine before launching Monocle.

Jim Sogi adds:

Hobart, Tasmania is a lovely town, and on a lovely island. You can buy oceanfront commercial for 0.5M. Acreage also inland. Like California about 70 years ago.



 William D. Cohan's House of Cards is an exciting account of the fall of Bear Stearns and a great inside look at the personalities in high finance on Wall Street. The firm fell in just a few days when their overnight financing dried up. They were heavily leveraged up to 50x. Their inventory collateral had the mortgage securities that are causing so much consternation in the financial system. They were one of the leaders in making securities out of the mortgages. They had been successful in almost every year prior to that. Cohan blames Jimmy Cayne and his hubris-filled leadership style for the the downfall. He did not really understand the concentration of their business and how the strategic inflection might impact them, or how or why their financial structure was so vulnerable. There is little substantive insight on trading strategies other than you have to make money. Still there is much to learn.

Combining the lessons of Bear Stearns, with Andy Grove's ideas reveals how easily hubris can creep in with success. Hubris or success leads to emotional attachment to methods that worked. The attachment makes change harder when the outside change makes what worked before, not work. This is a very difficult thing to overcome in an individual, and harder in a firm. It makes it harder to see the change coming. It is good to have more than one viewpoint, more than one approach. A charismatic and dogmatic leader can change from an advantage to hindering change when it is necessary. This is what happened at Bear Stearns.

Many of Bear's market positions were known outside the firm. Their weakness was apparent. That is what allowed others to take advantage of them when the time came. Wall Street is a small community and ruthless. As an aside, an interesting aspect of short term electronic trading is that there are no negotiations or outside parties that are privy to the strategies, and other than the tape, transactions tend to lack any window for information to spread such at brokers,lawyers, outside parties, clerical staff that might exist in M&A deals. This one of the beauties of the the current electronic system. However, as in the past, study of the tape has good information.

In past years we have discussed risk, how to control it. One method is leverage. Price stops can lower variance but will not increase return. Another method of limiting risk is time. Variance increases with time, thus risk increases with time. Though return in theory should increase to a point, there is a sweet spot. It will differ according to your horizons, but time is one of the main risk factors. The objective should be to balance vig and the conditional expectation.



A GroveAndy Grove of Intel wrote "Only the Paranoid Survive". His main thesis is that strategic inflection points come along and totally change the landscape for businesses. If they don't recognize it, adapt, they will perish. Such changes are caused by technology, government regulation, and growth and public change. He suggests that at some points, data, being historical, will not capture the inflection points, and intuition or anecdote must come in to play. Grove says that firms that have experimented, and have other irons in the fire are better equipped to change their focus. Its a scary thing to change from your bread and butter to the unknown. He says the reason CEO change is not that one is a better leader, its just that they are not emotionally tied to the old ways and methods that were successful before, but which are not working in the new regimes.

The financial system has passed a strategic inflection point. Government regulation will further change the landscape. Many firms who failed to see it coming, or see it happening have failed. Firms such as Bear Stearns and Lehman whose very success in mortgages, lead to the concentration in mortgage debt, lead to its demise when the inflection point came. Looking back, of course the signals are clear, but at the time, was it clear what 2/2/07, Bear Stearns, Lehman meant to the system? Few, very very few, recognized the signals. Fewer still capitalised on it, or protected themselves. The ones that did either changed, or were in a niche that wasn't impacted.

Grove is insightful. Its remarkable how any endeavor, business, sports, can lead to insight into the human condition. In Eastern philosophy the simple actions of living can lead to the ultimate truth.



SushilOn the one hand it is said that those funds, individuals, traders who could not get on in the 30% plus move across every equity index in the world will destroy this rally, yet on the other it is argued that because this market has remained under-bought any pullbacks will be bought into. These are both opinions, not facts.

Let me ask those who did not buy in because they did not like the news then or those who did not buy because they did not like the patterns in the data they read will they buy the next dip? News-readers will become ticker tape readers or those who are reading the news now of so many remaining under-bought will be able to sell the tape now?

Blondie said in the movie, "The good, the bad and the ugly" that, "You see, in this world, there's two kinds of people, my friend. Those with loaded guns, and those who dig. You dig."

Those who seek incentives of anticipating will anticipate and those who seek benefits of being followers will continue to follow. Nature of men does not change.

So, who is going to shoot this rally, whenever it does get shot? It likely will be those who are not digging (the guns) and those who indeed had the guns at the last set of lows. Those who shoot this rally will also then have a loaded gun to shoot the next drop when it comes. Yes, Blondie has been so correct, those who dig would dig, those who shoot would shoot.



Since this web site is read by many very successful investors, I was wondering if any of you had any insights on selling stocks. It seems there are a million different books and strategies on buying stocks, but not many people talk about when to sell. Right now I basically go off of what I am satisfied in gaining and start selling at that point. If it drops I usually keep buying as long as my analysis of the company still holds. This has worked out okay but I've missed out on a lot of gains and feel there is more to learn here. For instance, I bought ZINC at $2.50. It went up and bounced around from $3 to $4 for a while and I determined that at $3.50 I was satisfied with a 40% gain. Of course after I do this it shoots up to over $7 over the next couple months. On the other hand, in an attempt to exercise more patience, I held on to TRID when it was up over 40% and I am now in the negatives with it. I currently am up 110% on TUES and am confused about what to do with it. My instinct has been telling me to sell and lock in the gains but it just keeps going up. My dad once told me to "Sell and be sorry, but sell." This seems like pretty good advice but I can tell you when a stock keeps rising I sure am sorry I sold. Could anyone help me out? Not sure if it matters, but my investing style is that of value. Thanks in advance!… Brave Rifles!

Philip J. McDonnell replies:

Phil MMr. Bates posed the interesting question of when to sell. Much of his discussion focuses on minimizing his subsequent regret. Many of us buy stocks because we fear the train will leave the station without us on board. We fear taking a loss because we cannot accept the cognitive dissonance of admitting a mistake. We also fear that the stock will recover from the loss adding regret to the cognitive dissonance. We fear selling a profitable trade because it may go higher and cause us regret. For most counters the question of when to sell is often answered before they buy. Suppose one did a study such as Vic and Laurel did in PracSpec looking at REIT returns in one quarter and what the market did in the next quarter. Then the criteria of when to sell is one quarter later just as used in the study. In fact very often the criteria used in a quant study is based on time and not on price. One can suggest a few general guidelines. One should sell if:

  1. The criteria used in your analysis have been met. This could be time or it could be something like the first profitable open such as Larry Williams has suggested.
  2. You no longer have an advantage.
  3. You have a profit so large that the position size is too large relative to your portfolio. Note that this criterion only requires a partial sale. My book talks about position sizing.
  4. You have other better opportunities and need to raise cash.

For a fundamentally oriented value investor the time element may not be so clear. Corporate reporting is on a quarterly basis so presumably the time frame for a value investor is quarterly or longer. So one should look to value as the criterion for exit as well as entry. If a stock has gone up quite a bit then much of its advantage in the value sense has disappeared. The position size may now be larger than the optimum and other under valued stocks may present better opportunities.

Correct position sizing is the only reliable money management tool. Stop losses are not guaranteed to work because of gap openings. They also do not work the way most people expect. Buying puts is usually too expensive. Thus we are left with position sizing. For a value investor with longer holding periods one might arbitrarily decide to cut positions in half to allow room to double before position size adjustment is required.

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



The femme fatale seduces her lovers with her beauty and charm, but the sexual allure I think is the characteristic that bonds her victims the most in a deadly and compromising relationship. For some reason, she hypnotizes her victims, sometimes more than one at the same time, attracting them gradually, but inexorably, in a situation they can escape only with extreme actions and outcomes. She builds slowly and scientifically, an asymmetrical relationship where signals of confirmation of her affection alternate with denials. She has a sort of network where victims are monitored and managed to make sure they do not escape. She does all she can not to let them free, including lying. Her lovers enter finally a state of dependence and obsession that she enjoys and of which she drives the dynamics that with time become more and more extreme. The desperation, exhaustion, anxious and obsessive phase of lovers is characterised by an unhealthy and overwhelming attachment that can cause irrational decisions. The final destructive phase involves feelings of self-blame and often anger. The deadly femme fatale has a complex personality, hard to recognize at first. When victims realize the situation, it may be too late. Similarly, the market seduces lovers with charm, beauty and the art of deception. The deadly outcome leaves victims with huge losses.

Marion Dreyfus writes:

Just because the vast preponderance of readers here is male is no reason to excoriate females — the description of f.f. goes way overboard. Most women are aware of their allure (it does not take much to excite randy males, which describes, given the chance, 95% of all the gender), but we do not spin these nets and traps — it is an anachronistic model, based upon the impotence of former females in insurance securities, investments and her own nested income. Absent the need to survive and ensure for her needs, these females melt into the tough, hard-working, capable, no-nonsense female of today. To the extent that women are again (arguable if so) 'femmes fatales,' it is because of the insecurity of the times. That is why skirts rise in lean times: Females are wont to finding and bonding with a future of plenty, not want, and the sexual signal is the come-hither to desirable males.

Indeed, if a woman does behave in this alluring, seductive pattern when a male is about, it compliments his status-quotient. Were he to be adjudged low in value, her interest would not be piqued, and her sexuality would be aimed elsewhere.

We all try to to survive. The devices and tools women have are mimicked in the insect and animal world models–these are meant to procure food and necessities–stop spinning the paradigm as if it were *sui generis* for no reason other than the gratification of the destroyed male.

Scott Brooks replies:

Just like women are often attracted to the rebels…..you know the old saying….good girls are attracted to the bad boys….men are often attracted to femme fatales. I dated a FF for a short time in college. I found myself attracted to her as she was obviously a "bad girl". The attraction didn't last long as I found I was not quite as "adventurous" as she wanted to be.But of course, today, the Mistress has her hooks in me and she's driving me crazy. But I live a well balanced life. My wife is a balance wheel, very well grounded and keeps me on the straight and narrow!

Now our very beautiful, very femine Dr. Dreyfus bemoans the use of the FF phrase…..sweet innocent Marion…..who, I'll bet, has gone hunting, fishing and shot more guns than most of guys on this list…..who did her stint in the IDF. Who has roamed the hostile streets of the middle east and who manages to navigate the often moody straits of the Type A middle aged successful men who inhabit this list……and yet…… does so with flair, feminity and grace.

Fair Marion has probably been in more dangerous situations than many on this list will ever be…..I like to think of her as our groups own private FF……a living character in an adventure novel…..so we get to have all the adventure (but only in our minds) with none of the danger!



The chair has many times pointed out how the vix level is an indication of future moves on the SPX. The VIX seems to be under great pressure here, even with yesterday 2% fall on the SPX the VIX was down, that must be highly unusual. Just an observation.

Greg Calvin writes: 

 It seems there have been numerous unusual moves in VIX recently. Similarly, today's VIX movement thus far is interesting in contrast to the market's paint-drying picture, and the relative movement in contrast to for example, yesterday's relative moves intraday.

Vitaliy N. Katsenelson writes:

I've met a money manager yesterday who explained to me that the decrease in risk premium is driving the market up (and vice versa). He showed me a nice chart that displayed risk premium as inverse P/E (earnings yeild) less 10 year Treasury. This major problem with that concept is that E over last 3-5 years did not really represent a true earnings power of S&P, it overstated it. P/E was too low. Margins reverted towards the mean -declined, E declined and took market with it. I'd suggest to use a ten year traling P/E, at least it will cover the full economic cycle and thus margins will be normalized and P/E (or earnings yield) will be more meaninfull.



Handwriting analysis is mentioned as one of those areas that may be useful in "reading" the minds of others and determining their personality and motivations. With enough data and computer correlation it is possible that aspects of handwriting could provide additional information about a person similar to reading facial expressions. As of now handwriting analysis is considered by many as a "pseudoscience" and "worthless" endeavor. (http://en.wikipedia.org/wiki/Graphology) My recollection, however, is that the French have used it for hiring people in sensitive positions–such as banking. The President has released his signed tax return and the large initial letters of B and O may indicate a large ego and perhaps someone having a quick temper if those letters (ego) are "punctured". http://handwritinguniversity.com/barackobama/ From Paul Ekman—"If I was starting all over, I would look at handwriting. Everybody thinks that's nuts. It's a personal product, and I'll bet you there are some things in it. Of course, there are people who think they can get a lot from handwriting. I would start by studying them and seeing, scientifically, whether it's really valid, and seeing whether I can unpack it. It would have the great benefit that if you succeed — it's high-risk — but if you succeed, then you're the pioneer that gets it all started." http://globetrotter.berkeley.edu/people4/Ekman/ekman-con5.html

–Forwarded Message Attachment–

or handwriting analysis is mentioned as one of those areas that may be useful in "reading" the minds of others and determining their personality and motivations. With enough data and computer correlation it is possible that aspects of handwriting could provide additional information about a person similar to reading facial expressions. As of now handwriting analysis is considered by many as a "pseudoscience" and "worthless" endeavor.


My recollection, however, is that the French have used it for hiring people in sensitive positions–such as banking.

The President has released his signed tax return and the large initial letters of B and O may indicate a large ego and perhaps someone having a quick temper if those letters (ego) are "punctured".


From Paul Ekman—"If I was starting all over, I would look at handwriting. Everybody thinks that's nuts. It's a personal product, and I'll bet you there are some things in it. Of course, there are people who think they can get a lot from handwriting. I would start by studying them and seeing, scientifically, whether it's really valid, and seeing whether I can unpack it. It would have the great benefit that if you succeed — it's high-risk — but if you succeed, then you're the pioneer that gets it all started."




SterlingA couple of days ago a tour operator called Conquest Vacations failed. From one day to the next the doors were closed and they filed for bankruptcy. Their vacationing, and about to be vacationing clients, and travel agents for that matter, had no idea and did not see it coming. It turns out that a cash crunch killed them. Credit card companies have recently changed their policies with tour operators, not forwarding them the funds until after the clients' vacations are done - for exactly the type of thing that just happened to Conquest. They are afraid of being stuck with some of the losses if a tour operator goes under. So tour operators now need to finance the flights and hotels and other tour costs in advance. Ouch.

So here we have another form credit tightening that leads to business failures that lead to job losses that lead to further credit tightening (through fear of companies failing) that leads to … companies failing etc… It makes you wonder to what extent we are out of the woods yet, if at all.



Interesting drop off in ES volume today. Not sure what it means if anything.

2009-04-17        866.75    1873990
2009-04-16        861.50    2587100
2009-04-15        848.50    2175733
2009-04-14        840.25    2351211
2009-04-13        854.00    1635670
2009-04-09        852.50    2081575
2009-04-08        822.50    2088351



The market is like a beautiful woman of the fatale variety who always amazes with her virtuosity and newness. Never the same. Both must be quantified and used to advantage.

Phil McDonnell adds:

Phil McDA couple of years ago vic initiated a discussion of Information Theory and how it might apply to markets. One particular aspect of information theory deals with how codes can be represented. For example the letter A could be 65, B is 66 and so on. To interpret the market's signal one can classify market moves into categories. An up move would be a 1 and a down move a zero. This would be a simple two letter alphabet. For a four letter alphabet of market moves we could take large moves of more than +.5%, small moves up, small moves down and large down moves of more than -.5%. For larger market alphabets we could break the moves down into more bins with finer granularity.

In doing the study I looked at various alphabets from 4 to 16 characters (bins). In each case the results showed a significant predictive ability when one computed the information content of the resulting bins. On thing I noticed at the time was that the larger magnitude bins (both up and down) carried greater information value.

Another observation was that characters which were 'missing' or in relatively low frequency tended to be more likely to appear. This latter phenomenon is very much consistent with the Chair's femme fatale metaphor. The market tends to surprise us with what we have not seen in a while. Come to think of it, it has been a long time since we saw positive drift in the market.

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



I'll not make a prediction if this latest rally in stocks is sustainable or not. I don't know. But it is self-fulfilling. Rising stock prices improve consumer confidence, and more importantly send a signal to CEOs and other executives that maybe there is a light at the end of the tunnel, and maybe that light is not another oncoming train.

CEOs, who despite the appearances, are as human as everyone else, may decide to postpone or at least reduce the speed of job cuts as they start taking cues from the stock market.

Thus this stock market rally (if not followed by a sharp decline) may actually help the economy, at least in the short run.

Nigel Davies replies:

Interesting take on things. Optimism is usually associated with the likelihood of a fall, the logic being that 'everyone has already bought'. But maybe there's a difference between new optimism and old optimism.



 Mediocre BBQ in the South is usually better than the best BBQ in other areas of the country. Today, I finally went to a BBQ place I've been meaning to go to for years. Located across from the Venice, FL Regional Hospital, Gold Rush BBQ has a chintzy Western/gold prospector motif, but the name of the place and the decor are the only thing that would remind one of the West. The food is purely, to put it mildly, Southern all the way. Hitting the restaurant at lunch time, I had to stand in line to wait for a table. Crowds at BBQ places are usually a good sign. Finally seated, the waitress brought me a huge glass of sweet tea, and took my order. I ordered a chopped pork sandwich covered with slaw, served with fries and a cucumber salad on the side. I was amazed at the size of the sandwich, which was more than enough to satisfy my BBQ craving. I don't usually eat pulled or chopped pork preferring sliced, but they only offered it chopped, so that's what I ordered. The slaw offered a nice counterbalance in flavors, toning down the intensity that pulled pork usually has, and provided a little texture to the perfectly made sandwich. The sauce was homemade, and had a bit of zip to it, lacking the sweetness that I usually prefer. More Carolina in style, the sauce was still an excellent accompaniment to the sandwich and was delicious. The fries deserve special note, as they were perfectly made and tasted great. I decided to try the cucumber salad, a bargain at only $0.69. It was an salad made with cucumber, tomato, onion, celery, dressing, and celery salt. It was, no hyperbole intended, the best cucumber salad I ever tasted in my life. It was a very elegant little salad, lacking any complexity, yet a perfect accompaniment to the rest of the food. The food was served in metal pans, and the restaurant provided real gold miners pans for the discarded bones. I thought the choice of plates was a bit over the top, but it's the food that's important, not the plates. I noticed other diners eating the ribs, and while they looked good, the portions were not as large as I would have liked. Snooping on my fellow customers, it was apparent that everyone was enjoying the food immensely. The sandwich portion was large enough that I decided to skip my usual pecan pie for dessert, although theirs looked like a world class pie. The ambiance of the Gold Rush was only lacking because there was no good country music playing in the background. Somehow, listening to Toby Keith or Garth Brooks while pigging out enhances the Southern BBQ experience, or so I have noticed. If one has high blood pressure, cholesterol problems, or obesity, it might be best to avoid this place and eat somewhere else. Now that I've had my BBQ fix, I can go back to my usual healthy diet.

Clive Burlin reminds us:

On the subject of slaw, etc: this recipe from J.T., circa 2004 is definitely worth concocting at home.


1 head cabbage, grated fine

1/2 cup fine chop dill pickles

2 cups mayonnaise

1 teaspoon sugar

1 small onion, chopped fine

1 teaspoon pepper


Grate cabbage and let it sit in strainer about 20 minutes. Use paper towel to dry off excess moisture. Transfer cabbage to a bowl. Stir in remaining ingredients and refrigerate about 1 hour before serving. To those that wish to spice it up sprinkle Old Bay Seasoning when finished, you can also sprinkle Old Bay on those ears of corn when buttered up as well as on those Bloody Mary's, hell just put Old Bay on everything.



Some recent instances:

company name  3 03     4 14

bac           3.6      10.1

ge            7.0      11.5

dow           6.9      10.6

dell          9.1      10.5

One of first studies I ever performed with the CRSP data for every stock monthly from 1926 to present was to look at all breaks of the round number 10 from below.

It gave an extroadinarily alluring result but suffered from the multicollinearity of all cross sectional studies in that most broke through the round number at a particular glorious time, like 1933, and then showed their 1000% returns in tandem.



From the "dog chasing its tail-department,"  it is interesting to note that the Riksbank changed the measurement of inflation that they base their policy on a while ago. The measurement they are focusing on now includes cost of credit in a way that includes their own rate-lowering effect. So the more they lower the rate, the lower the inflation and the more they need to lower the rate if they are to keep with their policies. They used to follow a measure which took into account this effect, but not anymore. This is also one of the reasons that they kept raising rates until September last year.



"The best way to deal with pirates has always been to kill them, and that's still true today. It should not have taken this long to figure out what to do." A Reader.

I would focus more in this issue on the human dimension. How does the personality of the commander at the scene influence the outcome of a situation? He has to make decisions taking into account the political guidance (or lack thereof), the culture and characteristics of the adversaries, the procedures and the tactics (are they adequate to the new task? Are we flexible enough to understand what is needed in this context?), the training of his sailors, the capabilities available, the environmental conditions and finally the uncertainty that any event has embedded. There are some key questions to answer: What are risks and benefits for each course of action? What is the cost of a failure? How does a local, tactical event impact on the higher strategic and mediatic picture? Although to outsiders it may seem that all he has to do is apply very well established procedures and rules, in real life at sea it is never that way.



Andrew HaldaneThis speech by Andrew Haldane (Why Banks Failed the Stress Test, 13 February 2009) at the Bank of England has some great charts in the back that deal with kurtosis (fat tails or black swan events) back to the South Sea bubble. This puts these events into perspective, comparing to WW II, the 1970s etc.

Also some great historical insights into the the three recent black swans, caused by "risk managment"' failure: Oct 1987, LTCM Crisis and housing bubble, all roughly a decade apart.

It also has hints of what might be coming for UK, and for the future of risk management.



"I had guides skiing up in the wilderness, who have a lifetime of experience and reference. Like markets, if you lose your reference point, you're dead in short order." JS

In the spirit of drift, randomness, and our Dear Mr. Sears a very famous runner once said "The only good race pace is suicide pace, and today looks like a good day to die" (Steve Roland Prefontaine). To tie a few posts over the last few days Surfer asked when a mean would equal zero? I took that as if zero is good when the world is red… Well if 8-10% is the annual pace when 18% is the stdev of historic returns since ground zero (early 1930's) then the math to get the drift from 8 to 10 down to zero would be twice that, at least  18%, if the VIX hits a historic then the average must be altered as well and its stdev is altered. The Chair also shared recently those words of Galton that the herd of fish all have terror in witnessing their brethren fall victim to the artificial fly, but yet they must eat. How do the fish then decide? How do the fish choose then to eat amongst all that hits the water, fake or real opportunity? How tempting is it to choose for a starving fish in some Sartreian way through "free choice" that is so scary a fly that ripples the water when the fish that the fly falls to a fish when the fly is so many stdev's away from the norm of day to day feedng with it's ripples? That my fellow dailyspecs to me is speculation! Both as the fish and the fisherman. I am not a fish, I am a fisherman. It is not a matter of right or wrong, it is a matter of profit. My PaPa taught me over many hours of fishing that a fly is no more than an enticement of the natural day to day of the fishes appetite, we can only merely mimic the natural. To catch the biggest fish is to understand the hatches and the common "drift" as Mr. Prefontaine understood the correct winning pace. If the stdev's of the market are compromised for whatever reason to either tail then as fishermen we must adjust the fly of choice to fill the creel to eat as must the fish to avoid being caught. During extreme draughts of not catching fish knowing that the flies that usually gave quantity and size we must give the imitation up and go to the banks of the creek and switch to live bait or introduce bait at least to entice profits that the fish has never seen to entice a bite and bare profits. Just as mentioned prior we have to find that amongst either the most common days to profit or be creative enough to introduce new to the fish of profits. This though makes us as fisherman of profits to get into making those scary choices that may make us get in way over our head as the Chair has warned or as Bacon warned of switches.

Reference points are nice but are no Archimeadean point. Nor is a ship's destination once at sea no matter how certain the Captain is from point A to B.



 As markets all over the world move from down 50% last year to up 10% this year, there are numerous examples of herding behavior. Of the 20 major Asian markets, 19 are up, led by China — up 40%. Of 20 major European markets 16 are down, all ranging from -10% in UK to -1% in Norway, with Sweden, Austria, Hungary, Greece up on the year from 1% to 10%. In North and Latin America, all markets are up except for the US and Mexico down 7% or 8%. Looking at individual stocks, of the S&P 500, 232 are up on the year and 268 are down with the distribution as follows:

% change number of stocks
100% or more    2
50%-100%       15
30-50%            24
10-30%            88
0-10%              83
-0 to -10%        117
-10% to -30%   135
-30% to -50%    30
-50% or less        6

And in 2009, actually 41% of the days have shown comovements in bonds and stocks, versus the normal 35% of the preceding several years. I would attribute the herding to a number of positive feedback cycles. As consumers become pessimistic, producers curtail their output, which curtails employment and lessens confidence that jobs will be held. On the real estate front, as employment prospects worsen, the demand for housing decreases, which pushes real estate prices down, which drives stocks down, which causes capital costs to rise, and employment prospects to worsen. Brett Steenbarger has a nice indicator of herding based on advancing and declining volume, but I find the results somewhat coterminous with the corresponding changes in the stock market averages themselves. Thus, as the situation turns, I turn to the originator of herding theory, Francis Galton, for guidance. He points out in Human Faculty and Its Development, 1883 (one of the five most important books for specinvestors, right alongside Ben Green on horse trading and Robert Bacon himself):

Terror at any object is quickly taught if it is taught consistently, whether the terror be reasonable or not. There are few more stupid creatures than fish, but they notoriously soon learn to be frightened at any newly introduced method of capture, say by an artificial fly, which, at first their comrades took greedily. Some one fish may have seen others caught and have learned to take fright at the fly. Whenever he saw it again, he would betray his terror by some instinctive gesture which would be seen and understood by others and so instruction in distrusting the fly appears to spread. All gregarious animals are extremely quick at learning terrors from one another. It is a condition of their existence.



 I was a top car sales rep for several years at one time in my life and was able to not only read people, but then know how to process the information properly so that it could be used effectively to enhance the sales process. Reading people always came naturally to me and I have no degrees and never studied psychology. Reading people is art and science and every situation and person is different and cannot be categorized. As an example some of my biggest sales came from people that were not dressed well and that other car reps did not want to handle.

One day two rusty clunkers pulled into the parking lot and out come down and out looking poorly dressed husband and wife team with three kids. Something told me that when this picture comes into a new car lot it is not for looks. The other sales reps of course waited for better prospects. Well, these down and outers had won $200,000 the day before in a lottery and wanted to trade their two worthless clunkers for new cars. Three hours later they drove away with two sparkling new vehicles. Depending on the situation, never judge the book by the cover.

I never new much about cars. It never interested me, however I was in the top 1% nationally for car sales. I am an expert however at reading people, human psychology and how to interact with them to maximize the goal. My first job in car sales was selling VWs and Audis. After the obligatory "you can make as much as you want" speech I asked the sales mgr if I could skip the training program and just start selling. I will learn on the job, I said. So many folks studied every aspect of the car but just couldn't read people or deal with them and could not cut it. I knew that the people coming into the dealership did not know that I didn't know and I was good enough to read them and front run. I sold 32 cars my first month and collected $13,000 with bonuses and got fired. You're too good, Mark, and the others are complaining. I had another offer from another dealership within an hour and so it went. I went on to become the #1 rep for a fortune 500 petroleum company in the entire United States. I beat out around 100 candidates from what i was told. My resume was fabricated x 100 but I looked and acted the part.

I was the number 1 territory rep in the entire United States, and once a month my boss would fly in and ride with me. A really nice guy and great boss. He would say, I don't know how you do it, the plant mgr says you are disorganized, but it really doesn't matter, you are great at what you do and you make all of us look good. I simply said I can read people, Tom, and I'm a great actor and quick on my feet. About a year later the auditors caught up with my resume, and Tom flew in. Mark, I have good news and bad news. I knew what the bad news was. You will never qualify to be CEO here but despite your outrageous resume, all of us here right up to the very very top are glad you are here, now c'mon let's go get some lunch, I wanna know how you did that.

Being able to read people and front run them with reinforcing words can help you in endless situations. I lived in and traveled in Central America for a few years and used these same techniques and human psychology in various situations with great results. It can save your life. I often thought about how these techniques and others (some simple props as an example) could assist business people and govt employees in the event that they were in danger in foreign countries (kidnapping or other dangers). There are some simple, effective methods that shift the odds in your favor, even if only slightly, I believe.

After seeing well educated people go by the wayside I am convinced that great sales reps are born and cannot be trained. You can teach someone how to read people, but at the end of the day you have to be able to process this information very fast, be a great actor, great talker, part gambler and be able to get inside their mind. I would have been a great CIA agent or made a fortune as a wall street institutional sales rep. Here at White Glove I handle the VIP sales and get to deal with Wall Streeters, professional athletes, actors and a lot of great folks. They let me fly here because I am the best at what I do. Two years ago the sales mgr fired me over a foolish squabble they then fired him and brought me back. Reading people and human psychology is a fascinating subject and I have so many interesting experiences but I've written too much already.



I have enjoyed the discussion on reading people. I find it very important to read possible renters. Many are truthful and many will tell every lie known to man! Some of my favorite lies I hear…

  1. I live alone, but my boyfriend is here on rare occasions.
  2. I have an 18 year old, but he is seldom here.
  3. Can you work with me on the deposit?
  4. I have no children (but you can hear them screaming in the background.)
  5. I occasionally watch a friend's child (this leads to full time baby sitting.)

In all honesty, I try to rent to as few people as possible. Go in and clean a unit up after a large group has moved and you will see my reasoning. The 'wear and tear' is unreal with two or more children (most of the time).

Back to reading body actions. Those who call from a friend's phone or from a pay phone worry me. Those who need to move right now worry me. More and more of my units are going to be non-smoking units. People tell me they do not smoke, but the yellow fingers, and the smell on their clothes tells me a different story. I like to meet and then read how a person conducts himself while chatting to me and to see if he looks me in the eye.

One of the best ways to read a perspective renter is Erenter.com! For an application fee of $35 you can learn a lot about people. Many times I give them the application and never hear back from them (a good thing). I do add the $35 onto their deposit, most don't do this and the applicant simply forfeits if he or she is not accepted.

People who get behind on their rent have numerous stories I hear and most won't face you. When you don't see them you face a type of silent and invisible body language on which volumes could be written.



 When you maneuver a ship, there are controllable forces, such as propeller and rudder effects. There are also uncontrollable forces, such as wind, current, sea conditions. Moreover, each vessel has different characteristics and reacts differently. You have also to take into account the characteristics of your ship that may not be constant and given, such as ship loading and hull conditions. As a result, a captain works in an environment where a ship's behavior is not observed in exactly the same way and each situation is different from another. A maneuver is a dynamic process. You have your plan and when you execute it, you want to have a continuous update to understand the effect that your order has achieved and the next course of action in order to be able to follow your plan. Each time you find yourself in situations where your ship reacts differently due to everchanging combinations of speed, rudder, wind, current, sea state.

You need to be adaptable to the environment. Often, a too frequent assessment of your orders is not good because you need some time to let the ship react to your order because of its inertia. At the same time, if your feedback cycle is too slow, you might not have enough time to correct your action. You might end up not being able to follow your plan any more. In that case, the wisest thing you can do is give up and start again the maneuver from scratch instead of trying improbable corrections.

In markets, you do not have controllable forces, but you have expected crowd behaviors. In this context also each situation is different. A trader establishes a plan and during the trade execution, as new data come in, he/she assesses the market's behavior. The frequency at which this feedback process is done is critical. Traders may overreact and be deceived by the short term noise (you need time for the trade to develop), or they may be too slow to realize that the trade is not going as expected. How much data do you need, how often? How is the behavior different from what is expected is an interesting parameter. What is the threshold that makes you realize the trade went wrong? A ship maneuvering characteristics can be modeled mathematically, but in real life captains have to apply their experience and judgment to work in an observe-evaluate-decide-act cycle, which is very similar to what a trader does in a real time environment. Similarly, the market can be modeled, but most of the times expected outcomes require judgment and interpretation. It is all about the human dimension, where the action-effect cycle is matched against broad assessments of a generic "system" behavior.

Jeremy Smith comments:

“Consider how often a vessel must change its course in leaving a harbor, yet once on the high seas a single heading may bear it to its destination. Only
a major navigational hazard could change it.”

 – Louis Auchincloss, The Embezzler [1966]

J.T. Holley adds:

In the spirit of Patrick O'Brian I would have to disagree or at least add to this quote. Pirates, Enemies and Gov't can cause navigational changes in both the ships directions and destinations as well as in the markets. Seamanship by David Dodge is a excellent book that discusses the navigational patterns as well that the U.S. Navy utilizes. Having served onboard the U.S.S. Stark I can assure you that rarely is "a single heading" utilized to reach a destination. Sure it is the broad direction, but there are other directions that are in between when going from point A to point B.

Pitt T. Maner III writes:

Let me add a nice quote from The New Dictionary of Thoughts (1963). I wish I knew who "Anon" was:

A smooth sea never made a skilful mariner, neither do uninterrupted prosperity and success qualify for usefulness and happiness. The storms of adversity, like those of the ocean, rouse the faculties, and excite the invention, prudence, skill, and fortitude of the voyager. The martyrs of ancient times, in bracing their minds to outward calamities, acquired a loftiness of purpose and a moral heroism worth a lifetime of softness and security. Anon.

The pdf of the book is searchable and many a fine old quote can be found there. 

Jim Sogi adds:

Jeff is right. A sailing ship in particular will sail the best course made good, rather than rhumb line. For example, it will take the best angle to the wind, for the ship best speed, even though off rhumb line, for best course made good. A catamaran, for example, will go faster tacking down wind, zig zagging rather than shortest distance. I think day traders know this instinctively. It's quantified in markets in the absolute volatility numbers, or in Sharpe result numbers.

Another curious effect is when there is a strong current setting the vessel down. The vessel aims at a different point than where it intends to go, and 'crabs' along its course. This is hard for people to understand, as they can't really see the current, but one has to be aware of the motion of the ship in relation to the course, which is a derivative function. I suppose this might be thought of as Sharpe as opposed to gross dollars in trading or percent.

Another odd effect I experienced last weekend up in Alaska skiing was during a white out, a sense of vertigo. There is no visual reference point to balance, and its easy to lose balance in total white out conditions. While standing still, a small avalanche passed by, and though I was standing still, seeing the snow pass by gave the impression of motion, and threw me off balance. Or there is the feeling of standing still, then all of a sudden hit a bump and realize the skier was moving, but couldn't see it. The idea is that sometimes the perception is not correct and some other reference is needed. Pilots know this. This was one of the main points in survival. Loss of a reference point often lead to panic and death. In the markets, it's easy to lose reference. Chair's international numbers, I believe, are an attempt to get some sort of reference point. I had guides skiing up in the wilderness, who have a lifetime of experience and reference. Like markets, if you lose your reference point, you'll be dead in short order. 



 A very good exercise for increasing one's mental capabilities is to learn how to read people accurately. Reading people and sizing them up is essential in every walk of life, and one who can make a good read has a built in edge in everything. I like to do a lot of people watching, constantly making a read, and have found the exercise to be very stimulating and illuminating. One starts a read by looking at a person's outward appearance, dress, the condition of their shoes, hands, and what kind of haircut they have.

Moving along, one notices things like posture, gestures, and facial expressions. Do they have a smile, a twinkle in their eye, or do they have dour personalities? Do they speak softly, or loud? Are they well spoken or not? What kind of affectations do they have? I like to observe exactly what people are doing, and the body motions they use, comparing the data to past observations of other people.

People readers get an added bonus is when a person is interacting with another, or in a group. Interactions between two or more people can give volumes of information regarding things like temper, character, and and general mental state. Subtle, nonverbal clues can let you know if the person is a dominant person or a follower, information which can prove to be valuable.

A good reader can tell you the socioeconomic status of the man by sight, can tell you if he has kids, and get a good estimate of what his spouse is like. An experienced reader can make a good estimate of one's income, marital status, level of either happiness or desperation.

The best place to start learning how to make a read is by going to a mall and watching the men sitting by while waiting for their wives who are shopping Practice on men at the mall allows you to size them up, and then check the accuracy of your observations when the wife shows up. This allows one to hone their skills in reading people.

I attempt to read people as a mental exercise, everywhere I go from a restaurant to an airport. Recently, I was at a very nice restaurant and startled my companion with the accuracy of my reads of the various patrons. I learned to read people from too many hours at the poker tables and the wheat pit. In today's electronic markets, reading people might not be as important, but the same thought process and mind set is a very valuable tool in the arsenal of the speculator. Incidentally, some of the best readers are car salesmen, and people in retail.

Reading skills can be learned, although it takes great self discipline and an open mind. Beginning readers will get things wrong but as their skill level increases, their accuracy will approach 80% or more. Learning to read people is a very fun exercise, and will develop critical thinking skills that will ennoble your mind.

Steve Ellison writes:

 Paul Ekman has studied the movements of every facial muscle and what thoughts these movements convey…here he is as described by Malcolm Gladwell in a wonderful article.

Ekman recalls the first time he saw Bill Clinton, during the 1992 Democratic primaries. "I was watching his facial expressions, and I said to my wife, 'This is Peck's Bad Boy,' " Ekman says. "This is a guy who wants to be caught with his hand in the cookie jar, and have us love him for it anyway. There was this expression that's one of his favorites. It's that hand-in-the-cookie-jar, love-me-Mommy-because-I'm-a-rascal look. It's A.U. twelve, fifteen, seventeen, and twenty-four, with an eye roll." Ekman paused, then reconstructed that particular sequence of expressions on his face. He contracted his zygomatic major, A.U. twelve, in a classic smile, then tugged the corners of his lips down with his triangularis, A.U. fifteen. He flexed the mentalis, A.U. seventeen, which raises the chin, slightly pressed his lips together in A.U. twenty-four, and finally rolled his eyes–and it was as if Slick Willie himself were suddenly in the room. 

Jordan Low comments:

 It is interesting how we can get different views over different topics from books. Almost similar to how movies come in pairs — Deep Impact and Armageddon, for example. In Gladwell's book The Tipping Point, the NYC crime rate decrease from a host of factors that tipped the scale contrasts with Freakonomics explanation of legalization of abortion lagged 16 or so years. In What Every Body Is Saying by Navarro, he claims that facial movements are the least accurate. The most accurate body part is the feet and as we move up, the conscious brain can fake responses.

Sushil Kedia adds:

 Desmond Morris. I urge everyone interested in the subject of watching, understanding non verbal behavior, deception & an endless array of related subjects to search this name on google. He is a maestro at this social science.

For over two decades I have been searching to obtain his lost title Ape Watching. One of my most revered teachers during my school days had shown me his copy and it was etched deeply in my mind. Resplendent pictures of apes capturing tell-tale nuances. Each picture therein is a unique shade of primal emotions. Just a glimpse through this tome, a flip across the hundreds of pictures taken by Morris was breathtaking. Based on a twenty year old memory, I reccomend you grab howsoever old and tattered a copy of this particular title if you see it. Amazon, google books, many other usual hunting pots in cyberia for books do not even mention it. Wonder if someone who has a serious interest in behavior studies has ensured that this title just vanishes. His numerous other works are fascinating as well, but Ape Watching would stand above any other book on any other subject I have ever seen. 



 Newly baptized executive hobo Geko (pictured ), a Los Angeles computer sophisticate and sailor of the seas, rode a quirky freight out the Colton yard last night. We parked in a hospital lot like any other patients and crossed the Pepper Street bridge over Interstate 10 to scramble down an aloe vera carpet into the RR yard at sunset. This is the southern California Eucalyptus fringed hub (B.K. pictured ) where in these rough times a mile-long string of some 100 locomotives coupled nose-to-tail gather dust beneath the bloody red sun… now gone. Two other almost mile-long freights with four and five locomotives huffed near the Pepper bridge and we slithered twist them away from the bulls with infrared eyes in a thick diesel haze trying to fathom which would pull out first. "Whichever it is," I said, "We'll be carried over the San Bernadino hump (mountains), past the Coachella naked people (five hundred ten-story windmills), within twenty miles of my Sand Valley home under the sand, and on to the tramp capital of Yuma, Arizona in time for morning chow at the mission."

We climbed the metal ladder of a cement hopper car to a 8'x12' steel 'front porch' with a 3' portal to a hobo 'hotel room' within the bulwark and hugged the steel floor ready to spring if the adjacent train highballed first. Geko marked our spot with a GPS that would become his close companion on the trip as i flashed a disposable camera. An electrical click up and down the train signaled the brake check prior to departure on the line next to next us, so we rose to change rides even as our own freight clamped and strained in a metallic beat from engine to tail, and our platform on America jolted east. Hunkered on packs with a mounting breeze in our hair and not a care in the world the train advanced from one to five mph to… The yard bull (policeman) accelerated a white Bronco in pursuit nearly alongside our car until the dirt road hit the bridge where he peeled off, and we jiggled the iron road east.

Geko's analytical jaw dropped in appreciation of his first hobo ride and I peeked around our curved side cement car at the five locos and felt my own whiskers hit lapels at viewing a long intermodel freight perpendicular blocking our path at Colton Crossing a hundred yards ahead. The crossing is one of the busiest junctions in the United States where the east-west Union Pacific intersect the north-south BNSF rails that also carry Metrolink and Amtrak trains, and if it's a potential headache tonight it was a bloody scene in the 1882 Frog Wars between the two lines. At the last second our freight swung north, I whistled and admitted, "We just made a rare turn into unknown territory." He punched the GPS, and we settled into the sleeping bags on cardboard on the steel under a star spangled sky. An hour later Geko whispered to himself, "Average velocity 49 mph north-northeast." I propped on a calloused elbow and confirmed by the bounce and Polaris that we were speeding over 40 mph nearly due north.

 We'd packed light for the trip, just the sleepers, quart of water each, granola bars, and reading books stuffed into day packs, with dark clothes on our backs. My new road partner peered over the 1' platform lip at house-size boulders rolling past as I slid asleep and the train snaked through mountains striking sharp notes on curves with sparks under a full April moon. The freight chugged in the wee hours beneath a ghostly bridge and crawled under one after another yellow yard lamps popping with moths. Slowly the five locomotives and two human cargo entered a half-mile wide bowl of rails at least four miles long. "No idea where we are," I offered, "But strike the ballast before the yonder yardmaster tower…." The sentence was punctuated by the brake, stop, and release of all cars as the locos ran off. "Ditched in a mysterious yard," I muttered.We scrambled up a dusty bank and broke out a Euclyptus hedge to scan all horizons for a hint of location but saw only a quiet, darkened desert stretching off to a tiny green stamp that may be an interstate sign. "It matters less where we are than how to return," Geko said dryly. "Freight hopping is computer programming with grit," I replied shivering in his frosty breath, and adding, "What should we do?" He proposed to drop into the yard to try to catch back to Colton. Down we slid, stepped over a dozen rails capturing starlight, and climbed the rungs of a trundling car string that stopped and reversed. We hopped doggedly to the ballast and delved deeper into the yard.

In the next hour we took stationary or moving posts on a dozen cars as other metal strings entwined about us, and twenty times we bobbed around cars to avoid yard workers' eyes and a circling security truck with bubblegum roof lights. We boarded a slow rolling coal train and squatted atop anthracite like moonstruck cats until the train gathered speed and coal dust blew up and we jumped off the black cloud. So we shrugged and climbed out the yard bowl and slalomed the chaparral toward the far off postage stamp. An hour later Geko brightly used the GPS to determine our latitude and longitude, and dialed a Florida kin to paste the coordinates onto GoogleMaps and tell us where we are. "Then," assured my road partner, "I'll call Tomorrow, my wife, to pick us up!" However, Florida didn't answer and Tomorrow never arrives.

 Approaching the freeway in another hour, five mongrels leaped out an abandoned car and barked our butts to the freeway sign that read 'Interstate 15'. False dawn lit a long arc along the freeway to lead us full circle back to the RR yard far end where we hiked up to yet another sign that broke the suspense, 'Barstow, California'. A nearby all-night diner was assaulted for eggs, bacon, and a plan to get home. The options were to freight that we nixed, Amtrak just left, Greyhound didn't go till noon, hitchhike, call the wife, or.. I dropped my fork and slapped my head, "Let's rent a car." "Avis is around the corner," chimed our waiter, and in five minutes we had reserved a car with no drop fee from Barstow to Colton for $40, about the same price as one Greyhound ticket.

On the short walk to Avis it was apparent that the hobo bug had drawn blood in Geko. "I like the ongoing puzzles with the need to remain calm during crises," he gushed. Now it was back to a California condo hidden in roses and a loving wife and high salary job, with a pain that will forever stab the heart every time a train whistle blows. He had darted from the crowd like other executive hobos who stumble on www.bokeelytours.com and found I was not too mad in the short run. Four hours later Geko wheeled a '09 Pontiac into the hospital lot near the Colton RR yard and exclaimed, "That's the way to return from a class hobo trip!"



 Rock Climbing has evolved into several different styles and variations. Two of such variations are Bouldering and Free Climbing (traditional or sport climbing, depending on whether protections are removed after the ascent or fixed permanently to the rock).

In sport climbing, routes are typically 20-30 meters long while in bouldering, ascents are typically shorter (a few meters). Due to such difference in lengths, different type of efforts are required and then different physical qualities are needed. Pure strength is dominant in bouldering vs stamina in free climbing.

Nevertheless, in both styles it's your mind that makes the difference before and during performance.

When you are engaged in a project close to your performance limits, it can take a lot of time, work and preparation to achieve the result. A lot of motivation is needed in this phase not to let failures discourage you and give up.

When you are performing, mental control is everything. You must be 100% focused on movements, even little details can make the difference between success or failure. A mistake drains effort and mental energy. And it might sound strange, but in my case the most critical part is when you have passed the crux of the route. If you fall before, that's fine, the route is hard. After the crux, you start to feel the pressure to succeed, falling there is a real failure. Then you need to be able to stay in control of yourself.

Due to different lengths between bouldering and climbing, also type of mental engagement during the performance is different. For those who do not climb let me try to make an analogy with athletics: bouldering is a 100m race while free climbing is 1500m (marathon is could be compared to great ascents on big walls …).

In markets you can choose trading (bouldering) or long term investments (free climbing). Different qualities are needed in the two cases, knowledge of statistics, market behavior and dynamics for trading short term, fundamentals of economics for long term investments.

A lot of study and work is needed in the preparation phase in order to decide which trades to make or what asset to invest in, whatever approach you choose. And motivation as well is necessary, as it's easy to get discourage by your failures, even more when you are losing money.

Also in trading and in long term investments, time scale is different but the bottom line is the same: in the performance phase, you need focus, discipline, stick to the rules you decided to entry and exit the market, you need to keep control of details and of yourself, do not let the emotional part take control.



 Here is a fascinating review of Jonathan M. Karpoff, "Public versus Private Initiative in Arctic Exploration: The Effects of Incentives and Organizational Structure", Journal of Political Economy, February 2001, v. 109, iss. 1, pp. 38-78 by Anti-Dismal.



 In Outliers, Malcolm Gladwell seems to be making an argument for nurture in the nature v. nurture debate. In particular, he is interested in how culture, parenting, special opportunities, and timing factor into the stories of the wildly successful. The book is largely a compilation of results from various studies as well as the stories of some well-known individuals. For instance, he opens with the peculiar fact that a disproportionate amount of Canadian hockey players are born in January. The explanation being that they are the oldest players who can join the youth league. This, he argues, gives them a relative advantage, which over time, as they are selected for special opportunities, translates into real superiority.

He later goes on to analyze key breaks that allowed for the success of individuals like Bill Gates, e.g., more hours of access to a computer than virtually anyone else in the world at the time. He examines the importance of IQ, parenting, and the economic background of one's parents. He points to the strong correlation between the economic class of one's parents and one's ultimate success, and he argues that we are probably failing to cultivate a lot of human capital by not properly distributing opportunity.

This is an argument that I tend to agree with, as I have seen first-hand the difference that class makes in the distribution of opportunity. I came to grad school from Ohio State, and my roommate came from Princeton. I had better grades and a paper under my belt, but I was given a full-time teaching load whereas he had no teaching (presumably because I didn't have Andrew Wiles write my letter of recommendation). In theory, this gives him more time to work, which puts him further ahead in his research, and all things being equal, he gets the better job. (In fact, he didn't properly use his time and he was a third-round hire, and I was a first-round hire.) His parents both had graduate degrees and lived in a wealthy suburb of Boston, whereas neither of my parents went to college and lived in Appalachia. He went to Princeton, and as far as my family was concerned, that wasn't an option. I think most of us can relate to this sort of thing.

That said, despite my sympathy for Gladwell's argument, he fails to examine these studies for flaws. He's a little too quick to make sweeping generalizations, and he spends a little too much time explaining the obvious. He should have anticipated and responded to some potential criticisms. I'm glad I read the book, because I learned of the existence of KIPP("Knowledge Is Power Program") schools, which are spreading across the country. Their goal is to provide the kind of college-prep to low income students that is available to the affluent. If you go to their website, you can find information about teaching, starting new schools, and donating. I suspect I'm preaching to the wrong audience, but I think it is a really exciting idea.

Jason Thompson writes:

It would seem your experience highlights how class is not the main variable in success, rather it is your hard work and your intellect. Instead of focusing on the details of your roommate's experience vs. yours, examine the big picture. You have accomplished a greater goal than your roommate without all of his inherent advantages as proscribed by material advantage, in-other words meritocracy works! AFA Gladwell/Side-show Bob's assertion that class matters most, significant empirical work by James Heckman or Charles Murray have thrown water on that flame. Rather its clear that IQ leads to greater wealth, that such wealth persists highlights the important of nature (aka genetics). Overtime one should expect the smart folks and their progeny to obtain greater proportions of the spoils of the economy…unless of course the state intervenes.



 Since January, 1967 there have been 90 instances when the NY Stock Exchange "New 52-week Low List" had exactly zero stocks. Although the data are subject to revision, it appears that this happened most recently on March 26th.

This appears to be a fairly bullish omen. After this event, the one month S&P return is:

Mean return: 1.83%

Median return: 2.00%

St Dev: 3.21%

During the entire period since January, 1967 to present, the one month S&P return is:

Mean return: 0.53%

Median return: 0.85%

St Dev: 4.5%



The sports books are moving to online betting where you can bet bet during the progress of the game, like after the second inning or the first basket, or the first half, as to what the outcome might be. It reminds me of what happens when a company like Alcoa reports with the market first going up on the idea that Alcoa is going to report positive, then down in the 3:55 to 3:59 timeslot on fears it will be bad, then up as the friends with precognition and future emoluments to give take action, then up as their precognition is realized, then up because it's the first report and it signifies that things aren't as bad as thought, then down as people realize it's just one metals company reporting from the last quarter, then of course up, because what do the first quarter earnings have to do with the price of stocks anyway?



 One of the more upscale British laddie mags recently jawed on at length about the shift from size zero boy-models to 'normal'-sized, fit, regular guys who "look capable of doing the job" they are photographed in. The nameless street-urchin male waifs of the past seven years are nowhere to be seen in the hot books of the trendoid set.

These androgenous boy-men held sway in the fashionista capitals and photo layouts since 2001, when designers constructed threads that were younger, tighter, decidedly skinnier than adult males could reasonably be expected to purchase. Or wear.

One is forced to suss out why, after the popping of a market bubble, and a global setback from the 9/11 attacks, the mood would shift to something so outré that working men would be left on the sidelines.

Were 'real men' wholly if temporarily disenfranchised because they had to will themselves up the success ladder anew?

Or were no-sex/no-gender pale males the only images that sold to the few customers willing to buy fripperies and bling? Were the 'tween set with disposable income that did not reside in Market realities or job-jobs the only ones with disposable ka-ching?

The pendulum has swung back, however. Top designers and their acolyte photogs have realigned what constitutes the Body to Emulate Now, since 2008 sometime.

The indication is that x-ray androgenic, sorta-males do nothing to comfort the working classes in a downturn. Men were turned off, and stayed away from purchasing the unwearable threads in droves. And women didn't like looking at these anorectic no-pec wonders. Such geldings offered literally nothing to fantasize about.

Top global male model this minute, David Gandy, is macho, understatedly muscled, toned…and beautiful to gaze at. Ladies and gentlemen, the Masculine Male. Is. Back.

Proving that it is not just beauteous femmes needed to woo the men back to recovery effort in freighted, weighted times. But females too want (and need) to turn up the erotic thermostat for comfort 'food' and gender-role righteousness when the economy goes awry.

This is, to our eyes, a newish index. Or a gloss on an older, more established marker. When hedge-fund, derivatives- and swap-money woes are here in play:

Androgeny, go away.



 Models of my Life, an autobiography of Herbert Simon describes the highways and byways of the life of perhaps the most prolific and most cited social scientist of the 20th century. He won the Nobel Prize for his economic theory of bounded rationality in decision making in firms, but he is equally renowned as the inventor of artificial intelligence, the developer of the production theory in cognitive psychology, his studies of technique and knowledge in experts, his invention of the theory of satisficing as an alternative to partial equilibrium analysis his invention of a general problem solving program, and the development of the first list processing program, and his invention and programming of the process of scientific discovery.

Among the many reasons for reading the book are that it gives a vivid picture of the inner working of one of the greatest scientists of our time, it shows how the process of science was carried out in the 20th century, it provides an exhilarating reprise of the birth and development of the key fields that Simon pioneered in and often founded including, artificial intelligence, bounded rationality, dynamic programming, operations research, organization theory production processes in thinking, linear programming, information processing, problem solving, complex systems, preferential attachment; it gives a fine summary of the process of building a great business school, it provides an excellent overview of the political aspects of science, and it sets forth a method and provides a vivid case study of the proper procedures for decision making, and problem solving and scientific discovery.

An excellent review of his work can be found in Wikipedia. Let me comment on some aspects not covered there or those that are of special interest to those in the decision making under uncertainty field. Lets start with the many salient aspects of the great scientist that give us an insight into how to live the life of a scientist. He was a bird watcher, tree lover, chess player, insect collector, camping, stamp collector, artist, musician and boy scout as a kid. He read omnivorously about nature, science, the wilderness, and science. Each night, at family dinners, they'd spend time with the dictionary and encyclopedia to answer questions brought up by his engineering father and his musician mother, and constantly watching his father, the inventor of many processes for control systems of motors at work He was a workaholic throughout life, frequently putting in 60-80 hours of work a week. Yet he found time to practice the piano daily, sight reading Beethoven sonatas and Bach preludes while he formulated and solved the problems of the day. He also found time for frequent mountain climbing expeditions, and travel to almost every country of the world, especially Japan, China, and Russia, and Sweden, both before his Nobel when he was politicking for the award, and afterward, when he had as a sense of duty to oblige his sponsors.

He attributes much of his success to immersion in the great books program at University of Chicago. While he never went to a class, he was able to pass all his exams, and go along at his own pace. When he finished at the school, and went on the IIT, and Berkeley, he always asked the great big questions in all the fields he worked in, starting with administrative behavior in 1935, where he first noticed that organizations had conflicting goals, and limited information, and too many options for decision making under these circumstances to make any thing but a bounded rational choice, under the guidance of rules of thumb set forth by authorities. While asking the great questions, he studied every man in his daily life, the way he chose his work, navigated through the maze of choices that beset him or her in the path of life. He was helped in his pursuit by the Galtonian virtues of good health, (he died at 86 in 2002) excellent organizational abilities, a constant wife of 50 years, who graciously accepted his affair with a beautiful student with great aplomb and tolerance, and an insistence on computability for all decision making.

In the final chapter of his book, he describes the single big idea that he followed that allowed him to blaze so many paths. He found that institutions did not have adequate information to make utility maximizing decisions. Instead they had to make use of limited ability to commute in the face of complexity. He tried to model and improve that process by studying how the mind solves that problem, And in doing so he taught commuters to think, (as well as play chess and solve all algebra and physics problems)…He had one single model his whole life. He puts the visual representation of a problem as key to its solution standing on the shoulders of Einstein who said he could never understand a problem unless he could draw a diagram of it. In the final words of the book, he sets forth the most important lesson he learned over and above following the big idea to its conclusion. Have good friend who are energetic, and intelligent. And collaborate and learn from them.



Some very interesting research is being done at Cornell which could be very useful in uncovering laws underlying large datasets.

Here is a link to the university website, and an article from WIRED about it.



 Redundancy is one of the keys to digital cell phone transmissions, and packet transmissions for the internet, human speech, credit card numbers, music composition. The list goes on and on, but should include the market. In speech, typically people say the same thing over and over, to guaranty the message gets through. Digital cell phone technology uses some sort of redundant error correction to insure the correct message. Musical composition often has three verses, and repeats the theme to get the message through.

The market does the same. The mechanism is the result of trial and error, to some degree, but also of communication, error correction. A minimum of three is needed to provide some sort of error correction, and to insure transmission of the message. This is why we often see things in threes. It is good to know or expect repetition or redundancy as it gives an edge. For some reason the news and commentators seems to think rather of endless continuation as the normal mode.

Paolo Pezzutti adds:

Redundancy increases reliability of systems, usually in the case of a backup. You can find in many critical-performance systems and applications that some components or modules can be at least doubled. When you have a federated system, for example, you can choose to have a central "intelligent' core and a number of "non-intelligent" sub-systems, or you can have "intelligent" subsystems providing a higher degree of resilience to failures. This is typical of some combat systems on board ships for example. The point is that not only redundancy adds reliability, but it increases also the performance, because intelligence is distributed throughout the system of systems and decentralization is a more efficient and effective solution (there are less bottlenecks and so on).

Redundancy and reliability, however, have a cost. When designing a system you have to weigh costs and benefits to find a balance that meets the user requirements. Markets find dynamically a balance between costs and benefits through the price discovery process. Also in this case, network-enabled players that apply a decentralized approach have an advantage in situational awareness, speed of evaluating the situation and making decisions, and speed of execution have an advantage over bureaucratic, centralized and slow players.

Phil McDonnell comments:

Redundancy can be very good but there are some occasions when it accomplishes less than one might think. For example, most data centers have more than one server. But if they are running on the same electrical power system they are still vulnerable to the loss of that common critical resource.

Another example might be when the sources of failure are not independent. One example using two servers might be if both are plugged into the same wall plug. They are susceptible to common power surges and lightning strikes transmitted over the power lines. Even several computers connected via long network cables can be simultaneously damaged by the EM pulse from a nearby lightning bolt.



 Bollinger Bands are frequently deployed in multiples, with the most popular multiple probably being threes with upper and lower bands of one, two and three standard deviations.

From my perspective Bollinger Bands define whether prices are high or low on a relative basis. However, just as many authors find that the books others have read are not necessarily the books they wrote, Bollinger Bands are used for lots of things that I never conceived of. Enjoy and please report back on your success or lack thereof.



In yen/dollar above 10000 yesterday for first time since Oct. 21, 2007 and Nikkei today above 9000 for the first time since Jan. 2009. Gold below 900 for first time since 2/09, Dow above 8000 for first time since Feb. 09, and Vix below 40 for first time since Jan 28. Lobogola lives.



 Predictably Irrational by Dan Ariely is a very interesting book. A common premise in the study of economics is that people act rationally in their self-interest. Professor Ariely presents much evidence that this assumption is false. For example, most people would be willing to drive across town to save $7 on a $25 pen, but would not be willing to drive across town to save $7 on a $455 suit. Why should the answers be different? Either the expenditure of additional time and gasoline to save $7 is justified or it is not.

Most people are scrupulously honest when dealing with money, but their consciences don’t seem to be as vigilant against dishonesty in nonmonetary exchanges. While few employees would raid their employers’ petty cash drawers, many find it easy to justify taking office supplies for home use. Professor Ariely conducted an experiment in which students would be paid for each correct answer on a test. Students who were paid in cash were less likely to cheat than students who were paid in tokens that could later be redeemed for cash. In a similar experiment, people who were asked to recall the Ten Commandments before the test were less likely to cheat.

Most people have a set of social values that they consider to be on a higher plane than market or monetary values. Lawyers were more willing to provide their services to charitable causes for free than at reduced rates. Interestingly, if a relationship starts as a social relationship and “degenerates” to a mere market relationship, it is very, very hard to make it a social relationship again. At a day care center, for example, parents were initially prompt to pick up their children because they felt guilty about inconveniencing the day care workers. However, when the center introduced fines to discourage late pickups, late pickups increased, as parents no longer felt guilty; they were simply paying for additional services.

People are irrationally attracted to things they can get for free. In an experiment Professor Ariely conducted, nearly three quarters of students offered a choice between a piece of fine Swiss chocolate for 15 cents and a Hershey’s kiss for one cent chose the Swiss chocolate. However, when the professor lowered the price of each by one cent, so that the Hershey’s kisses were free, more than two thirds of the students chose the Hershey’s kisses.

There are many other interesting topics in the book, including the bias introduced by anchoring, the effects of strong emotions on behavior, the surprising effectiveness of placebos, and the tendency to overvalue things one owns. I found the insights valuable and recommend the book for specs.

Stephen Jovanovich adds:

A few empirical observations from a predictably irrational former lawyer and parent of an after-school program child:

1. People cheat with things other than money because money theft is the oldest, most easily proven crime in all cultures so humans have a very rational reason for treating money theft differently. Taking office supplies or "borrowing" tokens from other people are human actions that leave open far greater possibilities of plea bargaining.

2. Laywers donate their services to charitable causes for the same reason that companies do marketing; it is to add to their net profits through broadening their name recognition.

3. Lawyers heavily discount their fees. They do not reduce their published rates because a high "retail" rate is seen by the clients as a guarantee of quality. It is also another form of marketing/advertising.

4. The after school programs that are run by someone other than the government itself have late fees from the day they open their doors. Those late fees are their profit, and they want the parents to run behind schedule. (Some even set their clocks ahead a few minutes.) When the program's employees and owner maintain the fiction that "lateness" is a social infraction, it is for very rational reasons. The late fee is the same whether the parent is 5 minutes or 55 mintues late. By being "offended" the providers can use social pressure to push parents to be "not very" late, and make the same amount of money for a smaller expenditure of time.

As Harold Hill's competitors said, "you got to know the territory."



I am submitting a chart based on my coding that indicates (SMART) systemic processing of Jim's linear observation.

The plotting assimilates high and low lines relative to intraday correlation of 3 minute intervals during regular sessions of MSFT.

Recalibration of each day resets the correlations; however, interval variation allows this same schematic to process 24 hour (Forex) as well as day, week, month, year correlations. Also see how relative high and low noise is related to (what we may term here as) secondary levels of price floor and ceiling correlations.

The key appears to be closed loop processing to distinguish between irrelevant noise of the simulated price action occurring between (dark green/red) ranging and trigonometric variation and the actual (green/red) market changes occurring during the given session. In effect, a uniform domain (or state) is thereby created to account for randomness.

I presume… that the "simulation to show whether such lines are more frequent with the simulation from actual changes than the actual market itself" so concerns noise in relation to frequency?



 Friday ended 4 consecutive up weeks, in DJIA comprising almost 21% gain. This came after a down week (-6% in early March, before super-heroes rescued the world).

Looking for patterns of a down week followed by 4 consecutive up weeks (DUUUU), the recent 21% is the third biggest up-move. Here are similar past moves in DJIA, along with the returns of the following 4 weeks:

Date         DUUUU    nxt 4 week
08/01/32    0.519     0.226
04/24/33    0.319     0.182
08/30/82    0.180    -0.019
11/19/28    0.146    -0.006

Fiat bail-outs appear to work, once netted against world wealth gain. Ayn refuted?



What may be a good way for generating synthetic series of stock prices that shows OHLC for each day? What assumptions are reasonable to make in this endeavor?

Adam G Replies:

How about bootstrapping an existing series to remove any serial correlation (which also would remove any persistence of vol shocks)? Could carry further and mix and match daily “bars” from various instruments into one synthetic in random order.

keep looking »


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