In line with the spirit of counting favored by this site, here is an instance of a quantitative method employed by the Sun Tzu when tabulating the cost of war. For Sun Tzu, "money is truly the sinews of war":

“Raising an army
Of a hundred thousand men
And marching them
One thousand li (~330 miles)
Drains the pockets
Of the common people
And the public treasury
To the daily sum of
A thousand taels of silver.
It causes commotion
At home and abroad
And sets countless men
Tramping the highways
It keeps seven hundred thousand families
From their work.”

(from chapter 13)

A later commentary on the above lines by another military-statesman genius, the Regent-General Cao Cao, clarifies part of the calculation:

Of old, eight families made up a neighborhood; if one
family sent a man to war, the other seven families had to support them.
So when a hundred thousand troops were mobilized, seven hundred
thousand families were thereby prevented from tending their crops

Accordingly, the larger the distance from home, the more ruinous the
cost of transport. Plus the presence of an army will drive up prices of
everything. Thus, Sun Tzu considers it most prudent to impose this
burden on the enemy instead.

And on the subject of secret agents, which is of course the main
topic of “Chapter 13– The Use of Spies”. Sun Tzu again counts the
cost, this time of not using spies:

Hostile armies may face each other for years, striving
for the victory which is decided in a single day. This being so, to
remain in ignorance of the enemy’s condition simply because one grudges
the outlay of a hundred ounces of silver in honors and emoluments, is
the height of inhumanity.

One who acts thus is no leader of men, no present help to his sovereign, no master of victory.

Chapter 13 continues on to say that the acquisition of foreknowledge or intelligence:

cannot be elicited from spirits; it cannot be obtained inductively from experience, nor by any deductive calculation.
Knowledge of the enemy’s dispositions can only be obtained from other men.

… before detailing the 5 fascinating classes of spies: Local, Internal, Double, ‘Dead’ or doomed, and Live spies.

Interestingly, in the west, the Prussian monarch and general
Frederick the Great was ostensibly the first to use the double
agent, a captured enemy spy working for both sides and used by his
captors to send false information to his original employers.

And in the
merciless spirit which Frederick was infamous for, instilling fear
in both his enemies as well as his own rank and file, Frederick
considered “the best method of espionage, which always succeeds, was to choose
a peasant, arrest his wife as a hostage, and attach to him a soldier
disguised as a servant before sending him into the enemy’s camp…”



arsonAll those benighted idiots who took out adjustable rate mortgages a couple of years ago with 1% initial teaser rates are looking pretty good these days. They probably paid 4% interest over the last year, and are looking at adjustment to something like 3% for the year to come.

Ken Drees adds:

Pennywise, pound foolish. So what if you save some bucks on interest. You invested in housing at still questionably high prices, and interest rates can only now surprise on the upside. Selling your home (getting out) is not a button push. Housing can stay low and will for years–much longer than short term holders will be able to stand.

Now they should lock 30's. Lots of arson these days….



PetraeusGeneral Petraeus' testimony before Congress included this comment:

What impresses the Taliban is not the rules of engagement. It's the precise targeted operations that are designed to give them no rest. The idea is if you can get your teeth into the jugular of the enemy, you don't let go. This word "relentless" is an important word to describe the campaign against the Taliban.

These are the only tactics that win a war, and they are, inevitably, costly. Grant's campaign against Lee from the Wilderness to Appomatox was relentless and bloody and successful; so were the final assaults by the Allied Forces against Germany in both World Wars. Okinawa, which did more than the 2 atomic bombs to end the war against Japan, was by far the bloodiest single battle of the Second World War for the United States. More U.S. Navy sailors died in that battle (sailors!) than all the American KIA so far in the two Iraq Wars and Afghanistan.

It remains a crime against American history that our politicians repeatedly honor the veterans of D-Day but no public acknowledgement is ever made of the even greater sacrifice in the Pacific. (No doubt the explanation is that it is far more pleasant for members of Congress and the Executive to visit Normandy than to fly all the way across the Pacific to the one large island that has never developed a profitable tourist trade.)

Scott Brooks agrees:

Stefan is right. It's almost like those men who fought in the Pacific have been largely forgotten compared to their counterparts in Europe. The war in the Pacific was a horrific expedition in both blood and treasure.

And I'm quite confident that today's politicians and press completely lack the ability to wage that kind of war, which is why (IMHO), the war in the Pacific is largely ignored. We can demonize the Nazis for what they did (and rightly so), but we must ignore the atrocities of war that occured in the Pacific. If we shined the light on them, it would cause too many people to become uncomfortable.



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

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

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

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

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

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




Directed by Daniel Alfredson

Reviewed by Marion DS Dreyfus

Having just finished the Steig Larsson book, seeing THE GIRL WHO PLAYED WITH FIRE on screen was a much-anticipated and self-referential event, one readers had long awaited.

Scriptwriter Jonas Fykberg was adept at condensing many hundreds of pages of exposition and incident into a fluid narrative, though you had to wonder if, absent the reading, audiences would 'get' all the myriad details in the story. I had a slight problem with the core casting, Lisbeth Salander, because i had built up a somewhat different image than the one confronting us in the film. (I did not see the first in the series, where the same cast obtains.) In the book, for instance, Salander ha had breast implants, where in the film, of course, she is, ahem, not endowed. A small thing, but many of the people she encounters after her year away comment on the changes to her 'look.' Here, in the film, they do not. A romance is omitted that has much to say about the polymorphously perverse or plain experimental.

No big thing.

Overall, it is an engrossing and diverting spool-out of a complex story. One is sorry Stieg Larsson (1954-2004) is not still alive to enjoy the enactment of his dense, terse tale, the second in his Millennium series, after THE GIRL WITH THE DRAGON TATTOO. Despite the foreign provenance and the posthumous publication of the series, the books have easily hit the NY Times' bestseller list, and there are 40 million copies in print. The travelogue aspect of the far-ranging drama is certainly worth the price of admission, with beautiful vistas usually unfamiliar to non-Scandinavians.

Being a constant aficionado of Lowlands film output, this added to enjoyment by being so savvy and sophisticated, yet, of course, slightly and reliably foreign, too, in the spoken Swedish, with so many recognizable aspects of pan-cultural life in Europe today so closely paralleling or echoing the US. The heroine, Salander, played by the intense Nomi Rapace, who earlier won the Best Actress Guldbagge award, the swedish equivalent to our Oscar, for her portrayal of Salander in TATTOO. is a terrific protagonist, of course, being intensely intuitive, highly senstized techie, her own person, not a worshipper of the exterior, but deeply humanistic to the insightful eye. And she is of course a superb pugilist, a tenacious and spectacular hacker, and an intensely idiosyncratic female icon. This is not a film that hands you an easy "good person vs bad person" menu; you work to figure out which is whom, what is what. Your attention is fully given over to the story and people so dynamic in their individual lives. I wanted to see more of the Millennium magazine's politicking, more of the policeman Bublanski. Everyone has a tangible backstory, even those seen for a few moments of film, and you are vested in learning and seeing more of them.

The story of seamy global sex trafficking and the attempt to cover up associated crimes around which this adaptation is spun involves thugs, prostitutes, journalists and workaday people. Lisbeth is fingered as the one guilty of a sensational triple murder, though her friend and defender, Millennium mag publisher Mikael Blomkvist (Michael Nykvist), cannot square his knowledge of the wild post-adolescent Salander with the lurid newspaper accounts. Beyond sex trafficking, the film touches on the unchecked injustices rampant in the field of incarcerating the allegedly mentally unstable, psychiatry as a field ripe for abuse if its practitioners have unwholesome agendae, domestic violence, and the public's seemingly unquenchable desire for gossip and scandal, even if unproved and often, entirely misplaced.

At 129 minutes, it is slightly longer than many current sibling films, but the viewer is scarcely aware of the passage of time. The crescendo last scene could be followed by many more before the viewer would realize he is hungry or thirsty.

One now looks forward to the third offering of the GIRL WHO trilogy. Again: What a shame Larsson did not live for more to roll off his printer.

Marion Ds Dreyfus . . . 20(c)10



A union official adresses London dockers29 June 2010

Organizing Department

American Federation of State County and Municipal Employees

Dear Ms. Maralit:

Thanks for your mass e-mail this morning inviting me to recommend students for AFSCME's Alternative Union Break: Summer Session. I understand that students who attend this four-day program are taught how to "fight for a better country," and to promote "social and economic justice," by becoming union organizers.

Alas, I know no student who'd be interested in your program. The young men and women who study economics at George Mason University learn, above all, to think rather than to emote. So our students are rightly suspicious of vague terms such as "social and economic justice."

Our students learn also that an economy most beneficial to the poorest amongst us is one that is free and competitive - an economy governed by the laws of property, contract, and tort instead of by the arbitrary government diktats that are the fetish of labor unions.

Our students understand that widespread prosperity comes only from entrepreneurial creativity, market-driven investment, risk-taking, and hard work - all in response to the demands of consumers free to spend their money as they choose. Our students know that granting monopoly privileges to politically boisterous groups such as yours reduces, rather than produces, prosperity.

Our students understand that entrepreneurs and firms in market economies gain, not by taking wealth from others, but only by creating wealth and sharing that creation with others on terms that are mutually and voluntarily agreed to.

Oh, here's one more important fact that our students understand: labor unions routinely promote Injustice by lobbying for regulations (such as minimum-wage legislation and the Davis-Bacon Act) that price low-skilled workers out of jobs; by endorsing protectionist policies that deny consumers opportunities to get the most value for their dollars; and by supporting many bailouts and other forms of corporate welfare.

So I invite you to recommend to the young people who go through your program that they attend some of the many programs we have at GMU Economics (and affiliated organizations such as the Institute for Humane Studies and the Mercatus Center) in order to learn how they can truly best promote a society that is prosperous, and peaceful.

Sincerely, Donald J. Boudreaux

Professor of Economics

George Mason University

Fairfax, VA 22030

Don Boudreaux comments: 

Thanks for posting my letter, Vic. I'm honored.

Victor Niederhoffer writes:

The honor is ours. It is something that all kids and all adults should read. Nice summary. Of course unions are much worse than you made them out to be, and are responsible for the decline of all cities.



I have been looking at the average maximum moves on markets and relative value comparisons lately, and there may be a meal in it.

I.E. today crude got spanked on the open, as equity markets got hammered…though as crude approached down 3.00 bucks, there was a large relative move in terms of ATR, and S&P stalls at 1042-ish, the crude snaps back 20-30 cents. There's not a lot certainly, but maybe there's something in it.



"The Road to Serfdom" is one of my favorite books of all time. It is also on the bestselling lists because of some media mention. Here is a great version of the book in cartoon fashion, very suitable for children of all ages.


And speaking of McChrystal, one of my favorite places to surf in the world is New Smyrna Beach, Florida. Best wave in the state, funky beach town vibe, very cool, mellow tropical paradise. It also has more shark bites than any place on the planet . It's a rather disconcerting feeling when I'm out on the water and realize that I'm not at the top of the food chain.

Victor Niederhoffer comments:

About McChrystal and the good surfing versus the sharks reminds one of selling premium or buying the big downs.

Pitt T. Maner III writes:

And Jeff's odds are not too bad. Last fatality in the cooler waters off the Brevard/Volusia Co. area was in 1934 despite 339 documented attacks in the 1882-2009 time frame. Benchley unfortunately got us all thinking negative thoughts every time entering the water in the early 70s… as did a co-worker in the early 90s who had a shark nip story.

Map of Florida Shark Attacks



Wynne Godley was hardly a goldbug, but his system of monetary economics is remarkably consistent with the view of monetary economics embedded in the U.S. Constitution. Godley concluded that the size of a country's foreign trade deficit depended mainly on the size of the public sector deficit, while the exchange rate and the competitiveness of the economy affected mainly the overall level of output and employment. W. Godley: Money, Finance and National Income Determination (1996) [32 page PDF]

He was remarkably prescient in his comments in 2008 about what lay ahead for all of us. "Fiscal policy alone cannot, therefore, resolve the current crisis. A large enough stimulus will help counter the drop in private expenditure, reducing unemployment, but it will bring back a large and growing external imbalance, which will keep world growth on an unsustainable path." W. Godley, et al.: Prospects for the United States and the World (Dec 2008) [8 page PDF]



Spend some time with an oncologist.

Wrapping up a flyfishing trip to Canada with a radiologist (Dad), an oncologist and a cardio-thoracic surgeon, had a couple of snippets to add to the ongoing list thread re: medical issues. Dad fresh from the annual AMA meeting– " medical community is in need of 25M specialists today growing to 250M by 2015. It will obviously not be met."

From the oncologist, "small private practices will cease to exist in the next few years due to the ongoing grind from unrealistic medicare, medicaid and insurance co. reimbursements. In all likelihood, within a decade most Docs will be hospital employees unable to cope with the budgetary pressures from all sides. Mayo clinic in AZ dropped medicaid recently and that was a big, big deal given the organization's philosophies."

And in the tech will save the day dept, from the surgeon, " Now having great success replacing heart valves using minimally invasive catheter and stent procedures to fix the valve in place." Imagine the entire valve apparatus (one of many) replaced in one fell swoop. Separately, estimates his patient population could be cut by 30 percent or more through better diet, cholesterol management, smoking cessation and regular exercise. Is very enthused and excited for the promise stem cells seem to hold.

On a final note, all commenters were deeply suspicious of and in the revulsion stage when it came to equities as an asset class. I estimate they were 2 to 10 years from retirement but no one thought it was an option given investment returns unless forced to do so for physical reasons.



I re-read the Sun-Tzu on the weekend. I know it is one of the most hackneyed books out there, but I wonder how many have actually read it. It is an extraordinary text, and one with which I feel a great affinity. I singled out a few verses from within which i'll send to you. I love the ideas of formlessness, of having the enemy come to you and making them spend all their force in doing so; that the attacker is vincible, while the defender / passive is invincible. That numbers count for nothing, but strategy with sound tactics is everything and can defeat the largest force. The power that comes from knowing the enemy - and the even greater power that comes from knowing oneself. All very strong stuff.

Ken Drees comments:

I especially like the secret agent dealings that are laced throughout. See "secret agents" in the index for page numbers.



Attached chart of TIP/TLT (Inflation-indexed bond etf / 20Y bond etf) shows recent roll-over in the wrong (deflationary) direction for those seeking easier repayment of debts and waving of flags over tracts of appreciating houses.

OTOH it is a good direction for those seeking more stimulus and associated nest-feathers.

Kim Zussman refines his views:

A friend, Sam Humbert,  pointed out that TIP and TLT differ in duration (~3.7 yr vs ~20). So to better isolate on inflation, here is a chart of TIP/SHY (SHY= 1-3yr Treasury bond ETF).

The recent move for TIP/SHY is up; opposite to TIP/TLT, showing a significant yield-curve-change component is affecting the former chart. I conclude that the market is more concerned recently about inflation at a 3 year horizon.

Rocky Humbert comments:

The current inflation "breakeven" for 5 Year TIPS versus 5 Year T's is 1.56%.

The current inflation "breakeven" for 10 Year TIPS versus 10 Year T's is 1.91%.

This is the least worst measure of of "investor inflation expectations."

It's important to recognize that TIPS funds (and secondary market TIPS) have a variety of complex technical and tax nuances that make apples-to-apples comparisons with straight Treasuries difficult or misleading.

For example, a taxable buyer of seasoned TIPS who experiences deflation followed by inflation can have a strikingly different total return than a buyer of seasoned TIPS who experiences inflation followed by deflation. This path dependency does not occur in regular Treasuries.

And if one is really clever, one can try to understand the WIP etf … which is based on the DB Global ex-US Inflation Linked Index….

Al comments:

I must fight the war against my own ignorance here: What is a "seasoned" TIP?

Rocky Humbert responds:

Asking a question is not a sign of ignorance. It's a sign of wisdom.

A seasoned TIP is both a delicacy at my local steakhouse, and it's an inflation-linked bond that's been trading in the secondary market for a while. The TIP's par amount increases by a CPI factor (when the CPI is positive), and the par amount decreases by a CPI factor (when the CPI is negative).

So, for back-of-the-envelope purposes, if you invest $1mm in a particular TIP bond after it's been through a few years of inflation, and then you hold it through a few years of deflation, it's theoretically possible to lose money even if you hold it to maturity. An analogous extreme example would be if you buy a mortgage-backed security in the secondary market with a 6% coupon and a price of 108 … and the homeowner(s) unexpectedly refinance … and you suddenly get 100 back….losing 8 points.

Easan Katir pleads:

The country has had so many years, decades, of rewarding borrowers and spenders through creeping inflation. How about at least a few years for the ones who have scrimped and saved, are unleveraged and tired of paying more for everything every year for most of one's lifetime. Deflation is wonderful. Everything is on sale.

Nick White writes:

That is, of course, until you lose your job because your employers has gone bankrupt from falling prices…. ;-)  

Stefan Jovanovich comments:

Neither deflation nor inflation is wonderful because both are founded in dishonesties; their prices are not set by ongoing enterprise and competition but by government clipping of the coinage, political favors and the sheriff's auction. Easan exaggerates the rewards gained by the borrowers and spenders here in the Golden State. Most of the people in California who used their houses as ATMs did so because their after-tax incomes never recovered from the dot.com bust (unless, of course, they worked for the state or the schools.) There were great frauds committed on mortgage applications and by brokers, appraisers and mortgage lenders; but those were minor costs compared to the major fraud of having the GSEs become one-way hedge funds who agreed with the people chasing housing prices that no one ever lost money buying real estate. (The frauds at the retail level would never have been possible but for the demand from Wall Street. Without the credit bubble there would never have been a housing bubble.)

How about we all try a monetary/tax system that favors neither the borrower nor the lender? Prices would still fall; they always do in competitive markets because the buyers keep their eyes out for ways to get a better deal and the sellers work hard to produce things and services better, cheaper and faster. Nick is right; what makes "deflations" ruinous is not the steady decline in nominal prices that results from constant competition but the collapse that comes from a cascade of credit defaults that reduces commerce to a race to the courthouse.

In 1930 "everybody knew" that the solution to the problem was for the government to bring back the WW I boom by spending money. Mellon tried to argue against such stimulus. He did not say that the solution was to "liquidate, liquidate, liquidate"; what he did tell Hoover was that adding government borrowings to an economy already worried about private credit risks would call the soundness of monetary system itself in question. He was right, of course; that is why Hoover never forgave him and Roosevelt literally persecuted him. Once again, Gresham wins the day; sensible advice, like hard money, is never rewarded in a modern political economy.



Among the things a father has to do with his son is make him a hero at amusement parks, play catch with him, teach him how to deal with old, young, girls, boys, teach him to survive, teach him how to use tools, play games that will provide lifelong benefits, and take him to the track. I took Aubrey to the track tonight and he told the bus riders that daddy's horse lost, but it was winning at the beginning but the number 9 came from behind to beat him". I was very impressed and he said when I asked him whether he wanted to go back to the baseball game or track more, he said " i want to go back to both". I was impressed with the whole thing, and yet Artie's wisdom that " all gamblers die broke was running through  the mind. The spectacle at The Meadowlands is rather pathetic. They're losing 30 million a year or more, and each year attendance declines, and the purses decline.

About 1500 people came to the track on this beautiful day and in the comparable days when Derosa and I used to go it was 20000. The quality of the 1500 that were left was very high, and they knew more about the game than almost all market speculators that I knew. One of them was telling me that the trainers cant make money with these 8000 purses, so every now and then, all the favorites lose on a coalition and the trainers make out big with the exacta and pick 4. My goodness, this was rite out of Bacon, and shall we say, the squeezes and inflexionic trading that goes on in our field. The tracks have given up on selling handicappers picks, as the 1000 attendance isn't enough to support it, but the post and sports eye have at least 8 handicappers each who rate each race. Considering the average handle on a race of 10000, that would seem like a concentration of forces in a field with a low return to scale and effort. The erudite analysis of Dave Brower on each horse in each race in the program is very reminiscent of the experts I hear on TV when I am in a hotel and need prices.

I like this typical sentence one of 110 for the day. "Machs tenor. Makes third start off the bench here, and this is the spot to take a shot, draws the pole and trust me, he's better than he shows." Amazingly pithy and deep for each race. When Brower's horse wins, the announcer congratulates him. There are helpful operatives all around the track showing us how to use all the machines. But I opt for the old fashioned teller and he has a belly laugh when Aubrey says to him "x on the 4 hours to place". It's one of about 5 tellers left there with hundreds of computers taking all the meager remaining bets. The sports eye has 20 tells for each race, ranging from average winning dollars, percentage, in the money, beaten favorite, strong stretch, good trip, favorable post position, hot trainer, first or second recent race after layoff, favorable driver change, won last race and stays in same company, second recent race in same class after dropping, superior mudder, blocked in last race.

If only the level of analysis in markets was half as good or half as tested. There were dozens of patrons following simulcasts that were being screened and they screamed as the race progressed and the emotions were so much the same as the thing that Jeff and I and so many others on this list saw in the pits, and no prisoners and life and death passed so fleetingly through the rings.

Thomas Miller comments:

I was in Atlantic City a few years ago and was walking through the large public bus waiting area that serves the casinos. 99% of everyone there waiting for the lonely long ride home and looked dejected and sad staring blankly into space, It was eerily quiet, with almost no conversations taking place. They had obviously lost what little money they had for the week. If you ever fear for Aubrey becoming a gambler, take him for a stroll through this area (it's probably still there). Your father's wisdom is played out in real life on a daily basis. These people play an important role for the casinos like many market players that slowly churn through their accounts paying for the upkeep of the mistress.

Ken Drees writes:

NYT: Reasons for the Decline of Horse Racing

I am up too late tonight posting this–going to pay tomorrow.

I am in the lost generation that never knew horse racing. The only touch I got was from my grandmother who would call us on derby day morning and read us the odds and the names over the phone. We would tell her to bet the horse for two dollars and she would—how I don't know, and it didn't matter because we never won.

At least we watched CBS wide world of sports who showed the major horse races with some built up punchiness since we had skin in the game.

Ralph Vince comments: 

I don't know HOW anyone can approach ANY risk-opportunity in life WITHOUT having been steeped in "The Track," and all it's (now-evident-to-me-market-relevant) b.s., the list of such which would take the better part of today to catalog.

I was fortunate that my father and uncle's were so swarming-crazy about such things. Railbirds at the top of the lane, where the roar of thoroughbreds coming out of the last turn induced an unforgettable euphoria with each race….

"If you go near that window I'll break your g.d. arm," I remember my uncle reminding me at least a hundred times. (I shouldda listened).

As a little boy, there were three, really BIG days, Christmas, "The Opener," (where the Indians, playing their first at-home game mandated you cut school) and the first Saturday in May — the latter, being the biggest. To go to Churchill Downs for that was nothing less than a pilgrimage to the high temple of life itself.

To go there, on any other day and see firsthand the contrast of the high temple, transformed into Podunk Downs on a Wednesday afternoon, in the middle of dumpy L'ville, taunts a boys imagination and makes him realize that the entire episode, the magnanimity of it, is all in people's heads –as with everything.

Jeff Watson Comments:

I grew up at the track from the age 8 or so. I learned everything the hard way paying a very steep vig. I quickly learned to only bet 1 or 2 races on a card trying to find that elusive overlay and still usually lost. Luckily I discovered Bacon, Cohail, and a few others that made my daily deposit shrink just a little. The smells, cigar smoke, the body odor, the spilled beer, torn up tickets, the touts, the losers, the winners, lost dreams, every human emotion is amplified 200% at the track. As a kid, I learned that if I had a good afternoon at the flats, I could make it to Maywood Park by the 3rd race to bet the sulkies at night. We always found accommodating adults to get down our action. I usually went home a little poorer, but much wiser learning many things. There were so many indicators at the track, and I learned at a very early age when to throw out the chalk, which was perfect training for the pit. In fact, learning when to throw out the chalk was probably the best lesson I ever learned that I could use throughout my life. Electronics has done to the track what it has done to the trading pits and I feel very bad about the disappearance of a way of life. There's nothing like hearing the roar of the crowd of 25,000 people while the thoroughbreds are thundering towards the finish line, neck and neck. OTB and screen trading just don't cut it for sheer excitement.



It was yesterday, in the muggy heat though largely shielded from the midsummer sun by cloud cover. We had traipsed through the overgrown footpaths to the barely used church, no longer open for regular worship.

A turns the key and pushes open the old door, and we cross the boundary which has seen at least seven hundred years of history. He turns to close the door and lock it - experience has shown that this is wise, and our session is to be a private one.

We walk past the stained glass windows to the organ - there is room only for one to sit, and that is a tight squeeze. I stand behind the bench while A turns on the power and the whine of the pump is the only sound as the instrument stirs from slumber.

A explains the stops, the swell and the great, sitting inside the music which is steered by feet and hand. Eventually we turn to look at the sketches I had brought, for my setting of the Blake. In the distance the clunk of a door closing. "Ah, someone must have come in," says A.

For the first time the chord sequences are heard on the organ, as intended, though lacking the voices marked on the score. The sharp clicking of footsteps from the main part of the church. A plays again the chromatic voicing below the words "He who shall train the horse to war, Shall never pass the polar bar." More footsteps in the following bars as the anguish of the harmony recedes. I step back and look into the main part of the church. No sign of anybody. Oddly, the noise appeared to have come from higher up, but there was no gallery or staircase I could see.

Not wishing to move away from the organ (despite my curiosity), I returned. The footsteps sounded again. "I don't see anybody", say I. "Sometimes people come in," says A. We focus on the music, and the mysterious walker is silent from then on.

Later, as we leave, A signs the book at the entrance which logs all callers. "Whoever came," he says, "did not sign their name". He unlocks the door, we step outside into reality, and he relocks it, securing the boundary between worlds.

"Is the church haunted?" I ask. "We have just heard footsteps and there was nobody there."

"Sometimes I feel a presence," says A, who would no doubt ignore any distraction during his regular visits to the old instrument.



Its all so clear in retrospect that the market went down viciously. It had to be telling the subcommittees that unless they took out the restrictions on derivative trading by the banks that we were in free fall. The final decline to 1063 and dow 10080 today at 1030 was the warning. The scepter of death unless they changed things. The last thing we all want is a cratering economy and stock market before November elections. That's the one thing we can all agree on from Brussels to the Potomac. Let us hope that those very limber people mentioned many times in these posts were able to bring this impending debacle to the members of the subcommittees before they announced the eased restrictions, and that their good deeds were not performed with the just prospect of rewards.

Ken Drees comments:

Right as rain !



A few years back, Dr. Niederhoffer studied knots and how the science of knots might apply to the market.

Here is a link http://allaboutknots.blogspot.com/2006/01/selecting-strong-hitch-for.html discussing knots for new types of rope called spectra that are stronger than steel per weight, but slippery on the surface. A small line can hold tons.

This brings to mind the current market slippage over the last week, stair stepping down, and the gap underneath. What kind of knot formation will "hold" the market. The article discusses the criteria for a good knot: secure, stable, and strong. The double bend with a double wrap around the post or carabiner is considered an attribute that lessens the angle, thus increases strength,, stability and security. Together with a double bend, will finish.

When committing capital, one wants these attributes in the market so it will hold. The last bottom a few weeks back had the massive double bend, all in the space of a few hours. Quite wild. A sharp reversal in rope tends to lack strength. Same in the market. I think some sort of double bend and a double wrap after or lower angles is an idea worth testing.



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

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

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

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

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

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

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

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

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

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

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



I hypothesize that one of the emergent themes of complex messes like our markets is that they follow the example of vivid sports games. Like today, I don't think it chance that the market went up as Federer received the standing applauds and then went down as disaster loomed , and finally rallied right back when he won by a gnats eyelash thereby setting himself up for a disastrous loss in the next few rounds. Call me a nut case or non-quantitative person for saying this, but I believe it.

Sumit Agrawal comments:

If anyone else had said this, it would be the last time I would seriously discuss Anything with him.

But now that you say the same, then I would just say smart men have their quirks, and it is good to have quirks as it instantaneously makes one different , and may you silently enjoy your quirks in warm company of affectionate friends who overlook them with ease!

Word of advice is that one should not wear their quirks on their sleeve, for the public to see. The public is most likely to make an easy and a harsh judgment.



Dr..the day trader like a cop-er must file a report. Its not like the s&p and gold are hooked or gold would be 1080 or the s&p back to the highs.. Nor is the Dow an Nikkei and thank goodness we didn't go to 9700 today..not that the last full moon in May at 1070 want the bottom unless you had a 2% stop your really found the bottom under 1050..yea we just did 1130 but hope the next full moon shortly isnt the same 1170ish.. even if Dr copper is the new meme.I must point out the Dr did point out Bonds short and cost of carry wasnt the best idea cant remember when the short bond meme was around but I am certain the 30 yr future was no where near 125..one twenty five!It's known around the shoeless shop to be called Dr lack after I made a dumb trade which was…my Phd is losses. So Dr Copper made me laugh today. (as this entire post is a get the joke we are all happy to be alive this week)
and hope vic laughs because I still do when he wasn't pleased with my carelessness at times and Mr Vic always said "please never" the words for many days in a row is Magnitude please.

There was another good lesson "one must always wait" and that is why computers are so much better than day traders, computers do not get tired. What a week. I am shot, will the computers make another push? Are the programmers tired?

Word of the day was "dipsy doddle" and oldie but a goodie..

talk about old posts 2007 Mr roger said wait to refi you'll get 4%.. 4.62 today wowski. lack

Ps to the jokester lack, what does he got? Okay I got a meme for you AAPL is the opposite down with up and up with downs.. when it's close to a new hi lo intra day, do the opposite in the rest of your NDX stocks..(works for 5 minutes) or I have a much better idea take the NDX off your screen.. AAPL is now 20+% of the index and there is 7 kids in the NDX pits in Chicago and its all useless…and as Usual Tommy Ryan and Me are the last to get the joke lack



Today, I opened my cable bill and had a heart attack, as the bill had doubled. I use my cable for TV and as a backup fro my internet, with FIOS as my main internet source. For the past couple of years (since I hate to pay retail), I've been playing Comcast and Verizon off against each other in order to lower my bill. In my case, all of the little extras from Comcast went away today and I was faced with a whopper bill. I called the local rep, wasted 20 minutes with her and got nowhere, except for her comment, "That's your tough luck that your bill went up and if you want to use FIOS, go for it." I asked for her supervisor, who told me that since my bill was so cheap, they didn't really find profit in customers like me.

By then, I was fuming. I decided to pull a page out of my grandfather's playbook. I went online, and looked at the company officers of Comcast, looking for the name of the assistant to the president. My late grandfather told me long ago that there's no way a common person can talk to a president of a large company, as he has about 20 people to keep you away. I called the assistant to the president, explained my case, also telling about the rude treatment from the lower support staff. He said that they would get back with me later on today. Much to my surprise, the president of Comcast called me to apologize, take care of the over-billing, and throw in a couple of extras. He told me that he listened to the tapes of my earlier conversations with the support staff and was embarrassed by my treatment, and personally assured my rates would not go up, ever.

That was amazing, but the real lesson here is: If you have a problem that needs quick resolution, never try to talk to the CEO. They simply won't let you speak to him/her. Instead, talk to his personal assistant or executive secretary and politely state your case. They will listen and are readily accessible.. Remember, the assistant and executive secretary have the same power of the CEO in day to day operations of most organizations. They will also be glad to hear your problems.



Attached chart has equity curves for day session (open to close) and overnight (close to next open) for SPY, 2000-present.

The stock market run-up from 3/03-12/07 was primarily an "overnight" phenomenon. The 08-09 decline, as well as the borrowed recovery, accrued both day and night.




I have been re-reading Mandlebrot's book The Mis(behavior) of Markets.

Mandelbrot's notions regarding prices (and I have no reservation about saying this) do NOT pertain to us because we have a horizon, a finite period of time to trade in.

Secondly, and more importantly, price changes on the long side are bounded. I KNOW what the worst case can be — and this certain information I can use (overwhelmingly) to my advantage.

If Mandelbrot batted 1000 in his trading, I would listen to what his ideas were. Anything shy of that is silly for me (or anyone else) to listen to or consider.

Philip J. McDonnell comments:

Although I have never given the fractal gnome a chance to physically acost me I do have a peeve with him. His fractal theory has a certain beautiful appeal. However his fractal theory as he applies it to the markets has some serious flaws.

The most important flaw is the /*assumption* /of infinite variance in his form of the four parameter Levy distribution. Mandelbrot argues that because his form fits the cotton data reasonably well that proves the variance is infinite. However a four power rational polynomial fits the normal distribution reasonably well, However the analytical form of the normal is well known not to be a rational polynomial. Just because a form fits does not prove that it /*is*/ that form.

Assuming infinite variance obviates any attempt to do empirical significance testing because it would be meaningless. So you never see significance testing in a paper from the fractal school. They cannot do rigorous empirical testing and that is no way to do science. But it is a pretty theory.

The fractal gnome was F@m@'s Ph.D coach.

Ralph Vince writes:

Let's assume the worst — that Mandelbrot is correct and there IS infinite variance in the distribution of price returns (i.e. c1 / c0).

The Old Frenchman would say, "Who gives a rat's butt?" and he would be correct.

What we experience is a transformation of the distribution of the returns of prices by our trading rules — in other words, we take a pair of scissors to this paper distribution, paring off parts of it as we see fit.

Does a binomial option have infinite variance? Come on!



Its good to classify cons into big and small cons, the degree of complicity of the victim, the use of confederates, and ruses versus bait-and-switches. The market would rate at the top in all of these as is readily seen, especially the use of confederates, and baits-and-switches. I am particularly gullible and an easy mark for cons. Recently, with Aubrey I had the pleasure of being victimized by a nice con at a fair. It was the medium sized con of a basketball game with the player having to shoot into a basket about 20 feet away and 10 feet high, with the basket a little smaller than normal. The only way to get it in is apparently to shoot at so high a vertical angle that the ceiling on the game precludes. The prizes include huge 4 by 5 feet whales and dolphins which I thought would be just the thing for Aubrey. Okay I asked the operator how much it would be to win one of the whales. He demurred. It would be so expensive I am ashamed to say. " How about a hundred i said ? " well, I'll have to ask my boss. " The operator said.

He had a conference with several confederates. And then came back to me with a positive shred. "Bring the kid over and we'll make him a happy camper". I pay my money and then I go to bring Aubrey over. The game is still there, but the big prizes have all disappeared. Only a stuffed Finding Nemo is there.  Worth about 1/3 of the prizes I had in mind. "Which one do you want, kid?" Aubrey chooses the Nemo and the man tells him "kid you tried so hard and so well that I am going to give you a prize". As Aubrey walks away holding the Nemo bigger than him many bystanders ask him what he did to get such a prize. " i tried so hard they gave it to me as a reward ". The stages in this con, starting with a rigged game, relying on my desire to get a special deal, bringing in a confederate, then switching the reward are all too familiar. And it is very helpful in thinking about the market to go over these steps I think.

Pitt T. Maner III comments:

I found a nice overview with table of scam types. Elderly are often the main targets.

The success of many attacks on computer systems can be traced back to the security engineers not understanding the psychology of the system users they meant to protect. We examine a variety of scams and “short cons” that were investigated, documented and recreated for the BBC TV programme The Real Hustle and we extract from them some general principles about the recurring behavioral patterns of victims that hustlers have learnt to exploit.

We argue that an understanding of these inherent “human factors” vulnerabilities, and the necessity to take them into account during design rather than naively shifting the blame onto the “gullible users”, is a fundamental paradigm shift for the security engineer which, if adopted, will lead to stronger and more resilient systems security.

From Understanding Scam Victims: Seven Principles for Systems Security , University of Cambridge.

Victor Niederhoffer expands on his remarks:

Part of every big con is the final touch where you make the victim frightful to ever demand restitution,or better yet, ready to put in more money to really get the full advantage. It was a nice touch for the operator to praise Aubrey so highly and let him hold the Nemo with such pleasure that for many many times the amount I paid, I would never have demanded a return to the bigger prize.

Rocky Humbert writes:

The cup is half full: If the objective of The Chair's exercise was to bring joy and happiness to his son, then perhaps this was not a "con" — as Captain Nemo was both larger than Aubrey, yet not so large that his father had to drag around an eight-foot-tall stuffed bear for the rest of the day. After all, the eight-foot-tall stuffed bear had unknown risks including the inability to see oncoming traffic when crossing the street perhaps resulting in the demise of both Bear and Chair.

Jeff Watson comments:

Back in my [adventurous] youth, I ran across a husband wife team that were travelers. Their con was simple and was a beautiful work of art in it's simplicity. The lady(dressed to appear rich and very well coiffed) would drive a brand new Caddie Convertible into a gas station, get a fill up, then would start looking around frantically for the 3 ct. diamond ring she "Lost." while going to the bathroom. She'd enlist the help of the pump jockey and would spend a good 15 minutes looking for the ring. She left very distraught with a note with an address and phone number to the jockey that if the ring were found, there would be a $3000 reward, but please don't tell her husband and only call at a certain time. An hour or so later a ragged man would show up walking through the lot. He'd buy a soda then would show the pump jockey the nice ring he just found. After a little wheeling and dealing, the ragged looking man would walk out with the contents of the register, the pump jockey had the ring and thought he was going to make a big profit. The ring was paste, the address and phone number were all fakes, but the money they made was real serious cash, especially for the 70's when they would regularly pull the con twice a day and average $500 total.

Victor Niederhoffer comments:

What is the market application of Jeff's Cadillac story ? The market applications of the Nemo are that the market has many big up days to lure you in, then you try to buy it on the cheap the next day. At first it doesn't hit your limit so you raise it a little. It doesn't go there so you end up paying near the high ofthe day, or like yesterday, it finally goes down a few points to hit your limit. While this is going on, a tip to a TV or news is given that the market looks great or that his former employee really lost money on that deal et al, and that makes you even more enthused.

You put the position on and then your broker calls you when it goes down. You don't have enough margin in your account. But if you sell within next 10 minutes, he's arranged with his manager not to have the computer extricate you at 1040 the way they did on the flash crash day. Finally, you don't have to come up with more money because you just lost all your margin so you don't have to tell the other half about the tragedy, and the manager gave you an extra special deal by not having the robot take you out ruinously because of your special friendship.

Thomas Miller comments:

Regarding Chair's last paragraph:

Forcing a quick decision under threats and intimidation then showing they are really trying to "help" you is an old scam similar to the "jury scam" I didnt know brokers learned this so well.


Big Al comments:

On a trip to Europe with a friend, after high school graduation, I started talking to a German merchant marine guy who was traveling with his CentAm wife and kids back to Germany. This was back in the Iceland Air/Air Bahama days, when the cheap flights went through either Rekyavik or Nassau. So we talked for an hour or two during the Nassau layover and then on the plane. When we got to Luxembourg, he hit me with the story about not having money for the bus trip with his family, blah blah blah, and we "loaned" him $20 apiece (I insisted my friend participate - more embarrassment). Then he gave us his address (yeah, right) so we could let him know where we ended up and he could then send us the forty bucks. I still remember the street address: 1 Jahnstrasse. Ha ha.

Watching the bus pull away, I knew we'd been had. He used the technique of familiarity and friendliness, and my obvious yokelhood, to get the money. At first I was really angry and embarrassed, but after a while I almost felt grateful, because the guy taught me an incredibly valuable lesson about myself and about the con and he charged me only $20 for the experience. Cheapest, most effective education I've ever had in my entire life.

And on street cons, I've been targeted enough times to know the pattern: First, the con uses a simple question to make contact with the mark and **get the mark to do something**. It can be just, "May I ask you a question?" Or, sitting in a car with the window rolled down, "Could you come closer? I can't hear you." Then, after the mark has offered compliance, the con hits him with an intense, rapid-fire story - "My husband kicked me out of the house and took my credit cards and I need a room for the night but it's eighty dollars…" - and tries to maintain contact and control and also confuse the mark, until the mark may hand over the money just to break off the engagement.

One way to have fun is start giving it back to them: "Oh that's so terrible. That happened to my sister once, but she was better off without him anyway. The police can help - just let me get your license number so they'll know who to talk to when they get here." It's funny but very consistent how angry they get when you start lying back to them.

Ken Drees recounts:

I just asked my daughter if she remembered the mouse I won for her [at a fair].

"Oh yes, 'mousy', where is he?"

Oh I threw it out years ago when you got tired of him.

"Why did you do that, he was my favorite all time stuffed animal ever, he had a red coat and black whiskers…."

I just turned and slowly closed the door. 

R.P. Herrold responds to Ken's story:

From time to time, we 'clean house' and we find the black trash bags, presently carefully tied closed, up in the attic; from time to time, I am instructed to 'get rid of that clutter' as the now grown kids 'will never use those again'.

The Brio trains, the metal Erector set, the cast lead soldiers and molds, the Duplo blocks, the stuffed animals, Lincoln logs, the McGuffey readers, the arrow and ax heads collected in the fields, have all fallen to head of the queue for disposition over time

Stuffed animals were in the dock this past weekend. At that point, I usually carefully re-tie the sack, set it to one side for a moment, and then find a new hiding place for the bag in question after her attention turns to other matters. But a grandchild's mother and the child were delighted with the animal figures from my preservation efforts, even if my spouse was not pleased to see 'those old things' again

A few weeks ago, the Brio train set moved in with a gransdon infatuated with rolling stock and were 'new' again; The Erector set, the melting pot and molds, all gone (not to return with current day safety rules — choking hazard of the nuts and bolts, heavy metal fumes). I am on the lookout for a replacement McGuffey (that friend of books that taught me to read upstrairs in a quiet room as the adults 'talked' downstairs), so I can 'seed' a room for young visitorsThe flints and shaped stones? I was not atuned to their disposition occurring; a 'sharpie' sweet-talked a sale for a pittance from a elderly family memberwhen 'cleaning up' prior to closing down a house before sale. That lot of childhood treasures also carried out the door the minnie balls I dug from the earth at GettysburgEntropy won a round that time; I know we'll battle again.

Jason Ruspini comments:

Forgot who said that cons work because people want something for nothing. Clear implications for naive technical analysis here. See, it's easy, you can get rich by extending straight lines.. just keep one eye on your laptop while at the driving range.

To the young person who had a query about what to do with his trading system, at least he tested something, but perhaps there is some laziness there. Unhealthy to think of one system as your "ticket" even if it looks good. Better to find a good place to work where you might actually learn something new.

Stefan Jovanovich comments:

In the good old days of the 1970s the favorite panhandle con in downtown SF was to be a crazed Viet-Nam veteran. Since I spent half my life in those days lurking outside office buildings waiting to ruin some suits' day by handing him a summons, I got to hear every pitch going. The only way to escape was to do the "crazed killer wanting to go back" routine. "Hey, man, can you help me out; I was in the Nam." "Yeah, me, too, and Brother, am I glad to meet you because we got to go back there NOW!!!!! and finish the job."

Like Big Al's artful sympathy, it worked every time; but the reaction was more fear than anger. The con artists did not want to spend any time near someone who was so obviously crazy - for real.

Gregory van Kipnis writes:

The con that almost got me the first time I encountered it. It repeated itself 4 times over the intervening years.

I have deduced that the mark has to be a distracted businessman, walking alone midtown near the major hotels, hopefully someone in NY on a business trip.

In NYC, about 15 years ago, walking cross town early one evening, lost in thought, I was nudged by someone coming from the opposite direction. That was followed by "Jeez, you knocked the food out of my hand. Don't you look where you are walking". There on the sidewalk was a spilled plastic container of takeout food from the all too familiar corner Korean greengrocers.

I thought for a moment to review the memory playback of the contact and responded, "But you bumped into me."

He turned angry exclaiming he was on a short break from work and I ruined his dinner and I bumped into him and I should pay for the loss.

I started to reach for my wallet, then hesitated sensing a con, and said "No, you bumped into me."

He got belligerent, put his face close to mine and with intensity and a shaking body said he was angry and he ought to take me out. I stepped aside, hand on wallet again and started walking saying "there is a greengrocer around the corner. Let's go in and I will buy you a meal."

After a barrage of invective he leaned down to scoop up the spilled food. I continued on my way with a shaken feeling followed by euphoria when I realized I foiled a con.

I few years later the same thing happened. It was a different person different neighborhood near the St. Regis. This time two people. As soon as he spoke I said "bull shit, you did the same thing to me last month". He tried again to intimidate, but I just repeated the response. The engagement ended. They scooped up the food.

The third time, same guys same neighborhood near the Penninula, they just pulled the same stunt on a couple. He was reaching for his wallet. I yelled from across the street that it was a scam and he should walk away. Lots of hesitation followed on both sides. To my amazement the mark paid anyway.

The fourth time, same guys, I swerved just in the nick of time and yelled "you are still at it huh?" No response.

Whenever I see a food stain on the sidewalk with a few strands of noodles scattered about, I smile — the tell tail sign of the aftermath of the con. You would be surprised at how many there are.

Rocky Humbert comments:

An important distinction between this con and some of the other cons is that this one preys on the mark's sense of duty/charity versus the cons that prey on the mark's sense of greed.

One ponders whether being victimized in the pursuit of selflessness is any worse than being victimized in the pursuit of selfishness ? For example, was Madoff's theft from charities more heinous than his theft from plain old rich people ?




[When it comes to the war on terror,] we need to show the world in absolutely clear terms not only what we can do, but that we are willing to do it.

Unfortunately, there are far too many people in this country who are under the mistaken impression that [people everywhere] want the same things we want, and respond to the same set of incentives that we do, or respond to the same set of values that we do.

They don't.

Yet, we naively apply our "higher standard" to them. I almost hate to say it, but this is akin to the animal rights wacko's who actually think that they can give rights to animals. You can't give rights to anything that isn't capable of understanding them, or who is incapable of handling the responsibilities that go along with those rights…..let alone reciprocate and respect your (our) rights.

You have to deal with an animal at the level of that animal.

Laurence Glazier comments:

Is this not false logic? The mentally handicapped have rights which they may not understand. The rights of the human fetus are the subject of fierce debate. One could argue that the propensity of humans to wage war is a form of projective identification to avoid facing the moral question of the abuse of animals. Those that have resolved the latter issue in their own minds are not noted for forming battalions.

Moreover referring thus to the level of animals is unfair to animals which are less violent than humans.

In the UK animals have limited rights and there are frequent cases of conviction for cruelty to animals. Progress is slow in this area as we are still in the secondary cannibalistic era.

Jeff Watson writes:

The 9th district court in California gave Dolphins (Porpoises) the right to sue the Navy. Somehow, the rights of animals were being denied when the navy was training them to place limpet mines on ships and other tasks. Animals have rights, in fact, those rights should be extended to spirochetes, and they should be able to file a class action suit against the makers of penicillin which is the Zyklon-B of their species..Never mind service animals, the labor board ought to look into their working conditions, no pay, and hazardous duty. Equal rights for seeing eye dogs! As for slaughterhouses and eating animals, we need, as humans to go back to foraging for roots, berries, and lichens in order to protect the dignity and rights of our bovine and porcine citizens.

Kim Zussman comments:

Does it make any sense for the species at the top of the food chain to debate hunting (cultivating, slaughtering, farming, taxing, etc) its lessors?

What if we were somewhere in the middle: "Well, they ate our children again. But really, they deserved to die; in order to feed and perpetuate more successful species. And in any case the Good Book says we were put here for that purpose…"

Jeff Watson writes:

One of my favorite places to surf in the world is New Smyrna Beach, Florida. Best wave in the state, funky beach town vibe, very cool, mellow tropical paradise. It also has more shark bites than any place on the planet. It's a rather disconcerting feeling when I'm out on the water and realize that I'm not at the top of the food chain. http://tinyurl.com/49wgkf



I follow the California grape industry and I found this article (Grape Growers Prepare for a Difficult Market ) interesting:

It's a game of cat and mouse in California's winegrape sector this year, which can all be traced back to the worldwide economic downturn and the impact it is having on the wine-buying public. Growers in the state's major winegrape regions report an average to above-average crop. At the same time, though, they say they feel concern about a reluctance on the part of wineries to set prices and enter into purchase contracts to buy the grapes. Brian Clements, vice president of Turrentine Wine Brokerage in Novato, says there are three primary reasons for this hesitancy: Wineries want to have a good idea of future sales, they want to have a good idea of crop size and they want to have all of their finances in place. "I think in general the wineries want to wait as long as they can to figure out one or two or three pieces of that puzzle," he says. "Buyers want to buy and the sellers want to sell, but everyone is waiting to see who is going to jump into the market first. The market is slow and there will be plenty of opportunities for grapes when and if the wineries make the decision to come into the market."

Sonoma winegrape grower Richard Mounts agrees that marketing of the grapes is the big question mark right now. "It is still a pretty difficult market. I've had a couple talks with wineries so far and what they are doing now is bottom feeding. They are trying to get the grapes at a price that is way below the cost of production, but I don't think they are having a lot of luck," he says. On the Central Coast, Paso Robles winegrape grower and vineyard manager Dana Merrill holds a similar opinion. He notes that if one or two wineries started buying grapes, it would likely break up the logjam and turn things around. "Everybody is kind of jittery with the economic situation we have," he says. "But for growers, we don't know for whom we are raising these grapes. In fact, you might be raising them for yourself, so it can be kind of tricky not knowing who your customer is. That is a bit unnerving." Mr. Clements notes that wine inventories around the world are down and crops in other winegrape growing regions in Europe and the Southern Hemisphere are not as large as they have been in previous years. "I think that although the wineries have not come out and purchased grapes in most areas of California, the buying will occur starting around verasion (when grapes begin to ripen and change color)," he says. Culturally, vineyards throughout the state are flourishing as the result of the wet spring that has replenished the soil profile, leached away salt buildup in the soil and begun to recharge underground aquifers. "As far as growth, the vines love all this rain. Some of the leaves are the size of dinner plates," Mr. Mounts says. While Mr. Mounts and other growers make an early prediction that this year's winegrape crop will be average in size, in essence the recent average in California is a large crop. Last year's crop of 3.7 million tons was the second largest in the state's history behind the 2005 record of 3.76 million tons. Production in the year following a large crop is typically smaller, but growers say they aren't seeing that happening this year. And they are quick to point out that a lot can happen between now and harvest. Mr. Mounts says that the vines got a late start because of cool springtime temperatures and are still about two weeks behind average. At the same time, though, they are not showing any evidence of slowing down. "I'm sitting here in a zinfandel vineyard looking at tendrils that are a foot long and they are normally about 2 inches long at this time of year," he says.

In the Paso Robles area, Mr. Merrill says the vines have a nice look to them and have grown very quickly. "We are probably running a couple weeks late, but we will probably make up some of that. With all the rainy weather and the cloudiness, the maturity was delayed from normal. But in terms of the growth, the growth looks great," he says. "We are just coming to the end of bloom for most varieties. We have a pretty full panel of growth. We aren't going to need to push these vines a lot more to grow canopy, which is pretty nice. "This has been a year where we can lay off the wells. Normally, we are irrigating for 60 days or so before June and most of us this year haven't turned on any water at all until we were into June. So that has helped the aquifer and saves us on pumping costs," Mr. Merrill says. In the San Joaquin Valley, most winegrape varieties are through the bloom stage and the berries are growing. Fresno grape grower Ray Jacobsen says that the vines in his area are all about 10 days behind average, but all varieties look nice because of the moderate temperatures to date. "My zinfandel looks to be a nice, average crop, and the same for the cabernet sauvignon. The syrahs look a little light, and some of my older Thompson seedless for concentrate look fairly light," Mr. Jacobsen says. "I haven't seen or heard of any problems," says Hughson winegrape grower John Duarte. "The cluster counts are there and the vines look healthy. At this point we can count on an average crop. People farmed through the wet weather, using sulfur as needed after the rains. The warm weather that we have had in recent days has been very welcome. It sets the disease cycle way back and cleans things up quite a bit when it gets hot."

He also notes that there has been a shift in growing practices in the San Joaquin Valley because of wineries seeking more grapes from the region. "Wineries are coming to growers in the Central Valley and telling them that they need quality grapes at a certain price and they will take whatever tonnage a grower can produce of that quality in order to be globally competitive," Mr. Duarte says. "A few years ago, there was a lot of dialogue between growers and wineries about low input systems, low capital systems and ways to produce grapes cheaply. But what has actually happened is that growers have shifted toward high input systems, high capital, elaborate trellis systems, high vine density and pumping inputs to get maximum production," he says. "The high input-high output system is becoming the new norm, rather than the original strategy of trying to cut costs."



McChrystal Relieved of Duty; Petraeus Tapped - News Item

Old soldiers never die — they just fade away.

When politics trumps winning a war only the troops in harms way suffer.

David Hillman comments:

By exhibiting extremely poor judgment in allowing those things reserved for locker room utterance to be spoken in public and on the record by both himself and his staff, he busted the chain of command. Any professional military man/woman will tell you that simply is not to be tolerated. Period. If one questions one's superior's capabilities, orders, strategies, etc., do so in private and ask for a transfer. His transgression was egregious, especially for one of his rank and experience. This sort of behavior may play well to self-entitled Gen Y'er's, but as Boomer with 34 years of service in, he should have known better. Btw, imho and in that of many ranking generals asked to comment today, David Petraeus, the 'replacement', is not a downgrade. Consider him 'the ace of trump'. Now, can we, once and for all, adhere to the Chair's well known and oft ignored wishes and refrain from the political?

Ken Drees writes:

[Did you] ever think that he used this opportunity to get out–consciously or sub-consciously? I love how people automatically assume that it was a lapse in judgement. I love how the media plays up their own –how Rolling Stone snuck into the general's camp ala' the spy capturing the marshall in stratego–

He is a general. I am sure he ruminated day and night upon his situation the way a general would. I mean this isn't Gunnie from Heartbreak Ridge after a 12 pack of Michelob shooting his mouth off about his CO. I will give the general credit for getting himself relieved of command. Who knows what timing and or circumstances were behind the scenes to influence how this went down or why. If it was subconscious–then he got what he wanted afterall.



My sister Adrienne McDonnell has written a novel called The Doctor and the Diva which will be released in the next few weeks (July 22). She teaches Creative Writing at UC Berkeley and knows her craft. Surprisingly this is her first published novel. Apparently someone believes in her novel as it garnered a significant advance - roughly 100 times my book.

The following review was passed on to me and I will pass it on verbatim. Feel free to pass this on to your friends.

This review was written for "LibraryThing Early Reviewers, ( a literary book group!). The unidentified member confided:

"I was lucky enough to receive "The Doctor and The Diva" via the "Early Reviewers" program. It's an extraordinary book! If I could give it more than 5 stars, I would. It's THAT good. Stunning to realize it's a debut novel, which, sadly, means there won't be another new novel from Adrienne McDonnell for a while.

"Back to D&D, though (as I've affectionately started to call it): While taking place in 1905-1914, its storyline is one that could easily revolve around women today thinking about, or actually balancing, careers with motherhood …and Erika's struggles to decide her future at each crossroads in her life certainly rang true and authentic to me (being a similar age, in a similar situation, with similar thoughts and feelings). This is a serious, mature read for mature adults, no doubt about it.

"Yet, it is not a cliche novel in any way - in fact, McDonnell has penned a novel that is rich in settings, characters, and stories that guarantee its uniqueness, perhaps therefore allowing the normal human-ness of the characters to shine through. Each character, however minor (especially Quentin - wow, that kid is a gem!!), comes alive in his or her own time (immediately prior to WW1) and place (Boston, Trinidad, Florence - this is one atmospherically lush read!!!). The character and story development never feels rushed or short-changed. I never got the feeling that there was a story or piece being missed, either - one that would have made this book any better. It was just perfect the way it was. Heart wrenching on so many levels, heartwarming on others, and the novel goes back and forth between these emotions effortlessly.

"In the end, the story feels, for lack of a better word, solid -extraordinarily solid - in its construction. The characters of Ravell, Erika, and Peter are written with such depth and perspective that I could really understand why they made the decisions they did (especially Ravell's decisions while Erika was his patient..one major one, in particular) and not judge them, but just be interested in them, and fascinated/awed by them. It's ultimately a story about fallible human beings trying to be true to themselves, and as fair as they can to those around them.

"Loved loved loved the ending!! (though it came way too soon - this novel is 432 pages (verrrry sumptuous to hold!), I read it in 2 sittings - couldn't put it down!)

"One quip - the title of this novel does not do this novel justice..it's about so much more than the doctor and the diva."  | May 14, 2010 |



A stock market rebound helped the world's ranks of millionaires climb 17 percent to 10 million, while their collective wealth surged 19 percent to $39 trillion, nearly recouping losses from the financial crisis, according to the latest Merrill Lynch-Capgemini world wealth report.

Stock values rose by half, while hedge funds recovered most of their 2008 losses, in a year marked by government stimulus spending and central bank easing.

"We are already seeing distinct signs of recovery and, in some areas, a complete return to 2007 levels of wealth and growth," Bank of America Corp wealth management chief Sallie Krawcheck said.

The fastest growth in wealth took place in India, China and Brazil, some of the hardest hit markets in 2008. Wealth in Latin America and the Asia-Pacific soared to record highs………..

Source: Reuters report

More complete coverage in The annual World Wealth Report 2009 



I've been thinking a lot about exactly that in recent years — what criteria should one use in assessing the assumption of risks? Recently, on one of the lists there was talk about mathematical expectation as the primary criterion for risk assumption. I've put together a little, unpublished paper on exactly that. I have it at http://ralphvince.com and the link is about halfway down entitled "Mathematical Expectation as a Criterion for Accepting Risks; A Foundation for Risk-Opportunity Analysis."

I'm very interested in the comments of people on these lists about these ideas.

 Steve Ellison responds:

Interesting paper. It is claimed that trend following is difficult to stick with. Some of those who went through the Turtles training program failed because they simply did not execute the trades specified by the method. One reason for the difficulty might be that the expectation set of trend following trades is many small whipsaw losses and a few big gains (roughly similar to the example in the paper with the signs reversed). The overall expectation might be positive, but the probability of being a winner after a small number of trades is probably below 50%.



The different beaches in Coney island and Brighton beach all have their nitches and there is no mixing or migration between them and some are totally crowded and some are empty. One of my favorites is the hasidic Jewish beach which always reminds me of irving redels patented method of getting his property taxes reduced by transporting. I like the Hispanic beach also, which is always jammed and where there is loud music and horse play all the time. What lessons can one learn from these pristine beaches which are so clean these days and near the Ferris wheel, the w. 4th handball courts, the old checker tables, and other distractions.



Of the reason that was the reason that federer almost lost as cervantes would say is that he was concerned and distracted by the play of his beloved swiss soccer team. What other distractions lead to losses in the market?


Jay Pasch comments:

ringing telephones (never again)
a 3-martini lunch (never again)
one's own imagination regarding what one thinks the market is going to do,
delusion (again and again)

Victor Niederhoffer responds:


Nick White writes:

Beloveds of any kind, one would imagine. Good natured banter amongst one's associates can take mind off the job. I'm coming to see the Chair's wisdom of no noise, no talking, no intra-day distractions. It really does make a difference. However, it seems to me that perhaps there should be some distinction between "on" and "off" modes. When on, full noise / distraction lockdown. When off…well, game on. Like a firestation or military on alert.

Marion Dreyfus comments:

Safety issues

If one is immobilized by concerns about the outside world such as familial well being, adverse weather or unsafe streets, one cannot be free to fully concentrate

Indeed it becomes a juggling act–which concern will prevail?




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

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

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

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


Jeff Watson comments:

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



Aviation Safety experts talk a lot about "The Swiss Cheese Model" of human error as described by Dr. James Reason of the University of Manchester Dept. of Psychology.

From wikipedia:: ( http://tiny.cc/ysg88 )

"James Reason hypothesizes that most accidents can be traced to one or more of four levels of failure: Organizational influences, unsafe supervision, preconditions for unsafe acts, and the unsafe acts themselves. In this model, an organization's defences against failure are modelled as a series of barriers, with individual weaknesses in individual parts of the system, and are continually varying in size and position. The system as a whole produces failures when all individual barrier weaknesses align, permitting "a trajectory of accident opportunity", so that a hazard passes through all of the holes in all of the defenses, leading to a failure."

In "Human error models and management" ( http://tiny.cc/xl25n ) James Reason criticizes the "person approach" to human error and suggests a "Systems approach": "The long-standing and widespread tradition of the person approach focuses on the unsafe acts—errors and procedural violations—of people on the front line …" ~ " It views these unsafe acts as arising primarily from aberrant mental processes such as forgetfulness, inattention, poor motivation, carelessness, negligence, and recklessness. The associated countermeasures are directed mainly at reducing unwanted variability in human behavior."

… "Another serious weakness of the person approach is that by focusing on the individual origins of error, it isolates unsafe acts from their system context. As a result, 2 important features of human error tend to be overlooked. First, it is often the best people who make the worst mistakes—error is not the monopoly of an unfortunate few. Second, far from being random, mishaps tend to fall into recurrent patterns. The same set of circumstances can provoke similar errors, regardless of the people involved. The pursuit of greater safety is seriously impeded by an approach that does not seek out and remove the error-provoking properties within the system at large."

"The basic premise in the system approach is that humans are fallible and errors are to be expected, even in the best organizations. Errors are seen as consequences rather than causes, having their origins not so much in the perversity of human nature as in “upstream” systemic factors. These include recurrent error traps in the workplace and the organizational processes that give rise to them.

Countermeasures are based on the assumption that although we cannot change the human condition, we can change the conditions under which humans work. A central idea is that of system defenses. All hazardous technologies possess barriers and safeguards. When an adverse event occurs, the important issue is not who blundered, but how and why the defenses failed."

His seminal work : "Human Error", James Reason, 1990 ( http://tiny.cc/i1q5a )

 Peter Grieve comments:

This is very similar to Nigel's chess teaching - when someone makes a blunder, usually it's been set up by a position that has been deteriorating for several moves.




with all this talk about T–what is the population out there of female traders?

I never really thought about this until now–knowing that there must be some certain population out there–whenever I talk about trading to the intelligent female population that i know–they roll eyes quickly, change subject, etc. Of course they find my ideas engaging–but only to a certain extent–like how much money did you make.



Although not a new documentary (2005), I watched Grizzly Man this weekend (currently available on free movies on demand for NYC area TWC subscribers). It is the story of a man, Timothy Treadwell, who decided to move out into the wilds of Alaska to live with grizzly bears in an effort to “protect” the bears from what he perceived as their enemies (poachers, hunters, and to a lesser extent the parks division). In the process, Mr. Treadwell was fighting his own demons and using this life choice to enable a personal transformation of sorts over his 13 years on the job. The documentary was directed by Werner Herzog a notorious maverick and seasoned director deserving respect for his fearless attitude as well as his unrelenting commitment to his craft.

While being entertaining and visually stimulating, the film provides an interesting look into devotion, goals, and the need to blend dreams with reality (an ability Mr. Treadwell lacked with all too unfortunate consequences). I believe the documentary holds certain lessons and truths about respecting “nature” which are applicable to investing. Mainly, we all must respect the nature of the animal (be it bear or market) and becoming overextended or overly confident in positioning can have dire consequences financially or otherwise. While not a profound realization, it is interesting to see concepts such as this manifest themselves in various non-financial realms of life. Mr. Treadwell became too comfortable with the animals from too many years without incident and seemed to have forgotten the nature of what he was dealing with, a concept not alien to those of us in the speculation business. All things considered, I will certainly take Treadwell’s story to heart in future endeavors.



The testosterone, alcohol, crowd-induced, "couldn't control myself", "it's what we do after a championship", vicarious acting out explanation:

Such post-game violence is hardly unique to Los Angeles. Thursday's upheaval was the latest in a long string of similar incidents that have played out in U.S. cities and abroad after major sports matches. Psychologist and author Robert Cialdini, who has studied the behavior of sports fans, said the seemingly inevitable reaction by fans on the winning side is rooted not only in the emotional connection they build to their teams but in a chemical one as well.

Fans are so heavily invested in their teams that studies have shown that their testosterone levels spike significantly after they watch a major victory, Cialdini said. Elevated levels of the hormone are known to cause increased aggression, especially in young men.

"When the team wins, we win and we feel it in a very personal way," Cialdini said. "We're likely to experience a great sense of arousal and joy even though we haven't done anything."




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

Marion Dreyfus comments:

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

Why did the police permit this lawlessness?

Why should we accept this hooliganism?

Stefan Jovanovich responds:

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

Marion Dreyfus writes:

Thanks for clearing up the mystery.

It is dismaying in the extreme, however.

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


Alan Corwin comments:

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

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


Gibbons Burke comments:

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

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

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

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

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

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




If you are looking for a movie that is completely unexpected (or at least you wish it were unexpected), one that will force you to confront the reality of your beliefs, Unthinkable is the movie for you.

I will state right at the beginning of this review that this movie is a must see. It was stunning, breathtaking and a slew of other adjectives that I won't bother to write.

I said at the beginning of this review that this movie was "unexpected". It was…..in that you'd never expect a movie like this to come out of Hollywood. I also stated that you wish it were unexpected, because it makes us face a reality that we all know and fear could be real, but are not willing speak out loud or acknowledge in polite company.

Not to spoil the plot (you can read the jacket cover to get this much), but you have a terrorist (played brilliantly by Michael Sheen) who claims to have planted 3 nuclear devices in three different US cities. You have an FBI agent Helen Brody played by Carrie-Anne Moss (of Matrix fame) brought in to help with the interrogation. Already present at the interrogation is the man known only as "H" (played by Samuel L. Jackson).

Sheen represents all that is evil in the world. Moss represents that which is supposed to be good. Jackson represents all that we could become, but hope we never have to. Jackson is revealed to be the man that none of us want to acknowledge exists, but we all secretly hope does. He is the man with the expertise and skill necessary to derive information………..he tortures his victims until they tell us what we want know.

When Brody see's what "H" does she confronts him ("Torture doesn't work. You torture them enough, they'll tell you what they think you want to hear to make the pain stop!"), Jackson is cool and pragmatic ("If torture doesn't work, why have we been doing it for thousands of years?"), and goes about his business.

As I watched this movie, I was initially struck with how it was shaping up to be another PC Hollywood claptrap….with the usual left wing propaganda BS about how "America is bad". Yes, the movie did have a lot of Political Correctness…….but before long, you were sucked into the reality of what a PC point of view really means………quiet literally, slapped in the face with it.

The reality that slaps you in the face, over and over and over again during this intense movie is simply this: How far are you willing to go?

The movie forces you to face the reality of that question and, quite literally, takes you through the process, step by step, of what it means to go down that path.

And it doesn't pull punches. It doesn't leave gray area's for later debate. It takes a nightmare scenario and makes it one of the worst possible situations you can think of. It doesn't let us off the hook by making the terrorist an "unlawful military combatant from a foreign country". He's an American citizen, a former military guy with special forces expertise. It doesn't avoid the obvious and pretend that terrorist is one of those extremely rare apparitions of the left (i.e. a Christian conservative extremist), the terrorist is a Muslim.

But to take it a step further, he's a natural born American, who looks, acts and talks like an American……and he's white. They make it clear that he has all the rights of an American Citizen….but that he's also a man who has planted 3 nuclear bombs in three major metropolitan areas. They are also clear that it is estimated that 10 million American's will die when those bombs explode.

So those with a left leaning point of view are put through the ringer when they have to face the reality of the failure of "enhanced interrogation techniques" and weigh the lives of 10 million people against the "rights" of this one man.

Similarly, those that lean to the right are put through the ringer by having to face the reality of what it truly means to torture a human being.

Whether you're a card carrying member of the ACLU, or a Mitch Rapp loving Vince Flynn fan, you will feel like you are in the torture chamber and "H" is working on you, except in your case, you are being forced to watch what it means to really find out, "just how far are you willing to go".

And that takes us to the title of the movie. "Unthinkable". Why "Unthinkable"? Why that name?

Because it makes you confront the unthinkable……and yes, it really, really does!

The movies doesn't let us off the hook with any kind of a plot twist. That would be way to easy (and quite frankly, exactly what I'd expect from Hollywood). This movie grabs you by the throat, forces your eyes open and makes you watch what you don't want to see, what you don't think a human being can do, and what any of us would pray should never happen.

And I'll tell you now, it's not the gore that it makes you face. No, the gore is not "unthinkable". Although there is a lot of blood in this movie, there isn't any true "gore". There isn't a last minute rescue or reprieve…..each and every time you think you're off the hook, you are brutally confronted with reality that is "the next step"……steps that eventually become, "Unthinkable".

If you think about what a movie would NEVER EVEN DEPICT….what Hollywood would never even allow to be brought out to the light of day in anyway other than to show just how bad and evil America is (which is not what this movie does) then you'd know what you're about to be confronted with.

In the last 30 minutes of this movie, it became very clear to me where it was going to go and what was going to have to happen. When that crystallized in my mind, I grabbed the remote and hit the pause button…….for I had to make a decision. I had to decide whether or not I was going to be able to watch what I knew was coming. Even though I was confident that the movie maker would handle it discreetly and there would be very little gore…….I was actually confident that there would be little or no actual scenes of violence regarding what I knew was coming (and I was right, there wasn't)….still it was enough to give me pause and think about whether I was willing to go where "H" was going to take me.

"H" set the scale beautifully. He masterfully weighed the rights of one man on one side of the scale, against the lives of 10 million on the other side of the scale. He was clear about what he was doing and in his mind he was doing nothing more than saving 10 million lives. Samuel L. Jackson played the role of "H" with breathtaking perfection, drawing you into his world of "torture as a means to an end". As the movie progresses, it is clear that even though this is a job to "H", he is ultimately just a man. He was not a sadist, nor did he seem to enjoy what he was doing. But it was clear to him that it had to be done. What he was doing was merely a means to an end. But it is very clear what effect the "means" have on the human being that they call "H".

Watching "H" pull Agent Brody (Moss) down into her own personal Hell is unbelievable. Brody is appalled that a man like "H" exists…..at first……then she is forced deeper into the abyss. She finds "H" and his techniques vile, but if forced to confront the reality of weighing the rights of the terrorist against the lives of 10 million. The inner turmoil she experiences leaps through the screen at the viewer and you can personally sense the revulsion she feels as that question weighs on her very soul.

And Sheen is everything that you don't want in a terrorist. He is a maniacal psychopath one minute, and a loving family man the next. He is a sadistic animal and yet has a human side. Sheen is absolutely brilliant in this role.

As I watched this movie, I kept waiting for the Hollywood plot twist. I kept waiting for the PC world of the ACLU to win out and save the day. But, much to my surprise, and I'm sure to the surprise of all who don't think much of "left-leaning Hollywood", it didn't happen. Even the last 13 seconds of the movie…..right down to the last second……it didn't happen.

But that doesn't mean that the right got off easy, either. You want to know what it means to find out "Just how far are you willing to go?" You want to know what torture means and just how far you may have to go? Watch this movie and you'll find out what that really means.

This movie is a must see for every thinking American, no matter what you're political persuasion.

There are a few obvious plot holes in the movie, but those are easily overlooked if one appreciates the overarching theme of the movie. The counters amongst us will notice an egregious counting error early on in the movie (that is revealed later in the movie)……although it is necessary for the plot, one would hope that this kind of counting error wouldn't occur in real life.

But all that aside, "Unthinkable" is a movie that gets a thumbs up from me!

Prudish Dad alert: This movie is NOT for the kids, the squeamish, or those that prefer to live in a Pollyanna world. There is no nudity, or sexual content. But there is pervasive language and intense scenes of violence (and I do mean intense). There are also thematic issues that are not appropriate for anyone under the age of 15. I may consider letting my oldest son watch the movie (he's 15), but I doubt it. My wife would kill me if I let him see it.

If you're old enough (repeat: NOT FOR THE KIDS), and are willing to face what we all hope and pray we never have to face, then "Unthinkable" is a must see!



To show how behind I am —– till tonight I had no idea our Edison light bulb will be banned by 2014.

Also did not know there was a 10M prize for the best light bulb.

LED looks the best for now at a projected 40.00 each that will last 10 years.

Wonder if the government will offer ' coupons ' as they sent out for converter TV boxes ?

It seems current light bulbs use 22 pct of current USA electric power.

Comments ?

Nigel Davies comments:

Since January I've been living in a modern low-energy apartment and I've been shocked as to how inexpensive the running costs are compared to the previous one. That's also without considering the 'real' cost of energy, for example the price we pay doesn't include the expense of oil related military operations.

Having said that they way they seem to be going about this just stinks, it looks like they want 'control' at any cost.



I am reading a very interesting book, The Score Takes Care of Itself by the late 49ers coach Bill Walsh. One of Walsh's key messages was that, at the highest levels of competition, victory cannot be summoned at will. Those who would achieve great success must endure failure. One must handle failure appropriately, learning lessons to improve future performance without becoming despondent.

Upon taking the reins of the 49ers, who had had the NFL's worst record the previous season, Walsh implemented his Standard of Performance, a set of expectations for continuous improvement for everyone in the 49ers' organization. The Standard of Performance detailed skills expected at each position and appropriate behaviors. "Winners act like winners (before they're winners)", said Walsh.

The standard was perfection. "If you aim at perfection and miss, you're still pretty good", wrote Joe Montana in the book's foreword. Walsh insisted on precise execution. If a play called for the receiver to turn after 12 yards, the receiver needed to turn after exactly 12 yards, not 12 yards and 15 inches.

Walsh prepared his team very thoroughly and had exhaustive contingency plans. He was known for scripting the first 25 offensive plays of each game in advance. This practice enabled the players to visualize the opening minutes of the game in advance and reduce pregame jitters. The contingency planning, done deliberately and thoughtfully in advance, led to much better decisions than those that might have been made on the spot under extreme pressure.

When Walsh found himself saddled with lemons, he found a way to make lemonade. Early in his career, he was the quarterback coach for the Cincinnati Bengals, an expansion team with little talent. The Bengals could not successfully run the ball against stronger teams. They would have to score by passing. Unfortunately, starting quarterback Virgil Carter was considered to have a subpar passing arm. Walsh noticed, however, that Carter had great composure, could read defenses well, and was very nimble. Walsh therefore designed plays that would make the most of Carter's abilities: short passes to any of four or five receivers spread out across the field. This strategy was the prototype of what later came to be known as the West Coast Offense.

Walsh treated his players and assistants well. When an assistant was considered for a head coaching job elsewhere, Walsh would give a good recommendation even though the assistant's departure might set back the 49ers. He reduced hard contact in practice in order to have the players healthier for games. Word spread quickly around the league, and many top players and coaches wanted to join the 49ers. Like Jack Aubrey, Walsh paid close attention to the leaders among the players, who might support or undermine his leadership. He was quick to remove bad influences from the team, even if they were talented players.

Co-author Steve Jamison previously collaborated on a similar book with John Wooden. The Score Takes Care of Itself is targeted at a business audience, but many of its insights might also be useful in our field.



“What other great books on their fields have carry over value or are beautiful in themselves?”

Here is an initial draft of a master list of books recommended or cited at daspec since May 2009 – not sure of the reason for stopping here except for falling asleep. Thus, be assured that it is incomplete and flawed with omissions and commissions galore.

Perhaps there might be a vote to prioritize?

In that democratic spirit, refreshed from my Tocqueville commentary, an offering of one of his quotes as a thought toward devising a standard for inclusion within this listing: “There is hardly a pioneer’s hut which does not contain a few odd volumes of Shakespeare. I remember reading the feudal drama of Henry V for the first time in a log cabin.”

Thus, regarding what would be on the shelf of any given so-and-so concerning any given topic…

Nagi on fencing

Bacon on speculation

Wiswell on checkers

Caples on advertising

Williams on trading

Tilden on spin of ball

The Science of Swimming by James E. Counsilman

More Money Than God - Hedge Funds and the Making of a New Elite by Sebastian Mallaby

Trout by Ray Bergman

Scarne’s New Complete Guide to Gambling

You Can Negotiate Anything by Herb Cohen

Louis L’Amour’s Education of a Wandering Man

Nock, H. L Mencken, and Darwin

Karate: Technique and Spirit by Tadashi Nakamura

The Dangerous Book for Boys by Hal Iggulden

Message to Garcia by Elbert Hubbard

How to Win Friends and Influence People by Dale Carnegie

Strategy in Poker, Business & War by John McDonald and Robert Osborn

The Broker’s Edge; How to sell securities in any market by Steven Drozdeck and Karl Gretz

Selling The Invisible by Harry Beckwith

The Baseball Codes by Jason Turbow

Horse Trading by Ben Greene

Fortman’s Basic Checkers

A Season on the Mat: Dan Gable

Pursuit of Perfection by Nolan Zavora

Living with Children by G. Patterson

Parents and Adolescents by G. Patterson

Conan The Conqueror by R. Howard

Chess Secrets I Learned from the Masters by Edward Lasker

John Gardner: The Art of Fiction; Notes on Craft for Young Writers (1983) and

On Becoming a Novelist (1983)

The Flavor Bible: The Essential Guide to Culinary Creativity, Based on the Wisdom of America’s Most Imaginative Chefs by Karen Page and Andrew Dornenburg

Roasting-A Simple Art by Barbara Kafka, Maria Robledo

Outlaw Cook by John Thorne

The Way to Cook by Julia Child

Markets, Games, & Strategic Behavior by Charles A. Holt

Caught Inside: a Surfer’s year on the California Coast by Daniel Duane

The Grapes of Wrath by John Steinbeck

Law of the Jungle by John Otis

The Intelligence Investor by Benjamin Graman

Feynman Lectures on the Web, from Bill Egan

Why The Best-Laid Investment Plans Usually Go Wrong by Harry Browne

Copies of published newsletter by the late Louis Rukeyser

Patrick O’ Brian books

Dean King’s A Sea of Words

1960s Chicago Federal Reserve Bank booklet entitled Modern Money Mechanics

Pattern Recognition, 4th ed. by Theodoridis and Koutroumbas

2nd edition of Hastie et al.’s The Elements of Statistical Learning — free as a pdf

Bishop’s Pattern Recognition and Machine Learning

The Works of Guy De Maupassant, 1903 first edition

A Journey into Rabelais’s France, Nock

Wald’s book Sequential Analysis

Oliver Sacks included in his book The Man Who Mistook His Wife for a Hat

Lorie and Roberts’ book on marketing

The Mountaineering Handbook by Connally, Craig

Glacier Travel and Crevasse Rescue

Oliver Sacks, The Man Who Mistook His Wife for a Hat

The Road by Cormac McCarthy

McCarthy’s Blood Meridian, or the Evening Redness in the West, Blood Meridian, or the Evening Redness in the West



De Sade



Flannery O’Connor

William Styron

In the heart of the Sea, Nathaniel Philbrick

Moby Dick, Herman Melville

The ‘Code’: Ten unwritten baseball rules you might not know By Jason Turbow

Swindled: The Dark History of Food Fraud, from Poisoned Candy to Counterfeit Coffee by Bee Wilson

Water for Elephants

The Lovely Bones

Old Home Town by Rose Wilder Lane

Virginia Postrel’s book The Substance of Style

Galton’s The Art of Travel

The Story about Ping

The Upside of Turbulence by Donald Sull

Books by Ralph Vince

FEE essay, The House that Uncle Sam Built

Andrew Odlyzko’s online essay Collective hallucinations and inefficient markets: The British Railway Mania of the 1840s

Judgment under Uncertainty: Heuristics and Biases, Cambridge

Kahnemann, Tversky (eds): Choices, Values and Frames, Cambridge- Slovic et al: The Perception of Risk, Earthscan

Taleb: The Black Swan

Penguin- Popper: The Logic of Scientific Discovery, Routledge

Thaler: Advances in Behavioral Finance (Vol II), Princeton Publishing

Peterson: Inside the Investor’s Brain, Wiley- Forbes: Behavioural Finance

Gauch: Scientific Method in Practice, Cambridge

Chamley: Rational Herds: Economic Models of Social Learning, Cambridge

James Montier, The Little Book of Behavioral Investing– How Not to Be Your Own Worst Enemy

Dr. Aronson, Evidence-Based Technical Analysis, Wiley, 2006

Burning Bright, Ron Rash



Ayn Rand

Niederhoffer & Co.

Ken Smith,




Cowles Comprehensive Encyclopedia

Morihei Ueshiba, The Art of Peace

GM Davies is the author of Play 1 e4 e5: A Complete Repertoire for Black, Everyman, 2005

Mika Waltari’s The Egyptian

Sir Walter Scott’s Ivanhoe

The Christmas Lectures

Analysis of Financial Times Series by Tsay

Musashi, Book of Five Rings

Taming the Infinite

Strogatz has received good reviews for his book The Calculus of Friendship

Dan Ariely, Predictably Irrational

Buy*ology, Truth and lies about why we buy, Martin Lindstrom

Raising Your Child to be a Champion in Athletics, Arts, and Academics by Wayne Bryan and Woody Woodbur

Philip L. Carret, his 1931 book, The Art of Speculation

Beyond Candlesticks by Nison

The Secret History of the Mongol Queens: How the Daughter of Genghis Khan Rescued His Empire

Statistical Rules of Thumb, by Gerald van Belle

The Dogs of Capitalism by Mitchell Jone

The Selfish Gene, Richard Dawkins

Van Belle - Statistical Rules of Thumb

Sheshkin - Handbook of Parametric and Nonparametric Statistical Procedures

Snedecor -Statistical Methods, 8th ed.

Siegel - Nonparametric Statistics for the Behavioral Sciences, 2nd ed.(1988)

Conover - Practical Nonparametric Statistics, 3rd ed.

Martinez - Computational Statistics Handbook with Matlab, 2nd ed.

Staying Alive in Avalanche Terrain, Bruce Tremper

The Book of Chuang Tzu

Rise of the Machines: Algorithmic Trading in the Foreign Exchange Market

This Time is Different - Eight Centuries of Financial Folly, by Reinhart and Rogoff

Derek Rowntree - ‘Statistics Without Tears’ and ‘The Manager’s Book of Checklists’

Horse Trading by Ben Green

The Secrets of Professional Turf Betting by Robert Bacon

Zen and the Art of Motorcycle Maintenance by Robet Pirsig

The Rules of Winning Chess by Nigel Davies

Lobster Chronicles by Linda Greenlaw

Michael Lewis - Moneyball

A Terrible Splendor by Marshall Jon Fisher

Shogun by James Clavell

The Last Kings of Thule - Jean Malaurie

Many of Giono’s books

Many of Pierre Magnan books

Dava Sobel - Longitude

Order Out of Chaos by I. Prigogine

L’imprévu by I. Ekeland (in french only)

Des rythmes au chaos by P. Bergé, Y. Pomeau, M. Dubois-Gance, 1994

Deep Simplicity: Bringing Order to Chaos and Complexity by John Gribbin

The Foundations of Ethology by K. Lorenz

Studies in Animal and Human Behavior by- K. Lorenz

The First Three Minutes: A Modern View Of The Origin Of The Universe by Steven Weinberg

Mononcle d’ Amérique by A. Resnais (in French only)

The Botany of Desire by Michael Pollan

A Hole in the Ground with a Liar at the Top: Fraud and Deceit in the Golden Age of American Mining

The Complete Turtle Trader

Heyne’s Economic Way of Thinking

Practical Speculation

Made to Stick by Chip Heath and Dan Heath

Modern Principles: Microeconomics by Tyler Cowen and Alex Tabarrok

Fred Hapgood’s 1993 book Up the Infinite Corridor: MIT and the Technical Imagination

Getting Real

Scientific Method in Practice by Hugh G. Gauch

Psychology of Intelligence Analysis

The Farming Game by Bryan Jones

A Treasury of Deception: Liars, Misleaders, Hoodwinkers, and the Extraordinary True Stories of History’s Greatest Hoaxes, Fakes and Frauds by Michael Farquhar

Stocks for the Long Run by Siegel

Irrational Exuberance by Shiller

Beating the Street by Lynch

Trade Like a Hedge Fund: 20 Successful Uncorrelated Strategies & Techniques to Winning Profits by Altucher

The Intelligent Investor by Benjamin Graham

Common Stocks and Uncommon Profits and Other Writings by Fisher

Futures: Fundamental Analysis by Schwager

Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by Murphy

Contrarian Investment Strategies - The Next Generation, Dreyman

Trend Following: How Great Traders Make Millions in Up or Down Markets, Covel

Momentum Stock Selection: Using The Momentum Method For Maximum Profits, Bernstein

Hostile Territory by Gerald Westerby

The Gameby Neil Strauss

Arthur Schopenhauer’s The Art of Controversy; also by a different title: The Art of Being Right

A Random Walk Down Wall St., Malkiel

Security Analysis by Dodd

Atlas Shrugged

BECOMING WINSTON CHURCHILL: The Untold Story of Young Winston and his American Mentor, by Michael McMenamin, Greenwood Publishers (2007)

Our Enemy the State

On Doing the Right Thing

Memoirs of a Superflous Man [his autobiography and perhaps his best known book]


Isaiah’s Job

The Criminality of the State

The Jewish Problem in America

Applied Longitudinal Data Analysis by Judith Singer and John Willett

NurtureShock — New Thinking About Children, by Po Bronson & Ashley Merryman

Bruce Bueno de Mesquita’s book Predictioneer’s Game

The Art of Strategy: A Game Theorist’s Guide to Success in Business and Life by Avinash K. Dixit and Barry J. Nalebuff

Buffalo for the Broken Heart, by Dan O’Brien, 2001

Fourteen Methods of Operating in the Stock Market, published in 1918 by The Magazine of Wall Street

Moneyball, by Michael Lewis

Microtrends: The Small Forces Behind Tomorrow’s Big Changes, by Mark Penn

The Heart of the World by Ian Baker

Eye Movement Desensitization and Reprocessing (EMDR): Basic Principles, Protocols, and Procedures, 2nd Edition, by Francine Shapiro

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, by Larry McDonald and Patrick Robinson

The Lost City of Z: A Tale of Deadly Obsession in the Amazon, by David Grann

The Mystery of Numbers by Annemarie Schimmel

Trend Following: Learn to Make Millions, FT Press, 2009

The Complete Idiot’s Guide to Global Economics, Alpha, 2008

The Logic of Life by Tim Harford

Freakonomics by Leavitt and Dubner

Discovering Your Inner Economist by Tyler Cowen

Intelligence and How to Get It by Richard Nisbett

The Bell Curve by Richard Herrnstein and Charles Murray

Don’t Tread on Me by H. W. Crocker III

Military Bookman

Education of a Speculator

Optimal Portfolio Modeling, Wiley, 2008

Play the Catalan, Everyman, 2009

Day One Trader

Biological Invasions: Theory and Practice by Shigesada and Lawasaki

Biological Invasions by Mark Williamson

The Command of the Ocean by N.A.M. Rodger

The Best American Essays of the Century edited by Joyce Carol Oates and Robert Atwan

Intelligence in War by John Keegan

A Splendid Exchange by William J. Bernstein

The Villainy of Stock Jobbers Detected (1701) by Daniel Defoe

Chronicles and Characters of the Stock Exchange (1850) by John Francis

The Drunkard’s Walk: How Randomness Rules Our Lives by Professor Leonard Mlodinow

Spent by Geoffrey Mille

Living at Micro Scale by Reedie David Dusenbery

Lectures on the Relation between Law and Public Opinion during the 19th Century, A.V. Dicey

Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems

Life History Invariants by Eric Charnov




The common theory descriptive of complex messy systems where the outcome is dependent on many variables with much uncertainty about them, each of which influences the others, with much unknown about interrelations and new effects, like the market is that emergent properties, regularities and stable landings occur. What sort of emergent properties are there in the mess that we work in, and how can this be quantified and especially differentiated from randomness. The SP was 1110 + - 2 for 4 days in a row, and had a day of lowest volatility on 6 18 before its fifteenth biggest up opening of last 4 years. What does it portend? What flexionic states will endure?



 One was recently asked, how do you spot a hoodoo when you are in or dangerously close to their presence? I would say that their past record of failures is a good starting point. As is their ability to talk a much better game than they play. Also, their attempt to impress you with the trappings of success, ( a conference call with their five principals is a usual gambit). Not to be disregarded is their locus of operations, often from a ephemerally built recreational area where permanent lodgings and such things as pianos are not availalbe. The inclination to befriend you and flatter you is also a clue. But how can this be quantified, and how can we learn to avoid them? What should you do when you've met a hoodoo? I've always taken to burning my shirts, especially if they've hugged me as they ofen do. Dare I ask the question of whether there are such things as hoodoos or is it a figment of random numbers? No, that would be too mind boggling. But please help with your insights.

Alan Millhone writes:

Some years ago my late father and me were enlisted by Banque Worms to take over a failing condo project in our area.

The developer met us and after I shook his hand I could smell his pungent cologne on my hand for the rest of the day. He had a lady friend assistant who wore a see through dress with precious little underneath if the sunlight caught her profile just right. When I first met him I could see " carpetbagger " across his forehead.

He was a genuine "slicky boy" right out of South of the 38th Parallel.

People like him wear a lot of bling and cheap after shave. Usually have a woman at their side as a distraction.

They are long gone. Our crew finished the job.

Stay vigilant and wide eyed. 

Pitt T. Maner II adds: 

hoodoos at Bryce CanyonFortunately, I associate the word "hoodoos" with the past leader of my university (UF) geology field camp, Professor of Geomorphology, Dr. Robert Lindquist, who was an expert on the formation of hoodoos in the magnificent Bryce Canyon in Utah and knew of the locations of many wonders in the West–original survey markers left by Powell, dinosaur bone and gastrolith graveyards, amazonite on Crystal Peak and ancient lahars in South Park, Co. A geologist's geologist who looked like he had stepped out of the 1800s.

As for the other definition, there was a person who once recommended Enron, Freddie and Fannie, and several other long ago bankrupt companies and who was so consistently wrong for awhile that it was almost uncanny. If one had just done the opposite. It was a good education to lose money at an early age though on hoodoo picks. Better to lose and learn using your own thought processes–at least there is a sliver of hope for improvement. 

Russ Herrold writes:

I might add that to view a person's bookshelves (even ones only in public areas) or even books in the process of being read on a table, or to note the absence of such, in each case provide a window into the mind of that personis to me a 'tell'.

Alston Mabry writes:

To see something clearly, it can be helpful to study its opposite. Recent list discussion included one of my favorite anti-hoodoos, Richard Feynman– intelligence, curiosity, enthusiasm, creativity, generosity, joie de vivre.

Russ Herrold adds: 

This certainly may work for when to exit or what to avoid. My brother also seemed to have a uncanny ability to leave the party, when things were getting hot… too hot… right before the cops came and arrested everyone. His friends started following him. However, the same may not be true with when to start a party. As a kid I remember people would fight for a seat next to me during a math test. If I did not like them I would pull a Goldman synthetic and write down some wrong answers, to be corrected latter in secret. It has been my experience in investing that the surest sign of a Hoodoo is willingness to copy someone elses system or trade and yet have no idea why they should expect it to work. There seems to be floating around hundreds of billions par value of formerly AAA paper that now only worth hundreds of millions that seems to prove that these Hoodoos are extremely common, if not the most common Hoodoo around.

Nick White writes:

Perhaps the most difficult aspect of detecting hoodoo-ery is to discern the difference between the genuine actions of the bona-fide dealer versus the pretense of the hoodoo (who - come to think of it– may well be bonda fide, too, but just cursed. Let's call these poor souls benign hoodoos versus their more malignant bretheren).

I think the sure tell of a malignant hoodoo is that their most effective lies will be those very closest to the truth…yet there lies their very advantage over us, and requires some street smarts to know the difference. Perhaps the foil is to know and experience for ourselves the difference between ambition and aspiration. The Stoics made this sort of distinction to help them in their quest against self-hoodooery: Ambition was vulgar, akin to avarice, full of scheming and accompanied by a very lowbrow, keeping-up-with-the-jones mentality. These sorts of feelings were to be put to death in oneself moment-by-moment through Stoic practice. Aspiration, on the other hand, was considered more noble, civic and had the connotation of dilligence, discipline and a bent toward giving a world-class performance simply for the sake of excellence as a way of life. Therefore, perhaps we might say this kind of vulgar ambition is the giveaway quality of malignant hoodoo-ery? Applying this little rule-of-thumb might constitute the foundation of an early warning system.

However, before any of us jump on the moral high horse and consider themselves "aspriational", the Stoics further stipulated that it required very great self-knowledge to even know the difference between these two values, let alone to declare oneself in one camp or the other. Even then, the Pyrrhic victory was assured– if you felt yourself to be truly humble and aspirational, you were most likely hopelessly ambitious and required greater training to cure the very need to make such statements about oneself.

Jeff Watson adds:

Nick, you made the most erudite explanation of hoodooism I've come across in a long time. One might wish to consider the partial hoodoo which affects 95% of the population. With the exception of a few good trades and the ability to be a good father, I'm a world class hoodoo, among the best. I won.t deny this because that would be a folly, and total lie as I can make money but my personal life is a train-wreck. I won't get into the Faustian aspects of all of this, but it is there. Hoodooism comes in many ways, shapes, and forms and I've seen and done them all. Hoodooism is like the old adage that history doesn't repeat itself but it always rhymes. The hoodoo that the chair describes isn't enough, the one you have to watch out for is the one that makes money on a regular basis, he's the danger.. He might steer you onto something good, but there is always a price to be paid, and the price is not always what you expect and not the currency you wish to pay..

George Parkanyi writes:

This whole notion of hoodoos frankly I find rather uncharitable, and burning one's shirt after a tainted hug smacks far more of superstition than science.

Now not hanging around negative people I understand. Some just wear you down with their negativity, and you do have to cut your losses at some point. But to classify those who have tried and failed into their own undesirable caste is unfair and a vast oversimplification. People run into difficulty for many reasons– failed relationships, health problems, sometimes just honest mistakes. My experience has been that people have far more to offer than what appears on the surface– regardless of their circumstances.

I wander past homeless people– ostensibly life's greatest "losers"– sometimes as I go to work, and when I really think about, I'm awestruck at how they have managed to survive all this long– with absolutely nothing, through harsh winter conditions. How do they do it? Clearly, they have skills that I don't. One time I gave a not only homeless but also legless man $10. He didn't ask for it. I just walked over and gave it to him. Here he was on the front lines at the very edge of humanity, representing on my behalf one of the worst possible circumstances that I could even imagine for myself and somehow I was drawn to him. When I gave him the money, he beamed at me with this smile of pure joy, looked me straight in the eye, and cried "God bless you!" To this day I will never forget that blessing, because at that moment there was a seismic shift– I actually physically felt it– in my understanding.

In the lands of the dispossessed, I don't see hoo-doos at all. I see potential teachers.

As for people who befriend you only because they want something from you, the best I think you can do is make your own decisions on to what extent and level you wish to engage. If you enjoy their company or there is something about them that you like, go with it, but don't take risks that would seriously jeapordize your business, family, and other relationships. Not everyone is genuine, yet not everyone's on the make either– and some people are absolute gems. To be completely distrustful will cut off a lot of wonderful experiences. To expect too much of people or to be overly trusting will set you up for disappointment, or worse.

It's like trading really. If you diversify your relationships you have less risk and less volatility. If you concentrate your relationships, you have more risk and more volatility, but perhaps a bigger payoff in the intensity of love and friendship. You have to figure out the right mix for you. The interesting thing about relationships is that that while you're investing in others, they're also investing in you. The more relationship value you create, the more relationship value you (and others) will also accrue. I can't quantify it, but I think there is a real multiplier at work there.

Last point. If you're not confident enough to engage or deal with a "hoo-doo" without fearing harm to yourself, then perhaps you should worry less about the "hoo-doo" and examine your own fears. What difference should it make to you if have a conversation, dinner, or even a business deal with such a person (however defined)? In what sense would that make you a lesser person or cause you harm? It may or may not, but I think its a good question to ask.


Jeff Watson comments:

George, it would behoove you to read up exactly a hoodoo is before writing such an elegant, misguided essay. The essay was great, almost fantastic, but missed the point. I can say this because I'm a hoodoo and proud to admit it. Not all hoodoos lose money in the market and in life and divorce. Some lose through gambling drugs, going for long odds, begin too easy with short odds. I lose my money by staking unreasonable ventures, loose women, and bad ventures. Not a lot of misadventures but enough to affect 11% of my bottom line. Add that to my losing trades, my 30 dependents, and I have a big nut to make every month. Nothing like the Chair, but still significant. There should be a place in the hall of fame foe us grinders who knock it out every month for years…That's gotta count for something.

Duncan Coker writes:

On the topic of hoodoos, when I am performing a task others can either help me perform better, have no impact, or lead me to perform worse. A hoodoo would would reside in that last category. I am not so concerned about their motivation or intent, just their impact. With my favorite fishing comrade, we actual raise the level of our game so to speak, so an inverse hoodoo. We share information on the flies that are working, fish caught, good spots on the rivers, ( after a small bit of subterfuge of course for good measure). We have a good rhythm of leap frogging each other up the river, alternating the good stretches, not spoiling the water ahead for the other. Plus the general level of conversation or lack of it fits well with the day allowing us to focus on the river and landscape around us. In a pinch we can count on one another. I recall one day I slipped and snapped my fishing rod while at the same time managed to lose my fly box and all flies and watched it float away into the fast current. My friend saw it all and after a few jibes, offered to share his set up, and we took turns the rest of the day. We landed my rainbows that day.

But I have fished with hoodoos as well. One guy we nicked named Trigger. He was so nervous and jerky casting and moving around the river we thought he had an itchy trigger finger and thus the name. He could destroy a beautiful fish laden stretch of river faster than anyone I have seen, with sloppy casts, poor retrieves and a general disharmony with the environment. And he liked to talk, talked way too much. So just being around the guy brought my fishing down and took away my rhythm. Plus, he had the very real affect of spooking any fish near us. They must have known he was a hoodoo as well. One day was enough with Trigger.

Nick White comments:

Actually, I wonder if the null hypothesis is that we're all natively hoodoos…with only will, practice and a life record to help us refute it?


George Parkanyi responds:

Humanity in the aggregate, and individuals all, are - maybe flawed isn't the best term - let's say limited, at any given point, by the sum total of our experiences and our genetically born underlying capabilities and pre-dispositions. Most of us I would think have far more potential than we ever actualize. As infants and children, we start out gang-busters, absorbing everything - especially information and ability most pertinent to our survival. It is primarily a world of exploration for us at that time, underwritten by the support of those that take care of us in the early years. We're all about curiosity and imagination. As our thirst for knowledge and experience leads us to new experiences, we also begin to develop routines and habits, which enhance efficiency and conserve energy, but also help us re-experience that which we have enjoyed or that have worked in our favour before. The filtering begins, and the type and nature of recurring experiences that we seek increases. Habits take form, even at a young age. The continuously developing habits, I believe, progressively and increasingly compete with our desire and ability to pursue new experiences. At certain points in life, we even choose massively pre-packaged experiential templates (e.g. marriage, career) as well, which hugely filter and channel our future experiences. Ultimately, we (not all of us, but a large portion) reach a point where there is no further desire to seek new experiences that are outside our past experiences. Our habits completely define us. As we age, we also begin to lose the resources, particularly health and energy, with which to pursue and expand our overall life experience.

Perhaps a hoo-doo is simply a person that can or will not go to the next level, and finally settles for habit being the determinant of his/her future experiences. Perhaps they give up on the pursuit, or are ultimately distracted away from seeing or imaging that next level of experience beyond the point that they have already reached (which point would be different for each person), and never even think to look toward the horizon of their life again. All I know is that habit is a very powerful force, and ultimately I think it overwhelms us.

John Holley comments:

"Amen, JT. Sorry I made you burn a shirt that time I hugged you at the Mets game, Vic!" KD

Just to show I put my actions where my mouth is, I will share with the list that I recently have read two very important books that have shaped my life thus far. Both are shared favorites, highly insightful, and forever giving and common amongst the Spec Listers:

1) Memoires of a Superfluous Man - A.J.N. (via Vic)

2) Five Lessons: The Modern Fundamentals of Golf - Ben Hogan (via my Dad, also Kevin Depew's fav golfing book)

These books are on my top ten list. If you haven't read them then do it. In fact read them over and over again.

Other than G-man's speech in Atlas, the 1 thing I hang onto that Lack shared recently in a post regarding his Father that would get you out of being a Hoodoo is appropriately going to be number twenty six.

26) “If you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down on his shoulders—what would you tell him to do?” " To Shrug." Shrug, bare more. Your mind can handle it.



Richard RollThe annual meeting of the IAFE in New York on 2010/06/18 featured UCLA's Prof. Richard Roll , who was a colleague of Chair at the University of Chicago many years ago. He started out by warning the audience that his explanation is different from everybody else's, cannot really be considered proven, and may be hard to accept. Nevertheless he urged the audience to keep an open mind, if only because if this explanation is correct then the current remedies may actually be harmful.

First he dismissed the popular idea that inappropriately low interest rates caused a bubble in real estate prices, which then crashed. Although nominal interest rates were low, the more relevant real interest rates (as shown by the yield on TIPS) were actually rising during the period 2004 to 2007.

Also, defaults in the debt or derivatives markets cannot have been at the root of the crisis, contrary to common opinion. The net amount of debt in the economy is zero (someone owns each debt and someone else owes it) as is the net amount of derivatives (for every long there is a short). Default on debt simply involves a redistribution of wealth, not a destruction of wealth. For example if a borrower defaults on a $300,000 mortgage, and the house is now worth 200,000, the result is essentially as if the bank had given a $100,000 "gift" to the borrower. One is better off and the other is worse off, but the net national wealth is unchanged. These are just redistributions with no (or little) system wide effect.

So what happened? Roll believes that the root of the crisis was a reduction in wealth, and specifically a drop in the value of human capital. Recall that human capital is the present value of all future labor income streams for all persons. It is very difficult to measure because it requires knowledge (or estimates) of the future; but it must be a very large number, perhaps the largest component of national wealth. Roll believes that the value of human capital is correlated with the value of real estate and, to a lesser extent to the value of the stock market. The correlation can be seen, for example, in the fact that people who expect to have a high income in the future live in expensive houses; the value of someone's house is to some extent an estimate of that person's future income.

According to Roll a sharp drop in the value of human capital took place in 2007-2008. This immediately, or perhaps with a short lag, caused a drop in the value of real estate and (to a lesser extent) a drop in stocks (because if the people's future income is expected to be lower, the revenues of corporations will also be lower). We cannot measure the drop in human capital directly, but the drop in real estate and stocks is a clue that (according to Roll) the value of human capital dropped.

The only remaining question is why the value of human capital fell. Roll's controversial explanation is that the market correctly anticipated that government intervention would greatly increase in the years ahead, and that his would cause a permanent lowering of the rate of growth of labor income. Economists have found that past a certain point, a decrease in the share of GDP generated in the private sector leads to lower growth; conversely "liberalization" or an increase in the private share typically leads to higher growth.

This explanation was contested by a member of the audience, who said he had worked in the mortgage securities field and who felt that enormous problems developed in the mortgage market which the Professor was leaving out and which were essential to understaning the crisis.

Another member of the audience pointed out that the professor's explanation is similar to the theory of Amity Shlaes as to why the Great Depression lasted a long time.

Another critique was made by derivatives textbook author John Hull, who felt that the human capital explanation was on the right track, but disagreed about the cause. He felt that the markets began to realize that the US was increasingly unable to compete with China and could not easily restructure itself because of weaknesses in education and skills of the US population. Roll replied that this explanation was too specific to the Us, and did not account for the fact that other countries, for ex. Great Britain, also experienced a severe financial crisis.

Steve Ellison writes:

One possible reason for a decline in human capital is the aging of the population. As the average age of the population increases, the value of future income decreases.

Rocky Humbert writes:

Roll says, "Default on debt simply involves a redistribution of wealth, not a destruction of wealth. And that wide-spread defaults have no system-wide effects."

His argument is like saying "Muggers and bank robbers simply involve a redistribution of wealth, not a destruction of wealth." He ignores the costs and consequences that wide-spread mugging and bank robbing would have on behavior and economic activity. He also ignores that bankruptcy and reorganization imposes significant costs on all of the stakeholders (and by extension, society as a whole.) That's one reason why the value of an enterprise declines as it enters bankruptcy protection. Defaults is not a zero sum game with the value moving from shareholders to creditors. It's a negative sum game.

Professor Roll's argument falls down when one considers that "human capital" is a balance sheet item, but "human income" is on the cashflow statement. A country, company and individual with a negative net worth (negative human capital) can function without any problems — but it's when the cash flow cannot support the expenses that the problem causes a crisis. Hence, human capital is like goodwill on a corporate balance sheet. It's an accounting fiction. It's the human cash flow that matters.

Gibbons Burke writes:

Abortion and contraception have taken a heavy toll on human capital. Since Roe v. Wade was decided, over 50 million potentially productive human beings have been murdered in the womb in the U.S. alone.

Kim Zussman adds:

You wrote "the drop in real estate and stocks is a clue that (according to Roll) the value of human capital dropped."

Then it must have been true that human capital (anomalously) increased, causing the housing bubble in the first place.

In the attached chart (Case-Shiller real house-price data, 1890-2010), the bubble peaking in 2006 DWARFS all other housing price peaks over 120 years.

Perhaps a surreptitious rally in human capital occurred, manifested by the unprecedented housing bubble?

Rudolf  Hauser comments:

It is not quite fair to criticize Prof. Richard Roll without having heard his presentation, but based on Alex's summary thereof, I will do so nonetheless. I agree with some of what he has to say but differ in many respects. The main failure is to make any reference to the discount rate. Wealth may be the present value of future income but that is both a function of those future income streams and the rate by which they are discounted. I also find the focus on the value of human capital a strange form of analysis which ignores some market realities as to what actually happened.

Let me start by a very simplified explanation. Real wealth in the capital stock is created when someone labors to produce it. That includes amounts spend in developing human capital via education and training. That labor means that consumption will be less than the amount of production by the amount of that capital investment. But that tells us nothing about how existing wealth is valued. Assume A is moving from NY to LA and B is moving from LA to NY. Both purchased their homes for $100,000. They now decide that their homes are worth $500,000. They trade homes. All they have is capital transfer. It hardly matters what the actual value is in that it is an even exchange. Now in reality A will sell his home for that amount to someone, just a B will, and they will both buy their respective homes from others. The ignoring the intermediate transactions, that is in effect what you have. Now in the past people and lenders would base their decisions largely on their expected future incomes. But in the sort of bubble situation we had in housing, people were expecting home price appreciation to bail them out. In essence, expected future appreciation was part of their anticipated income stream. Now when it was finally realized that this assumption was a chimera that it was decided that the two homes were only worth $300,000. Now wealth has declined in value. The only question is who bears the loss. Given the mortgage amounts the lenders might well find that they must bear some of that loss. There is no reason to refer to "gifts" to the borrower. It is the decline in the value of the property, of wealth that causes the loss. It makes no sense to call that loss a gift.

Then we get to what brings about the additional losses of real wealth. That happens when capital, either physical or human, becomes useless in producing future income. That can happen when lenders refuse to renew loans and/or revenue declines cause bankruptcies. Long periods of unemployment destroy human capital. Physical capital decays from neglect. And that can happen because firms are driven into bankruptcy because of debt defaults and their ability to refinance themselves.

As to the argument that this was a drop in the value of human capital, it is first of all something that cannot be measured. The wealth we can measure has cyclical tendencies. While the recent recession was one that might logically influence future expectations, for the most part recessions are and should be expected as they have always happened from time to time. There is no reason why they should change long-term expectations other than emotions. What does happen is that there is a need in the time of crisis to have more liquidity. That increases the risk premium on longer-term and less liquid assets. Part of that increase in returns is an expectation of capital gains when the liquidity crisis/recession ends. That is why we often see an inverted yield curve leading into such declines. Logically, the yield curve should become more positive, not turn negative, because risk premiums should rise more on the longer term assets. But what matters is total return and that included anticipated capital gains. When those are not great enough the yield curve does not invert, as was the case in the 1930s. Well if the declines in wealth were due to changes in future expectations that is not what you would see. Rather it is because of what I would call risk liquidity premiums rising. If Roll's argument were valid with regard to government intervention, how does he explain the increase in stock values of the past two years-a period when by all logic the changes in government should be increasing fears of greater intervention?

What happened was that the markets finally realized that with all the complicated debt and derivate structures that depended on counterparties many transactions away to deliver was in doubt and that no one's balance sheets could be trusted anymore. With that lending dried up and all values where put into question. That cause a large increase in risk liquidity premiums that was only mitigated by the Fed belatedly pouring in large amounts of liquidity and the government offering guarantees for parts of the financial system.

Another point, although a bit more trivial. When Alex writes that Roll said that "The net amount of debt in the economy is zero." he ignores the fact that some of that debt is owed to foreigners. That is the statement is only true in an international sense.

What you had in this period was an increase in the foreign inflow of savings. Net fixed non-residential investment by business relative to GDP was significantly lower than it had been in the 1990s. In essence there was too much savings wanting to earn higher returns relative to the business investment opportunities leading investors to finance a housing boom instead.



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

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

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

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

Scott Brooks comments:

Two thoughts on this:

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

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

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

Pitt. T. Maner III comments:

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

Meanwhile in Oakland, Ca:

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

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

Al Corwin writes: 

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

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

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

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



My grandfather grubstaked miners. I have grubstaked many many systems. Only one made money and then ok but no great shakes.



 A trade is like the flight of a boomerang.

One must aim and grip the boomerang with purpose and correct resolve. Similarly in trading, you need to aim your capital tool and set parameters for its release. The boomerang slices through the wind using the force from the throw and release as its starting power and at its farthest point from home begins its return trip using that same wind that was once resistance as an impetus to make it back to the thrower. The trader throws out his rang and at some point of apex or apogee collects his win and then collects his tool as it comes back to him. The winds of resistance. As in trading, sellers and shorts against you if you are long are needed in order to get your trade executed in your favor and throw back your tool after you have made good.

If you throw the rang too flat, it goes swooping up and dives to the ground. This reminds me of getting into a stock that's going up fast or parabolic only to end up crashed, a rookie mistake of throwing the rang like a frisbee. Yet, many like to trade the super hot parabolas. Throwing it correctly means going out towards the horizon with an almost 90 degree angle of release or with a small amount of tilt to the right for a right handed thrower. Going with the trend is almost your best bet to get a good trade started. Aim the rang too low to the ground and it never catches real flight, aim too high and the tool will fly high and go farther back behind you on the return. Why trade for a tiny objective-aiming too low? Why trade for a sky high result which makes you wait and hope for it to come back to you.

Adjusting for the winds. As in market conditions you must know what the prevailing winds are before you throw out a trade or your rang. You must have the winds hitting you directly in the face. You must then throw 45 degrees right of this line and then the rang will use the force of wind correctly and mesh its aerodynamic motion of spin, forward motion and eventual twist to cut through and then ride out the winds back to the thrower. Sometimes you need to use a heavier rang for different wind conditions. Sometimes you cannot throw at all based on wind speed, or if the winds are swirling and coming and going from different directions.

Sometime trades get cut short. Sometimes they hang up or drift away and get lost. Throwing the boomerang wrong and or into the winds incorrectly leads to less than optimal results.

Catching the rang is done with two hands clapping flat together with palms catching the apex of the rang, not the edges which are spinning like blades and can nip, cut, or bruise your fingers or hand. Sometimes you may want to show off with a one handed catch only to get clipped-a trading bravado and its all too real result.

Gyroscopic precession is the term used for the flight dynamics of a rang-the spin, the design of the wing and the wind shear that makes it lay over horizontal and then hover home is something to behold, a wonder when it works. Somehow when a trade goes correctly and according to plan it is a sheer marvel. You throw out your best attempt when the winds are there and then convert at that peak point of risk/objective. With patience you let the market come back to you. Don't run after it since its designed to come right back to your hand. Then you reset your trade for another throw.

A boomerang is a sporting article and not a toy like its says on the box. Trading is the same in that it's real and can cause pain if not done correctly.



Today's sermon at church began a new series on the application of wisdom as we study the book of Proverbs. I was struck by a few things and their parallels to trading:

The pastor defined wisdom as:

* A skill derived from living

* The ability to interpret the world correctly

* Being able to speak into the world, have an impact, and affect change

A trader might define wisdom as:

* Years of trading and experiencing the many ever changing cycles

* Having superior analytics or research

* Being big enough to move (or manipulate) the markets

The pastor went on to discuss what a proverb is and that context/application are important to understand them.

Two quotes stood out for me:

"A proverb is true when it is correctly applied"

"Wisdom is discerning the right proverb and applying it at the right time"

That last quote got me thinking about proverbs as being trading rules, set-ups, or some other method of deciding to enter a trade.

How many of us have the wisdom to know that a "proverb" should be ignored because it doesn't apply in this instance? Does this only apply to discretionary traders, or can a systematic trader find ways to apply this wisdom? Could one create a trading program based proverbs? What proverbs are essential for trading right now?



 The games between the playoff teams in basketball resemble nothing more than a battle between the bulls and bears with the individual star and goat players resembling the best and worst performing stocks. What can we learn from the games that will help up in markets?

1. Returns from deficits are often probable. The Lakers were behind by 13 points.

2. Multiple comparisons make ephemeral seasonal and set up patterns completely non-predictive. Boston C's had won 4 of its last 4 games out of 7 in the playoffs. C's had won all 11 finals. They had led 3/2 of 25 finals. The team that had led 3/2 won in 21 of the series. The team that was ahead the first quarter won each of the 6 previous contests. C's were 12/2 in games they held their opponents below 90. All these in C's favor, but they lost. Many more. Similarly for setups for markets.

3. An individual good player or bad player is the difference between success and failure. The placement of Robinson in the game when Rondo got tired was enough to insure loss for Boston as was the loss of their center. An individual stock like Proctor and Gamble, or Apple or GS can be the difference between a good or bad day.

4. The home court advantage is very great. The Lakers were well rested and they know the spins of the balls. The angles of the chess board are key in a blitz game. A market that has not used up all its bullish or bearish juices with a recent spate of victories on the road, i.e. a big up trend is much more ready to perform.

5. A strident approach never beats the thoughtful one. Doc Rivers was yelling at his team to perform and not be heroes while Jackson was patiently telling Kobe not to be so animated.

6. Rebounding is key. The C's shot 7 percentage higher than the the L's. But they were out-rebounded by 10. The markets that have the ability to swing back from deficits throughout the day get more chances to win.

7. The ability to score from the paint was key to the victory. If you take care of the draws, the easy shots, the wins will take care of themselves. A market that goes up or down in an uninterrupted way throughout the day is much more likely to show subsequent superior performance than one that's constantly backing and filling.

8. Good health is the key to victory. The injury to K. Perkins of Boston led to the 53-40 rebounding advantage of Boston that was the key to victory. It also had a ripple effect on the smaller Boston players making them try harder to get rebounds after their shot, and paved the way for the loose cannon Robinson to get in the game to spell Rondo thereby cementing the loss.

9. The tortoise beats the hare. The C's were ahead for 90% of the game, but they managed to lose. It's the team that has not lost all its energy for the final part of the day that is going to win. The C's were all enervated after all the fast breaks and helter skelter shooting so uncharacteristic of them, and reminiscent of the Knicks with no rhyme or reason to their play in the fourth quarter.

10. Never give up. The L's missed more than half their foul shots, made only 30% from the floor, got only 20% shooting from Kobe, and were behind the whole game, including an insurmountable 13 in third quarter but managed to win. They refused to give up. Neither should the market player when behind and he's tempted to stop himself out.

Pitt T. Maner III writes:

Game 7 was not a pretty game. The refs very early decided not to call fouls. The 2 teams recognized that immediately. Defense, boxing out, rebounding and positioning became critical. San Antonio Spurs played that hard defense during some of their title runs.

Boston to some extent overleveraged on defending Kobe. Ray Allen played him tough but the rotation to Kobe left other players open and it was only a matter of time before experienced players like Artest and Derek Fisher hit key shots or picked up rebounds. Lamar Odom began dribbling the ball up the court in Game 6 that changed play setups.

Calm coaching (emotional instructions vs. critical assessments) , adjustments and situational awareness were important. Pacing was key. If you go out too fast in a series or game you can "blow up" in the end. Developing a rhythm is important to success. Very small things like having Vujacic in for free throws made a difference.

The Lakers played hard towards the end of several games they lost. There was a constant pressure that was palpable and it let the Celtics know that if they missed free throws or shots or turned the ball over they could lose. So instead of playing to win the subconscious note was to not lose. Avoidance of choking replaced winning thoughts.

Noise, trash talk , crowd hostility, and assortments of distractions had to be worth 2 to 3 points for the Lakers.

The overall theme seemed to be that hard work, rebounding and experience (the 10 and 13 year veterans) and suffocating defense won out over shooting % and a deep bench. Past history was not predictive—younger players weren't born and had no sense of history in most cases. Bill Russell who?

Ken Drees writes:

The psychology of not losing is more aptly described as the art of losing on schedule.

This has been mentioned before I believe–teams that win game 5 and go into game 6 with a mentality of only having to win 1 of 2 are setting themselves up for failure. Like the Indians against Boston being up so many games in the alcs and only having to win one—just one game and their pitching aces choke. Once you lose the first game, then the subsequent game is a must win and then the pressure is all on you and not on your opponent.

In trading, after a good run–one may think that one only has to trade even or slightly better to keep a winning scorecard. Or in golf, with a lead playing for pars instead of continuing after birdie golf. When you are hot you have to play or trade even better. Its time to focus and excel, not coast to the finish. When you are in a slump, then its hit the practice courts/cages/charts/post-mortems.

Lars van Dort adds:

In the same spirit is something I remember from a book on chess by Max Euwe (world champion 1935-1937). He wrote that after gaining a material advantage, one may have the tendency to play more cautiously. Instead, one should strive to put the extra material to maximum use, keep the pressure on and not shy away from complications. I have often found this thought to be very useful during games of chess and indeed other activities.



Tinsley vs. ChinookI was having a discussion with a colleague on the topic of Chess vs. Checkers. Somewhere I had the impression that Checkers had been "solved" –that it is ultimately an elaborate version of tic-tac-toe, i.e. there is a well-defined correct move to make in every situation. Chess though is different, as I understood it–there is no known correct way of playing in every situation, either because it can't be known in principle or because the computers just haven't found it yet. Can someone set me straight on this topic? (Background: I haven't played chess or checkers in over 30 years, but I am quite good at tic-tac-toe.

Nigel Davies weighs in: 

As I understand it there is no 'solution' as such to either game and that with checkers in particular it is quite easy to make it considerably harder by playing on a larger board and with more pieces (one can also play 'big chess', though this looks somewhat artificial to my eye). With regard to board games being 'computer proof' it's also worth checking out Shogi and (especially) Go where computers are still rather mediocre compared to the best humans.

From the point of view of educating children all of these games are wonderful in that they can teach the young to falsify their own ideas. In order to play 'well' one must find out what's wrong with a move before playing it on the board.

One major consideration in the choice of game might be the number of opponents to be found. In the West at least I believe this is where chess shows to advantage.

Hope this helps. 

Pitt T. Maner III writes:

TinsleyDr. Schaeffer wrote an appreciation of one of the best checker players ever, Marion Tinsley, who actually liked the challenge of facing a computer (nicknamed Chinook).

After Chinook's first game against Tinsley in 1990, we started analyzing the game. Tinsley began recounting the history of the line we played, recalling games he played in the 1940's! The move sequences flowed easily from him without hesitation, sometimes annotated with the name of the opponent, date or place where the game was played! 1947 was as vivid in his memory as if it were only yesterday. The second facet to his play was his incredible sixth sense. A glance at a position was sufficient to tell Tinsley everything he needed to know. For example, in 1990 Chinook was playing Tinsley the 10th game of a 14 game match (won by Tinsley 1-0 with 13 draws). I reached out to play Chinook's 10th move. I no sooner released the piece when Tinsley looked up in surprise and said "You're going to regret that". Being inexperienced in the ways of the great Tinsley, I sat there silently thinking "What do you know? My program is searching 20 moves deep and says it has an advantage". Several moves later, Chinook's assessment dropped to equality. A few moves later, it said Tinsley was better. Later Chinook said it was in trouble. Finally, things became so bad we resigned. In his notes to the game, Tinsley revealed that he had seen to the end of the game and knew he was going to win on move 11, one move after our mistake. Chinook needed to look ahead 60 moves to know that its 10th move was a loser. In my experience with tournament chess and checker players, the sixth sense is experience. It is well-known how intensely Tinsley studied the game, analyzing anything from a Grandmaster game to a game between novices. His uncanny ability to know good from bad and safe from dangerous, is the direct result of all his hard work. Strong chess players have the same ability, but perhaps it is not quite as evident as it was with Tinsley .

Nigel Davies writes:

Seems like we get a whisker away from quite deep philosophical questions. My personal belief is that the goal of 'replacing humanity' in the cause of 'efficiency' is a deeply flawed one. It always feels to me like the attempt to show that computers can 'play' these games much better makes our attempts at self-improvement appear futile, an idea which many people will buy into. Is it too fanciful to suggest that they represent a 'greater goal' of being looked after by machines whilst humans have mindless 'fun'? Nigel Davies

David Hillman writes:

This is not unlike giving up the warm, tactile sensation of the paper page in a book for the slick plastic of a Kindle, or the daily newspaper's beautiful scent of cheap pulp and ink replaced by the netbook's display. The aromas of silicone and polymers do not mix as kindly with the scent of espresso wafting on the morning air. My own livelihood is derived from computer-based industrial productivity and efficiency systems, but my life is kept on a yellow legal pad with a #2 pencil. Balance, always balance. To paraphrase Queen, "we need it all and we need it now." The Deep Blue's, Chinook's, etc. may be wondrous, but there is simply no mineral nor petrochemical-based substitute for the hug of a happy child, for the lap of a caring spouse upon which to lay one's head at the end of a bad day, or for the twinkle in a grand-master's eye across the chessboard when he mates you in 6 moves.

Nigel Davies responds:

I don't think it's the same thing David. An analogy with having a kindle versus a book would be to play chess against a human via your PC. Having computers do the playing and trying to demonstrate their 'superiority' is more like having them write the books, and purportedly do it more efficiently than humans; fewer words for the same meaning perhaps, 'War and Peace' reduced to 10 pages.

Chris Tucker agrees:

I agree with you completely Alan, my point is just that programmers are not out to replace us completely (yet, anyway), but they are out to codify decision making. Games are a good place to do this because the rules and possible moves are very limited, even though the number of possible outcomes can be astronomical. The arena is structured and they can test and validate their ideas within this framework. The idea of game playing is much deeper, philosophically, (as Nigel suggests) than most care to admit. I will leave that bit for you two to explore. Machines that can replace the humanity of squaring off with an opponent do not exist, there are simply too many levels of interaction there. 

Nigel Davies replies:

Chris, there is no decision making in the programs or any attempt to replicate human thinking, they simply use brute force to analyze all the possibilities (with chess slapping in a primitive evaluation function) and the mathematical limitations of the games enable them to get away with it and 'win'. Perhaps when they started out the intention was to create 'artificial intelligence', but I don't see that this claim can be maintained given the route they have taken. Looks like an ego driven attempt to 'beat mankind' of the type which enables a car to go quicker than someone on two legs. 

Dave Bacon addresses the original question:

I believe Checkers on a standard sized board has indeed been solved. The reference is Science, Sept. 2007, Vol. 317. no. 5844, pp. 1518 - 1522.

“Checkers Is Solved” Jonathan Schaeffer, Neil Burch, Yngvi Björnsson, Akihiro Kishimoto, Martin Müller, Robert Lake, Paul Lu, Steve Sutphen

The game of checkers has roughly 500 billion billion possible positions (5 x 10^20). The task of solving the game, determining the final result in a game with no mistakes made by either player, is daunting. Since 1989, almost continuously, dozens of computers have been working on solving checkers, applying state-of-the-art artificial intelligence techniques to the proving process. This paper announces that checkers is now solved: Perfect play by both sides leads to a draw. This is the most challenging popular game to be solved to date, roughly one million times as complex as Connect Four. Artificial intelligence technology has been used to generate strong heuristic-based game-playing programs, such as Deep Blue for chess. Solving a game takes this to the next level by replacing the heuristics with perfection.



 Channeling current events like only the Mistress could, she dropped a "Strasburg Curve" on the markets today, the lowest volatility of the last 'n' days in many markets where volume had ruled the day and she did it on a witch infested options expiration. Everyone was looking for heat. How many were left mightily swiping at air as the ball softly settled into the catcher's mitt?

The kid goes live at 7:05 est. WSox vs Nats.



 Robinson lost the game for the Celtics as predicted, missing key shots, scoring no points, taking Rondo out of the game, and completely negating the Celtics ability to get any rebounds while he was in and field marshaling the final loss. It reminds one of feeble attempts of stocks to end the day higher when bonds sail through the roof with some random announcement of manufacturing output in Philadelphia or some such.

Al Corwin adds: 

I was distressed to see your prediction play out as it did regarding Robinson. It's a little harsh to blame the whole loss on him, but he had a chance to make a positive difference at a critical juncture and did not. He was only in for a few minutes, and the Lakers gained eight critical points in that short time span.

As much as I am pained by the thought of another championship banner hanging in Los Angeles instead of Boston, the Lakers have to be commended. I am not used to thinking of the Lakers as gritty, and this was a gritty performance. They dug deep when the Celtics had the chance to put it away and they outscrapped the Celtics for loose balls on several critical occasions in the fourth quarter. A little less than maximum effort at any point in this game would have doomed the Lakers, but they did not shirk.

I have to admit that my admiration for the skills of Gasol were elevated by this series. He has a remarkable set of offensive skills, and he plays with fire in his heart. His offensive rebounds at critical times did much to put the game away. His defense was much better than the book on him would indicate. His most blatant weakness is at the line, but he made the ones that counted at the end.




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



 A very good book on swimming comparable to Aldo Nadi on fencing or Bacon on speculation or Wiswell on checkers or Caples on advertising or Williams on trading or Tilden on spin of ball is The Science of Swimming by James E. Counsilman. It was given to me by John Floyd. Everything is tested. What other great books on their fields have carry over value or are beautiful in themselves?

Ken Drees writes:

Trout by Ray Bergman

Jeff Watson writes:

Scarne's New Complete Guide to Gambling. A true masterpiece.

Herb Cohen's You Can Negotiate Anything has probably saved me $200,000 in my lifetime. It is also a true masterpiece though poorly written.

Ken Drees writes:

If this book string gets larger lets get some kind "greatest books" recommended list archived for the spec site.

Victor Niederhoffer writes:

Good idea. I'd like to make dailyspec a little better and more useful as it's shameful that we have so much good within us and we are like a ship passing in the night. 

Tim Melvin writes:

 Anyone who has not yet read Louis L'Amour's Education of a Wandering Man should do so at once.

Jeff Watson adds:

Not to shamelessly plug my blog , but I have several sections devoted to free book downloads. One section is on old books about trading and Markets…I have Bacon's book in there. One is a section on Classics that you might have slept through in college, I also have a selection of Nock, H. L Mencken, and Darwin. Feel free to peruse.

John Floyd writes:

Karate: Technique and Spirit
by Tadashi Nakamura

John Tierney writes:

For the younger (much younger) generations:

The Dangerous Book for Boys
by Hal Iggulden

For graduates, instead of the popular but worn, "If…"

Message to Garcia
by Elbert Hubbard

William Weaver writes:

How to Win Friends and Influence People by Dale Carnegie

Strategy in Poker, Business & War by John McDonald and Robert Osborn

The Broker's Edge; How to sell securities in any market by Steven Drozdeck and Karl Gretz

The last book is the only one that should need an introduction. It was definitely written with a desired purpose, but the methods described within can be used across most any social situation. Also, the original edition of How to Win Friends and Influence People has a chapter about writing letters in business that is not included in the versions since– definitely worth looking for.

Anton Johnson writes:

 Selling The Invisible by Harry Beckwith

Chock-full of lively anecdotes and short stories, Beckwith's engaging style and muted humor softens this typically dry subject matter. Although described as "A Field Guide to Modern Marketing", there are abundant philosophical lessons, applicable to personal relationships, speculation and beyond.

Jay Pasch writes:

The Baseball Codes by Jason Turbow is one such book to consider:

Everyone knows that baseball is a game of intricate regulations, but it turns out to be even more complicated than we realize. What truly governs the Major League game is a set of unwritten rules, some of which are openly discussed, and some of which only a minority of players are even aware of. Old-timers and all-time greats share their insights into the game's most hallowed-and least known traditions. At the heart of this book are incredible and often hilarious stories involving national heroes in a century-long series of confrontations over respect, honor, and the soul of the game…

Victor Niederhoffer adds:

It's a given that Martin Shubik 's recommendation of the best book on trading as Horse Trading by Ben Greene should be up in the pantheon. 

Alan Millhone writes:

Fortman's Basic Checkers. It is long out of print, but a classic studied by all classes of players.

Larry Williams writes:

For advertising, any copy books by Clyde Beddell–of the Caples school. Clyde also traded up until his death he did a remarkable job on the Urantia book.

Alston Mabry adds:

On wrestling, A Season on the Mat: Dan Gable and the Pursuit of Perfection by Nolan Zavora

Amazon.com Review

Had Dan Gable played baseball or basketball instead of wrestled, not only would ad campaigns have been built around him, but also a wing in the hall of fame. Gable, a true athletic icon, dominated his sport–a virtually obscure one by American standards–as no one has before or since. An Olympic champion, Gable was virtually unbeatable. As a coach, he's been dauntingly invincible. His Iowa Hawkeyes have won 10 straight national championships–15 altogether–and every Big 10 title in the sport since Gable took over the program in the mid-1970s. A Season on the Mat is the engrossing narrative of Iowa's 1996-97 Cinderella season, Gable's finale as coach, and the intriguing hold wrestling has on its participants. Still, Gable is the clear star here. With drama and pathos, author Nolan Zavoral profiles him as a fiercely driven and competitive man, wracked by physical and emotional pain as he grapples with the life-altering decisions that he knows it's time to make.

Jim Sogi writes: 

On my 'great' list: 

Living with Children by G. Patterson

Parents and Adolescents by G. Patterson

Conan The Conqueror by R. Howard

Alston Mabry adds:

A rich source of interesting how-to is books on food and cooking. Here are some I have found to have great usefulness and depth:

The Flavor Bible: The Essential Guide to Culinary Creativity, Based on the Wisdom of America's Most Imaginative Chefs by Karen Page and Andrew Dornenburg

Roasting-A Simple Art by Barbara Kafka, Maria Robledo

Outlaw Cook by John Thorne 

The Way to Cook by Julia Child



I just read Rocky's post and his wife's comments on her van. In 1999 I completed a big roof job for a man who just retired from a large pipeline firm he owned. In 1981 he had bought new the Ford pick up in the photo. Upon completing the roof work he told me he was going to sell this truck. I asked at what price? That was a Wednesday and he said he would quote me on Friday what he wanted. It has a 300 six and is 3/4 ton automatic. I bought it for 1,100.00. It serves my needs. The other day someone asked me when I would get another truck? I replied in jest, "three more payments and it will be mine!". They gave me a dumb-struck look.



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

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

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

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

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

Scott Brooks lectures: 

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

Al Corwin agrees:

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

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



Attached chart is 10Y-1Y (FRED, "Market yield on U.S. Treasury securities at 10-year, 1-year, constant maturity, quoted on investment basis") vs date, along with log SP500, 1982-present (weekly).

Note 3 major minima: 3/89, 8/00, 11/06
Note 3 major maxima: 7/92, 8/03, 4/10



Starling flockHere is an interesting study I read in Wired. I wonder if anything useful can be applied to markets that suddenly move en masse with funds buying or selling in unison as a result of an outside stimulus?

Amazing Starling Flocks Are Flying Avalanches

To watch the uncanny synchronization of a starling flock in flight is to wonder if the birds aren't actually a single entity, governed by something beyond the usual rules of biology. New research suggests that's true.

Mathematical analysis of flock dynamics show how each starling's movement is influenced by every other starling, and vice versa. It doesn't matter how large a flock is, or if two birds are on opposite sides. It's as if every individual is connected to the same network.

That phenomenon is known as scale-free correlation, and transcends biology. The closest fit to equations describing starling flock patterns come from the literature of "criticality," of crystal formation and avalanches — systems poised on the brink, capable of near-instantaneous transformation.

In starlings, "being critical is a way for the system to be always ready to optimally respond to an external perturbation, such as predator attack," wrote researchers led by University of Rome theoretical physicist Giorgio Parisi in a June 14 Proceedings of the National Academy of Sciences paper.

Parisi's team recorded starling flocks on the outskirts of Rome. Some had just over 100 birds, and others more than 4,000. Regardless of size, the correlations of a bird's orientation and velocity with the other birds' orientation and velocity didn't vary. If any one bird turned and changed speed, so would all the others.

In particle physics, synchronized orientation is found in systems with "low noise," in which signals are transmitted without degrading. But low noise isn't enough to produce synchronized speeds, which are found in critical systems. The researchers give the example of ferromagnetism, where particles in a magnet exhibit perfect interconnection at a precise, "critical" temperature.

"More analysis is necessary to prove this definitively, but our results suggest" that starling flocks are a critical system, said study co-author Irene Giardina, also a University of Rome physicist.

According to the researchers, the "most surprising and exotic feature" of the flocks was their near-instantaneous signal-processing speed. "How starlings achieve such a strong correlation remains a mystery to us," they wrote.

Read More

Russ Sears comments:

 It would seem to me that "scale free" correlation and one bird following another bird is a fairly parallel description of what happened with mortgages and the banks.

When regulators encourage investing in subprime, quasi regulators like the rating agencies turn a blind eye escalating risks outside their models and encourage economy of scale… no matter the scale and early entries appear to print money and apparently know where all the regulator stuffed bird feeder are….But unlike the flock size the markets all have their limits on supply and demand no matter how "synthetic" you make them it still comes down to this reality.

I will leave it to the reader to decide what this has to do with trading systems, risks managment and Mark to Model apprasials during booms and bust in home ownership.

Pitt T. Maner shares:

StarlingI found this unusual story from the UK, a "flight to safety" disaster:

A flock of starlings which died after they crashed on to a driveway could have confused the drive's shingle with reeds they could land in or might have been trying to escape a predator, experts suggested today.The flock of 76 birds crashed into the ground because of a "fatal error" in their flight, according to an inquiry led by the Veterinary Laboratories Agency (VLA) wildlife group.

They could have crashed as they tried to escape a predator such as a sparrowhawk or become confused by traffic, light reflections or noise, experts at the VLA said.

The VLA also said the shingle on the drive was a similar colour to reed beds and the birds could have thought they were descending fast into tall reeds when they hit the ground.

The agency, along with Natural England and the RSPCA, carried out an investigation into the massdeath of the starlings after dead and dying birds were found littered across a garden in Somerset earlier this month.

Onlookers heard a whooshing sound before the birds were spotted falling from the sky and on to the driveway of a house in Coxley in good weather conditions on Sunday March 7.

Investigation of 60 birds found they were in good condition with no broken wings, legs or skulls but a number had damaged beaks and blood in their mouths.

Read more 

Jeff Rollert comments:

I suspect that the lead birds are self selecting, such that their responses are a nano second faster than the others. I've seen some of these models, and the real life "lead" birds never fly in a straight line.



It's quite rare that an important market both rises and declines 50% in a six-month period. It's even rarer for it to happen in a low-volatility, trend-following way. For a trend-follower, this is the sort of chart that pays for a thousand whipsaws.

I call this chart the "Revenge of the Turtles!"

(It's a screenshot of Lumber Futures.)

William Weaver writes:

I seem to remember someone saying lumber futures were not tradeable due to their illiquidity. Rocky, wasn't that you last February? A specific story about not using stop losses overnight as one would always be stopped out due to m@nipulation by the l_cals. 



Over a Chinese meal, I'm considering whether past areas of price accumulation i.e 6 months ago or 12 months ago, have any more significance the closer they are to last price or vice a versa, and whether any hour of the day's trading say in S&P, is stastically significant as a indicator for the close. (As the last hour has seems to lead to plenty of whip saws lately.)



A wise man from the great white north made the comment about trading lumber below:

Lumber is a small contract and it traded limit down six days in May. Which is only a problem if you're on the wrong side of the market. Kind of like being long 3x leveraged long stocks during the May flash crash….liquidity is your enemy when you are right, and it's your friend when you're wrong…



 I strongly recommend the book Markets, Games, & Strategic Behavior by Charles A. Holt.

It is an outstanding compendium of real executable games for speculative minds. This book has been structured very well. In the process of playing a lot of games that are worked out in this book (through an associate web based free utility for most of them), one is bound to build and discover many new ones and several great variations.

Kindly do spend your valuable time reading through at least the first few pages and hopefully a game or two, and you will likely be convinced of the utility of this good work.

Perhaps at the upcoming Spec Party some of these could be played. I would imagine with the web based utility all the DNA of the Spec list can participate in them one by one from wherever we all are. It could be a new burst of thought and energy in this learning group with such diverse minds and such diverse games ranging from almost every aspect of the market and including probability matching, lottery choice anomalies, Information Learning and Signalling, Takeover games, Auctions, Statistical Discrimination, Information cascades, Co-ordination, market manipulation, Traveller's Dilemma, Volunteer's Dilemma etc. etc.

I am just 10% in to the book and am craving to have this throughly played between all Spec List colleagues over time across the internet.

Experimental learning, if you might grant a euphimisim, could be a refreshing new thing for us Speclisters.



Yankees vs. HoustonIn various readings, one casually hears about meetings between the flexions at dinner or lunch, where they discuss their positions such as the counterparts who are buying pounds from them or lunches where they all are invited to give their views. These obviously serve the same function as the annual meetings at Delphi a few thousand years ago and Jackson Hole, and Davos today, And conventions where the bigs can make sure they are on the same page. But how do they make sure they are on same page during a given day when so much can happen these days. The shadow wants to know, And at a baseball game between the yankees and Houston that Aubrey attended yesterday one was looking closely at the hidden signals and conventions for clues as to how they communicated.

One was impressed with the myriad ways the teams have evolved, their equipment, and particularly their stretches and sideways running practice to better steal. I liked also the rhythm of the throws around the infield after an out so that the third basemen would gradually approach the mound as they relayed it around the paths, and then lob it so gently to the pitcher so as not to offend the sensiblities of his pitching hand et al.



 At AccuWeather, the private forecasting service, hurricane expert Joe Bastardi said in a video presentation that there’s another formidable African wave right behind 92L: “One of the things we notice with the African wave train is that when it gets running early like this it’s usually the precursor for a big season.”

Could add to movement in energy markets. And perhaps coastal real estate too.

It used to be, from what I have heard, that beach homes in Palm Beach were not as desirable as having a house 1/4 or 1/2 mile away on the Lake Worth (west) side of the island. Now the inlet connects the Atlantic Ocean with the once freshwater lake and hurricanes can cause potential storm surges on both sides of the island. Of course in those days Alligator Joe amused tourists near what is now Worth Avenue.

More on Warren "Alligator Joe" Frazee



 As a first-time homebuyer a few years back, I am now working on becoming a first time homeseller. I was told by our realtrix that she recently had a closing that was held up by a house that failed to appraise at the selling price. Since she specializes in old houses (and ours is pushing 95) she told us that it was unlikely but possible that a sale of our house could be held up for the same reason, depending on how much we were able to get for it.

I nodded my head at the time, but thinking on it later in the day, I was more and more baffled the more I considered it. In the financial markets, if you value infrequently traded securities, then you know that the absolute holy grail of a security's valuation is an arms length trade, in size, viewable on the "tape" (stock exchange, TRACE, MSRB, etc.). Even if you have no trade, an appropriately sized offering on the security sets a ceiling on the price, while a live, executable bid sets a floor price beneath which there's no justification to value the piece. The terminology varies from sector to sector, but fair valuing, marking to model, etc., should be avoided whenever possible.

I guess people for a while have been saying the appraisal system for houses was a contributor to the housing crisis, but most claim it was improperly performed appraisals which led to the problem. To me, the whole structure of the system is wrong. Right now, it works like this: customer pulls a price less than selling price out of the air, and probably after some negotiations, a price is settled upon by the buyer and seller. At this point, it is probably a written, binding offer, contingent upon inspection and appraisal at or above selling price . THEN, an appraiser is brought in to determine "market value." But the market price has already been set! If the appraiser can't take the live, accepted bid on the very property in question as the house's value, then what can he possibly go on?

The answer, incredibly, is that the appraiser is marking to market. He is marking to a model, based on comps, accouterments, neighborhood, lot size, rebuild cost, etc., but it is undeniably a model. If the system made any sense, it wouldn't go offer -> negotiate -> agree -> appraise -> close. The appraisal would be conducted prior to the offer and negotiation as a bidding tool to the buyer… or even as justification by the seller for the offering price. As it is, the appraisal serves two purposes. One, it gives the buyer a false sense of security that he paid the right price, and it gives the bank a false sense of security that sufficient equity will be coupled with the down payment to motivate the mortgagor to perform, and/or that a sale under duress could make the bank sufficiently whole to take the loan risk. I know that theoretically appraisers don't try to "hit the number" but it seems like the knobs on the appraisal are probably turned a little bit at least to get in the right ballpark. I know that it's supposedly a science and they are professionals, etc., but still…

The structural problem, of course, is that the buyer and the lender are trusting an appraiser's mark-to-model to protect their long-term interests. It allows lenders to be more impersonal and buyers the sense they are delegating responsibility. To me, it's yet another example of unintended consequences of regulation: a process that was intended well but ultimately creates an environment where a buyer's biggest purchase in a lifetime and the financier facilitating the trade are entrusting huge sums of money to the model and signature of an interested (but probably not interested enough) third party. A signature counts more today than it ever, in a time when it probably means less than ever.

But I sure hope my house appraises right when I accept an offer!

Jim Sogi comments:

The appraisers' methods have been well tested in the courts, and recently not so well in the markets. There are 3 ways to value property:

1. Comparable Sales

2. Income

3. Replacement Cost.

Marginal price in liquid markets are set by comparable sales of that security. But we know that they can be wrong also. Comparing the appraisal methods to see if there is undue variance give some back up to each method. If one or more are way off, perhaps something is not right. Chair's Fed Model looks at the income for stocks. Replacement cost is rarely used and does not account for things like location or in the stock market, goodwill. Over reliance on comparable sales, which are set at the margin, resulted in the boom and crash of real estate and derivatives of the mortgages.There is quite a bit of play in the range of price that an appraiser can defend, and it plays out regularly in court with the IRS in estate tax cases so the method has been well tested.
They key is getting a good appraiser.

Sam Humbert explains:

The prospective buyer of your home isn’t the young couple with the cute kids and Labrador retriever you’ve been “negotiating” with. It’s their bank. The bank takes all the risk, aside from the small haircut the down payment represents. And appraisals are how banks roll. If you don’t like it, sell to an all-cash buyer instead, so there’s no bank in the picture.

Jonathan Bower writes:

Appraisers are part of the vig in a real estate transaction. As recent first time homesellers (about a year ago) who "scratched" the house, we discovered the long line of people with their hands out to help facilitate my transaction…

City (Sales and Stamp Tax)

County (Sales and Stamp Tax)


2 Brokers (on the market less than 2 weeks…)






Municipal Service Fee

Document Preparation Fee

Closing Fee

Wire Fee

Overnight Fee et al

This is when I realized why the gov't is so interested in stimulating the housing market…

Ken Drees writes:

In general, during the housing boom there was no restraint on the appraisal part of the transaction. The appraisal price was matched to or above the agreed upon sale price in order for the loan to go through. The appraisal person often asked the real estate agent what number they needed. Once again, this is not true in all cases–but obviously lax rules and lax ethics swirled around this function during the boom. Now there is a lot of heat and scrutiny on the appraisal part of the process. These people can and will be held liable and responsible for any questionable values. So naturally they are over reacting and sharpening their pencils to the point of overkill on the low end of ranges. It really is a buyers market–and only now the appraisal needs to be at or below the selling price for the loan to go through.

No wonder that money supply is high at the base level and crashing in terms of reaching the people. Where is the lending?

Rocky Humbert comments:

If a lender isn't involved, there's no need for an appraiser, and there's no bank closing fees. If one has engineering expertise, an inspector is optional. A knowledgeable buyer can also conduct his own title search from public records and (bravely) skip the Title insurance, and can also (in most states) represent themselves "Pro Se," and not retain an attorney. You can also buy and sell without a broker. All of these people are providing risk-reduction or other services for the parties.

The real "vig" in a real estate transaction is not only the stamp tax and bid/ask spread, but also new drapes for all of the windows, and the discovery that there's no way to fit your 9-foot Steinway Concert Grand Piano through the front door.

Real estate markets have one unique peculiarity: In what other market is the seller's identity and cost-basis a matter of public legal record, but the buyer can remain anonymous prior to the closing?

Phil McDonnell adds:

In a market with fungible items the fair market value is the gold standard. The reason is that the previous transaction is a good measure of value given that all items traded are identical. But in Real Estate every property is unique. Even in cookie cutter developments the locations are unique.

Real Estate also differs in financing because the margins are only about 10% or so. Your broker can and will sell you out if your stock falls in value below maintenance margin even momentarily. The bank cannot do that to a homeowner. In effect a mortgage is a loan and a put option. This is because the homeowner can put the house back to the bank if it falls underwater via a foreclosure or short sale.

In California during the boom an immigrant gardener was able to buy something like 10 houses from his friend for inflated prices because of lax mortgage appraisal standards. In scams like that the friend walks away with fast cash from the overpayment. Appraisals are really designed to weed out the risk of less than arms length transactions for the banks.

Stefan Jovanovich writes:

Around here (Contra Costa, Alameda Counties) in California the appraisers were usually in on the deal and their justification for the absurd valuations was the "fair market value" of the lots on which the houses were built. The primary fallacy was– and is– the idea that the dirt itself could be adequate security for the loan. That has been a recurring delusion throughout American history– that land alone could support debt. In the bad old days when money was itself the gold standard, bankers refused to lend against land; they limited their risk to the earnings power of the improvements - i.e. the buildings or the prepared soil. Rents and reliable crop yields were seen as the only reasonable estimate for comparable value; and, since those were expressed in dollars, properties were not considered unique. That was, of course, one of the limits of the gold standard that the newer, more flexible currency was going to solve. And it did in one sense; imagine what dirt prices would be without FHLBs, FNM, FRE and the AAA of 1938.

Rock Humbert replies:

Maslow's hierarchy of needsOuch. Maslow's Hammer just came down on my head, as Stefan once again suggests that society's ills would be cured by the gold standard.There is an important difference between saying "appraisers were usually in on the deal" (which suggests fraudulent intent), and saying the justification was "fair market value.""Fair Market Value" (FMV) is a defined term: the "price" where a willing buyer and a willing seller complete a transaction. This concept is applicable to all assets (including land, copper, gold, horses, equities, etc.), and the price can be stated in any agreed medium of exchange (dollars, gold, salt, seashells). Although it wasn't called FMV, the FMV concept dates back to at least King Solomon and the Talmud.

If a third party (e.g. a bank) provides capital for an asset purchase/investment (debt, equity or barter), and the third party is falsely induced to provide capital, this is fraud. And the existence of fraud also pre-dates modern history. Hardly an argument for the gold standard.

If the third party provides capital based on assumptions (including FMV) regarding the asset purchase that turn out to be wrong, this can be called a bad business decision. And bad business decisions are not a recent development either. Again, hardly an argument for the gold standard.

However, if the bank makes an investment because it plans to flip the loan to Fannie & Freddie– that's a completely different story. And much of the recent mess can be attributed to this phenomenon.(Yet I don't understand why a gold standard and the existence of a gold-rich Fannie & Freddie are necessarily mutually exclusive.

Perhaps Stefan will explain…. 

Stefan Jovanovich explains:

No Fannie or Freddie could possibly be or want to be "gold-rich"; if you can exchange your paper with the central bank why would you want to endure the vicious discounts that 19th century merchants imposed because they insisted on valuing their inventory by what it would sell for in cash, not what it could be appraised for or securitized into? No one here has disagreed that the state has a monopoly of legal tender. What the medium of exchange folks have said is that the government monopoly (and the potential for abuse inherent in any legal monopoly) does not matter because you can always trade your horses, copper, land for money whenever you want and the government's self-regulation will prevent abuse. Or, as Rocky put it, the tax man will take property instead of cash in payment of taxes. Alas that part is simply not true: the tax liability remains even after the taxpayer's property is seized; it is only discharged when and if the property is sold. (One of the interesting interactions of the present tyranny is how the drug laws have revived debtors prison.) Perfect liquidity, like FMV, is a notion that works better on paper than it ever does on the barrel head where - even now - legal tender (Fed reserve balances and notes) remains in limited supply. Because legal tender is in limited supply, there is the unavoidable temptation for the holders of the government to make more money available whenever Congress and the President want a war - whether against poverty or Iraq. That was what the Founders properly feared. They wanted the unavoidable monopolies of our central government - the powers to make Money and War - to be constrained by the requirement that both be approved by an actual vote of the Congress. Since they knew that no unpopular war could be waged without a debasement of the currency, they imposed the further restraint of insisting in our Constitution that the Money be Coined to a Standard Weight and Measure. Credit would regulate itself, even in a world of mark to model and foreign military/aid adventures, as long as the government monopoly could not create legal tender as needed. Money exchangeable on demand into specie was the ballast for republic itself; it might seem useless to waste all that precious cargo space carrying heavy weights that were only hoarded– until you found yourself caught in a storm– and then the ballast would be the only thing that would give the ship of state's righting arms the weight with which to do their work.

David Hillman writes:

Speaking of real estate, more particularly of having the ranch foreclosed upon, TCM [Turner Classic Movies] will air this evening at 10 EDT/9 CDT, a chair and list favorite, the original 1970 version of the classic 'demise of the old west' tale, "Monte Walsh" starring Lee Marvin. Thought some might like a heads up. Enjoy. 

Stefan Jovanovich adds:

And now for a brief jab at Maslow: anyone who would compare being the lonely Jew in a New York school full of gentiles in 1920 to being "the first Negro enrolled in an all-white children" had a sense of self-importance that would have made even our country's original hammer head (aka George Washington) blush. Talk about a hierarchy of needs!



 One has been asked the name of the beautiful Jack Schaefer story. It is Miley Bennett.

"Yes. I gave Miley the gun. But then I knew what he would do with it. I guess you'll have to let me tell this in my own way. There's no one else can tell it, not so it comes out right. I guess I'll just have to hope you understand what I mean. And how I felt."

Miley said "I'll find it. (the sheep ranch). "You see, I've got to. The sheep are depending on me. I told them I'll be back."

"Sheep didn't worry me any. They did worry the old style ranchers. Worried them and made them mad. They had been running cattle in their own way a long time and didn't see any reason why they should keep right on as they always had. These men and their kind controlled the (state dept of interior). It didn't mean a thing to them that the fed laws made no distinction between cattle and sheep. They did, and they tended to enforce it. And they had been finding ways. Sheep had been killed and flocks stampeded. I knew of two herders found dead back in the hills and several more beaten badly. Miley Bennett's was the only flock I had heard about anywehre around that year."



 I've been re-reading Daniel Duane's excellent, Caught Inside: a Surfer's year on the California Coast. The book describes the author nearing 30, caught in a dead end job, constantly reminiscing about his youthful forays into surfing and the beach culture. With great courage, he chucked his career, girlfriend, most possessions, and moved to Santa Cruz for the sole purpose of surfing every day. The book chronicled his year in Santa Cruz, starting out with the wrong board and wetsuit, and eventually becoming a dialed in surfer, at one with the sea. Along the way, he met a professor who had the magical ability of predicting exactly where a wave would break and always managed to catch the wave of the day. The professor became a guru of sorts, a mentor and buddy, and helped him on his spiritual quest. He also taught him the finer points of surfing and helped him with his style.

The professor was a Joe DiMaggio type believing in the economy of motion which he applied to his surfing, An undertone of the book, very apparent when re-reading, is that as he got better in his surfing, his thought processes became more coherent, less rambling and more linear. This book is a great read for any surfer, and is an essential read for those who want to learn about the life that ends at the shoreline. Someone once told me, or I read it or saw it in a movie, I can't remember where, "There's two kinds of people in the world. Those who live at the beach and those who don't." Such a true statement on so many levels.



Robin HoodIt is interesting to contemplate what the markets would look like if instead of a 25 percentage increase in such areas as the contributions of businesses to the interior as a door opener for 2010, they all were increased to totality–to Robin Hood away 100 % of all business profits and gains from investing. Would not employment decrease and interest rates go to zero? Would not the stock market descend? And would not the loan to holdings of government securities of banks fall to zero? Most important of all, would not the amount spent on lobbying be increased and even more important, would not all pilot fish of excessive capitulation be eviscerated? In short, the reflections on the market would not look that different from today, I think?



In a nice chapter on Morse in 50 Years On Wall Street, Clews talks about how people followed him even after he was down and out, before my dad's predecessors had to retrieve the body from the Bowery for the morgue and pay off the debts. It reminds one of the changes in tempo and forms that plague us now with the interventions of flexionic nature et al.

But he did ruin the chronic bear Little even when he had two feet in the grave.



James MadisonJames Madison's greatest fears were that future generations of American would allow faction to control politics and allow the law to create artificial monopolies. He would have been truly horrified that, in the name of the public good, states have imposed not only compulsory education but also compulsory licensing on the citizenry.

The result has been, as he would have predicted, that resumes have steadily inflated even as actual skills– the ability to read and write sentences, for example, has steadily declined. Public "Education"–the kind that the professional schoolies like the NEA have inflicted on the nation– has been the greatest bubble of them all.



 Hello Everyone:

Marion emailed me on my way home from the tournament and asked how I did.

I managed 12 points out of a possible 28. I earned every point this past week-end.

I noted all entrants had pad and paper to write down their games and to make notes. My oponents reminded me of the Market Mistress and the tricks she uses to bamboozle the unsuspecting trader in the market. I will review a few of my games to look for my mistakes and where better play might be had for my next tournamnet.

There isn't any Magic 8 Ball in Checkers or the Market. "Knowledge is Power" in anything!

I had a great time over seven 2 game rounds of 3-Move Restriction style of Checkers. 156 opening deck that is as vast and elusive as the Market.

Good luck to all traders on Monday.





The first chess computer, 1960There is a vast literature supporting the use of mechanistic decision in repetitive situations, [instead of] over relying on human expertise. Forgetting about accuracy for a moment, which is key, humans are quite inconsistent in the way they use information. Show an expert the same fact set on repeated occasions and the conclusions only correlate at about 0.50. In other words, the facts only account for about 25% of the variation in the expert’s final conclusion. This suggest that the way information is being weighted from instance to instance is inconsistent or the expert is considering information outside of the fact set. When it comes to accuracy the decision algos do better, overall.

Rich Bubb adds:

Here is an interesting example. Soon all of you will be replaced by machines [LOL]:

[An automated investing] system was developed by Robert P. Schumaker of Iona College in New Rochelle and and Hsinchun Chen of the University of Arizona, and was first described in a paper published early this year.

It's called the Arizona Financial Text system, or AZFinText, and it works by ingesting large quantities of financial news stories (in initial tests, from Yahoo Finance) along with minute-by-minute stock price data, and then using the former to figure out how to predict the latter. Then it buys, or shorts, every stock it believes will move more than 1% of its current price in the next 20 minutes" and it never holds a stock for longer."

Source: MIT Technology Review Blog

Nigel Davies writes:

That's a pretty sad comment on fund management standards. Humans have put up one hell of a fight against computers on the chess board using raw (unaided) brain power and still beat the best machines if they're armed with an ordinary PC and have a longer time limit. And that's to say nothing of the drubbing that Go players have given computers, even giving so far as to give them odds.



 On my way to the yearly checker tournament I always stop at Mehlman's Cafeteria in St. Clairsville, Ohio.

They have a tremedous selection and have two serving lines.

You stand there and can choose from an array of various foods.

Today I choose a small bowl of pickled beets and mac and cheese. Then a helping of mashed taters with brown gravy and could have had chicken gravy instead. Took a dinner roll and had a choice of butter or margarine in pats. Unsweet iced tea. They serve a world class deep dish apple dumpling and I had one today.

Today for the first time I thought of the choices while in line and what appealed to me.

The Market Trader also makes choices and buys accordingly as to appetite for various stocks.

I am at my next stop on my journey: Cabelas.

That might be another story…




 I was in Berlin recently and this opened my eyes to what is Germany today and what the Germans can do.  I visited this city right after 1989. There was a profound wound at that time that needed to heal and the eastern and western sides were so different. They had a lot of work to do on their infrastructure and mindset. 

Berlin is now a new city, completely rebuilt.  From public transportation to government buildings, roads, private corporations headquarters, you can see that everything has been done rationally and neatly. This city works pretty well. There is no traffic, there are excellent services. They restructured old buidings, keeping whatever was left from the old architecture. You can still see bullet holes from machine guns on the walls of some of these buildings. The American Embassy so close to the Brandenburg Gate, the iconic landmark of Berlin, is there to remind you of the past. 

The wonderful Reichstag, the seat of the parliament of the Weimar Republic between 1919 and 1933, was badly damaged during the war. In 1990 it hosted the ceremony of reunification and only in 1999 it became the meeting place of the parliament, the Bundestag. 

You perceive that Germans have a particular relationship with their history. Their past is not presented openly in all its dramatic aspects, but you can feel it in the air. Germany is now in a position of leadership in Europe. It is amazing what they did if you consider the situation of total destruction of this country after the war. They are the biggest economy in Europe. One of the few nations in Europe with a trade surplus. I think the current crisis has blessed Germany as the leader in Europe. In relative terms to other European countries, thanks to the crisis, they are further improving their position. Think of their role during the Greek crisis, and note how badly Great Britain is being hit by the financial meltdown.

They are getting stronger also with regard to the French, who are for sure uncomfortable with a too strong and influential Germany, although their continental ties from a political and industrial standpoint are quite good. 

 One of the long term trends I see in Europe is the consolidation of their leadership and an increased role of Germany in all European matters.  This might not be perceived well by those who look at the past history of the country, and also look internally in Germany.   Very recently, the Federal President of Germany Horst Köhler announced his resignation following heavy criticism about comments he made on Germany's military role in the world.  On May 22 upon his return from a trip to Afghanistan he stated that "in emergencies, military intervention is necessary to uphold our interests, like for example free trade routes, for example to prevent regional instabilities which could have a negative impact on our chances in terms of trade, jobs and income."  Some critics said that his comments indicated he would use the military unconstitutionally and for economic reasons. This is an important signal of the sensitivity of discussing certain topics in this country. 

Fiscal measures were decided recently; Berlin will cut the budget deficit by a record 80bn euros by 2014.  Some have been critical of German budget plans. With so many European governments under pressure, German budget cuts do not help the European economy to recover and the risk is that Europe goes back into recession. And I think it will.  Germany is also reluctantly providing the biggest national share of the euro rescue package and the bailout for Greece.

In summary, although Germany is now the recognized leader of Europe, they still are not fulfilling their role comfortably and their population is reluctant more than the political leaders are.



Italian fansIf euphoria/animal spirits lifts markets (and the two past winners Italy and Brazil are suggestive) then maybe Portugal is in play.  If Spain wins they are neighbors to the positive vibe.  Brazil is the ultraskilled bunch mentioned below.  If Portugal win at 25-1 it could be really something.  At least it looks like a temporary euro benefit at a minimum.  Perhaps worth a look like the solar magnetic perturbations.

"Spain, winner of the 2008 European Championship, and its ultraskilled South American rival are 4-1 favorites to win.

In the third spot is the Lionel Messi-led Argentine squad at 6-1, according to the popular online betting site and oddsmaker.

England, which faces the U.S. team on Saturday, is also considered a top contender, with 8-1 odds.
After England, the rest of the teams in the top 10 are:
Netherlands, 9-1;
Germany, 16-1;
France, 20-1;
Portugal, 25-1;
Chile, 40-1.
Rounding out the bottom 10 are:
Denmark/Australia/Greece, 150-1;
Slovenia and Switzerland, 200-1;
Slovakia, 250-1;
South Korea and Japan, 300-1;
Algeria, 500-1."

Read more here.

Also, here is a nice overview from GS.

Here are some possible economic and consumer spending impacts.

And finally, a headline risk in England.

keep looking »


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