Author Niall Ferguson continues to disappoint. His book on the Rothschilds is wonderful, but his recent work (High Financier, The Ascent of Money) is pure muddle. Nowhere does he mention what was the primary cause of the hyperinflation– the linking of pay for everyone in the economy who worked as an employee, whether of the state or private enterprises, to the official measure of inflation. The farmers and independent business people– the future voters for the Nazis– were the only people not so protected. Ferguson follows Keynes in blaming the reparations (even though at their highest point they represented less than 1/4th of Germany's exports), the "right-wing" civil unrest (even though the rate of assassination of public figures was less after the war than it had been before, Hitler's attempt at revolt was put down by the "conservative" Bavarian government, and the greatest violence came from the Left, not the Right) and the Army (who, in fact, mostly stayed in their barracks).

To be fair, Ferguson does quote Addison: "The daily creation of fresh paper money which the government requires in order to meet its obligations both at home and abroad (services and goods which it is 'obliged both to render and deliver') inevitably decreases the purchasing value of the mark and leads to fresh demands, which in turn bring about a further decline, and so on ad infinitum." But Ferguson seems determined to look to every cause except the obvious one: in a country that had lost its wealth, people could not restore their former "standard of living" by having the government print money and pretend that the war had never happened. Lord Curzon's observation at the time was "There has been no real determination to stop the printing press, there is little efficiency in the tax-collecting system, and there is very great timidity in putting a stop to doles and subventions."

The doles and subventions were the moving force - both for printing money and for tax evasion - just as they always are in any country. What was different in Germany was that everyone, except the future Nazi supporters, already worked for the DMV and had automatic escalators in their wage contracts.

Kevin DePew writes:

Speaking of Weimar, here is a free ebook available from Google that I found very interesting. "Cool conduct: the culture of distance in Weimar Germany," by Helmut Lethen.

The Google summary: "Cool Conduct is an elegant interpretation of attitudes and mentalities that informed the Weimar Republic by a scholar well known for his profound knowledge of this period. Helmut Lethen writes of "cool conduct" as a cultivated antidote to the heated atmosphere of post-World War I Germany, as a way of burying shame and animosity that might otherwise make social contact impossible."

Apart from the irony that Ferguson's book about the Weimar hyperinflation (Paper and Iron) is available for free (a year or so ago library copies were selling for more than $1,000), the Lethen book I found more informative about cultural conditions in the wake of economic distress/collapse. Everyone knows the mechanics of hyperinflation, which is what Ferguson's book largely deals with– only a small portion is devoted to the sociological aspects. Less known, and more instructive, are the methods societies use to cope with extreme economic disturbances.

Stefan Jovanovich responds: 

I wish I could share Kevin's appreciation for Lethen's book. I tried reading it over the weekend and did not succeed. Lethen's assumption that the culture of Weimar was "cool" seems to me too much of a stretch to be even comic in its absurdity. George Grosz was anything but "cool".  I wish I could agree that "everyone knows the mechanics of hyperinflation". You can read Fergusson's book and Keynes's diatribe about the economic consequences of not listening to him and not find a single mention of wage indexing in either tome. It is not enough to point to "money printing"; you have to answer the question of how it becomes politically acceptable to debase the currency. At the end of his life Hayek wrote this: "I do not want to leave this recollection of the Great Inflation without adding that I have probably learnt at least as much if not more than I learnt from personally observing it by being taught to see - then largely by my teacher, the late Ludwig von Mises - the utter stupidity of the argument then propounded, especially in Germany, to explain and justify the increases in the quantity of money…None of those apologists of the inflationary policy was able to propose or apply measures to terminate the inflation, which was finally ended by a man, Hjalmar Schacht, who firmly believed in a crude and primitive version of the quantity theory. - From Occasional Paper 45, Institute of Economic Affairs, July 1975. Hayek recalled that his salary went from 5,000 krona a month in October 1921, to 15,000 krona in November, and to 1 million krona by July 1922.

Zimbabwean economics was introduced to the former German-speaking empires after WW I because it was politically impossible for anyone to tell the public employees of the war economy that the Great War had destroyed their wealth and reduced the market value of their labor. We have the same situation developing now in the People's Republic of California. Our various wars on behalf of the causes of "social justice" and "the environment" and "education" have produced an economy where the activities of the people who work for the state and those whose only customer is the state are easily more than half the state's GDP. The immediate crisis here is much the same as the one that started the presses printing in Vienna and Berlin - retiree pensions.

The one significant difference is our latter-day paradise of Bismarckian socialism does not have the ability to create its own legal tender. We Californians can and do issue vouchers; but even our own state Treasurer will not accept those same vouchers in payment of California taxes. (Yet another example of the inescapable postulate that, in a society with a sovereign monopoly, money = legal tender.)

I would welcome the speculations of the readers of this site as to whether or not our golden state will be "saved" by a re-enactment of the Dawes plan (the "strong" country drains its legal tender reserves to pay back the preferred creditors who bet wrong on the great leap forward - i.e. the war to end all wars. You may have a rooting interest since since the People's Republics of Illinois/New York/New Jersey would be part of the same "rescue package". If one comes, it seems only appropriate that we name this "societal method for coping with extreme economic disturbance" as Lusitania II.

Ken Drees comments:

Cally will be bailed in version .3 of QE– Jerry Brown will receive a huge check a la Monty Hall– let's make a deal!

A bundle of lesser tier bailouts ala a fruit basket of rotten munis, bruised and blemished states will happen in conjunction– version .31 QE because the people can gulp down only one massive bailout per year so make it a big horse pill and wash it down with a big gulp.

2011 March/April for this to go down?

Mr. Krisrock shares: 

Here is a great speech Ferguson gives on"empires on the edge of chaos".

Pitt T. Maner III comments:

The paintings by Thomas Cole ("The Course of Empire") referred to by Professor Ferguson at the beginning of his lecture can be found at the New York Historical Society, 170 Central Park West at 77th St and are available as prints . I imagine they make fine postcards too.



UPDATE 1/31/2011:

Contestants Summary:

- 31 Spec-listers contributed to the 2011 Investment Contest with "specific" recommendations.

- Average 4 recommendations per person (mean of 4.2, median and mode of 4) came in.

- 6 contestants gave only 1 recommendation, 3 gave only 2 and thus 9 out of the total 31 have NOT given the minimum 3 recommendations needed as per the Rules clarified by Ken Drees.

- The Hall of Fame entry for the largest number of ideas (did someone say diversification?) is from Tim Melvin, close on whose heels are J. T. Holley with 11 and Ken Drees with 10.

- The most creatively expressed entry of course has come from Rocky Humbert.

- At this moment 17 out of 31 contestants are in positive performance territory, 14 are in negative performance territory.

- Barring a major outlier of a 112.90% loss on the Option Strategy of Phil McDonnell (not accounting for the margin required for short options, but just taking the ratio of initial cash inflow to outflow):

- Average of all Individual contestant returns is -2.54% and the Standard Deviation of returns achieved by all contestants is 5.39.

- Biggest Gainer at this point is Jared Albert (with his all in single stock bet on REFR) with a 22.87% gain. The only contestant a Z score greater than 2 ( His is actually 4.72 !!)

- Biggest Loser at this point (barring the Giga-leveraged position of Mr. McDonnell) is Ken Drees at -10.36% with a Z Score that is at -1.45.

- Wildcards have not been accounted for as at this point, with wide
deviations of recommendations from the rules specified by most. While 9
participants have less than 3 recommendations, those with more than 4
include several who have not chosen to specify which 3 are their primary recommends. Without clarity on a universal measurability wildcard accounting is on hold. Those making more than 1 recommendations would find that their aggregate average return is derived by taking a sum of returns of individual positions divided by the number of recommends. Unless specified by any person that positions are taken in a specific ratio its equal sums invested approach.

Contracts Summary:

- A total of 109 contracts are utilized by the contestants across bonds, equity indices (Nikkei, Kenyan Stocks included too!), commodities, currencies and individual stock positions.

- The ratio of Shorts to Longs across all recommendations, irrespective of the type of contract (call, put, bearish ETF etc.) is 4 SELL orders Vs 9 Buy Orders. Not inferring that this list is more used to pressing the Buy Button. Just an occurence on this instance.

- The Average Return, so far, on the 109 contracts utilized is -1.26% with a Standard Deviation of 12.42%. Median Return is 0.39% and the mode of Returns of all contracts used is 0.

- The Highest Return is on MICRON TECH at 28.09, if one does not account for the July 2011 Put 25 strike on SLV utilized by Phil McDonnell.

- The Lowest Return is on IPTV at -50%, if one does not account for the Jan 2012 Call 40 Strike on SLV utilized by Phil McDonnell.

- Only Two contracts are having a greater than 2 z score and only 3 contracts are having a less than -2 Z score.

Victor Niederhoffer wrote:

One is constantly amazed at the sagacity in their fields of our fellow specs. My goodness, there's hardly a field that one of us doesn't know about from my own hard ball squash rackets to the space advertising or our President, from surfing to astronomy. We certainly have a wide range.

May I suggest without violating our mandate that we consider our best sagacities as to the best ways to make a profit in the next year of 2011.

My best trades always start with assuming that whatever didn't work the most last year will work the best this year, and whatever worked the best last year will work the worst this year. I'd be bullish on bonds and bearish on stocks, bullish on Japan and bearish on US stocks.

I'd bet against the banks because Ron Paul is going to be watching them and the cronies in the institutions will not be able to transfer as much resources as they've given them in the past 2 years which has to be much greater in value than their total market value.

I keep wondering what investments I should make based on the hobo's visit and I guess it has to be generic drugs and foods.

What ideas do you have for 2011 that might be profitable? To make it interesting I'll give a prize of 2500 to the best forecast, based on results as of the end of 2011.

David Hillman writes: 

"I do know that a sagging Market keeps my units from being full."

One would suggest it is a sagging 'economy' contributing to vacancy, not a sagging 'market'. There is a difference. 

Ken Drees, appointed moderator of the contest, clearly states the new rules of the game:

 1. Submissions for contest entries must be made on the last two days of 2010, December 30th or 31st.
2. Entries need to be labeled in subject line as "2011 contest investment prediction picks" or something very close so that we know this is your official entry.
3. Entries need 3 predictions and 1 wildcard trade prediction (anything goes on the wildcard).

4. Extra predictions may be submitted and will be judged as extra credit. This will not detract from the main predictions and may or may not be judged at all.

5. Extra predictions will be looked on as bravado– if you've got it then flaunt it. It may pay off or you may give the judge a sour palate.

The desire to have entries coming in at years end is to ensure that you have the best data as to year end 2010 and that you don't ignite someone else to your wisdom.

Market direction picks are wanted:

Examples: 30 year treasury yield will fall to 3% in 2011, S&P 500 will hit "x" by June, and then by "y" by December 2011.

The more exact your prediction is, the more weight will be given. The more exact your prediction, the more weight you will receive if right and thus the more weight you will receive if wrong. If you predict that copper will hit 5.00 dollars in 2011 and it does you will be given a great score, if you say that copper will hit 5.00 dollars in march and then it will decline to4.35 and so forth you will be judged all along that prediction and will receive extra weight good or bad. You decide on how detailed your submission is structured.

Will you try to be precise (maybe foolhardy) and go for the glory? Or will you play it safe and not stand out from the crowd? It is a doubled edged sword so its best to be the one handed market prognosticator and make your best predictions. Pretend these predictions are some pearls that you would give to a close friend or relative. You may actually help a speclister to make some money by giving up a pearl, if that speclister so desires to act upon a contest–G-d help him or her.

Markets can be currency, stocks, bonds, commodities, etc. Single stock picks can be given for the one wildcard trade prediction. If you give multiple stock picks for the wildcard then they will all be judged and in the spirit of giving a friend a pearl–lets make it "the best of the best, not one of six".

All judgments are the Chair's. The Chair will make final determination of the winner. Entries received with less than 3 market predictions will not be considered. Entries received without a wildcard will be considered.The spirit of the contest is "Give us something we can use".

Bill Rafter adds: 

Suggestion for contest:

"Static" entry: A collection of up to 10 assets which will be entered on the initial date (say 12/31/2010) and will be unaltered until the end data (i.e. 12/31/2011). The assets could be a compilation of longs and shorts, or could have the 10 slots entirely filled with one asset (e.g. gold). The assets could also be a yield and a fixed rate; that is one could go long the 10-year yield and short a fixed yield such as 3 percent. This latter item will accommodate those who want to enter a prediction but are unsure which asset to enter as many are unfamiliar with the various bond coupons.

"Rebalanced" entry: A collection of up to 10 assets which will be rebalanced on the last trading day of each month. Although the assets will remain unchanged, their percentage of the portfolio will change. This is to accommodate those risk-averse entrants employing a mean-reversion strategy.

Both Static and Rebalanced entries will be judged on a reward-to-risk basis. That is, the return achieved at the end of the year, divided by the maximum drawdown (percentage) one had to endure to achieve that return.

Not sure how to handle other prognostications such as "Famous female singer revealed to be man." But I doubt such entries have financial benefits.

I'm willing to be an arbiter who would do the rebalancing if necessary. I am not willing to prove or disprove the alleged cross-dressers.

Ralph Vince writes:

A very low volume bar on the weekly (likely, the first of two consecutive) after a respectable run-up, the backdrop of rates having risen in recent weeks, breadth having topped out and receding - and a lunar eclipse on the very night of the Winter Solstice.

If I were a Roman General I would take that as a sign to sit for next few months and do nothing.

I'm going to sit and do nothing.

Sounds like an interim top in an otherwise bullish, long-term backdrop.

Gordon Haave writes: 

 My three predictions:

Gold/ silver ratio falls below 25 Kenyan stock market outperforms US by more than 10%

Dollar ends 10% stronger compared to euro

All are actionable predictions.

Steve Ellison writes:

I did many regressions looking for factors that might predict a year-ahead return for the S&P 500. A few factors are at extreme values at the end of 2010.

The US 10-year Treasury bond yield at 3.37% is the second-lowest end-of year yield in the last 50 years. The S&P 500 contract is in backwardation with the front contract at a 0.4% premium to the next contract back, the second highest year-end premium in the 29 years of the futures.

Unfortunately, neither of those factors has much correlation with the price change in the S&P 500 the following year. Here are a few that do.

The yield curve (10-year yield minus 3-month yield) is in the top 10% of its last 50 year-end values. In the last 30 years, the yield curve has been positively correlated with year-ahead changes in the S&P 500, with a t score of 2.17 and an R squared of 0.143.

The US unemployment rate at 9.8% is the third highest in the past 60 years. In the last 30 years, the unemployment rate has been positively correlated with year-ahead changes in the S&P 500, with a t score of 0.90 and an R squared of 0.028.

In a variation of the technique used by the Yale permabear, I calculated the S&P 500 earnings/price ratio using 5-year trailing earnings. I get an annualized earnings yield of 4.6%. In the last 18 years, this ratio has been positively correlated with year-ahead changes in the S&P 500, with a t score of 0.92 and an R squared of

Finally, there is a negative correlation between the 30-year S&P 500 change and the year-ahead change, with a t score of -2.28 and an R squared of 0.094. The S&P 500 index price is 9.27 times its price of 30 years ago. The median year-end price in the last 52 years was 6.65 times the price 30 years earlier.

Using the predicted values from each of the regressions, and weighting the predictions by the R squared values, I get an overall prediction for an 11.8% increase in the S&P 500 in 2011. With an 11.8% increase, SPY would close 2011 at 140.52.

Factor                  Prediction      t       N    R sq
US Treasury yield curve      1.162    2.17      30   0.143
30-year change               1.052   -2.28      52   0.094
Trailing 5-year E/P          1.104    0.92      18   0.050
US unemployment rate         1.153    0.90      30   0.028

Weighted total               1.118
SPY 12/30/10               125.72
Predicted SPY 12/30/11     140.52

Jan-Petter Janssen writes: 

PREDICTION I - The Inconvenient Truth The poorest one or two billion on this planet have had enough of increasing food prices. Riots and civil unrest force governments to ban exports, and they start importing at any cost. World trade collapses. Manufacturers of farm equipment will do extremely well. Buy the most undervalued producer you can find. My bet is
* Kverneland (Yahoo: KVE.OL). NOK 6.50 per share today. At least NOK 30 on Dec 31th 2011.

PREDICTION II - The Ultimate Bubble The US and many EU nations hold enormous gold reserves. E.g. both Italy and France hold the equivalent of the annual world production. The gold meme changes from an inflation hedge / return to the gold standard to (a potential) over-supply from the selling of indebted nations. I don't see the bubble bursting quite yet, but
* Short gold if it hits $2,000 per ounce and buy back at $400.

PREDICTION III - The Status Quo Asia's ace is cheap labor. The US' recent winning card is cheap energy through natural gas. This will not change in 2011. Henry Hub Feb 2011 currently trades at $4.34 per MMBtu. Feb 2012 is at $5.14. I would
* Short the Feb 2012 contract and buy back on the last trading day of 2011.

Vince Fulco predicts:

 This is strictly an old school, fundamental equity call as my crystal ball for the indices 12 months out is necessarily foggy. My recommendation is BP equity primarily for the reasons I gave earlier in the year on June 5th (stock closed Friday, June 4th @ $37.16, currently $43.53). It faced a hellish downdraft post my mention for consideration, primarily due to the intensification of news flow and legal unknowns (Rocky articulated these well). Also although the capital structure arb boys savaged the equity (to 28ish!), it is up nicely to year's end if one held on and averaged in with wide scales given the heightened vol.

Additional points/guesstimates are:

1) If 2010 was annus horribilis, 2011 with be annus recuperato. A chastened mgmt who have articulated they'll run things more conservatively will have a lot to prove to stakeholders.

2) Dividend to be re-instated to some level probably by the end of the second quarter. I am guessing $1.00 annualized per ADS as a start (or
2.29%), this should bring in the index hugging funds with mandates for only holding dividend payers. There is a small chance for a 1x special dividend later in the year.

3) Crude continues to be in a state of significant profitability for the majors in the short term. It would appear finding costs are creeping however.

4) The lawsuits and additional recoveries to be extracted from the settlement fund and company directly have very long tails, on the order of 10 years.

5) The company seems fully committed to sloughing off tertiary assets to build up its liquid balance sheet. Debt to total capital remains relatively low and manageable.

6) The stock remains at a significant discount to its better-of breed peers (EV/normalized EBITDA, Cash Flow, etc) and rightly so but I am betting the discount should narrow back to near historical levels.

Potential negatives:

1) The company and govt have been vastly understating the remaining fuel amounts and effects. Release of independent data intensifies demands for a much larger payout by the company closer to the highest end estimates of $50-80B.

2) It experiences another similar event of smaller magnitude which continues to sully the company's weakened reputation.

3) China admits to and begins to fear rampant inflation, puts the kabosh to the (global) economy and crude has a meaningful decline the likes of which we haven't seen in a few years.

4) Congress freaks at a >$100-120 price for crude and actually institutes an "excess profits" tax. Less likely with the GOP coming in.

A buy at this level would be for an unleveraged, diversified, longer term acct which I have it in. However, I am willing to hold the full year or +30% total return (including special dividend) from the closing price of $43.53 @ 12/30/10, whichever comes first. Like a good sellside recommendation, I believe the stock has downside of around 20% (don't they all when recommended!?!) where I would consider another long entry depending on circumstances (not pertinent to the contest).

Mr. Albert enters: 

 Single pick stock ticker is REFR

The only way this gold chain wearing day trader has a chance against all the right tail brain power on the list is with one high risk/high reward put it all on red kind of micro cap.

Basic story is this company owns all the patents to what will become the standard for switchable glazings (SPD smart glass). It's taken roughly 50 years of development to get a commercialized product, and next year Mercedes will almost without doubt use SPD in the 2012 SLK (press launch 1/29/11 public launch at the Geneva auto show in march 2011).

Once MB validate the tech, mass adoption and revenues will follow etc and this 'show me' stock will rocket to the moon.

Dan Grossman writes:

Trying to comply with and adapt the complex contest rules (which most others don't seem to be following in any event) to my areas of stock market interest:

1. The S&P will be down in the 1st qtr, and at some point in the qtr will fall at least

2. For takeover investors: GENZ will (finally) make a deal to be acquired in the 1st qtr for a value of at least $80; and AMRN after completion of its ANCHOR trial will make a deal to be acquired for a price of at least $8.

3. For conservative investors: Low multiple small caps HELE and DFG will be up a combined average of 20% by the end of the year.

For my single stock pick, I am something of a johnny-one-note: MNTA will be up lots during the year — if I have to pick a specific amount, I'd say at least 70%. (My prior legal predictions on this stock have proved correct but the stock price has not appropriately reflected same.)

Finally, if I win the contest (which I think is fairly likely), I will donate the prize to a free market or libertarian charity. I don't see why Victor should have to subsidize this distinguished group that could all well afford an contest entrance fee to more equitably finance the prize.

Best to all for the New Year,


Gary Rogan writes:

 1. S&P 500 will rise 3% by April and then fall 12% from the peak by the end of the year.
2. 30 year treasury yields will rise to 5% by March and 6% by year end.
3. Gold will hit 1450 by April, will fall to 1100 by September and rise to 1550 by year end.

Wildcard: Short Netflix.

Jack Tierney, President of the Old Speculator's Club, writes: 

Equal Amounts in:

TBT (short long bonds)
YCS (short Yen)
GRU (Long Grains - heavy on wheat)
CHK (Long NG - takeover)

(Wild Card)
BONXF.PK or BTR.V (Long junior gold)

12/30 closing prices (in order):


Bill Rafter writes:

Two entries:

Buy: FXP and IRWD

Hold for the entire year.

William Weaver writes:

 For Returns: Long XIV January 21st through year end

For Return/Risk: Long XIV*.30 and Long VXZ*.70 from close today

I hope everyone has enjoyed a very merry holiday season, and to all I wish a wonderful New Year.



Ken Drees writes:

Yes, they have been going up, but I am going contrary contrary here and going with the trends.

1. Silver: buy day 1 of trading at any price via the following vehicles: paas, slw, exk, hl –25% each for 100% When silver hits 39/ounce, sell 10% of holdings, when silver hits 44/ounce sell 30% of holdings, when silver hits 49 sell 60%–hold rest (divide into 4 parts) and sell each tranche every 5 dollars up till gone–54/oz, 59, 64, 69.

2. Buy GDXJ day 1 (junior gold miner etf)—rotation down from majors to juniors with a positive gold backdrop. HOLD ALL YEAR.

3. USO. Buy day 1 then do—sell 25% at 119/bbl oil, sell 80% at 148/bbl, sell whats left at 179/bbl or 139/bbl (whichever comes first after 148)


Happy New Year!

Ken Drees———keepin it real.

Sam Eisenstadt forecasts:

My forecast for the S&P 500 for the year ending Dec 31, 2011;

S&P 500       1410

Anton Johnson writes: 

Equal amounts allocated to:

EDZ Short moc 1-21-2011, buy to cover at 50% gain, or moc 12/30/2011

VXX Short moc 1-21-2011, buy to cover moc 12/30/2011

UBT Short moo 1-3-2011, buy to cover moc 12/30/2011

Scott Brooks picks: 


Evenly between the 4 (25% each)

Sushil Kedia predicts:


1) Gold
2) Copper
3) Japanese Yen

30% moves approximately in each, within 2011.

Rocky Humbert writes:

(There was no mention nor requirement that my 2011 prediction had to be in English. Here is my submission.) … Happy New Year, Rocky

Sa aking mahal na kaibigan: Sa haba ng 2010, ako na ibinigay ng ilang mga ideya trading na nagtrabaho sa labas magnificently, at ng ilang mga ideya na hindi na kaya malaki. May ay wala nakapagtataka tungkol sa isang hula taon dulo, at kung ikaw ay maaaring isalin ito talata, ikaw ay malamang na gawin ang mas mahusay na paggawa ng iyong sariling pananaliksik kaysa sa pakikinig sa mga kalokohan na ako at ang iba pa ay magbigay. Ang susi sa tagumpay sa 2011 ay ang parehong bilang ito ay palaging (tulad ng ipinaliwanag sa pamamagitan ng G. Ed Seykota), sa makatuwid: 1) Trade sa mga kalakaran. 2) Ride winners at losers hiwa. 3) Pamahalaan ang panganib. 4) Panatilihin ang isip at diwa malinaw. Upang kung saan gusto ko idagdag, fundamentals talaga bagay, at kung ito ay hindi magkaroon ng kahulugan, ito ay hindi magkaroon ng kahulugan, at diyan ay wala lalo na pinakinabangang tungkol sa pagiging isang contrarian bilang ang pinagkasunduan ay karaniwang karapatan maliban sa paggawa sa mga puntos. (Tandaan na ito ay pinagkasunduan na ang araw ay babangon na bukas, na quote Seth Klarman!) Pagbati para sa isang malusog na masaya at pinakinabangang 2011, at siguraduhin na basahin kung saan ako magsulat sa Ingles ngunit ang aking mga saloobin ay walang malinaw kaysa talata na ito, ngunit inaasahan namin na ito ay mas kapaki-pakinabang.

Dylan Distasio comments: 

Gawin mo magsalita tagalog?

Gary Rogan writes:

After a worthy challenge, Mr. Rogan is now also a master of Google Translate, and a discoverer of an exciting fact that Google Translate calls Tagalog "Filipino". This was a difficult obstacle for Mr. Rogan to overcome, but he persevered and here's Rocky's prediction in English (sort of):

My dear friend: Over the course of 2010, I provided some trading ideas worked out magnificently, and some ideas that are not so great. There is nothing magical about a forecast year end, and if you can translate this paragraph, you will probably do better doing your own research rather than listening to the nonsense that I and others will give. The key to success in 2011 is the same as it always has (as explained by Mr. Ed Seykota), namely: 1) Trade with the trend.

2) Ride cut winners and losers. 3) Manage risk. 4) Keep the mind and spirit clear. To which I would add, fundamentals really matter, and if it does not make sense, it does not make sense, and there is nothing particularly profitable about being a contrarian as the consensus is usually right but turning points. (Note that it is agreed that the sun will rise tomorrow, to quote Seth Klarman) Best wishes for a happy healthy and profitable 2011, and be sure to read which I write in English but my attitude is nothing clearer than this paragraph, but hopefully it is more useful.

Tim Melvin writes:

Ah the years end prediction exercise. It is of course a mostly useless exercise since not a one of us can predict what shocks, positive or negative, the world and the markets could see in 2011. I find it crack up laugh out loud funny that some pundits come out and offer up earnings estimates, GDP growth assumptions and interest rate guesses to give a precise level for the year end S&P 500 price. You might as well numbers out of a bag and rearrange them by lottery to come up with a year end number. In a world where we are fighting two wars, a hostile government holds the majority of our debt and several sovereign nations continually teeter on the edge of oblivion it's pretty much ridiculous to assume what could happen in the year ahead. Having said that, as my son's favorite WWE wrestler when he was a little guy used to say "It's time to play the game!"

Ill start with bonds. I have owned puts on the long term treasury market for two years now. I gave some back in 2010 after a huge gain in 2009 but am still slightly ahead. Ill roll the position forward and buy January 2012 puts and stay short. When I look at bods I hear some folks talking about rising basic commodity prices and worrying about inflation. They are of course correct. This is happening. I hear some other really smart folks talking of weak real estate, high jobless rates and the potential for falling back into recession. Naturally, they are also exactly correct. So I will predict the one thing no one else is. We are on the verge of good old fashioned 1970s style stagflation. Commodity and basic needs prices will accelerate as QE2 has at least stimulated demand form emerging markets by allowing these wonderful credits to borrow money cheaper than a school teacher with a 750 FICO score. Binds go lower as rates spike. Our economy and balance sheet are a mess and we have governments run by men in tin hats lecturing us on fiscal responsibility. How low will they go Tim? How the hell do I know? I just think they go lower by enough for me to profit.

 Nor can I tell you where the stock market will go this year. I suspect we have had it too good for too long for no reason so I think we get at least one spectacular gut wrenching, vomit inducing sell off during the year. Much as lower than expected profits exposed the silly valuations of the new paradigm stocks I think that the darling group, retail , will spark a sell-off in the stock market this year. Sales will be up a little bit but except for Tiffany's (TIF) and that ilk margins are horrific. Discounting started early this holiday and grew from there. They will get steeper now that that Santa Claus has given back my credit card and returned to the great white north. The earnings season will see a lot of missed estimates and lowered forecasts and that could well pop the bubble. Once it starts the HFT boys and girls should make sure it goes lower than anyone expects.

Here's the thing about my prediction. It is no better than anyone else's. In other words I am talking my book and predicting what I hope will happen. Having learned this lesson over the years I have learned that when it comes to market timing and market direction I am probably the dumbest guy in the room. Because of that I have trained myself to always buy the stuff that's too cheap not to own and hold it regardless. After the rally since September truly cheap stuff is a little scarce on the ground but I have found enough to be about 40% long going into the year. I have a watch list as long as a taller persons right arm but most of it hover above truly cheap.

Here is what I own going into the year and think is still cheap enough to buy. I like Winn Dixie (WINN). The grocery business sucks right now. Wal mart has crushed margins industry wide. That aside WINN trades at 60% of tangible book value and at some point their 514 stores in the Southeast will attract attention from investors. A takeover here would be less than shocking. I will add Presidential Life (PLFE) to the list. This stock is also at 60% of tangible book and I expect to see a lot of M&A activity in the insurance sector this year and this should raise valuations across the board. I like Miller Petroleum (MILL) with their drilling presence in Alaska and the shale field soft Tennessee. This one trades at 70% of tangible book. Ill add Imperial Sugar (IPSU), Syms (SYMS) and Micron tech (MU) and Avatar Holdings (AVTR) to my list of cheapies and move on for now.

I am going to start building my small bank portfolio this year. Eventually this group becomes the F-you walk away money trade of the decade. As real estate losses work through the balance sheet and some measure of stability returns to the financial system, perhaps toward the end of the year the small baileys savings and loan type banks should start to recover. We will also see a mind blowing M&A wave as larger banks look to gain not just market share but healthy assets to put on the books. Right now these names trade at a fraction of tangible book value. They will reach a multiple of that in a recovery or takeover scenario. Right now I own shares of Shore Bancshares (SHBI), a local bank trading at 80% of book value and a reasonably healthy loan portfolio. I have some other mini microcap banks as well that shall remain my little secret and not used to figure how my predictions work out. I mention them because if you have a mini micro bank in your community you should go meet then bankers, review the books and consider investing if it trades below the magical tangible book value and has excess capital. Flagstar Bancorp(FBC) is my super long shot undated call option n the economy and real estate markets.

I will also play the thrift conversion game heavily this year. With the elimination of the Office of Thrift Services under the new financial regulation many of the benefits of being a private or mutual thrift are going away. There are a ton of mutual savings banks that will now convert to publicly traded banks. A lot of these deals will be priced below the pro forma book value that is created by adding all that lovely IPO cash to the balance sheet without a corresponding increase in the shares outstanding. Right now I have Fox Chase Bancorp (FXCB) and Capital Federal Financial(CFFN). There will be more. Deals are happening every day right now and again I would keep an eye out for local deals that you can take advantage of in the next few months.

I also think that 2011 will be the year of the activist investor. These folks took a beating since 2007 but this should be their year. There is a ton of cash on corporate balance sheets but lots of underperformance in the current economic environment. We will see activist drive takeovers, restructures, and special dividends this year in my opinion. Recent filings of interest include strong activist positions in Surmodics(SRDX), SeaChange International (SEAC), and Energy Solutions. Tracking activist portfolios and 13D filings should be a very profitable activity in 2011.

I have been looking at some interesting new stuff with options as well I am not going to give most of it away just yet but I ll give you one stimulated by a recent list discussion. H and R Black is highly likely to go into a private equity portfolio next year. Management has made every mistake you can make and the loss of RALs is a big problem for the company. However the brand has real value. I do not want town the stock just yet but I like the idea of selling the January 2012 at $.70 to $.75. If you cash secure the put it's a 10% or so return if the stock stays above the strike. If it falls below I' ll be happy to own the stock with a 6 handle net. Back in 2008 everyone anticipated a huge default wave to hit the high yield market. Thanks to federal stimulus money pumping programs it did not happen. However in the spirit of sell the dog food the dog will eat a given moment the hedge fund world raised an enormous amount od distressed debt money. Thanks to this high yield spreads are far too low. CCC paper in particular is priced at absurd levels. These things trade like money good paper and much of it is not. Extend and pretend has helped but if the economy stays weak and interest rates rise rolling over the tsunami f paper due over the next few years becomes nigh onto impossible. I am going take small position in puts on the various high yield ETFs. If I am right they will explode when that market implodes. Continuing to talk my book I hope this happens. Among my nightly prayers is "Please God just one more two year period of asset rich companies with current payments having bonds trade below recovery value and I promise not to piss the money away this time. Amen.

PS. If you add in risk arbitrage spreads of 30% annualized returns along with this I would not object. Love, Tim.

I can't tell you what the markets will do. I do know that I want to own some safe and cheap stocks, some well capitalized small banks trading below book and participate in activist situation. I will be under invested in equities going into the year hoping my watch list becomes my buy list in market stumble. I will have put positions on long T-Bonds and high yield hoping for a large asymmetrical payoff.

Other than that I am clueless.

Kim Zussman comments: 

Does anyone else think this year is harder than usual to forecast? Is it better now to forecast based on market fundamentals or mass psychology? We are at a two year high in stocks, after a huge rally off the '09 bottom that followed through this year. One can make compelling arguments for next year to decline (best case scenarios already discounted, prior big declines followed by others, volatility low, house prices still too high, FED out of tools, gov debt/gdp, Roubini says so, benefits to wall st not main st, persistent high unemployment, Year-to-year there is no significant relationship, but there is a weak down tendency after two consecutive up years. ). And compelling arguments for up as well (crash-fears cooling, short MA's > long MA's, retail investors and much cash still on sidelines, tax-cut extended, employee social security lowered, earnings increasing, GDP increasing, Tepper and Goldman say so, FED herding into risk assets, benefits to wall st not main st, employment starting to increase).

Is the level of government market-intervention effective, sustainable, or really that unusual? The FED looks to be avoiding Japan-style deflation at all costs, and has a better tool in the dollar. A bond yields decline would help growth and reduce deflation risk. Increasing yields would be expected with increasing inflation; bad for growth but welcomed by retiring boomers looking for fixed income. Will Obamacare be challenged or defanged by states or in the supreme court? Will 2011 be the year of the muni-bubble pop?

A ball of confusion!

4 picks in equal proportion:

long XLV (health care etf; underperformed last year)

long CMF (Cali muni bond fund; fears over-wrought, investors still need tax-free yield)

short GLD (looks like a bubble and who needs gold anyway)

short IEF (7-10Y treasuries; near multi-year high/QE2 is weaker than vigilantism)

Alan Millhone writes:

 Hello everyone,

I note discussion over the rules etc. Then you have a fellow like myself who has never bought or sold through the Market a single share.

For myself I will stick with what I know a little something. No, not Checkers —

Rental property. I have some empty units and beginning to rent one or two of late to increase my bottom line.

I will not venture into areas I know little or nothing and will stay the course in 2011 with what I am comfortable.

Happy New Year and good health,



Jay Pasch predicts: 

2010 will close below SP futures 1255.

Buy-and-holders will be sorely disappointed as 2011 presents itself as a whip-saw year.

99% of the bullish prognosticators will eat crow except for the few lonely that called for a tempered intra-year high of ~ SPX 1300.

SPX will test 1130 by April 15 with a new recovery high as high as 1300 by the end of July.

SPX 1300 will fail with new 2011 low of 1050 before ending the year right about where it started.

The Midwest will continue to supply the country with good-natured humble stock, relatively speaking.

Chris Tucker enters: 

Buy and Hold


Wildcard:  Buy and Hold AVAV

Gibbons Burke comments: 

Mr. Ed Seykota once outlined for me the four essential rules of trading:

1) The trend is your friend (till it bends when it ends.)

2) Ride your winners.

3) Cut your losses short.

4) Keep the size of your bet small.

Then there are the "special" rules:

5) Follow all the rules.

and for masters of the game:

6) Know when to break rule #5

A prosperous and joy-filled New Year to everyone.



John Floyd writes:

In no particular order with target prices to be reached at some point in 2011:

1) Short the Australian Dollar:current 1.0220, target price .8000

2) Short the Euro: current 1.3375, target price 1.00

3) Short European Bank Stocks, can use BEBANKS index: current 107.40, target 70

A Mr. Krisrock predicts: 

 1…housing will continue to lag…no matter what can be done…and with it unemployment will remain

2…bonds will outperform as republicans will make cutting spending the first attack they make…QE 2 will be replaced by QE3

3…with every economist in the world bullish, stocks will underperform…

4…commodities are peaking ….

Laurel Kenner predicts: 

After having made monkeys of those luminaries who shorted Treasuries last year, the market in 2011 has had its laugh and will finally carry out the long-anticipated plunge in bond prices.

Short the 30-year bond futures and cover at 80.

Pete Earle writes:

All picks are for 'all year' (open first trading day/close last trading day).

1. Long EUR/USD
2. Short gold (GLD)

MMR (McMoran Exploration Corp)
HDIX (Home Diagnostics Inc)
TUES (Tuesday Morning Corp)

PBP (Powershares S&P500 Buy-Write ETF)
NIB (iPath DJ-UBS Cocoa ETF)
KG (King Pharmaceuticals)

Happy New Year to all,

Pete Earle

Paolo Pezzutti enters: 

If I may humbly add my 2 cents:

- bearish on S&P: 900 in dec
- crisis in Europe will bring EURUSD down to 1.15
- gold will remain a safe have haven: up to 1500
- big winner: natural gas to 8

J.T Holley contributes: 


The Market Mistress so eloquently must come first and foremost. Just as daily historical stats point to betting on the "unchanged" so is my S&P 500 trade for calendar year 2011. Straddle the Mistress Day 1. My choice for own reasons with whatever leverage is suitable for pain thresholds is a quasi straddle. 100% Long and 50% Short in whatever instrument you choose. If instrument allows more leverage, first take away 50% of the 50% Short at suitable time and add to the depreciated/hopefully still less than 100% Long. Feel free to add to the Long at this discretionary point if it suits you. At the next occasion that is discretionary take away remaining Short side of Quasi Straddle, buckle up, and go Long whatever % Long that your instrument or brokerage allows till the end of 2011. Take note and use the historical annual standard deviation of the S&P 500 as a rudder or North Star, and throw in the quarterly standard deviation for testing. I think the ambiguity of the current situation will make the next 200-300 trading days of data collection highly important, more so than prior, but will probably yield results that produce just the same results whatever the Power Magnification of the Microscope.

Long the U.S. Dollar. Don't bother with the rest of the world and concern yourself with which of the few other Socialist-minded Country currencies to short. Just Long the U.S. Dollar on Day 1 of 2011. Keep it simple and specialize in only the Long of the U.S. Dollar. Cataclysmic Economic Nuclear Winter ain't gonna happen. When the Pastor preaches only on the Armageddon and passes the plate while at the pulpit there is only one thing that happens eventually - the Parish dwindles and the plate stops getting filled. The Dollar will bend as has, but won't break or at least I ain't bettin' on such.

Ala Mr. Melvin, Short any investment vehicle you like that contains the words or numerals "perpetual maturity", "zero coupon" and "20-30yr maturity" in their respective regulated descriptions, that were issued in times of yore. Unfortunately it doesn't work like a light switch with the timing, remember it's more like air going into a balloon or a slow motion see-saw. We always want profits initially and now and it just doesn't work that way it seems in speculation. Also, a side hedge is to start initially looking at any financial institution that begins, dabbles, originates and gains high margin fees from 50-100 year home loans or Zero-Coupon Home Loans if such start to make their way Stateside. The Gummit is done with this infusion and cheer leading. They are in protection mode, their profit was made. Now the savy financial engineers that are left or upcoming will continue to find ways to get the masses to think they "Own" homes while actually renting them. Think Car Industry '90-'06 with. Japan did it with their Notes and I'm sure some like-minded MBA's are baiting/pushing the envelopes now in board rooms across the U.S. with their profitability and ROI models, probably have ditched the Projector and have all around the cherry table with IPads watching their presentation. This will ultimately I feel humbly be the end of the Mortgage Interest Deduction as it will be dwindled down to a moot point and won't any longer be the leading tax deduction that it was created to so-called help.


Short Gold, Short it, Short it more. Take all of your emotions and historical supply and demand factors out of the equation, just look at the historical standard deviation and how far right it is and think of Buzz Lightyear in Toy Story and when he thought he was actually flying and the look on his face at apex realization. That plus continue doing a study on Google Searches and the number of hits on "stolen gold", "stolen jewelery", and Google Google side Ads for "We buy Gold". I don't own gold jewelery, and have surrendered the only gold piece that I ever wore, but if I was still wearing it I'd be mighty weary of those that would be willing to chop a finger off to obtain. That ain't my fear, that's more their greed.

Long lithium related or raw if such. Technology demands such going forward.


Long Natural Gas. Trading Day 1 till last trading day of the year. The historic "cheap" price in the minds of wannabe's will cause it to be leveraged long and oft with increasing volume regardless of the supply. Demand will follow, Pickens sowed the seeds and paid the price workin' the mule while plowin'. De-regulation on the supply side of commercial business statements is still in its infancy and will continue, politics will not beat out free markets going into the future.

Long Crude and look to see the round 150 broken in years to come while China invents, perfects, and sees the utility in the Nuclear fueled tanker.

Long LED, solar, and wind generation related with tiny % positions. Green makes since, its here to stay and become high margined profitable businesses.


Short Sugar. Sorry Mr. Bow Tie. Monsanto has you Beet! That being stated, the substitute has arrived and genetically altered "Roundup Ready" is here to stay no matter what the Legislative Luddite Agrarians try, deny, or attempt. With that said, Long MON. It is way more than a seed company. It is more a pharmaceutical engineer and will bring down the obesity ridden words Corn Syrup eventually as well. Russia and Ireland will make sure of this with their attitudes of profit legally or illegally.

Prepare to long in late 2011 the commercialized marijuana and its manufacturing, distribution companies that need to expand profitability from its declining tobacco. Altria can't wait, neither can Monsanto. It isn't a moral issue any longer, it's a financial profit one. We get the joke, or choke? If the Gummit doesn't see what substitutes that K2 are doing and the legal hassles of such and what is going on in Lisbon then they need to have an economic lesson or two. It will be a compromise between the Commercial Adjective Definition Agrarians and Gummit for tax purposes with the Green theme continuing and lobbying.

Short Coffee, but just the 1st Qtr of 2011. Sorry Seattle. I will also state that there will exist a higher profit margin substitute for the gas combustible engine than a substitute for caffeine laden coffee.

Sex and Speculation:

Look to see go public in 2011 with whatever investment bank that does such trying their best to be anonymous. Are their any investment banks around? This Boxxx will make Red Box blush and Apple TV's box envious. IPTV and all related should be a category that should be Longed in 2011 it is here to stay and is in it's infancy. Way too many puns could be developed from this statement. Yes, I know fellas the fyre boxxx is 6"'s X 7"'s.


This is one category to always go Long. I have vastly improved my guitar playin' in '10 and will do so in '11. AAPL still has the edge and few rivals are even gaining market share and its still a buy on dips, sell on highs empirically counted. They finally realized that .99 cents wasn't cutting it and .69 cents was more appropriate for those that have bought Led Zeppelin IV songs on LP, 8-track, cassette, and CD over the course of their lives. Also, I believe technology has a better shot at profitably bringing music back into public schools than the Federal or State Gummits ever will.


Long - Your mind. Double down on this Day 1 of 2011. It's the most capable, profitable thing you have going for you. I just learned this after the last 36 months.

Long - Counting, you need it now more than ever. It's as important as capitalism.

Long - Being humble, it's intangible but if quantified has a STD of 4 if not higher.

Long - Common Sense.

Long - Our Children. The media is starting to question if their education is priceless, when it is, but not in their context or jam.

Short - Politics. It isn't a spectator sport and it has been made to be such.

Short - Fear, it is way way been played out. Test anything out there if you like. I have. It is prevalent still and disbelief is rampant.

Long - Greed, but don't be greedy just profitable. Wall Street: Money Never Sleeps was the pilot fish.

I had to end on a Long note.

Happy New Year's Specs. Thanks to all for support over the last four years. I finally realized that it ain't about being right or wrong, just profitable in all endeavors. Too many losses led to this, pain felt after lookin' within, and countin' ones character results with pen/paper.

Russ Sears writes:

 For my entry to the contest, I will stick with the stocks ETF, and the index markets and avoid individual stocks, and the bonds and interest rates. This entry was thrown together rather quickly, not at all an acceptable level if it was real money. This entry is meant to show my personal biases and familiarity, rather than my investment regiment. I am largely talking my personal book.

Therefore, in the spirit of the contest , as well as the rules I will expose my line of thinking but only put numbers on actual entry predictions. Finally, if my caveats are not warning enough, I will comment on how a prediction or contest entry differs from any real investment. I would make or have made.

The USA number one new product export will continue to be the exportation of inflation. The printing of dollars will continue to have unintended consequences than its intended effect on the national economy but have an effect on the global economy.. Such monetary policy will hit areas with the most potential for growth: the emerging markets of China and India. In these economies, that spends over half their income on food, food will continue to rise. This appears to be a position opposite the Chairs starting point prediction of reversal of last year's trends.

Likewise, the demand for precious metals such as gold and silver will not wane as these are the poor man's hedge against food cost. It may be overkill for the advanced economies to horde the necessities and load up on precious metals Yet, unlike the 70's the US/ European economy no longer controls gold and silver a paradigm shift in thinking that perhaps the simple statistician that uses weighted averages and the geocentric economist have missed. So I believe those entries shorting gold or silver will be largely disappointed. However in a nod to the chair's wisdom, I will not pick metals directly as an entry. Last year's surprise is seldom this year's media darling. However, the trend can continue and gold could have a good year. The exception to the reversal rule seems to be with bubbles which gain a momentum of their own, apart from the fundamentals. The media has a natural sympathy in suggesting a return to the drama of he 70's, the stagflation dilemma, ,and propelling an indicator of doom. With the media's and the Fed's befuddled backing perhaps the "exception" is to be expected. But I certainly don't see metal's impending collapse nor its continued performance.

The stability or even elevated food prices will have some big effects on the heartland.

1. For my trend is your friend pick: Rather than buy directly into a agriculture commodity based index like DBA, I am suggesting you buy an equity agriculture based ETF like CRBA year end price at 77.50. I am suggesting that this ETF do not need to have commodities produce a stellar year, but simply need more confirmation that commodity price have established a higher long term floor. Individually I own several of these stocks and my wife family are farmers and landowners (for full disclosure purposes not to suggest I know anything about the agriculture business) Price of farmland is raising, due to low rates, GSE available credit, high grain prices due to high demand from China/India, ethanol substitution of oil A more direct investment in agriculture stability would be farmland. Farmers are buying tractors, best seeds and fertilizers of course, but will this accelerate. Being wrong on my core theme of stable to rising food/commodity price will ruin this trade. Therefore any real trade would do due diligence on individual stocks, and put a trailing floor. And be sensitive to higher volatility in commodities as well as a appropriate entry and exit level.

2. For the long term negative alpha, short term strength trade: I am going with airlines and FAA at 49.42 at year end. There seems to be finally some ability to pass cost through to the consumer, will it hold?

3. For the comeback of the year trade XHB: (the homebuilders ETF), bounces back with 25% return. While the overbuilding and vacancy rates in many high population density areas will continue to drag the home makes down, the new demand from the heartland for high end houses will rise that is this is I am suggesting that the homebuilders index is a good play for housing regionally decoupling from the national index. And much of what was said about the trading of agriculture ETF, also apply to this ETF. However, while I consider this a "surprise", the surprise is that this ETF does not have a negative alpha or slightly positive. This is in-line with my S&P 500 prediction below. Therefore unless you want volatility, simply buying the S&P Vanguard fund would probably be wiser. Or simply hold these inline to the index.

4. For the S&P Index itself I would go with the Vanguard 500 Fund as my vehicle VFINXF, and predict it will end 2011 at $145.03, this is 25% + the dividend. This is largely due to how I believe the economy will react this year. 

5. For my wild card regional banks EFT, greater than IAT > 37.50 by end 2011…

Yanki Onen writes:

 I would like to thank all for sharing their insights and wisdom. As we all know and reminded time to time, how unforgiven could the market Mistress be. We also know how nurturing and giving it could be. Time to time i had my share of falls and rises. Everytime I fall, I pick your book turn couple of pages to get my fix then scroll through articles in DSpecs seeking wisdom and a flash of light. It never fails, before you know, back to the races. I have all of you to thank for that.

Now the ideas;

-This year's lagger next year's winner CSCO

Go long Jan 2012 20 Puts @ 2.63 Go long CSCO @ 19.55 Being long the put gives you the leverage and protection for a whole year, to give the stock time to make a move.

You could own 100,000 shares for $263K with portfolio margin ! Sooner the stock moves the more you make (time decay)

-Sell contango Buy backwardation

You could never go wrong if you accept the truth, Index funds always roll and specs dont take physical delivery. This cant be more true in Cotton.

Right before Index roll dates (it is widely published) sell front month buy back month especially when it is giving you almost -30 to do so Sell March CT Buy July CT pyramid this trade untill the roll date (sometime at the end of Jan or begining of Feb) when they are almost done rolling(watch the shift in open interest) close out and Buy May CT sell July CT wait patiently for it to play it out again untill the next roll.

- Leveraged ETFs suckers play!

Two ways to play this one out if you could borrow and sell short, short both FAZ and FAS equal $ amounts since the trade is neutral, execute this trade almost free of margin. One thing is for sure to stay even long after we are gone is volatility and triple leveraged products melt under volatility!

If you cant borrow the shares execute the trade using Jan 12 options to open synthetic short positions. This trade works with time and patience!

Vic, thanks again for providing a platform to listen and to be heard.


Yanki Onen

Phil McDonnell writes: 

When investing one should consider a diversified portfolio. But in a contest the best strategy is just to go for it. After all you have to be number one.

With that thought in mind I am going to bet it all on Silver using derivatives on the ETF SLV.

SLV closed at 30.18 on Friday.

Buy Jan 2013 40 call for 3.45.
Sell Jan 2012 40 call at 1.80.
Sell Jul 25 put at 1.15.

Net debit is .50.

Exit strategy: close out entire position if SLV ETF reaches a price of 40 or better. If 40 is not reached then exit on 2/31/2011 at the close.

George Parkanyi entered:

For what it's worth, the Great White North weighs in ….
3 Markets equally weighted - 3 stages each (if rules allow) - all trades front months
3 JAN 2011
BUY NAT GAS at open

BUY SILVER at open

BUY CORN at open
28 FEB 2011 (Reverse Positions)
SELL and then SHORT NAT GAS at open

SELL and then SHORT SILVER at open

SELL and then SHORT CORN at open
1 AUG 2011 (Reverse Positions)
COVER and then BUY NAT GAS at open

COVER and then BUY SILVER at open

COVER and then BUY CORN at open
Hold all positions to the end of the year

3 JAN BUY PLATINUM and hold to end of year.


. Markets to unexpectedly carry through in New Year despite correction fears.

. Spain/Ireland debt roll issues - Europe/Euro in general- will be in the news in Q1/Q2

- markets will correct sharply in late Q1 through Q2 (interest rates will be rising)

. Markets will kick in again in Q3 & Q4 with strong finish on more/earlier QE in both Europe and US - hard assets will remain in favour; corn & platinum shortages; cooling trend & economic recovery to favour nat gas

. Also assuming seasonals will perform more or less according to stats

If rules do not allow directional changes; then go long NAT GAS, SILVER, and CORN on 1 AUG 2011 (cash until then); wild card trade the same.

Gratuitous/pointless prediction: At least two European countries will drop out of Euro in 2011 (at least announce it) and go back to their own currency. 

Marlowe Cassetti enters:

FXE - Currency Shares Euro Trust

XLE - Energy Select

BAL - iPath Dow Jones-AIG Cotton Total Return Sub-Index

GDXJ - Market Vectors Junior Gold Miners

AMJ - JPMorgan Alerian MLP Index ETN

Wild Card:


VNM - Market Vectors Vietnam ETF

Kim Zussman entered: 

long XLV (health care etf; underperformed last year)
long CMF (Cali muni bond fund; fears over-wrought, investors still
need tax-free yield)
short GLD (looks like a bubble and who needs gold anyway)
short IEF (7-10Y treasuries; near multi-year high/QE2 is weaker than



To what extent does the inner guilt within all market players lead to revulsion at such times as Auld Lang Syne is sung?



It is very unusual to see an article like this in the Farm Journal, which is a magazine that offers good editorial and insight to general ag market conditions. It reminds me of the hoopla right before the 1973 corn blight/Russian grain purchase season. That big grain move in '73 got me into this business. I wonder what 2011 will bring….other than major volatility?



 The Chair offers a meal in the ideas of forgetting and trying to start fresh in trading every day, week, month. In my case I tend to remember and overweight the large losses and not the average gains. This leads to trading too infrequently and then being subject to adverse selection. Sometimes forgetting is a good thing. This past year it would be hard to forget the intra hour move of 10% in May, or intra month move of 25% in Oct 2008. Though they deserve some consideration, their likelihood of occurring again is probably overweighted for me. I am reading a book called Waves where it documents a 1700 foot wave that hit Lituya Bay Alaska in 1958. How many fishermen would ever venture out if they dwelled on the past too much? I have found in tennis, I often play better after a period of not playing, as I forget my bad habits. For some reason I manage to remember the core fundamentals. This affect unfortunately wears off when the dreaded reversion to the mean takes hold.

Ralph Vince comments: 

Interesting observation Duncan. I am of a similar mindset, have been working with the idea the past 12 months and have drawn the conclusion therefrom that "expectation," the probability-weighted sum of possible outcomes, aka "Mathematical Expectation," of what might happen, is not only NOT how human beings asses risk-opportunities, and rightly so. If we did, the analogy I like to use is, we would never board a flight.

But we DO board a flight, knowing there is an incredibly small probability of never arriving at our destination. Why? Because we "expect" to arrive at our destination.

In fact, the notion of Mathematical expectation is really a mere proxy (and a poor one at that) for assessing risk-opportunities compared to what we should use.

Thinking about writing a book on this. The problem is it ties into everything else I have ever worked on, and a lot of it would be redundant.

George Coyle writes:

I too suffer from this problem. This is obviously tough for those trading with casino logic which requires the "house" to play all games (subject to size limits). There is a concept in psychology known as systematic desensitization ( which attempts to stop responses to fear and anxiety. It might be useful for trading, but presumably one would have to incur many losses to get the benefit. Also, if we check the opposite end of the spectrum (the bank traders who take large risk because they can just jump ship and move to the firm across the street if they lose) it would appear having nothing to lose personally, and thus an asymmetric risk profile, would also result in eventual disaster. So there must be some optimal level of fear/greed/caring/indifference, the efficient frontier of trading emotions. It is difficult to think of how it might be measured and then used.

Craig Mee comments:

This seems to be a catch twenty two here, how individuals receive risk, and how the market does.. As everyone is boarding different flights at different times, surely fear and greed , or lack of …fifo's each other out. 

Ralph Vince adds: 

Put another way, what the casino "expects," and what you, the solitary individual "expects," are not mirror images of each other.

George Coyle adds:

The casino expects a slight positive expected return over the course of time (by virtue of the odds of the games). The only real exception is blackjack in which a player has an edge provided s/he can split aces and double down on split aces. The speculator using a casino approach would expect the same. Basically the central limit theorem says that over a large enough sample the distribution of outcomes will be approximately normal. In this instance both speculators and casinos using this logic assume a slightly positive mean (expectation) to the distribution. So they do expect the same, a profit over time by virtue of the laws above. The amount of said profit varies as markets are not governed by the statistical laws of casino games. So they aren't mirrored, but they have the same trajectory. Both experience runs against the expectation, the goal is to manage emotions such that a big loss does not prevent a speculator from playing the next game which may cause the positive average to be realized. The casino does have the benefit of odds remaining in their favor over infinite time.



 We've all seen too many black swans over the past decade. But why must all the black swans be negative? Why can't we have a black swan on the positive side?

This is NOT my prediction– but it's worth contemplating the following from Jan Hatzius (GS). In a nutshell, he alleges that much of the recent economic sluggishness is attributable to deleveraging in the private sector. And he suggests that this is coming to an end.

As a thought experiment, I'm analyzing how Hatzius' outlier prediction of 6% or 7% growth in 2011 might affect my portfolios. I routinely fret about double dips, and triple dips, European crises, and $30 oil/$200 oil, but I haven't spent much time fretting about 7% growth…but I probably should! Is it possible that we'll look back at QE2 with the same funds that we look back at the final Fed rate cut during the summer of 1993? (It's left as an exercise for the reader to see how stocks, bonds, and commodities behaved in 1994.)

And, why is Hatzius' prediction any wackier than Mr. Roubini's repeated predictions in 2005 and 2006 and 2007?

(Oh, and by the way, the US commercial truck fleet age is now the oldest that it's even been!)

From the FT:

Jan Hatzius, chief US economist of Goldman Sachs, is one who has become more positive. "There's been a clear improvement in underlying final demand," he says. "My explanation is that we're seeing a slowdown in the pace of deleveraging in the private sector." Deleveraging is the fundamental reason why the economic recovery since 2009 has been so slow. It explains why unemployment remains stuck at 9.8 per cent.

The call on consumption is contentious because debt levels in the US remain high by historical levels. Household debt, at about 90 per cent of GDP, is back to levels seen in 2005 but it would take years of deleveraging to return to the 80 per cent seen in 2002-03. Consumers do not need to stop saving, however. They just need to stop increasing the rate at which they save for the economy to grow.

If the US populace really does begin to catch up on consumption after three miserable years then growth could hit 6 per cent or even 7 per cent in 2011. The chances of that remain modest – but if it happens then the boost to confidence may feed on itself and the nastiest US downturn in decades might truly start to feel as if it is over…

Mr. Albert writes:

For what it's worth, Prof Roubini just bought a Manhattan condo…

Kim Zussman writes: 

Which begs the question where did the energy of the housing bubble (and related lending/spending) go, and is it now durably irrelevant?

The attached charts Shiller real home price index, which shows the 2006 bubble dwarfing any prior local maxima/minima for the last 120 years. Real home prices are now near where they were in 2004– which is still above all prior levels.

The FED over-rules the law of post-bubble over correction?

Ken Drees comments: 

1. this is a warm and fuzzy outlook (especially after 2 years of up market)
2. this is good to think about because its the white swan
3. if growth were to hit 6% it must do it in three quarters because it will take 1 quarter to pay off fourth quarter frugal fatique binge
4. if growth hit 6% it would ramp up quickly in a 3rd and 4th quarter burst
5. the ben factor about putting on the breaks would be argued down–can't hurt the president's reelection chances with a rate hike
6. Inflation would be running probably higher than 2% (fed measured) and no doubt inflation factors would be influencing growth–tainting real growth
7. Market would surge–second half after it wakes up to the fact of growth without a fed bummer.
8. banks would start to lend more in second half.
9. Real estate would firm some and so forth–growth begets growth.
10. Fed would leave it alone and overheat in 2012 would be a risk.

Jobs and job outlook in the spring 2011 would be key to overcoming recession inertia. I don't know if we are there yet–3 dollar gas with some predicting 5 next year will not help the prospect of saving less. Gas prices need to be 2.50 or less to give this scenario a fighting chance. 5 dollar gas would be an inflation goose (swan).

Bill Rafter writes:

I would agree that Hatzius is certainly correct in that a lot of the economic malaise can be attributed to deleveraging. It is evident in the Fed series TOTBKCR, CIBOARD and TOTALSL, bank credit, commercial and industrial loans and consumer credit respectively. You can also look at the monetary aggregates (going nowhere) and make calculations of the velocity of money (so low as to be underneath the outhouse).
What I cannot justify is the prediction of a turnaround. Admittedly at some point those who wish to deleverage have nothing else to deleverage. But that only manifests itself in a mean reversion of the rate of decline. It does not necessarily manifest itself in increased leveraging activity, presumably a result of economic growth. Thus we believe that those who see a decline in deleveraging as evidence of upcoming economic growth are extrapolating way beyond what is reasonable.

Many of the indicators we follow are extremely bullish, and yet others scare the daylights out of us. This is a time of mixed signals. The speculator must make certain that he goes into his activity without preconceived ideas, for if he perceives things to be bullish he will certainly find indicators which reflect that belief. But here's the rub: it's the same with the bear.

It may simply be too soon for the unequivocal good things to happen or be evident. I believe there is evidence that decision makers do not act on anticipated tax relief, but wait for it to actually take effect. Also, the recent tax legislation was not a drop in costs, but the suspension of an increase, which is not the same. Other than taxes, entrepreneurs tend to find a way to cope and then a way to eke out profit. No one is sitting around just waiting for the deus ex machina. To some that means outsourcing (perhaps overseas) and being maligned for doing so. There have been some private equity deals lately. All of that repositioning is good eventually. Maybe we just need to wait for the fog to clear a bit.

Fred Crossman writes:

Rocky, there could be a black swan event next year, but probably not in GDP growth. The last time we had over 7% growth was in 1984. This past recovery in 2002-2008 only had one year of GDP growth over 3%. That period had very low rates and benefited from tremendous credit expansion with huge housing growth, a construction boom, massive home equity withdrawal, etc. only 2003 had a GDP over 3%. It was 3.8%.

If hatzius believes in 6%- 7% GDP growth for 2011 or 2102, (basically the 2002-2008 recovery replicated next year at over twice that past period's 3% GDP rate growth) in a current environment of high unemployment, negative home equity and facing city and state layoffs, then he would be worthy of more than the black swan award.



Apropos of this derivative-centric world, I'll never forget the first time I was asked, "what might happen if there were a crash UP?"

Bill Rafter writes:

There were "up crashes". During the flash crash in May there were some thinly traded ETFs that had big range days with the activity being on the upside. I believe that was because they were involved in some long/short strategies such that when the holder dumped the long side, he covered the short ETF driving it up. 



 I've noticed a surge in people quoting and referring to Ayn Rand and Atlas Shrugged this year. Ironically, usually its from someone who works on Wall Street, usually at a big bank. I try to explain to them how hypocritical their stance is, but they don't get it.

A liberal friend was having an email debate about FinReg with some guy who works at Morgan Stanley, and this guy tried to cleverly end the debate by sending her an Amazon link to Atlas Shrugged. She reached out to me for a proper response, and I told her its obvious the guy hasn't actually read the book, because if he did, working at a place like Morgan, he would have the decency to shut up as he awaits his taxpayer sponsored 2010 bonus.

But now, from a WSJ article on AIG, we get the following quote from the CEO:

"I was wondering if I might get a call from someone saying maybe 'you were right,' because we look better than we did last May and we can see the finish line from here, and it comes with a profit for the taxpayers," Mr. Benmosche said in an email. "But as I learned in [Ayn Rand's book] 'Atlas Shrugged,' find your Thank Yous from within."

If there was ever a spoken phrase that captured the essence of the year 2010 to me, this is it. The CEO of the most government bailed out corporation in the history of governments and corporations quoting Atlas Shrugged.



 Emanuel Lasker always tried to forget as much as possible so he'd be fresh for any game. He was apparently very weak in opening games because of this. But the freshness was enough for him to be world champion for many years. Presumably Nigel would say that this is no longer possible. The degree of freshness in studying market regularities is probably a key as what happened x years ago is usually opposite in regularity to what's happening now, a variant of ever Baconian racing.

Jay Pasch writes:

This is a great piece of trading advice. Forget yesterday's game and concentrate on the airborne serve… 

Nigel Davies writes:

 Yes it would be much more difficult to go into major tournaments without extensive opening preparation these days. But I think it's still a good idea not to do this on the day of a game, and I tend to advise students to cultivate a repertoire that is fairly immune to surprises. This helps cultivate the balance and ease that Lasker felt was so important.



 "Better by far that you should forget and smile than that you should remember and be sad." Christina Rossetti

Featured on 60 Minutes and dubbed "the Human Google" by Good Morning America, Brad is only the second person ever studied for HYPERTHYMESIA, an extremely detailed memory for the events of his life.

It is a nice song too, but do we really want to remember everything intensely: a cautionary fictional (I think) story from Nature .

"The pressure to succeed steadily increased and so did the need to stay alert, to focus relentlessly. I prowled the smart-drug chat-rooms and message boards. During the day I traded stocks and shares, during the night I was trading ideas and experiences. I learned about stacking and cycling, optimizing the stimulation and minimizing the side effects. All of us avidly sought the pot of gold at the end of the pharmacological rainbow, an eidetic memory, capable of perfect recall. I got the drugs from incurious online pharmacies."

And are there virtues to be found in the ability to forget? also a good read here.


The default view in the epistemology of forgetting is that human memory would be epistemically better if we were not so susceptible to forgetting—that forgetting is in general a cognitive vice. In this paper, I argue for the opposed view: normal human forgetting—the pattern of forgetting characteristic of cognitively normal adult human beings—approximates a virtue located at the mean between the opposed cognitive vices of forgetting too much and remembering too much. I argue, first, that, for any finite cognizer, a certain pattern of forgetting is necessary if her memory is to perform its function well. I argue, second, that, by eliminating "clutter" from her memory store, this pattern of forgetting improves the overall shape of the subject's total doxastic state. I conclude by reviewing work in psychology which suggests that normal human forgetting approximates this virtuous pattern of forgetting.


"At first glance, AJ might appear to have an enviably good autobiographical memory. But closer examination of the case suggests that though we naturally assume that increased access to stored memories (less forgetting) would amount to an improvement to memory, this is not in fact the case. There are two points to note here. First: Though it is natural to assume that a \better" memory would provide us with a signi cant cognitive advantage, this is likely not the case. As Parker, Cahill, and McGaugh point out, AJ's exceptional memory has provided her with no apparent advantage in daily life or in her studies; nor is it helpful on IQ tests and the like (2006, 48). And at the same time, AJ's unusual retrieval capacity carries heavy cognitive costs. In particular, she \spends much of her time recollecting the past instead of orienting to the present and future" (2006, 48).An increased retrieval capacity comes at a price: time that would otherwise be spent on other cognitive tasks is devoted to retrieval; time that would otherwise be spent acquiring new knowledge is spent simply processing \surplus" retrieved memories."

Sam Marx writes:

The 60 Minutes program piqued my interest in people who have this super memory as a natural talent. It is obvious that there are people who are super geniuses in certain fields such as chess, music, math, etc. Maybe Thomas Edison was a super genius, he certainly accomplished a lot. Super geniuses in these fields can be easily discerned.

There may be super geniuses in other fields, business for example, but luck and other variables may affect their success.

I once knew a fellow who was just a clerk on the trading floor but he could complete the NY TIMES crossword puzzle in minutes. He was amazing. Maybe he was a super genius in just this one field because he never advanced further than that of a clerk.

These study of these super geniuses may someday lead science into creating a race of super geniuses to hopefully help mankind.

I've wondered as I watched football is there a super genius offensive director who can anticipate the moves of each defensive player for each offensive play he calls, a Prof. Nash in the booth.

Ralph Vince writes:

About your last point–No. Great offense — like great chess — or brilliantly playing a
mediocre bridge hand– requires the element of surprise moreso than
knowing what all the pieces might do.

"Surprise," is anticipatating what most are quite certain will happen,
fienging it, then taking advantage of that en masse, not individually.
-Ralph Vince 

T.K Marks writes:

 My recollection of Jerry Lucas' memory methodology is that it had much more to do with technique than talent. Something he readily admitted. There's an old axiom in legerdemain: A magician never tells. Lucas told. Heresy happens.

But, first of all, Lucas was delightfully different from the get-go.

While on the Knicks he played center so far from the basket that the other team's defender would look confused as to what to do because if he went out to meet Lucas he effectively just took his own team's best rebounder out of the equation. Therefore it would oftentimes appear as if Lucas was playing offense undefended. A bizarre sight to behold.

My first brush with his mnemonic capabilities though was when he demonstrated his ability to recite pages from a New York phonebook to Johnny Carson on The Tonight Show.

Intrigued by how he was able to do that, I read some of his materials. He freely provided how one could easily and quickly memorize long lists of objects and actions in precise order by using rhyme and incongruity.

It worked like this. There was a rhyming scheme linked to the number of the sequence of items/actions to be memorized. For instance, 1 corresponded to gun, 2 to shoe, 3 to tree, 4 to door,…8 to gate, …44 to knock on a door….

Rhyme resonates in memory and Lucas, a luminous soul, knew this. As such, It was very easy to learn the initial rhyme key, and one could readily extrapolate further from what was provided.

The second part of the equation involved somehow associating the number-linked rhyming sequence with the object or action to be memorized. And the incongruity involved helped make it stick as an image.

For example, if the second thing to be remembered is a bottle of aspirin, the memorizer pictures in their mind a bottle of aspirin in a shoe. That's an unlikely scenario, and that's what helps make it stick. And just keep on going. If item 8 were a cat, picture a cat walking up and opening up a gate to a country estate. If item 44 were a rogue politician, picture him knocking on the door of a convent for a shakedown donation. The idea obviously was to make it as incongruous as possible, provided it remained consistent with the rhyming key.

It was remarkable how quickly this information could be retained based on this easily learned technique. So much so that I fondly recall as a kid having a little fun with my father as soon as I learned it. I said, Da, write down 20 items and I bet you I can recite them back to you in less than 5 minutes. Frontwards, backwards, randomly, any way you want. He said, no way you can do that in 5 minutes.

After we concluded the little demonstration, he asked — demanded actually — how his kid had just done that. Told him I couldn't tell him. It was magic.

He smiled.

I sensed as well that there was also a little "magic" involved in the 60 Minutes piece on autobiographical memory. Some of subjects too quickly and unsolicitedly mentioned what day of the week it was when asked about what had transpired on a random date. That suggested a key-scheme gimmick peculiar to days of the week in any given year. And with such, a presumption of legitimacy in a larger sense.

But there were other non-scientific methodologies mentioned as well. The least of which was certainly not the fact that the lead reporter, Leslie Stahl, had remembered midstream that she just happened to know well one of the final 5 subjects, actress Marilu Henner, and so brought her into the tiny sample group.

She just happened to know a 1 in a supposed xx million shot? How is that not curious.

I was initially intrigued by that piece when I had first heard that it would be aired, but after watching it, found it to be much more science-cum-show biz than peer-reviewed journal. The editorial board of The New England Journal of Medicine would get them on the Leslie Stahl/Marilu Henner abject lack of randomness angle.

One would hope.



I'd like to make a couple of points on education.

1. I don't think that the US is capable of making a decision as a nation to pursue proper education. The concept itself is highly collectivist, so it's unlikely to work in anything but a dictatorship, and even then it's hard to implement. Individual people have to make a decision to value education, and however flawed the present system is, the children of many Asian immigrants, for example, have no trouble getting educated extremely well. Culture determines educational achievement to a much greater degree than the available infrastructure, unless it's extremely poor.

2. The country is still capable of attracting the best minds in the world if the conditions are otherwise suitable for entrepreneurship. Any shortages of highly educated workers can be fairly easily solved. There are not millions of engineering and programming jobs that are unfilled because of the lack of suitable candidates. There certainly are some, and the unemployment rate is much lower among the educated, but being a good place to do business will do wonders. That and not having "free trade" with centrally planned economies.

Ralph Vince writes:

That argument assumes my dog can learn calculus. It assumes that dopes can be meliorated to be not dopes."Education," only goes so far. You cannot take your average bozo and make him into a brilliant mathematician any more than I can train hard enough to run a mile in under 6 minutes.

Isn't going to happen– and the fallacy perpetrated by the NEA is that other countries are "Investing in education," and getting results like they are trying to have us believe we can achieve here in the states.

The rest of the planet is bunch of dopes too– only, oddly, more naive than what you find in this ever-so-sophisticated society of America.

Further — jobs aren't being hemorrhaged because the rest of the world outside the states is so smart. They're finding their way to the bottom, to slaver labor present in places elsewhere, and in the case of commodities (like steel) to places with the softer currencies. I propose that education– teaching dogs how to integrate functions– isn't moving jobs around the planet.(Incidentally, the notion that torts cost society I take issue with. Torts cut into insurance company profits, and profits never, ever EVER flow downward. If they did, those pimpy running shoes that cost $150 bucks would be available for $10).



 Just finished reading A Warrior's Life, the autobiography of Paul Coehlo. This man, always searching, always doubting, always persevering, can teach us in many areas. Although he was not without considerable failures and flaws, both personal and in business, he took all opportunities and was quick to reinvent and market himself. With his quest for answers in life and success he covered much territory, and although achieving great world wide acclaim as a writer, he learned much about life in the process.

This passage from his diary is like a beacon for traders:

When I finished writing The Fifth Mountain, I recalled that episode– (getting fired from his CBS executive position many years prior) and other manifestations of the unavoidable in my life. Whenever I thought myself the absolute master of the situation, something would happen to cast me down.

I ask myself: Why? Can it be that I'm condemned to always come close but never to reach the finishing line? Can God be so cruel that He would let me see the palm trees on the horizon only to have me die of thirst in the desert? It took a long time to understand it wasn't quite like that. There are things that are brought into our lives to lead us back to the true path of our Personal Legend. Other things arise so we can apply all that we have learned. And some things come along to teach us…

Maybe represents all three.



HR Block, from Tim Melvin

December 28, 2010 | 1 Comment

HR Block has almost as much cash as they do debt so they should survive. The question is how much business do they lose if they do not find a way to offer RAL's this tax season? Given the value of the franchise, I would be less than surprised to see this end up in a private equity portfolio by this time next year. Management has consistently made serious mistakes over the past few years. Tangible book value has fallen by half over the past five years. They still have a bank charter and the tax brand is viable. The dividend will provide some support, but I don't think i would be an excited buyer until about $7 a share. With reduced revenues form the lack of RALs and even a slight tick up in mortgage putback for old securitizations and the stock will get there. At that level somebody is going to make an offer for the company. Insiders own less than 5% so they would be powerless to stop an offer.

Scott Brooks writes:

HRB is middle/lower middle America's tax service. HRB got themselves in trouble a few years ago when they decided that they could get into the securities business and offer investments to their clients. They learned the hard way that's it's really really difficult to make a living on $2,000 IRA deposits.

The refund loans were a high priced, but desired service that their clients wanted and now the government, in it's usual nanny state method, has "protected these consenting adults" from making a decision that they deemed to be in their best interest to gain quicker access to money that they stupidly loaned to the government interest free in the first place.

As a side note to all this…..

This is a great example of how you get fleas when you lay down with dogs.

HRB needs the corrupt government system to enforce their idiotic nearly incomprehensible tax laws so that organizations like HRB can exist, and then when HRB get's big and powerful, the corrupt government that they have to support finds way to control them, via regulation, and ulitmately push them towards much lower profitability (how long can they be pushed?).

So the organization (the corrupt US Government Tax System) that is working towards their (HRB) demise is the exact same organization that they HRB) need to support to justify their existence.

The ultimate Catch-22.

Russ Sears writes:

It has been a few years, but personally they have lost the self help
software battle to TurboTax. I found the H&R software was full of
glitches and bugs with poor technical support model.

This despite the difficulties switching brands from one year to the
next. Like bank's checking account customers, they should have a lock on
repeat business. Besides having to re-enter data, they also should have
capitalized on familiarity with the software and superior customer
service by maintaining personal data in electronic format and all the
great benefits electronic version has over paper. Turbo Tax has built
this costumer loyalty into a nice little annual annuity with prices
rising with the tax savings potential and complexity.



Today in Sarasota county, while the northeast is buried, we are freezing with the current temp of 46 degrees. I was driving down US 41 this morning and noticed water mirages in the road, the type of mirages one would expect to see on a hot day in desert conditions. I never really thought about it, but didn't expect to see a mirage in the cold weather. Drawing a parallel,it made me think of what kind of mirages we see in the markets, do they even exist, can we see them, do they occur all then time or only during certain conditions?

Pitt T. Maner III comments: 

Here on the Florida east coast you can really make out the ropy, twisting Gulfstream (GS) on the horizon. Its a common boating forecast that "seas are higher in the Gulfstream" but I suspect that the cold temperatures may enhance density differences and make the GS "ride higher" and become more visible to landlubbers. It looks almost like there is some vast offshore island on which the waves are breaking.



I had an interesting encounter with one this morning. Was in a cafe out on Long Island, having some coffee and reading when a young industrious sort approached my table. Introduced himself as a reporter for the local newspaper and asked would I like to offer a quote for the blizzard story he was writing.

I told him no because anecdotal evidence is close to meaningless and beyond tedious, so I wouldn't feel right burdening his readership with my understanding of a subject as pedestrian as the weather.

But, I continued, I'll give you some career advice. A polite kid, he was all ears. I told him that we both know that he was working at the paper he's working at because that's how the journalism game works. Hope to break in a small market, then further hope that an editor at a big market paper notices your work.

It's the standard model. So I told him that he should consider enhancing his chances of one of those editors taking note of him, and that compiling anecdotes was not the optimal way of doing such. Why, because everybody else is going to be writing the same thing and it's all going to amount to nothing more a big slush of ephemera.

He then asked what's the best alternate route to go then.

I told him to look out the window and what does he see. (I love being a compass for kids when they're eager and polite.)

He told me that he see's 2 feet of snow. So I tell him that all the other reporters are going to be seeing the same exact thing, so what else does he see. Now the kid's bewildered.

So I tell him where most see 2 feet of snow, some see the central limit theorem, and that's what he should write about. Based on meteorological data what would the odds be of having another 2 foot storm within x days and what would the possible enormous consequences be. What would the ramifications be of a weather shock on top of a weather shock be for airline travel and how long could it reverberate.Then I told him to call up the mayor's office and ask for a comment on what services would have to be cut in such a scenario to make up for the budget shortfalls due to all the clean-up overtime. Lay out the possibilities: library, parks and recreation, Meals on Wheels for the homebound. I told the kid, listen, I don't want you to become unduly jaded but you want the guy to bite on the Meals on Wheels thing, as it would resonate.

So the kid tells me that he wouldn't be able to put this all together by his afternoon deadline. So I tell him that he doesn't have to write it today. Go to the library and brush up on the college statistics that he said he'd forgotten and write the story whenever he wants. It's like a bullet in the chamber because another snow storm is inevitable this year or next and that's when he should pull the trigger.

So he asks me that he should start to research a story about a possible snow storm a year from now and release it then as timely reporting.

I told him to look at the obituary page in tomorrow's New York Times. It will contain insightful information on interesting people, most of whom he has never heard of before. But although the person only will have died today, that obituary was probably written years ago. And it was just a bullet in a chamber, waiting to be fired.

There are few things in life as satisfying as watching the light go on over a young person's head.



 Most books and movies have a indirect way of indicating that their talent and authors are fellow travelers. The common thing is to have the radio or tv on showing some stereotyped situation where the rich are living in mansions while the homeless are on the street, or a Republican President like Regan or Bush or Nixon saying something that looks evil and cold-hearted when taken out of context. A new technique would be "Fox News would have us believe that"…."tenure gives university professors the green light to teach that revolutionary overthrow of the capitalist system is appropriate." What are some of the other techniques? How does financial news color the news to make us do and think the wrong things?

Scott Brooks writes:

It doesn't matter what you say, it can be edited to be anything that the "opposition" (whoever they may be) needs it to be. Witness Alan Grayson's attack on Dan Webster.

In today's MTV short attention span 10 second sound bite world, the media can easily manipulate the 90% of the population that are the "unthinking masses". They lack the critical thinking skills necessary to put 2 and 2 together to get 4. Unfortunately, in today's society, the world is much more complicated than 2 and 2. The media, the government and complicit so called capitalists industry (which they are not) have complicated things so much that we're way past 2 and 2….we're easily at 3 and 3 and with the housing market derivative meltdown we're at 4 and 4.

Asking 90% of the population to put 4 and 4 together is ridiculous… may as well ask them to explain how gravity works.

Ken Drees writes:

Looking back at 2010 and market / news coverage related trades I would confess that I missed a big one–being taken in by fear even when intuitively I knew I should have tried to buy that fear.


The coverage was oppressive. Obama was going to keep a boot on the throat, x billion was for "starters". BP would have to sell off divisions, they would be constantly garnished—every market guy on tv said BP this and BP that but always ended the interview with "Of course I would not buy it at this level yet".

I made up my mind to pass it up since I couldn't figure out how the USgov was going to handle it. BP CEO looked out of touch–yacht racing when he should have been in the bunker, then he gets sacked. Someone was buying all that BP stock and Jeff Watson framed the big picture of how much was spilling into how big an area–but the logic of this was weighed with the fact that cap was still leaking and the blowout may need a nuclear option and the shrimpers were committing suicide.

The news was the most bleak and black–and not only network news but blogs and such. In the end I missed a biggie—there is a lesson to be learned here that I still have not completely distilled out in terms of what triggered me not to even "try" a trade. Even when the leak stopped–it seemed like it would not hold!

George Coyle writes:

Having recently read some books on screen writing techniques, it becomes apparent that certain structures are conventions and are generally present (or should be if one wants to sell dreams to studios for production). Also, the biggest grossing films tend to be either love stories or Horatio Alger style rags-to-riches tales of the poor boy turned not so poor. People love these stories because they allow escape into the ideal growth toward fame and fortune (financial or otherwise) and provide hope. We don't see many modern videos selling being green or moral values either…it is all g5 this, bling that, etc. Take Avatar of late, crippled none-too-bright man on earth becomes champion of a new world, gets the girl, becomes the leader, etc. Hollywood is notorious for sticking with what works and the fact is selling love and rags-to-riches tales just trump the alternatives because who wants tragedy in fantasy or to come out of a situation we paid for feeling bad, life provides more than enough of that. It is a story telling norm and is rarely violated in mainstream commercial profit seeking films. So patterns not only exist, they were specifically tailored to what made a profit last time and will again. As pretty much everyone is seeking more wealth and/or love and wouldn't turn down becoming the hero of a new world we all become fellow travelers on these stories. The stories feed our hope of being something greater.

As for popular media, especially the financial variety, they seem to filter their speakers to suit the topic du jour. During the crisis Roubini was a financial God and was quoted by everyone I knew but he doesn't get near as much air time at present with the spx nearly double the crisis lows. Should the market collapse again they will undoubtedly trot out the doomsday seers to explain why the longs got it so wrong. Media giants allow price action to dictate program lineups such that when markets go one way or another out come the biggest advocates of that move to tell us all why. It serves as a reinforcing phenomenon and can foster buying more or widespread panic depending on the environment. But I feel people will generally believe what they hear on tv (especially people who aren't market professionals). It would be interesting to see the p n l of following the recommendations of all of the commentators. Who knows if they are telling us the truth or dumping their positions profitably to the general populace.

Galt Niederhoffer writes in with a comment:

Movies have always been a populist medium and the structure of the plot is best suited for very simple ideas to be proven or disproven with beginning, middle and end. I don't think writers are socialists by nature. I just think that movie plots best lend themselves to tales of good and evil and it's easiest to prove the error of new, mass or radical ways than the opposite.

Gary Rogan writes:

The most important tool at the disposal of the information industry is choosing what not to cover. If it's a politician they like, they will not cover significant concerns about their background, like the lack of basic information about their past. If it's a financial bailout, etc. they will create an illusion that there is a consensus supporting it by concentrating on those with the "right" opinions.



 Only 59 private jets at the fixed base. Mostly big ones. There were 120 before the crash.

George Zachar writes:

Aspen airport private jet parking inventory down roundly the same %, if not a bit more. Empty storefronts during the busiest week of the year here, and real estate blather has an unseemly pleading tone.



Any time a market manages such a drop, is usually due to an era within imput….either by executing broker or a fund manager who is not "on the pulse" of the said market and how to best deliver his order into the market for that specific day.

In a holiday volume reduced day, the chances for an error, increase dramatically , including due to fact that market makers may not be as prevalent.

This no doubt, need to be looked at to increase confidence in the markets.

Note: I had no position, but considering the last 15 days ranges where engulfed, no doubt some species happily enjoying a round of golf and well in the money, wont be too happy once they check p and l.



 Titanic Thompson by Kevin Cook is a deeply flawed book about a reprehensible man that has many lessons for market people. The deep flaws in Ty's persona are ably expressed by Herman Keiser, a former masters winner, who was just one of Ty's hired stooges, hired to pretend to be a caddy. "He was a thief," Kaiser said. "One day, at 80 he shows up at my house with a partner and two young girls. Herman, I've got a plan that's gong to make you rich. Give me 5,000, Herman." I tell him, "Ty, stay here. I'll be right back." I go to the house and get my 22 pistol. I come out and tell him, "Get outta here right now or I'm gonna shoot you."

Ty had no shame in cheating his best friends. When he was a sergeant in the army, he cheated all the soldiers under him out of their pay check. When in an old age home, he cheated all his fellow patients out of all their money. His father stole his mother's last money, and Ty treated his wives similarly. Worst of all, he fixed the game that Arnold Rothstein lost his fortune in and that led to Rothstein being murdered, when he welched on the deb on the grounds that he had been cheated.

And yet, there are many things we can learn from him. The first is the importance of practice. He practiced card throwing, dice throwing, horse shoes, shooting, and golf in line with the 10,000 hour rule and became the best in each of them. He kept records of the throws and was able to reduce the odds of throwing a 7 in dice with various dodges. He always made his proposition bets the kind that he had fixed before hand, and that could not be tested afterwards. I like the one where he offers to retrieve a golf ball from Lake Michigan 100 yards out in the winter where he marks many balls with an x before hand, and then retrieves one with an x, but no one is likely to swim into Lake Michigan and dive in to the bottom to test him. Or the time he bet that he could hit a golf ball 500 yards and he did on a frozen Lake Michigan, but he had the rules of the bet set down in writing before hand so he didn't have to hit it 500 yards on the course.

Also good was his trick of throwing loaded lemons and peanuts over a roof where the object he was throwing would disappear. His numerous proposition bets make you realize that you should never take the opposite side of a derivatives bet, as there is always something you don't know. The advice in Guys and Dolls about a jack squirting you in the eye if someone bets you it will, is a good one. Never accept a deal that looks too good to be true.

What a waste. He was so skilled. About the best golfer, horse shoe thrower, shooter in his day. He could throw a key through a key hole, and chip a put into a cup loaded with water so the ball wouldn't fall out from 15 feet, or flip 50 cards in a row into a hat 10 feet away.

What evil lied in this man, and how many men were ruined by him.

The best thing anyone ever said about him was that he would never steal or hustle all the money from someone who would kill himself afterwards. How fortunate that he died broke, hated by everyone including his son. And how the biographies show that evilness is inherited. His father and he were both the most evil of men, who thought of nothing but themselves and gaining money by any means and it runs in his family with his kids.

My favorite con of his: 

He dresses the best golfer of his generation up as a farmer. Has him driver a tractor around a gold course for a month, pitching manure, and chopping trees. Then he goes to the golf club where they've seen the farmer doing his rounds routinely and says he'll challenge the best two player in the club to a match, and they can choose any partner for him in the world. They choose the farmer. The farmer is a -4 handicap and they win and rush out of town.

Ty was very good with the gun, had to kill many people, and was often in jail and left for dead by thugs. Had to travel with a body guard as he was always cheating to win, and his fellow gamblers were as adept at marking cards, and using wires as him.

One con that he tells is hiring Harry Lieberman to feed him checker moves in a checker match against the best in Kansas city through a wire. Hard to believe that a checker player would do that, and the story doesn't ring true as supposedly the wire told him when a move was bad as he was wavering and touch move must have been played.

His cons remind me so much of the kind that the brokers play when they send you a big research report on a company or industry or country and then offer to take the other side of your trade. You are in the same position as the club people who insisted the farmer be his partner.

Gordon Haave comments: 

My experience when they offer to take the other side of the trade, if you press them, is that they say they are just a middleman and are offloading the risk on someone else. Or course as they own the fed, treasury, congress, CFTC, and FINRA they can pretty much do whatever they want.

Pitt T. Maner III writes:

A fellow Arkansan and famous pinup girl who also used the results of hours of practice to advantage :

'Jeanne Carmen was born in Arkansas in 1930 into a family of poor cotton sharecroppers. She ran away at 13, first to St. Louis, then to New York City, where she eventually landed a job as a fashion model. In 1949 she got an assignment to model clothing for Jack Redmond, a local golf pro and shop owner. Carmen, who had never seen a golf course, was modeling different outfits at Redmond's indoor golf range when he playfully asked her to take a swing at the ball. A lefty, she spun the right-handed club around in her hand and, with the back side of the club face, smacked the ball into the canvas backdrop, knocking it off its support.

"You sure you haven't played before?" asked Redmond. He then set up the backdrop again. "He had me stand on the other side of the ball and hit right-handed," Carmen recalls, "which was harder, but I knocked the drape down again."

Redmond asked her to come in the next day: "I'd like someone to see you."

The next day Redmond had the golf champion Jimmy Demaret watch as Carmen hit balls.

"They were oohing and aahing," she says, "and I thought, 'What's the big deal?' I don't think this is a very difficult thing."

Finally, Redmond said, "I think I can make a trick-shot artist out of you," and asked if she would mind coming in two or three times a week.

"Sure," she said. She hit nearly every day, sometimes for hours on end, for six months. Then she was ready.

"I could stack three balls on top of each other, which itself is very hard to do. I'd hit the middle ball 200 yards, the top ball would pop up and I'd catch it, and the bottom ball would rest, untouched. I could hit the ball 200 yards while standing on a chair on one leg. I could hit a flagpole 150 yards out."

She and Redmond traveled up and down the East Coast, putting on three shows daily at various clubs and earning upward of $1,000 per day. For their finale, she would have a volunteer from the gallery lie flat on his back and tee a golf ball between his lips; then she would drive it 200 yards without disturbing so much as a whisker.

Within a year personal differences ended this lucrative partnership. Carmen then met a dapper young man from Chicago, John Roselli, and moved with him to Las Vegas. Roselli was a lackey in the Chicago mob who helped run the Sands Hotel. When he found out about Carmen's golfing talents, he told her, "Look, honey, we're going to play a little game here." The way he described it, she says, "He said we're never going to take a nice guy. We're only going to take the assholes, and I know who they all are."

"I could hit the ball 200 yards while standing on a chair on one leg. I could hit a flag- pole 150 yards out…."
"Well, that sounds good to me," Carmen recalls saying. "What did I know?"

Roselli would plant her in a lounge reading a magazine. He'd sit at the bar, scouting for pigeons. Eventually he'd strike up a conversation and steer it toward golf and gambling."That's not so great," Roselli might say. "Even I could beat that." Then, pointing at Carmen, "Hell, even she could beat that."
Says Carmen: "And the guy might say something like 'Maybe in the bedroom but not on the golf course.'"

Wanna bet?

The group then would go over to Carmen, who, pretending to be a stranger, would innocently agree to be a pawn to their betting proposition. Dressed as provocatively as the era would permit, she would stand on the first tee and spin the club around in her hand, feigning to have never played before.

"I'd hold the club all wrong and then duff it, or slice it, whatever. After a couple of holes the guy would say, 'This is getting to be a bore. I'm going to win this hands down.' And John would say something like, 'Give the lady a chance. Give it a few more holes.' And then I'd get a little better and a little better. Until right at the end, when I'd start reeling them in. We'd win every time. They never knew what hit them."

The two worked the scam for about a year, until one day when Carmen slipped. She'd had a drink while waiting for Roselli to set up the mark, and, a bit tipsy, started playing too well too soon. The man knew he had been set up. "He was carrying on, complaining," Carmen says, "and Johnny said, 'Look, pay up, you lost the bet. Pay up and let's call it a day.' But this guy refused."

Roselli told Carmen to go to her room; he'd call her later.

"He then roughs this guy up. He calls me and tells me to get to the roof of the Sands Hotel. I get up there and open the door to see Johnny toss this guy over the side. Oh, my God. I'm in shock. I'm crying. So Johnny says, 'Come over here and look.' I didn't notice that the guy had a rope tied around his ankle. I go over and see this guy dangling down there… . He pulls the guy up and … Johnny's got his money and cuts the guy loose.

"Right then I decide I'm in too deep. I had to get out of there. I go pack my things." She moved to Los Angeles and became a star in B-movie potboilers such as Guns Don't Argue, Reckless Youth, and Born Reckless. '

Jeff Watson writes:

 I'm not a chess player, never have and never will be one. I know how each piece moves, a little strategy and that's it. However, school my best friend was a solid chess player and a member of the chess club, however ranked kind of low on the totem pole. I heard of a surefire method to beat a whole group at chess without cheating and ran a proposition against him and a bunch of the guys in the club. I bet him and the guys that I could play chess against the club and win at least 50% of the games, no draws allowed, play each game to the conclusion, and also beat the process;. We commandeered a classroom and set up 16 chess boards on desks in a circle around the room with me in the center. I assigned different numbers to different tables and when one would make a move, I'd make that exact move on another player. In reality, they were playing each other, and I was just the mailman. I won exactly 50% of the games and I beat my roommate by having him play the club champion. I couldn't believe that they fell for that one, but I made the bet so high that their greed made them irrational and the took the bet hook line and sinker. If that is cheating, that's up to someone above my pay grade. I thought it a clever bet, like most of my props but never used gaffs only percentages, exact terms, paradoxes, math, or physics to win. The lesson here is that one can make a bet so high that people will take it, especially when they think they have the edge. If one makes a really, really high bet, the edge better be huge. The best prop hustlers play games that they have an edge in, play it for freeze out, and let old man vig grind away at their opponents stack. Small prop games like flipping coins can be played for loose change, you will have a very high edge, and your friends will be delighted and amused, thinking you're clever, while you take their money. Gotta let your opponents win sometime as someone once said, maybe it was Runyon that "While you can shear a sheep all the time, you can skin him only once."

Nigel Davies comments: 

This is an old con that was repeated on TV by Darren Brown. I'm sure that the assembled titled players knew very well what was happening but they must have been getting well paid to get them to wear suits! 



 The long-heralded MIT Billion Price Project , which monitors the daily price-changes on 5 million items is now available. This is a valuable data for TIPS and other traders, and a step forward in the dissemination/analysis of market-based data….independent of the Labor Department.

Worth a visit.

Jim Sogi writes:

The data is surely helpful, but the the graphic on the site using colors and a separate legend is nearly impossible to decipher, especially for the colorblind. They would learn much from Tufte.

Rocky Humbert adds:

I'm sure if you make a sufficiently generous donation to MIT, they will send you a copy in whatever color you'd like.

Your comment is reminiscent of when I was a first-year associate at GS (in Fischer Black's group), and delivered one of the first option-pricing models to the new oil trading desk. The app ran on an IBM 3270 terminal (hooked to a System /370). The trader said, "This is really nice. But can you do it in yellow?" [IBM 3270 terminals were monochrome and informally known as "green screen terminals."

Epilogue: That trader didn't last very long at GS.Personally, I find the following text from the MIT website more interesting than the color: " As part of the BPP we are not only constructing average price indexes – such as those you can see in the web page – but also construct tracking indexes with the purpose of predicting macroeconomic variables. We are working on predicting the CPI seasonally-adjusted announcements, the PCE, and even the GDP. These tracking indexes use the information from daily price changes to improve standard models that predict the macroeconomic performance of the US economy.

We started in the most obvious place – trying to forecast what the BLS will announce in terms of monthly inflation. Although the BLS publishes the inflation of November in mid December, today is the last day of the month so we already have a measure of the inflation rate of the retailers in our data. So, here we go… Our prediction is that the BLS will announce November's inflation rate (headline, seasonally-adjusted) of 25 basis points. Our models produce estimates between 21 and 27 depending on how the different prices are aggregated. Well, we now have to wait 15 days to see how close we are… that long? yes… that long.

An important point: this estimate is different from the inflation you can compute in the average of online prices (the indexes we are showing on this page). They are related but not identical. We are not going to release the tracking indexes yet. We are at the stage in which we are mostly testing and researching the best way to do the prediction.Epilogue: The CPI actually came in at 0.12% … so there's a divergence that will either resolve or cause MIT to tweak their methodology….



 From a Mercatus study on pensions:

Pension plans operated by state governments on behalf of their employees are underfunded by an estimated $452 billion according to official reports, with total liabilities of $2.8 trillion and total assets of $2.3 trillion in 2008. However, many economists argue that even these daunting liabilities are understated. Current public sector accounting methods allow plans to assume they can earn high investment returns without any risk. Using methods that are required for private sector pensions, which value pension liabilities according to likelihood of payment rather than the return expected on pension assets, total liabilities amount to $5.2 trillion and the unfunded liability rises to $3 trillion. The ability of governments to pay for the retirement benefits promised to public sector workers runs up against the reality of limited resources.

In this study, we consider the case of New Jersey, which operates five defined benefit pension plans for state employees. The New Jersey Senate unanimously passed legislation in February 2010 that would put a question on the November ballot to constitutionally require the state to begin to make its full annual payment to the state's pension system. The bill requires the state to catch up to paying its full obligation by FY 2018. From that year forward the state will be constitutionally required to make the full payment to its pension systems each year as calculated by plan actuaries. The state reports that its pension systems are underfunded by $44.7 billion, when liabilities are discounted at the 8.25 percent annual return that New Jersey predicts it can achieve on funds' investment portfolios.

However, when plan liabilities are calculated in a manner consistent with private sector accounting requirements, methods that economists almost universally agree are more appropriate, New Jersey's unfunded benefit obligation rises to $173.9 billion. This amount is equivalent to 44 percent of the state's current GDP8 and 328 percent of its current explicit government debt. This calculation applies a discount rate of 3.5 percent (the yield on Treasury bonds with a maturity of 15 years) to reflect the nearly risk-free nature of accrued benefits for workers. It is estimated if state pension assets average a return of 8 percent, New Jersey will run out of funds to meet its pension obligations in 2019. If asset returns are lower than 8 percent, they will run out of funds sooner. State actuaries estimate that under certain assumptions, New Jersey's pension plans will run out of assets to make benefit payments beginning in 2013.

Scott Brooks comments:

So basically, all that needs to happen for pensions to be fully funded is to pass legislation to require that they be fully funded. Now, all the states have to do is pass legislation that allows them to print money and they could make all their problems go away over night!

If one were to squint one's eyes and put on a "fact blind-fold", you can see that there is no problem with pensions. This is obviously alarmist claptrap.

I seem to remember bringing up the underfunded pension problem on this list over the last several years and getting "poo-poo'ed" for being a bearish chicken little.

Nothing to see here, move along, move along.



From The Mathematics of Money Management: Risk Analysis Techniques for Traders by Ralph Vince, pp xv:

Cutting the fat out of the market requires more than an understanding of

money management concepts. It requires discipline to tolerate and endure

emotional pain to a level that 19 out of 20 people cannot bear. This you will

not learn in this book or any other. Anyone who claims to be intrigued by

the "intellectual challenge of the markets" is not a trader. The markets are

as intellectually challenging as a fistfight. In that light, the best advice I

know of is to always cover your chin and jab on the run. Whether you win or

lose, there are significant beatings along the way. But there is really very little

to the markets in the way of an intellectual challenge. Ultimately, trading

is an exercise in self-mastery and endurance.



Here is the story of Stubby Pringle by Jack Schaefer for any one who hasn't read it already…one of my favorite stories of all time.



I propose as one measure of trend, the number of runs of exactly x or more y day changes up or down in a market.                                                      

For example:

exactly                          # of times 10 day sp change up                                                  

1                                                  220                                                                      

2                                                 153                                                                      

3                                                 132                                                                      

4                                                 109                                                                      

5                                                 101                                                                      

6                                                  91                                                                      

7                                                  85                                                                      

8                                                  80                                                                    

9                                                  76                                                                    

10                                                71                                                                      

11                                                56!!!                                                                  

12                                                48                                                                    

13 or more                                  398                                                                        

A 10 day change is up if today's close is higher than the close 10 days ago.



 Hi everyone,

Watching an episode of Pawn Stars. In reality I like to see what items people bring to the pawn shop to either sell or pawn.

The owners seem to a have large shop full of all kinds of collectibles. My main concern is Rick (owns shop with his father ) constantly has to call in outside experts to evaluate or verify authenticity. To be in that business you better know a little bit about ephemera and coins and ball cards and cast iron toys and still and mechanical banks as knock offs are everywhere that antiques have risen in value. Also include art.

Is this like the Market trader having to rely on others to make important buy or sell decisions and not learning on their own to make critical educated decisions?



Sam Marx comments:

I've watched Pawn Stars a few times & the gullability of people when they need a loan is amazing. It's like watching a car accident. Also, I would venture that the average of all the IQ's of people pawning items is below average. I would also guess that the vast majority of those items pawned are never redeemed. Confession: I pawned an item once, an emergency, but I took it out of pawn 2 days later.

I know that junk car yards are connected to find parts between themselves, it's like having a vast inventory. I don't believe pawn dealers are connected this way.

Has anyone ever thought of working a deal with these pawn brokers and putting their items on an internet website. Something like an Ebay for pawn brokers or maybe they are doing it themselves ?

Thomas Miller writes:

This show is a great example of the ageless advice "never try to bullshit a bullshitter" you'll never win. I suspect most pawnbrokers love the art of haggling and would rather sell to someone one face to face to use their skills to get the best price, rather than through internet auctions.

Art Cooper adds:

Related to this, see the article "Payday Lenders Go Hunting" on p. C1 of today's WSJ, on the expanding operations of such companies as Advance America, which make unsecured loans at annualized interest rates as high as 391%.



This video is NSFW, but shows that the boys in the pits still have fun. I used to like to light the shoe laces of unsuspecting victims on fire. One would be surprised how flammable shoelaces can be. As well as I could dish it out I still had to take it with a smile on my face. If they weren't pimping you, that means you weren't liked, and that means you're likely out of business, if you're a local.



 1. I am reading the deeply flawed book Bounce by Matthew Syed who believes that the quantity and quality of practice is key to determining greatness. Also reading another book from the same garage of hatred of the subject he writes about– The Company Town by Hardy Green and also Titanic Thompson: The Man Who Bet On Everything by Kevin Cook, about a man that should be hated but is quite interesting.

2. They say that when there is a big traffic accident in an area and it's cleared, there is still a traffic jam there the next day, I think because people are slow to observe past effects. And one is reminded of that at the opens of all the markets. In the pit days, there used to be tremendous volatility and big moves like in the first 5 minutes. But now there is no pit trading in most markets, but there's still the same volatility that occurs, like in bonds today at 820.

3. One notes that after 13 or more 10 day changes up, the expectation the
next day is -1/10 of a % and after 13 or more 10 day changes down the
expectation for the next day is -1/10 of a % however there are 244
occasions when the 10 day SP is down 13 or more times in Rowand 398
occasions when the 10 DYA SP is up 13 or more times in row. Thus,
declining 10 day moves less harmonious than up 10 day moves a meal for a
day not here but possibly for life time.

Thomas Miller shares: 

Trafficwaves is an awesome website by an electrical engineer about what causes "invisible traffic jams" with lots of illustrations. 

Chris Tucker writes:

I've heard this referred to in an astrophysics class as a Density Wave, it is one of several theories brought up to account for the formation of the distinct arms in spiral galaxies. The teacher used this specific example of highway traffic to explain it.

Jim Sogi adds:

When particles interact due to input of energy they move at different speeds. The faster ones overtake the slower ones. A buildup occurs at the slow point. Everyone has seen this in traffic. This is how big waves are created in the ocean. The interaction of energy pushing forward, and forces of resistance due to bunching, due to structural resistance (in the ocean its the bottom) in markets due to vig etc., and the secondary forces created by interaction of the various maxima and minima gets complex. It seems the areas of maxima and minima are easy to focus on and they provide distinct boundaries, maximum energy, and minimal densities.

T.K Marks comments:

Apropos of the peculiarities of traffic mishaps otherwise involving cars, just moments ago I had sent sent a similar response to your thoughts contained below only to be have it unceremoniously bounced back to your humble correspondent.

So here we go again.

Back in the day when pit trading held sway, the lion's share of the action took place on the open. Afterwards, the tempo was akin to the pace of watching grass grow. The occasional rock'n'roll news developing days notwithstanding.

So after I would take care of my market opening responsibilities and see that there was not unduly pressing on my book, I would delegate responsibilities to my second-in-command and repair upstairs to the the gym on the 8th floor gym of the WTC for a palliative steam and sauna.

The equilibrium benefits of such generally worked wonders because the close made the open look like the most genteel of tea parties,. It was the closet I'v been to Nam. Every day was a Tet Offensive.



 It's the holiday season and prime time shopping season for art from retail sources. It's also the perfect time to sell forgeries, fake art goods. Salvador Dali has probably been the most forged artist in history. In fact, probably 300,000 forgeries of his works exist. Here's a good article that discusses the forgery methods, markets,and players. 

According to the aforementioned article, this gallery is the most unscrupulous of the bunch that preys on innocent art buyers, conducting art auctions on cruise ships and other resort venues. As bad as they are, there are many more charlatans out there selling fake Dalis.

When Dali was old and in his dotage, he sold over 300,000 blank signed sheets of paper according to this paper. Since most of his works are forgeries, it would be advisable to avoid purchasing a print, etching, lithograph or even painting with his signature. If reputable houses like Sotheby's and Christie's won't sell Dali's etchings and lithographs, that is a market tell. If you happen to own one, it would be advisable to get an appraisal and verification, which might be difficult as most houses won't even look at a lithograph, etching, or drawing from Dali.

Several years ago, a friend of mine found out I was a serious art collector and wanted to show me his "Fine" art collection. As art patrons tend to be proud of their collections, I felt privileged to be invited to see his collection which he described as a vast collection of a major artist, without revealing any details. Lo and behold, when I got to his house, I was surprised to see about 100 framed Dali lithographs and etchings, all fakes. I didn't have the heart to say anything, and left on a gracious note.

Like bucket shops and forex shops fleece newbie investors, unscrupulous galleries and dealers fleece another type of sheep, the beginning unsophisticated art collector. And just because they're unsophisticated (and not stupid people at all as the best of us get conned), that doesn't mean that they will balk at paying $20,000+ for a worthless fake. It happens every day and is probably happening right now at this very minute, somewhere in this world. If you have an insatiable desire to see a real Dali and are in St. Pete, Fl. there is the excellent Salvador Dali Museum which houses a good selection of his major works, all 100% real. 

Caveat emptor.



Here's a paper on wagering from someone from the stat dept. of Columbia. I suspect that he's an intellectual and has not spent much time at the track, poker rooms, betting on sports, etc. However, there is some good discussion following the article which makes for a very entertaining read. As little as I know about the real world, it's refreshing to know that there are people who even know less. I wouldn't mind sitting down with the author betting on a game of his design, choice, or anything. Getting the losers to pay is another topic that deserves a paper from the same department with equal gravitas.



 I wonder what is the level of dedication required to 'succeed' in different fields. I hypothesize that certain areas have such incredibly high standards that childhood beginnings and incredibly dedication are mandatory to acquire any kind of level (music and chess come to mind as good examples). On the other hand there are those with low general standards in which major players can start in the teenage years and later and yet nonetheless make a living from (eg poker and markets).

The main factors which delineate such fields might be the barrier to entry (any fool can push a buy or sell button, regardless of experience, whereas not many people will draw an audience to hear them play the piano), though with markets I suspect standards are especially low because the industry has had a strong focus on fees rather than excellence. And that's without considering the 'Madoff factor' (cheating in its various forms).

I suggest it follows that one should bring ones children up to excel in weak fields rather than strong ones, so maybe we should dump such worthy things such as violin lessons in favor of a pack of cards…

Pitt. T Maner III writes:

Unless you are talented like Shirley Temple, online is the weak field where the kids appear to make the money.

You need a good idea and a programmer in Romania.

Jonathan Manzi (born 1991, Beverly, Massachusetts), an American entrepreneur, is known as the youngest person in history to attain a net worth exceeding $1 million via industry, doing so at the age of 16:

OK, this is quite an accomplishment. Where does this entrepreneurial streak come from? It's almost as if I was born with it. When I was 6 years old, I was collecting rocks and painting pictures on them, and trying to peddle them down the street to an art gallery. I started a shoveling business when I was 8. Did your parents influence you? My dad is a civil engineer, and my mom is a nutritionist. They're very hands-off, which I think they know I like.

Jeff Watson writes: 

It would be a crime to dump things like chess and violin for kids. They still have their elements of grace and beauty. But the market and simple economics, the invisible hand of Adam Smith, is making its move. It should be noted that the top poker player that was 100th last year in earnings (Howard Lederer) made $1,526,000 in tournaments alone, not including side games. Incidentally, the leader in poker made $12,000,000 last year playing only in tournaments. Professional violin players can expect to make $75,000-$100,000/year in a very top orchestra. However, very little information is available on the average remuneration of the highest paid violin players. As a child, I elected to play the guitar, becoming semi-competent. We had a high school band for awhile where we might make $75.00 a night for the entire band playing a 2.5 hour gig (we were really bad).

On the other hand, at the same time I could play a very tight poker game and expect to grind out at least $50.00 and the economics dictated that I concentrate on playing poker. It is as tough to become a solid poker player and takes as much talent as it does for any musician. One caveat, all my money was earned fair and square then usually very quickly deposited at Hawthorne, Arlington, Sportsman's, or Maywood Park. Perhaps I would have been better off in the rarefied atmosphere of classical music,but I sure had a helluva lot more fun grinding it out on the felt then blowing my stake on a 40 to 1 shot sulky in the 7th at Maywood. As a kid I was an attendee of the opera, symphony, theater, ballet, poker games, and the track. The poker games and track won hands down. There's no words that can describe the thrill of standing at the rail on a cool but sunny afternoon, tickets in hand, with a dozen horses thundering past you where the ground literally shakes beneath your feet… It's indescribable, but you haven't really lived until you've experienced this joy.

Lawyers regularly bill out 60-80 hours a week and are under constant pressure to increase their work load, especially in a firm where they're trying to make partner. Dancers work a 6-8 hour shift, with maybe 5 stage dance routines per shift in a club(please don't ask how I know this). In a decent "Gentleman's Club" the dancer can earn as much as a lawyer will make, tax free. While dancers face risk from ex-beaus etc, lawyers are murdered all the time by ex-clients. Arguing whether dancing or lawyering is better, or which profession is more noble is a moot point as money has no conscience as long as it's legal and as far as I know, dancing is just as legal an occupation as being an attorney. Plus, most dancers have higher ethical standards than some lawyers I've encountered.

Nigel Davies adds:

This explains why classical musicians don't earn much; their art requires a highly cultivated palate to appreciate. Top chess is the same, you need a REALLY strong player to even start to understand what's going on. This makes a huge contrast with, say, poker and snooker where the strategies are very simple so they can easily be followed.

Stefan Jovanovich writes:

Snarks for a morning:

(1) Mozart would be writing scores for movies and television - which is where the only real money is for composers.

(2) The competition in professional sports is far, far greater than it is in classical music - which is one reason why football - both varieties - has more millionaires; the footers put on a better show

(3) When Ulysses Grant said that he knew two songs - "one was Yankee Doodle Dandy, and one wasn't" - he was showing his usual wonderfully modest sense of humor and teasing journalists about the fact that "taste" in music was a matter for individual opinion (like Jeff's), not social approval by Henry Adams and the New York Times. It is not surprising that few people now get the joke, for the United States has gone from being an absolutely music mad country (every regiment in the Civil War had a band) to one that is not. In the middle and late 19th century, and everyone was expected to know how to play an instrument just the way they are now expected to know how to drive a car. Any decent-sized town (20,000 people or more) had a Handel and Mozart society AND a Bach Society.



Today the US census reported slower growth in population. Over the past few years, Japan has experienced flat or declining population growth.

Here is a regression of contemporaneous annual return in Nikkei (1944-2009) and annual population change:

Regression Analysis: nik chg versus pop chg

The regression equation is
nik chg = 0.0801 + 6.22 pop chg

Predictor     Coef  SE Coef     T      P
Constant    0.080    0.0489  1.64  0.107
pop chg      6.223    3.863   1.61  0.112

S = 0.296056   R-Sq = 4.0%   R-Sq(adj) = 2.4%

The slope coefficient is not significant, but there is a positive correlation between stock prices and population growth (as shown by the loose correlation plot).

This may not be the correct lag to check: why would population change and stock returns correlate in the same year (except for wives the following year in Connecticut)? Birthrate should decline as a population ages, and to the extent that assets are sold more to finance the consumption of pensioners than new parents.




The following is from "How to make profits trading in commodities: A study of the commodity market" (page 42) by W.D. Gann

Google excerpt is here:

"Triple Tops (and bottoms) are the MOST IMPORTANT. By going over past records you will find that the greatest advances and declines, or those that last the longest, start from Triple Tops or Triple Bottons. …. Triple Tops occurring several months apart are more important than several weeks apart, and the most important campaigns start when Triple Tops or Bottoms occur several years apart."

With Mr. Gann's insights in mind– one should take a look at Mr. Copper's chart– which just broke out from a triple top dating back to 2006. Furthermore, stock market bears/bulls who view copper as predictive might be advised to heed this news as well. Lastly, one notes that copper is in a modest backwardation– which is also quite rare.

If today turns out to be the high in copper, please note that Mr. Gann died in 1955– hence he will not be able to defend himself.

Victor Niederhoffer comments:

One will also note that Mr. Gann's view is opposite from the chair's view that round numbers never hold, but consistent with the boy plunger's view that a break of a round number is a mad trend following signal as witness his profits in anaconda before he became the fifth suicide of his second to last wife.



I find the concept of mimicry quite interesting, and I wonder if false signaling via insider purchases of stock are a good example of mimicry. Prospective investors then become aware purchases may be more signaling in nature (rather than economic) and thus turn their attention to the materiality of the purchase. In the commodities space I would speculate that there is a similar desire for manager to appear to be "short term" to their prospective investors (those who have positioned themselves as such have seen large inflows) to offer style diversification, with possible ramifications for investors in vehicles based on short term traders.



I believe being good at music is highly dependent on the nature of the practice put in and when someone starts. The young develop skills faster because of healthy myelin production (see Coyle's The Talent Code).



Knicks, Giants… What next? It may be time to go short on NY teams although the return of the Knicks to the living was good to see while it lasted. I guess we'll just have to settle for the Lakers and Kobe, the greatest finisher since Kavorkian (despite the presence of Hoodoo Howie in his town).



 One notes that:

1. NY Commuter rail fares will increase by more than 11.1% on December 30th (for the Harlem and New Haven lines.) 

2. NY Commuter rail fares will increase by more than 14.3% on December 30th (for the Hudson line).

Assuming a brisk walking pace, a Westchester County resident can make this round trip trek in about 12 hours. In contrast, a round-trip peak ticket costs $28.50 and train-station parking costs $6.50. Hence, a day-trip into Manhattan costs $35.00 per person. Assuming a 40% marginal tax rate (State & Federal Income Tax), the pre-tax cost becomes $58.33. This is about $4.86/hour.

It's therefore a relief to know that the New York State Minimum Wage is now $7.25/hour. So it still pays to work.

Victor Niederhoffer writes:

One would have to adjust Mr. Humbert's calculations based on the age distribution of the population. "One senior ticket and one child," Aubrey always says when the conductor comes. That's Keely's 7 bucks for me, but my walking pace has slowed, (as witness my failure to pass the California test for the DUI). Say I am at 3 miles and hour. It would take me 17 hours to get to Manhattan for my 50 miles. (I believe Elonra Sears, the lady squash champ, would do it in 16). If my time is worth more than 50 cents an hour or so, it pays to take the train, assuming I would not make losing trades. (In the past, when asked to do chores, I could always tell Susan, that the chore cost me 1000 or 5000 an hour when I could make money with impunity, but now that doesn't work and Susan often says that I'd save money by washing the dishes or changing the light bulb, or shoveling the snow.)

Russ Sears writes:

 A couple guys come to mind when you talk of going 50 miles a day to work.

Legend has it that Bill Rodgers headed for nowhere, working in a morgue delivering bodies, when his motorcycle was stolen. He started to run everywhere. This helped him to start running again after stopping after college track. He also was smoking before this. And he is the only guy I have heard of that doing more than 150 miles per week actually strengthen him. He topped out at 200 miles per week 16 in the morning 13 in the evening.

The other guy is Dr. Horton, who was a Phys Ed Professor at Liberty. He set the record for running the Appalachian Trail. He averaged I believe, near 50 miles per day. He had line up Churches to help him throughout the course. He would meet them at points most nights, so he could eat hardy and sleep and then next morning drop him off at the same point. It was getting to the meeting points that added to the distance to the 2,200 mile course. (now I hear 2 other guys have broken his record of 52 days) This was very tough on him and I heard from my CC coach that it took him over 2 years to shake the mental depression such distances placed on his mind and body.

At 50 miles: plans would have to be made to have plenty of liquids along the way some light food. then latter eat and eat hardy and well. A mile burns roughly 100 calories, for average weight guy. Plus the normal 2000 calories, would require about 7000 calories a day. Phelps is said to eat 12,000 calories a day.

One summer in college, I lived on a nickel to save for the next years tuition and road a bike near 30miles a day for a couple months to work. 100 mile days are normal for serious bicyclist.

Henry Gifford writes:

I used to compete in and win, 24 hour bicycle races– ride as much as you like, rest as much as you like. Some wimps even took naps.

At the level we were at, consuming enough food was a deciding factor during a race, and buying it was a major expense, for a race and at all other times. One year someone handed me up candied pineapple, which I had never eaten. I barfed, but still rode as hard as I could, but I was like the car in the Indy 500 with the torn gasoline fill pipe from a sloppy pit stop exit. I was able to keep up, but couldn't  refuel, surely coudn't have finished or won.

Someone helping run the team knew to feed me boiled potatoes, after which I was good to go. I ate everything on the next lap around. 

Larry Williams wrote: 

I also found boiled potatoes to be the key, with salt, to correct food for ultra marathons.



 The other day, I was forced to attend an amateur showing of Dickens "A Christmas Carol." The production was well executed, the stagecraft was excellent, and the scenery was first rate. I've seen the Dickens classic so many times, I either just nod off, daydream, or try to improve my mind. During the show, I started to think of how the author, Charles Dickens, really hated capitalists and was a socialist at heart. He portrayed Ebeneezer Scrooge as the prototypical capitalist of the day, but his real "sin" was that he was a miser, only interested in his self, mistreating everyone. The fact that Scrooge had a bad attitude and dour personality did not work in his favor and was a great device used by Dickens to generate hatred for capitalists and the rich in general.

This got me thinking on many levels. For one thing, Scrooge was a businessman who earned his money fair and square. He cheated nobody and expected his contracts and debts to be paid as per any previous agreements, Scrooge ran a tight ship, to the point of being called miserly. He was a demanding employer of his clerk Mr. Cratchit, who accepted the employment contract with Mr. Scrooge with good cheer. Much has been said and written about the evil Mr Scrooge, his name has become part of the lexicon of the definition of an evil capitalist. Even the people in the neighborhood made disparaging remarks about Scrooge, and this mistreatment and lack of respect added to his dour personality. There was no evil to Mr Scrooge, and his unfavorable treatment was a literary device, a populist reaction by the left, the socialists who portray all rich as greedy, evil people who allow people to suffer while they live rich, extravagant lives. 

As I said before, Mr Scrooge had an employment contract with his clerk, Mr. Cratchit who was a man of good cheer. Cratchit's wife constantly complained that Scrooge was an old miser with a flinty heart of stone. She neglected to mention that Mr. Cratchit was free to seek employment elsewhere if his working conditions were so bad, but this aspect and so many others were left out by Dickens. As for Scrooge's miserly description, some would call his miserliness thrift, which is an esteemed Franklinian virtue.

Scrooge's refusal to participate in a festive dinner with his nephew and wife was his business and he certainly didn't deserve the ridicule heaped upon him by the women folk, nor was he required to offer an explanation or apology. He was merely exercising his freedom to do what he wanted, and if he chose not to celebrate Christmas, that was his natural, god given right. During Scrooge's pre ghost phase, he was a hard nosed flinty business man, albeit a bit ill mannered. There is no law against being ill mannered, dour, mean, or miserly. Scrooge was free to do whatever he wanted, with no worries what society would think as long as he behaved within the law and remaining scandal free.

Every good story likes to make a case of human redemption, a change from self interest to the interest and service of the collective. In popular culture, rich are inherently evil, their gains ill gotten off the backs of workers, and the poor always triumph over the rich. Dickens masterfully pulled this off when he had three ghosts visit Scrooge on Christmas Eve to scare the hell out of him and change his evil ways. His powerful scare tactics caused Mr Scrooge to abandon his own self interest, abandon his personal freedom for the good of society, destroy the profitability of his business, and spend his hard earned wealth on charity to repent for his earlier miserliness.

The messages Dickens made in a Christmas Carol were very clear. Productive people must give to the more deserving poor to be considered worthy, rich people are not happy due to guilt, producers must abandon self interest in order to satisfy the needs of others in a society who don't work as hard, businessmen must run their personal business for the sole benefit of their employees, conversely to the detriment of the stockholders. And finally one must give exorbitant sums to the poor, provide medical care for the employees, and give retroactive raises to allegedly underpaid employees. Benevolence is not a virtue in this world, it is a requirement. Scrooge was manipulated into this transformation by the three ghosts creating immense guilt and fear, and by the end of the story Mr Scrooge was more concerned with what people thought of him, his personal image, than the real work of creating profits, creating jobs, growing a business, and contributing to the general business climate.

At the end of the story Mr. Scrooge was a transformed man. He was happy, benevolent, highly thought of, giving,almost giddy, much like a person who has had a drink or ten. A good case could be made that he was a better man, but w hat he lost was the real tragedy. Scrooge lost his independence, his freedom, became dependent not on profits, but on the opinions of others. He was required to give money away, raised expectations of others, and caused economic imbalance by changing the market pay scale of employees in his business. In a way, Scrooge's new found largesse probably was bad for the economy as a whole a la the theories of Hazlitt. On another note, happiness tends to be fleeting much like health and I suspect that with Mr Scrooge, old habits die hard.

When the curtain closed, everyone was cheering. I felt a bit of sadness, as here's another story of poverty trumps wealth, rich is evil while poor is good, and being a second hander is more important than being a real, virtuous free man. In the end, Mr. Scrooge was the real loser and the real story was the transformation of a rich, productive man into a welfare state.

Rocky Humbert comments:

Dear Jeff:

Considering "A Christmas Carol" to be an indictment of Victorian Capitalism is not a novel idea, yet I still find your words and spirit to be sad, indeed.

While you are free to intrepret Dickens however you see fit, you have no such freedom with respect to core Judeo-Christian values, which parts of Dickens' play embodies. The principles which you lament are the core principles of Judaism and Christianity.

What you find lamentable, I find laudable. When you find trivial, I find grand. In short, I celebrate the charity and goodness toward man that Christmas celebrates, while you mock it as political correctness.

I wish you a happy holiday, and hope that you someday discover what Scrooged learned– that there is no greater joy than bringing happiness to others.

Scott Brooks adds:

 Let's not confuse charity with force of threat.

Scrooge offered a fair deal at a fair price. The way we can infer that this is the case is that people came to him, and willingly signed a contract. Scrooge performed his half of the contract by loaning them money. What is wrong with him expecting that they honor their portion of the contract?

And, let's not confuse what Scrooge did for charity. Giving to other under threat of force…..i.e. the spirits (under the direction of Dickens) threatened him with the threat of eternal damnation if he didn't commit business suicide.

Another problem with "A Christmas Carol" was that the story ended on December 25th. Let's flash forward to the "The Week After Christmas":

Bob Cratchit shows up at work on the 26th only to find that he doesn't have a job. Why? Because Scrooge, in his "fit of charity to bring happiness and joy to others" tore up all the debts owed to him and there was no more accounting work for Cratchit to do.

Later that day, and throughout the next week, a bunch of former Scrooge customers come to the office to borrow more money, only to find it closed because Scrooge has no more money to lend out. If he did, it would be evil (under Rocky's view of the world) to unfairly loan out money. And he couldn't just keep the money, he would have to give it away to atone for his supposed sins.

Therefore, the vital role that Scrooge played in the community…i.e. loaning money to people that had need of a loan for whatever purpose they felt they needed a loan for (and that Scrooge deemed as a good "loan risk")….that vital role was no longer available in the community.

And what happens when credit dries up in a society….well, I think we can all agree that that's not a good thing.

Sorry Rocky, but you're wrong in your assessment. This is not charity or Christian/Judeo ethics. This is a story by a man who didn't like Capitalism, that slams capitalism. It could have been written by most any journalist or university professor in today's society.

David Hillman writes:

 And then, there's the contrarian point of view

….which makes as much sense as does the interpretation of A Christmas Carol as an indictment of Victorian Capitalism [which, by the way, was far different from what we generally think of as 20th Century capitalism, i.e., the kinder, gentler Fordist model or the so-called millennial capitalism that has been evolving since the 1980s.]

I don't know much, but two things I know, 1) what Dickens' meaning and intent in A Christmas Carol was is about as clear as what the founding fathers intended in the Constitution, or as clear as whether the origin of the universe was a God or a Big Bang, and 2) we don't see things as they are, we see things as we are.

That said, I would posit that one's interpretation of A Christmas Carol, or just about anything else for that matter, tells us far more about the interpreter than it does of Dickens. 

Gary Rogan writes:

It's interesting that with all of his supposedly anti-capitalist novels, Dickens undertook two trips to America mostly to lobby for copyright enforcement. He also blamed his bankruptcy and later health and financial problems close to his death on being deprived of his rightful royalty stream. Somehow various American software companies and their hyper-liberal billionaire founders fighting intellectual property theft in China come to mind, although they are all in decidedly better financial shape.

Kim Zussman chimes in:

It's not every day you see Jewish pro-Christmas arguments against Mormons; a market top indicator?

The 1938 Christmas Carol is a great film, and if you don't tear up your trading accounts are definitely too flush.

Scrooge's encounters with ghostly futures cause us to ask what is really important. It is difficult to balance the race for money with taking time for things and people who will too soon be grown, old, or gone.

Stefan Jovanovich writes:

"A Christmas Carol" is far less about what our List calls "capitalism" - i.e. pricing by competition - and far more about Dickens' wanting the world to have a universal catcher in the rye and not be like the America he saw in 1842. He was appalled by our slavery and by our insane "push". He was also upset by the fact that, like the East Asians today, Americans were notorious copyright pirates. We were also the source of his growing wealth by being the best customers for his books. During his visit to New York his American publisher and his admirers (Washington Irving, William Cullen Bryant) held a gala in his honor, with 3000 people attending.

Dickens knew almost nothing about business by 1843 (the date of A Christmas Carol's publication) from direct experience or observation. His father had worked in the Navy Pay office and lived on a family inheritance. Dickens' only job in any "dark, satanic mill" was a few months sticking labels on bottles of shoe polish. He then went back to school. After school he worked in a law office as a clerk, taught himself the new short-hand and became a court reporter through a family connection. That led to political journalism. Sketches by Boz - his first book published in 1836 - is a collection of his political pieces for the Morning Chronicle, covering the Parliamentary elections.

The socialism Jeff finds in the story is there; it is the same socialism you find in Thoreau. It came from the same source - Unitarianism - which Dickens became interested in while visiting the U.S. And, capitalism in its modern forms was still in its infancy. It would be another decade and more before limited liability was formally recognized in Britain in the legislation of 1855-1856.

Gibbons Burke writes:

A Christmas Carol is not anti-Capitalist as such. But it makes a case strongly against Capitalism run by capitalists who serve Mammon rather than God. Scrooge, who initially perfectly represents that anti-human form of Capitalism at its worst soul-less excess, is the perfect picture of a seemingly-self-satisfied soul roasting in a Hell on Earth of his own devising, and he seems certainly destined for the eternal flame pit until his heart is converted later in the book. At that moment he becomes filled with the Joy that is the gigantic secret of the Christian (according to Chesterton).

Here is Dickens' initial description of old Scrooge - which seems to have plenty of editorial voltage:

Oh! But he was a tight-fisted hand at the grindstone, Scrooge! a squeezing, wrenching, grasping, scraping, clutching, covetous, old sinner! Hard and sharp as flint, from which no steel had ever struck out generous fire; secret, and self-contained, and solitary as an oyster. The cold within him froze his old features, nipped his pointed nose, shrivelled his cheek, stiffened his gait; made his eyes red, his thin lips blue; and spoke out shrewdly in his grating voice. A frosty rime was on his head, and on his eyebrows, and his wiry chin. He carried his own low temperature always about with him; he iced his office in the dog-days; and didn't thaw it one degree at Christmas.

External heat and cold had little influence on Scrooge. No warmth could warm, no wintry weather chill him. No wind that blew was bitterer than he, no falling snow was more intent upon its purpose, no pelting rain less open to entreaty. Foul weather didn't know where to have him. The heaviest rain, and snow, and hail, and sleet, could boast of the advantage over him in only one respect. They often "came down" handsomely, and Scrooge never did.

Nobody ever stopped him in the street to say, with gladsome looks, "My dear Scrooge, how are you? When will you come to see me?" No beggars implored him to bestow a trifle, no children asked him what it was o'clock, no man or woman ever once in all his life inquired the way to such and such a place, of Scrooge. Even the blind men's dogs appeared to know him; and when they saw him coming on, would tug their owners into doorways and up courts; and then would wag their tails as though they said, "No eye at all is better than an evil eye, dark master!"

But what did Scrooge care! It was the very thing he liked. To edge his way along the crowded paths of life, warning all human sympathy to keep its distance, was what the knowing ones call "nuts" to Scrooge.

The book is available in several illustrated editions for free on Project Gutenberg.

Jeff Watson responds: 

So, in other words, while Scrooge was unpopular, he enjoyed total freedom. That sounds pretty good to me. At least If I had his rep, I wouldn't have to say no to 30 requests for donations a day. Can you imagine how refreshing it would be to perform an essential service, perform admirably in business, deliver superior service, and not give a damn what people thought of you? That would make Hank Reardon proud. It is not a crime to be disagreeable, a skinflint, self serving or any other eccentricity. If we punished men for their eccentricities, Henry Ford would have never created and revolutionized the automobile business, J.P. Morgan would never have risen beyond the level of margin clerk, the old Commodore Vanderbilt would have probably died in a house of ill repute, Barney Frank would have been hanging out on…, and Bill Clinton would probably be in an Arkansas … for a very youthful indiscretion. 

John Tierney writes:

In 1899 Elbert Hubbard viewed the "Scrooges" thusly:

We have recently been hearing much maudlin sympathy expressed for the "downtrodden denizen of the sweat-shop" and the "homeless wanderer searching for honest employment," & with it all often go many hard words for the men in power.

Nothing is said about the employer who grows old before his time in a vain attempt to get frowsy ne'er-do-wells to do intelligent work; and his long patient striving with "help" that does nothing but loaf when his back is turned. In every store and factory there is a constant weeding-out process going on. The employer is constantly sending away "help" that have shown their incapacity to further the interests of the business, and others are being taken on. No matter how good times are, this sorting continues, only if times are hard and work is scarce, the sorting is done finer- but out and forever out, the incompetent and unworthy go.

It is the survival of the fittest. Self-interest prompts every employer to keep the best- those who can carry a message to Garcia.

I know one man of really brilliant parts who has not the ability to manage a business of his own, and yet who is absolutely worthless to any one else, because he carries with him constantly the insane suspicion that his employer is oppressing, or intending to oppress him. He cannot give orders; and he will not receive them. Should a message be given him to take to Garcia, his answer would probably be, "Take it yourself."

Tonight this man walks the streets looking for work, the wind whistling through his threadbare coat. No one who knows him dare employ him, for he is a regular fire-brand of discontent. He is impervious to reason, and the only thing that can impress him is the toe of a thick-soled No. 9 boot.

Tim Melvin comments:

 The question of scrooge and how we view him is one that men of business have wrestled with since the damn story was published. The thing is that Dickens does not paint Scrooge as the example of every businessman. We tend to take much of the Scrooge story out of context, I think. Business itself is not painted as evil or wrong. Was not Fezziwig the owner of a prosperous and successful business when young Ebenezer was employed there in his youth. Judging by the Christmas party it was prosperous business indeed. Yet Fezziwig was a generous soul to his employees who treated then well and asked for a fair days work for a fair day's pay and got it it cheerfully from those in his employ. Scrooge described his time employed there and his boss thusly, "The happiness he gives, is quite as great as if it cost a fortune ."

In contrast Scrooge underpaid Bob Cratchitt and treated him poorly. To say that Mr. Cratchitt could simply look for other employment is as ridiculous a statement as it is heartless. With a large family and a sick child he would be foolish to change what employment he did have by seeking other employ. Given the hours he toiled when would he had the time anyway?

Scrooge is indicted not for being a man of business but for being a man who shuts out the world and pursues only business in a mean spirited way. I greet my lender when I see him on the street. Scrooge was harsh man who was probably the lender of last resort and treated his customers poorly. Good business is a win win were the partied walk away feeling that both have scored a victory in my experience. To have your neighbors ignore you in the street and cackle over yor corpse does not paint the idea that he did business fairly in my mind. To be sure we all have probably made some enemies along the way, but we have made friends as well who would mourn our passing/ not so in this case.

Scrooge is indicted of closing his heart to all of humanity. He chooses commerce over the love of a woman and the potential for a life and a family. He helps no one with a kind word, a gentle lesson or a shared idea. The concept of charity is unique to us all. But hard asses as all of us are, as libertarian and objectivist rooted as we are, would we hesitate to assist a friend, relative or even employee who had an ill child if we had the resources to do so? Which of us would not give our nephew, our only family a visit on a holiday eve or at least a kind word, a lesson in the ways of the world that might help them succeed in life?

Scrooge was not indicted and sentenced to haunting for being a business man. He was convicted of living without love. The love of a child, of a woman, of humanity. He hated himself as much as he hated the rest of the world. Scrooge's crime was not being a business man but for failing to appreciate the wonder that life actually can be. I like so many other readers of this site detest the corporate charities, and I say no quickly and clearly in my best bah humbug fashion. But just like everyone else here there are charities and causes I believe in and donate my time and money. I do not buy the in the give to all philosophy or faceless giving anymore than the rest of you. I do believe in libraries, special olympics and a few other causes and I give. So do you whether it's a church, a cause, a philosophy of a friend in need so quit pretending your are an objectivist hardass who helps no one. Not only is that so much BS, it's a heartless life that would create a scrooge like existence and so far I have met no spec who fits that description.

Scrooge's crime was not business. It was living with love, without the touch and hear of another, without a child's smile, a lover kiss or the hand of a friend. By Dickens account he denied himself all the makes life special. There is no account given of good food, or beautiful music or even good books. Scrooge's crime was not one of business. He was guilty of crimes against life itself. 

Jeff Watson responds: 

(While I agree with much of Tim's premise, I'd like to see the statutes Scrooge violated regarding the aforementioned crimes). If those are indeed crimes that Scrooge committed, I fear the state is on the road to becoming more totalitarian if they feel the necessity to regulate those areas of normal but eccentric human behavior. Again, it's not against the law to be a total dick, nor should the government concern itself with forbidding person to be rude, self absorbed, cheap, hated, or mean spirited. I certainly can't find anything in the constitution addressing this issue. 

Stefan Jovanovich writes:

Dickens wanted women to stay in the kitchen; Hubbard wanted them to own the restaurant.

His company - Larkin Soap - gave Frank Lloyd Wright his first big commission. The friezes on open galleries of the building had these mottoes: GENEROSITY ALTRUISM SACRIFICE, INTEGRITY LOYALTY FIDELITY, IMAGINATION JUDGMENT INITIATIVE, INTELLIGENCE ENTHUSIASM CONTROL, CO-OPERATION ECONOMY INDUSTRY.

Here is Hubbard's story of how he started the Philistine magazine and the Roycroft shops. Begins at page 309



 What is often not said is that walking and exercising is not what generally causes weight loss in and of itself. In fact, it is the extra muscle built into the process of getting in shape that causes the weight loss. Muscle increases your metabolic rate, fat slows it.

Further exercise reduces your stress level and makes good use of your cortisol levels. What causes fat gain is stress that the body thinks is sign of starvation and kicks in cortisol. All this signals more hunger and tells your body to store calorie as fat, for the coming starvation your stress is telling your body is coming . This system worked well when it was true that is you did not work (physically) you did not eat. But does not work so well when stress only means you do not upgrade to sports car for a few years, or when it means you are living on govt provided safety net rather than having to work for a hand-out. While the media would have you to believe that it matters not how intense you exercise, this is not true, some need to workout more intensely to combat the stress. Plus everybody's level of intensity is different.

Most people that start to exercise actually gain weight for about 3 weeks, and then start losing thereafter. Muscle weighs more per cubic inch than fat however, so the thing to watch is the tape measure NOT the scales. Many people bodies are not meant to be thin or even low weight. Many are built for heavy lifting not distance. These people should strive for muscles not fat. The extra weight even as muscle however does mean these people need to maintain a more consistent and regimented healthy lifestyle.

In short the exercise is to combat the stress levels that cause people to gain or roll-a-coaster in weight. Exercise is a way to make it stay-off. Calorie restriction is simple for dropping the pounds. For the very over weight sometimes the weight must come off before they can actually exercise enough to fight the stress levels appropriately for them. Calorie restriction also has it own health problems as a long term plan.




A little chart gazing I was doing showed the following:

Not sure if it's statically significant i.e 14 years only set, and 2 month window, but I can hear a strangle coming up, and maybe even a small backpocket outright short,

March –April Turning Points in U.S. SP500


5 out of 14 years, the March/April month has seen a turn that has resulted in the price closing the year at the inverse extreme.

11 out of 14 years has seen the market not break the March/April extreme in price for at least the following 3 month period.

Note: Bill Gross of Pimco has suggested that in the past 15 years, every time the fed funds rate was higher than thenominal GDP growth rate, assets such as stocks and/or housing always fell. He even suggested that the best way to price the fed funds rate would be 100 basis points below the nominal GDP growth rate.

This is not a situation at the moment.

Phil McDonnell writes: 

Remember that extrema are only known in hindsight. Also remember that extrema are governed by the ArcSine distribution which is counter intuitive once you get the normal distribution wired in your head. One of the corollaries of this is that extrema occur early or late in the given time frame but not so much in the middle time period. Also be aware that the ArcSine is a U shaped distribution. This means that ALL of the distribution is in the tails, little in the middle. So you need much larger samples than for a normal distribution.

This is not meant to throw cold water on Craig's interesting line of thought, but more an explanation of why I try to avoid extrema lines of inquiry. Ultimately you would need to test this using a randomized bootstrap simulation to see where it lies. I suspect n=14 is too small though, but might be fine for a normal dist..



 Keynes was interested in markets, and did pretty well. What about Hayek?:

"Keynes was another Kelly-type bettor. His record running Kings College Cambridges Chest Fund is shown in Figure 2 versus the British market index for 1927 to 1945, data from Chua and Woodward (1983). Notice how much Keynes lost the first few years; obviously his academic brilliance and the recognition that he was facing a rather tough market kept him in this job. In total his geometric mean return beat the index by 10.01 per cent. Keynes was an aggressive investor with a beta of 1.78 versus the bench- mark United Kingdom market return, a Sharpe ratio of 0.385, geometric mean returns of 9.12 per cent per year versus Ð0.89 per cent for the benchmark. Keynes had a yearly standard deviation of 29.28 per cent versus 12.55 per cent for the benchmark. These returns do not include Keynes (or the benchmarks) dividends and interest, which he used to pay the college expenses. These were 3 per cent per year. Kelly cowboys have their great returns and losses and embarrassments. Not covering a grain contract in time led to Keynes taking delivery and filling up the famous chapel. Fortunately it was big enough to fit in the grain and store it safely until it could be sold. Keynes emphasized three principles of successful investments in his 1933 report:

1. A careful selection of a few investments (or a few types of investment) having regard to their cheapness in relation to their probable actual and potential intrinsic value over a period of years ahead and in relation to alternative investments at the time; 2. A steadfast holding of these in fairly large units through thick and thin, perhaps for several years until either they have fulfilled their promise or it is evident that they were purchased on a mistake; and 3. A balanced investment position, i.e., a variety of risks in spite of individual holdings being large, and if possible, opposed risks.

Jeff Watson writes:

I could not find much about Hayek's investment performance and speculate that his work in getting a Nobel Prize and publishing seminal works probably attenuated any desire to actively play in the market. Granted, Keynes was a genius……completely wrong about everything, but a genius nonetheless. I notice no comment from his fans on the left about his legendary Anti-semitism, his frequent use of the N-word when describing American Blacks, and his dismissive attitude towards Russians, and other Eastern Europeans who he thought to be the unwashed masses and very ignorant. Still, in his complete wrongness, he provided a very bright beacon for those of us who wish to pursue the correct course. Keynes is our own perfect fade factor, a Douglas "Wrong Way" Corrigan of economics.

Larry Williams writes: 

What an article on this that does not mention Ralph Vince. Oh, I get it…much of his comments are lifted from Ralph, so why let people know he exists? Trade kelly and you are doomed to die.

Ralph Vince responds:

Thank YOU Larry. A couple of things on this.

1. Whenever people start talking "half Kelly," or other ad-hoc locations on a dynamic curve (with respect to the number of plays) I realize they don;t know what they are talking about. It doesn't mean they aren't good mathematicians, they just don;t understand their material well enough. Ziemba has been doing that for years.

How can a man look at the curve and not begin to discern the nature of it beyond that???

2. The "Kelly" Criterion answer is NOT what any of these guys thought it was. It is NOT the optimal fraction to invest. It is a leverage factor — a number not bound between 0 and 1 but 0 and + infinity. Thus, if you treat it as a fraction, you will inadvertently be using a fraction that is way beyond optimal in trading.

3. Once you discern what the real optimal fraction is to invest (and you won't get there with the Kelly Criterion) then you can make intelligent decisions on what value to use as a prediction of where the optimal fraction will be in the forthcoming periods.

All of that if you want to be growth optimal. Go ahead, have at it slugger. The REAL benefit to understanding the nature of the curve of the optimal fraction (not to be confused with Kelly's misguided criterion) is that you can use it to satisfy OTHER objectives aside from the incredibly aggressive growth optimal one.

I don't claim to be the mathematician any of these guys are. But I know I understand this material better than all of them combined.

And I have the real-time track record to prove it.



 A SpecList member recently lamented that his stock picks have lost money over the past 12-18 months. How likely is that?

Since "THE" market low on 3/6/2009, Bloomberg shows only 14 members of the S&P500 produced a net loss excluding dividends. The list includes: BAX, GME, FE, EXC, MON, SAI, PHM, GILD, PCS, WFR, PBCT, HRB, SVU, APO, DF. Most of the losses were trivial. However, "The Biggest Loser" was DF, which as a dairy producer flirting with bankruptcy, gives rise to numerous bad puns.

The biggest winners are: GNW, FITB, WYN, F, CBG, AIG, XL, THC, FFIV, HIG. Since THE low, the S&P has gained about 82%.

But, let's be a little more generous on timing, as I'm the only person who actually called "THE" market low. (not)

Since 12/31/08, 57 companies (roughly 10%) in the S&P have produced a net loss excluding dividends. During this period, the S&P gained about 42% (excluding dividends); the "average" non-market-cap-weighted stock gained about 75% as smaller companies substantially outperformed during this period.

I humbly suggest that any long-only stock investor who achieved the ignominious feat of losing money during the past 12-24 months be anointed with the Holy Water of Lake Wobegon.



 It seems that many expect or at least pronounce that there will likely be a market "pullback" ("the market has gotten too far ahead of itself") within "the next 3 to 4 weeks" or a "correction around mid-January" or "in February".

James Montier brought up the following example of how people might think when predicting what other people are going to do– it sticks in the head. I wonder if these 2nd and 3rd order behavioural thought processes have any predictive usefulness in the real world, either in there being less or more time until the next stock market downswing actually occurs.

It's an interesting game if nothing else and I imagine investing pros think in even more complicated fashion.

This game can be easily replicated by asking people to pick a number between 0 and 100, and telling them the winner will be the person who picks the number closest to two-thirds the average number picked. The chart below shows the results from the largest incidence of the game that I have played - in fact the third largest game ever played, and the only one played purely among professional investors.

The highest possible correct answer is 67. To go for 67 you have to believe that every other muppet in the known universe has just gone for 100. The fact we got a whole raft of responses above 67 is more than slightly alarming.

You can see spikes which represent various levels of thinking. The spike at fifty reflects what we (somewhat rudely) call level zero thinkers. They are the investment equivalent of Homer Simpson, 0, 100, duh 50! Not a vast amount of cognitive effort expended here!

There is a spike at 33 - of those who expect everyone else in the world to be Homer. There's a spike at 22, again those who obviously think everyone else is at 33. As you can see there is also a spike at zero. Here we find all the economists, game theorists and mathematicians of the world. They are the only people trained to solve these problems backwards. And indeed the only stable Nash equilibrium is zero (two-thirds of zero is still zero). However, it is only the 'correct' answer when everyone chooses zero.

The final noticeable spike is at one. These are economists who have (mistakenly…) been invited to one dinner party (economists only ever get invited to one dinner party). They have gone out into the world and realised the rest of the world doesn't think like them. So they try to estimate the scale of irrationality. However, they end up suffering the curse of knowledge (once you know the true answer, you tend to anchor to it). In this game, which is fairly typical, the average number picked was 26, giving a two-thirds average of 17. Just three people out of more than 1000 picked the number 17.

I play this game to try to illustrate just how hard it is to be just one step ahead of everyone else– to get in before everyone else, and get out before everyone else. Yet despite this fact, it seems to be that this is exactly what a large number of investors spend their time doing.



The University of Iowa Ag Department has enacted a pilot program of mapping the basis of corn and soybeans on a county by county basis. Although the project is far from complete, here is an example of what it will look like:

The grain companies already have trading rooms that look like NASA control, and maps like this are all over the walls. Now the general public will get to enjoy some of the same tools as the big grain. Before you get excited, you can be sure that the big grain companies will be one step ahead of you and the public will still be behind the form. That's just why the grains are so hard to handicap, and even harder to cash out…



USPS, from Phil McDonnell

December 20, 2010 | 1 Comment

At our local post office, at the morning opening the line was 37 deep. They only had 1 person at the desk and some customers took as much as 20 minutes to complete their orders. The institution should be closed. It is obsolete and not cost effective. It is fundamentally customer antagonistic. UPS and Fed Ex do a better job.

Victor Niederhoffer comments:

As Nock pointed out, the first thing a govt does is to establish a
postal service so that they can collect the service benefits.

Stefan Jovanovich writes:

Our political parties take their origin from Jefferson's wanting to take the Post Office away from Hamilton's Treasury Department and give it to his Department of State. As Nock observed, the argument was about patronage: Hamilton already had the customs officers. Jefferson wanted the postmasters. The Whiskey Rebellion was hardly the great blow for freedom that Jefferson's orations have led people to think. He and Madison were upset by Washington (and Hamilton's) success in establishing the excise because it meant rewards for the Federalists/Whigs patronage constituency. That arguments about the national bank had the same origin. It is hardly surprising that the first thing Jefferson and Madison each did as President was try to establish an embargo that would starve the customs officers while at the same time embarking on a program of expanded postal roads.



 One has been reading a book on speed mathematics by Bill Handley. Most kids who take the course can do all arithmetic operations much faster in their head then with a calculator, a very useful thing I've found. To multiply 98 by 97 take 2 from 97. That becomes 9500. Then add 2×3 for 9506. To multiply 11 by any 2 digit number, like, 11 x 32, the answer has a 3 and a 2 in it at the ends, and the sum of digits 4 in between 3 4 2. I'm not that good at it yet as there are as many rules as memorizing the tables almost.

But… one wonders whether there are any speed rules for making a profit that apply to all markets.

Alan Millhone writes:

Tom says. Move in haste - repent in leisure.

Does that fall under the "speed rule" for the Market?

Jeff Watson writes:

Most successful pit traders had a mastery of "quick arithmetic" out of necessity. In fact, I never ran across one that wasn't an arithmetic whiz.

Steve Ellison writes:

Arthur Benjamin's Secrets of Mental Math has many similar techniques. For example, the square of any 2-digit number ending in 5, let's call the number n5, always ends in 25. The product of n and n+1 goes before the 25. For example, 75 squared is 5625 (7×8 with a 25 tacked on).

Professor Benjamin recommends solving math problems left to right, contrary to the standard method of solving right to left and carrying digits. An advantage of solving left to right is that if one wants to instantly answer a problem called out by the audience, as Professor Benjamin does at his public appearances, one can start speaking the first part of the answer while still working out the final digits.

My daughter and I were watching a video of Professor Benjamin in which he showed a standard multiplication table from 1 to 10 and asked what the sum of all the results was. In 2 seconds, my daughter called out a formula, which was easily solvable using one of the mental shortcuts.

There are some mental shortcuts for the stock market that have become part of Wall Street lore and seem to have some validity, although they are far from 100% accurate:
- "Sell in May and go away"
- "Don't fight the Fed"
- "Never short a dull market"
- "Cut losses and let profits run"

My suggestions for the stock market would be: - Liquidity premium (when there is forced buying or selling as evidenced by a sharp price move, it often pays to take the other side)
- Follow the insiders
- "Always copper the public play" (Bacon)

For physical commodities:
- Buy backwardation; sell contango
- "The trend is your friend"

Sushil Kedia writes:

Vedic Mathematics, a book I remember having sent to you by post a few years ago is a brilliant SYSTEM of only 10 rules that will facilitate a very wide variety of calculations. It can calculate as good as instantly a multiplication of any digits of numbers multiplied by any number of digits too. There are recipes in that…



The mind set of a fighter is not much different than that of a trader. A great read: The Fighters Mind: Inside the Mental Game by Sam Sheridan.



 TRON: Legacy

Directed by Joseph Kosinski

Whatever you thought of the 1989 debut iteration of TRON, starring the sturdy Jeff Bridges as a man who is caught aspicked in the innards of a computer game, this iteration looks far more profligate with CGI and special effects, and specializes in extravagant 3D effects with occasional, deliberate 2D scenes to ease the bridge of your nose from the heavy special battery-run specs required for this film.

TRON: LEGACY offers everything the 14-year-old nerd would welcome. A virtual-world worker tries to take down the Master Control Program from the inside. No bad words, heavy erotic anything, references of scatology or bathrooms. Loads of chases and despoiling of other human-like male beings. A few decorative and pointless females in shiny second skin stretchy materials. To be sure, there are spectacular motorcycle races, overwhelming event horizons, convergences, gloomy bad-ass virtual dudes with defined musculature—and the piece de resistance, a couple of Jeff Bridges look-alikes from 1989 playing opposite his current more grizzled 2010 self.

The now grown-up son, rebellious Sam Flynn, played by Garrett Hedlund, seeks his long-gone beloved dad, Kevin Flynn, one-time patriarch of Encom and game-design pioneer. Encom, now, runs sans its founder lo these many years. One admires the composite name—if nothing else—which combines the ill-fated Enron with the laudatory premier syllable of encomium. Nice touch; like the substance in AVATAR called Unobtainium or some such unintentional humorous throw-away. There are overlong sequences of flashy light-diode frizbee discs, amazing high-tech electronic accumulated-on costumes a la IRON MAN, and a series of black-light vistas and topographies that flow effortlessly in cyberspace inevitabilities. “Programs” [buff game-piece men] crumple picturesquely into silvery cubes or picturesque crimson-and-orange fiery plosives when ‘hit’ or zapped. Script exchanges are <yawn> on the level of freshman philosophical profauxndity.

Compared with the outsized spectacular movie-making accomplished in the superb THE KING’S SPEECH, with breathing, pulsating, thinking human beings in recaps of real circumstances, TRON falls very short, despite the mega-millions spent to entrance the eye of the embryological specie young.

Even with copious free popcorn, always a bad sign, the couple next to us disappeared for half the film, no doubt occupied with more salacious and enjoyable acrobatics than could be located on the screen 10 feet in front of us.



 Galt's partner of 10 years, James Strouse, is a master at writing books and screen plays for movies about low lifes, under achievers, ne're do wells, dysfunctional families and other darker matters. One of his recent films was "The Winning Season" that features a girl's basketball team, (coached of course by a woman who prefers women of her own sex), that depicts a girls team that is so bad that they shoot in their own basket, lose 100 to 2, are trampled by the other team, etc. The Knicks against the Heat reminded one so much of that team. They looked like midgets and little leaguers against the Heat on Friday, during the second half, and it looked like if the Heat wanted to so they could have won the second half 100 to 2 or some such. Of course, the reason aside from the poor coaching and the fact as TK has said that any shots that Amar doesn't take for the Knicks are random, is that they are such poor sports. They booed James from start to finish with the encouragement of the coach and the owners. And they so incensed the other better team, that the Knicks were lucky to come out of the game with their shirts on back. They didn't so it was absolutely predictable that it would start yet another losing streak which they started against Cav's today. The game against the heat reminds me so much of the games that my father, Artie Niederhoffer would have played against Notre Dame when he was quarterback at 16 for Brooklyn College against where they usually lost 98 to 3 or some such, (I don't believe they ever achieved a minus score). It would be funny if only Artie didn't get knocked out and carried off the field so often (he suffered a literal 17 broken noses on the Brooklyn team that I believe it shortened his life as I believe that being knocked out at an early age send signals to shorten life to the body systems.)



 From the PETA blog:

For years, the PETA Files has been telling you how eating vegan is all the rage. But now, the clever folks at Google Labs have given us the tool to prove it. Their new Books Ngram Viewer allows visitors to see and compare, in graph form, trends in word usage over time, based on a database of books (here's a more thorough explanation of how it all works). And the food editor at Good has noticed that mentions of the word "tofu" have far surpassed those of "hot dog."



 One notes in the hagiography about the Madoff son's suicide that he had made 35 million or so in proprietary trading and that it represented a above market return. One would hope that these "revenues" would be returned to the victims as they were doubtless part and parcel of the total melange of moneys going back and forth. When asked whether I thought he was guilty, I made two speculative general observations. When you're involved in a crooked enterprise, you are always victimized by the fellow crooks, who extort and blackmail you knowing you cant get legal retribution. Since the son was in charge of the business during the hundreds of days a year the father was pretending to be a man of respect in the riviera, palm beach, the catskills, ( where I might have played him paddle ball), and Long Island, the son might doubtless have been subjected to these thousands of extortions from the secretary, the computer people, et al. And he would have had to pay all these people off. "Dad, x wants another million to pay for his college." Also, with the thousands of customers, they would have had to receive a million special requests a week for special returns and analyses of what's happening their account during the turbulent times. He would have had to be chief winger in telling them how they "did it".

Vince Fulco writes:

It has been years since I dealt with the technicalities as it relates to G.P./L.P. responsibilities but one of the ongoing tragedies is genuinely joe sixpack like folks who invested in Madoff and took nominal amounts out over the years then lost everything. My family has distant friends of friends, both groups who invested with the madman, now being sued by the trustee. They face the prospect of filing for personal bankruptcy after facing the earlier indignities. Brings to mind the scenes of Bosch's triptych with no escape.

Anatoly Veltman writes:

All family and long-time employees had to have known, as much as all Kerviel superiors had to have known, but current results only have Bernie behind bars. Any lessons here for the kids? 



 It's striking that Mrs. Picower has voluntarily returned $7.2 Billion to the Madoff Trustee Recovery Fund. (This settlement is worth about 40 cents on the dollar to the other victims.)

I believe that she did the "right" thing, as the costs and pace of litigation would have ensured a much smaller eventual recovery.

Yet, should one salute her and hold her out as an example of morality and generosity? (How many of us would voluntarily write such a large check?)

Or should one be cynical? Did she know about the fraud– given her husband's string of dodgy business deals… And believe that this check was the cost of quickly healing her reputation and getting back on the dinner guest lists from her peers?

One notes that there is still a long list of other obvious beneficiaries that are hiding behind their lawyers…

What would Mr. Scrooge have done had he discovered that he had been a unwitting beneficiary of a fraud?

Scott Brooks comments:

Rocky presents a conundrum for which there are applications everywhere in the market.

What about the investors who rode Enron, Worldcom, Global Crossing, etc. up and sold out at the top? Does the same hold true for the bubble? What about the real estate bubble?

What about the biggest ponzi scheme of all time…Social Security and those that take/have taken social security benefits….when SS blows up will they pay back their ill gotten gains?

If a person cashes out or smells a rat (like many did with Enron), do they owe something to those that didn't get out?

Would I personally give any back? I'd have to look at the situation on a case by case basis. But my initial reaction is, "no, I would not".

OTOH, if I was the one left standing without a chair when the music stopped, I would not expect those that had chairs to give me their chair. If they were complicit in the fraud, that's a different story….but if they were innocent (as I would be), I would not expect them to be penalized for their wise move…..or said another way, I would not expect them to be punished because I failed to do my due diligence.

Kim Zussman writes:

Scott raises a great question, which can be generalized: what is the difference between a share of stock and a share of Madoff investments?

Both were claims on earnings streams of the future
Both had value because many knowledgeable people believed so
Both were verified by various financial authorities
Both were presented and sold by educated, sophisticated professionals
with impressive credentials and licenses
Both were proven sources of wealth for prior investors
Both were understood to entail risk, including the possibility of 100% loss
Both capitalize on "greater fools": why buy a stock unless you believe
the seller is foolish?

It is hard to think of the differences.

Rocky Humbert comments:

Kim's analogy is cute but it is like me saying: "What's the difference between my wife and a sugar maple tree?

Both have limbs.
Both like sunlight.
Both need food and water.
Both are inspected by health professionals.
Both are proven sources of sugar…
etc etc.

One must not confuse the VALUATION of an enterprise with the ACTIVITIES of an enterprise, and similary one must not confuse the ultimate SUCCESS of an enterprise with the INTENT of the executives.

Criminal and civil fraud require three elements: (1) An action/statement with an intent to deceive (scienter); (2) a victim's reliance on the action/statement; (3) damages.

Kim's argument usually fails at #1– and it's why prospectuses are long, and CEO's taciturn.

Stefan Jovanovich writes:

Scott's characterization of Social Security is wonderfully dramatic (as always), and it is an accurate description of the facts of our current pay-go system.

But, the Social Security Act of 1935, as conceived, was anything but a Ponzi scheme. The original act presumed that Social Security would follow the same model as private life insurance and annuities; benefits would be paid from the earnings of a reserve. The initial Social Security "crisis", in 1939, came because the government was collecting too much money and setting it aside as an actual reserve for payment of future benefits. (Keynesians argued - then as now - that the reserves needed to be spent.) Those arguments - and the Democrats' stunning losses in the 1938 Congressional elections, led to the first acceleration of benefits; eligibility was adjusted so that the first checks went out in 1940 instead of 1942. The amendments of 1939 also changed the system to pay-as-you go by allowing the Trusteee to invest in non-marketable securities. (That is what has led to the infamous lock-box, which is a file drawer in West Virginia that has "special issue" U.S. Treasury bonds that are - like the President's birth certificate - computer-generated facsimiles of presumed originals.)

Social Security taxes have remained unchanged from the 1935 Act. It hardly seems fair, therefore, to accuse current recipients of Social Security Old Age and Survivors benefits of being greedy. They have paid into the system their entire working lives; and, even with the increase in life expectancy, the payouts they will receive represent a ZERO rate of return on their contributions when those are adjusted for inflation. They might even have the right to ask why the trustee chose to invest only in non-marketable securities. If, as of the end of November, the U.S. had reverted to the original Act and the Treasury were required to exchange the special issue bonds for ones equivalent to those owned by the Federal Reserve, the Trust Fund would have assets of $2.93 Trillion. I will leave it to Rocky and Big Al and others who are qualified to estimate what that would portfolio would earn, but I do have confidence that their investments would accrue more than the $160M that Treasury accrued on behalf of the special issue bonds for the first 11 months of 2010. Let's be optimistic and assume that, without quantitative easing and other central bank manipulations, the portfolio would have earned 4% for those 11 months ($117.3B). According to the Treasury, the payouts for that same period were $97.5B.



The attached chart shows this year's (1/5/10-12/16/10) compounded growth of SPY: "day" = o-c, "night" = c-o.

Both equity curves have converged toward the end of the year, but at various points there were divergences. From April to July, cpd day returns dropped from +6% to -9%, while overnights ended relatively flat. From July to present, day has risen steadily - now around +4%. Overnights dropped over the month of August, from +3% to -4 % - in the lead up to the QE2 announcement in late August.

It's hard to guess who figures into difference between intra-day and overnight returns, but to the extent that YTD returns are similar, the much smaller peak/valley of overnight suggests they were more accurate.

Two-sample T for c-o vs o-c

      N     Mean    StDev  SE Mean
c-o  241  0.00026  0.00702  0.00045 T=0.08
o-c  241  0.00020  0.00883  0.00057

>> statistically not different, but different volatility:

Test for Equal Variances: c-o, o-c

95% Bonferroni confidence intervals for standard deviations

      N      Lower      StDev      Upper
c-o  241  0.0063668  0.0070199  0.0078160
o-c  241  0.0080116  0.0088334  0.0098353

F-Test (normal distribution)
Test statistic = 0.63, p-value = 0.000

Levene's Test (any continuous distribution)
Test statistic = 10.10, p-value = 0.002




Elbert Hubbard titled his essay about work "Sending a Message to Garcia" because Andrew Rowan's successful effort to reach General Garcia (think Stanley finding Livingston) was the first great catchphrase to come out of the mythic stories of the Spanish-American war. "Fire when ready, Gridley" was the other.

If you enjoy Elmore Leonard, Cuba Libre is a wonderful fictional introduction to "the splendid little war". It is also one of Leonard's rare stories that has a believable romance.



All my life, I have been a student of notable quotes from my betters. I've learned many a valuable lesson, many little nuggets of wisdom from the most offhand quotes. I found a nice little list of quotes assembled from F.A. Hayek that deserves consideration from my friends and fellow readers.



 Any Boy Scout who achieves his Eagle in 2010 not only gets an Eagle Pin, but this year, their Eagle Pin will even have a "100" on it to commemorate the 100th anniversary of the Boy Scouts.

If this site will indulge me to boast a little…….

Tonight, David had his Eagle Scout Board of Review and passed with flying colors. He is very excited about getting his Eagle pin with the 100th anniversary logo on it. He worked long and hard to achieve Eagle.

Those on this list that have met my son know that he is one of the finest of the rising generation.

I am honored and blessed to be his father!

David Brooks writes:

Hi everybody, this is David. Thank you everyone for the kind words on me getting my Eagle. My father asked me to give a short report on how I got my eagle and my eagle project.

Well the first year of scouting one works on getting first class. In order to get this there aren't any merit badges needed, its just stuff like getting enough camp-outs and knowing the scout oath, scout law, etc.. once a person achieves first class the new challenges are merit badges. In order to get one one has to work on the badge and meet with the counselor for that badge. A person needs twenty-one merit badges to be an eagle (plus the eagle project). I believe 15 of those 21 are not optional, one needs to get merit badges like: citizen ship in the nation, first aid, swimming, etc.. and 6 optional merit badges-one can pick six out of the over one-hundred optional merit badges. That is the relatively easy part.

Then work on the eagle project begins. After thinking of ones project and getting it approved from the organization one is doing it for the first step in this drama is begins. one meets with the eagle board with there proposed eagle project. they 'ingterigatin' of the persons eagle project and will hopefully approve it with only a few minor changes-on mine I only left out a few minor details on the report-. a typical eagle project a takes about twenty hours of the actual scouts time and about fifty hours of the troop and other volunteers time(all their time combined). On mine I spent about twenty-four hours personally and my troop and volunteers spent about fifty hours on the project. After this, one writes a report on the project and sets a date to meet with the final eagle board. I spent an hour and thirty minutes in the room with the scouting 'enthusiasts' and, thankfully, they passed me. This is just a brief overview of what one can do in scouting, but there are definitely many other things, enjoyable things like campouts, canoeing trips, the Klondike Derby-a sled race- but its not all just boring merit badges and writing reports, I have definitely enjoyed my scouting experience.

For my eagle project we picked up trash, planted twenty native MO trees, and built six wildlife bundles. My project was located on a flood plain and there was an abundance of trash that had been washed into the park from the previous flood. I instructed my team to make a police line and pick up all the trash in one quick sweep. then I instructed my team to divide into smaller groups and plant the trees. After this we built the six wildlife bundles which are basically six feet high 'teepee' like structures to house the small game in the area.

Pitt T. Maner III writes:

 Congratulations David!

Coincidentally, I was going through some old books the other day and ran across my grandfather's Boy Scout handbooks from around the time of WWI. He was born in 1902. If you were able to learn all the things in the handbook you would have had a very good start on a practical education. I imagine that some of things you have to learn today are similar and perhaps some of the tasks remain the same.

Unfortunately I was pulled from scouting after the local troop asked for an extra donation. But I did participate long enough to help carve and build a small, hand-sized, wooden racing car that finished in 3rd place after running down a short ramp. It was a nice summer memory. Don't imagine that many kids do a lot of whittling these days!

Planting trees is a very commendable endeavor. You may be interested in the following organization. I have enjoyed doing a bit of field volunteer work with them– environmental preservation and restoration certainly is a great cause.

Jonathan Bower adds:

Congratulations David! As a fellow Eagle Scout I know the amount of time invested by you, your troop, and your family in this achievement. It takes hard work and commitment to achieve the rank of Eagle as evidenced by the fact that less than 2% of all Scouts have ever achieved this milestone. The lessons in life learned from Scouting will provide you with a solid foundation for great things ahead in your personal, scholastic, and professional life. Well done!



 These pages have been filled about prognostications about natural gas– and how the UNG etf has been a fast trip to the poor house (courtesy of the brutal roll/contango).

In the spirit of Ecclesiastes 3:1,  I humbly report that the contango in natural gas has finally collapsed. The spot price– all through next year's hurricane season is strikingly flat.

This means that venturesome bulls can own the UNG for several months with virtually no negative carry. And only minor carry thereafter.

This does not mean that natural gas prices will necessarily rise. But it does mean that holders of UNG will no longer be walking up the down-escalator.

Note to Bob Crachit: tell Mr. Scrooge to replace his coal fireplace with a cleaner-burning, more-economic natural gas-fired stove.

Anatoly Veltman writes:

What a downhill ride it has been since $13.69 futures peak of July 2008! This week's slide is likely to suck newbies into a Short position. Exactly the category of johnny-come-lately's who got involved in NatGas futures for the first time in their life back then, cheered on by Cramer's chant of the inevitable $16 target. If you hear what DOWN-SIDE is being targeted now, please let me know



Having arrived at only this candidate stock by a process of selection from the 3000 optionable stocks, the anomaly from 27 September stood out, and I changed the low to be interpolated equally between the days either side.

I have no idea what caused it, I guessed that it was - perhaps? - earnings day, but it seems to have no bearing on matters, and I have offered a trade based on the assumption of what should have happened that day. Should it be accepted, there will be an overhead in daily charting; strange that logic should direct me to the one of the few charts with such an anomaly.

Alex Castaldo adds:

Current data shows the following for PGN on September 27, 2010: Open 44.63 high 44.69 low 38.38 !!! close 44.43.

This is after correcting for cancelled trades on that day:

Sept. 27 (Bloomberg) — Fifty-three trades in Progress Energy Inc. occurring prior to the stock being halted under market-wide circuit breakers were canceled on the Nasdaq Stock Market, according to data compiled by Bloomberg. All of the transactions occurred at 12:57:42 p.m. New York time before trading was suspended when the shares slid to $4.57 apiece, a 90 percent decline from the previous close. Progress Energy rebounded to $44.48 as of 2:33 p.m. in New York.

It appears to have been caused by an inaccurately entered sell order. A "circuit breaker" was triggered, based on a 10% decline in 5 minutes.



 Let me call this a literary digression so as not to run afoul of the prohibition on political proselytization:

Perhaps what I am about to say will appear strange to you gentlemen, socialists, progressives, humanitarians as you are, but I never worry about my neighbor, I never try to protect society which does not protect me – indeed, I might add, which generally takes no heed of me except to do me harm – and, since I hold them low in my esteem and remain neutral towards them, I believe that society and my neighbor are in my debt.

Spoken by the title character of The Count of Monte Cristo. Chapter XV The Breakfast.

Stefan Jovanovich writes: 

Dumas the elder and Auguste Maquet were probably the most successful literary collaboration ever. Maquet was a prodigy of historical study; he was a professor at the Lycee Charlemagne at age 18! He did the historical research, plot outlines and character sketches– what Hollywood would call treatments– and Dumas wrote the scripts. They were also a wonderfully sensible division of labor. Dumas who was already a celebrity was the name author; Maquet and he split the royalties. Maquet was a much better investor. He died rich.  Dumas– in the great tradition of spendthrift geniuses– was always on the edge of bankruptcy.

The back story for the Count, who is really Dumas himself, is that Dumas and his son (Traviata is based on the son's play) both suffered scorn, sarcasm and insult for being what would now be called "black". The Count's view of "society" is very much that of the outsider looking in. "Life itself is an exile. The way home is not the way back." (Colin Wilson)



 My gym features a fair proportion of middle-aged single women, who show three clinical diagnostic signs: big hair, thin body, and friendly eyes. Recently while on the pec-machine, I noticed one such lady kneeling over a weight bench; facing downward, using one arm to support herself while the other worked a barbell.

She was wearing the usual tight-fitting gym attire, and had remarkably large breasts given her slim physique; bent over as she was they almost reached the weight bench. When she stood up, they went from vertical to horizontal - a telltale sign: implants!

As a longtime fan of the unadulterated female form, these got me thinking globally. In the absence of cancer reconstruction, what is the allure of a bag of water (or silicone)? If you had one on the desk in front of you, it would be interesting but probably not arousing. Would it be as intriguing if implanted in your dog, or on top of your neighbor's head? No. Implanted beneath the female breast it intensifies the male>female sexual diamorphic attraction. But still…it is fake.

What about the unadulterated breast? Those who have studied and dissected them can tell you they are little mounds of mostly adipose tissue (fat), and milk glands, held together by a mesh of connective tissue (Cooper's ligament), with a pigmented exit nozzle. Analyzing these contents removed from their fanciful context elicits a different reaction than the familiar self-induced diversion to spiritual eternity.

This recalls the "suspension of disbelief" one performs when starting to read a work of fiction or watch a movie: You know it isn't real, but subconsciously tell yourself "in the interest of pleasure - just for now pretend it is real". Much of what we do contains such illusion, in order to create emotions of joy, romance, nostalgia, and love.

Toward the end of my work-out, I bumped into a guy I know in front of the women's locker room and joked "stay out of there!". I pointed at the big "W" on the door, "That means WARNING! Bright fluorescents and no illusion!".

In a round about way, breasts got me wondering about the phenomenal stock market rally since the near destruction of the financial system. How much of the recovery is due to the human desire to see goodness, hope, and eternal joy, even in handfuls of non-specific fat?



 Thanks to Stephen for recommending the book The Last Full Measure by Jeff Shaara, which is such a rewarding chronicle of the civil war through the eyes of one of the bravest, coolest and toughest regiments in the union army. From their volunteer start from the "western frontier" to their valiant and heroic participation nearly three years later at Gettysburg in the east–the book is woven with soldiers viewpoints via letters, diary accounts, and excellent narration from Moe. Not a book that bogs one down with dates or with the gore and carnage of war– although its difficult to not present it, the story marches through in such a way as to the tell the real story from the soldiers perspective.

Some themes:

–the respect of officers from the men even though the leaders (union) were timid and not bold enough to take the south out early.
–the lost opportunites in terms of leadership of the union during the first two years.
–the hell of marching and the moving around of the troops from place to place, retaking ground lost before, etc.
–the righteousness of the union soldier's mindset of his cause.
–the idiocy of fighting each other, why this bloodshed?
–morale was a real factor in many ways: camp morale, pre and post battle, etc. Not getting paid.
–there seemed to be a very effective postal system for the union.

Some items of note:

Chess, eucher, poker and baseball (this shocked me) were mentioned as games played in camp. After July 2nd, 1863 the day of the big battle including a 2 hour cannon shelling many men lost their hearing for a few days. The bayonet charge usually made the enemy run or break since guns and muskets took time to reload and if you were in a defensive fire position then you had to exit. Information was key and Lee seemed to have more of it from spies and spotters. Skirmishers were troops who held the buffer areas between troop concentrations and usually plinked away at each other in probing type engagements. Men improved their writing skills through letter writing over time. Coffee was big, hard tack was staple. Meat was scarce. Men could sleep at the drop of a hat. The way these troops survived day to day was unreal. Fighting in warm weather much harder then cool. Throwing away a coat (due to weight and burden) that only weeks before you would kill for. Heatstroke. The rebel yell really was the south's war cry and the northern soldiers didn't say it affected then much. The soldiers were never inspired before a battle, like governement employees they just did their job. They were given a speech once and they liked it from a general. The soldiers had a rubber backed blanket that they used in the field to sleep on (what is this item?).

Trading/trickery related? (as best I can here):

Gold was best, some men tricked by currency changers. Inflation of prices for foodstuffs. One soldier spent a lot of money on an apple pie and when the pie was cut into there was nary any apple. Armies usually were followed by sellers of food, liquor, etc. (profiteers–necessary evil to some degree) Whiskey for officers only was watched closely by the enlisted. Whiskey used as medicine. I took a double measure of whisk, and up it came. Never drink on an empty stomach. They came upon an earthworks with heavy cannon, upon closer inspection the cannon were stove pipe. Inside the work were some pitiful secesh (rebels). In order to not to miss high, the men were charged to aim for their feet.

In ending I have not read a civil war book in quite some time and decided to refresh the mind about it. Many emotions are kindled by reading about the war and what the country went through. The first Minn. as a model of coolness, obedience, level-headedness, bravery and tenacity to name just a few qualities is worth one's time to get acquainted with.



 Payroll tax receipts are a very good surrogate for jobs. The data is daily with a 1-day lag. It is reported by the Treasury rather than the BLS, and is NEVER revised. It does have the disadvantage of being presented raw rather than seasonally-adjusted, a fact which keeps many from considering the data. The series tends to lead the unemployment numbers (which are the opposite side of the coin) by some four to five weeks. All of the above is a repeat announcement. Now the news: At this time the growth/slope of that data is decidedly negative, almost to the point of being scary in our opinion. This is not what we expected and put it out as a word of caution. Of course, remember that the economy is not the market.

Scott Brooks adds:

Two anecdotal observations:

1. My insurance brokerage clients and insurance industry clients are reporting that their workers comp premiums are down and not coming up.

My small business clients that are hiring are reporting that they are having a very difficult time hiring at the lower end of the pay scale. They simply can't compete with unemployment benefits that are paid for doing absolutely nothing. People would rather earn slightly less money without the hassle or expense associated with actually working.



Here is a link to my favorite trading and investing books.



 That was some game.

Afterwards I looked up the following and was not entirely surprised, as years ago it had been pointed out to me that in basketball, defense in terms of points allowed is largely an illusion. The reason being is that it is less an indicator of dogged fundamentals on the part of the defenders as it is a function of how capable those same are of scoring when they have the ball.

For the overwhelming part of any basketball game if a team can score with alacrity, they generally do. And, unless it's in the waning seconds of a quarter other than the fourth, the game clock is an afterthought.

But if a team is saddled with poor shooters and otherwise less creative opportunity makers on offense, they tend to use most of the 24-second clock looking for somebody to get a lesser contested look at the basket.

That shortens the game.

The Knicks in their present form can score.

But by being nimble with the ball, they lengthen the game in that they give the opposition more possession and, thus, chances to score. Presently, out of the 30 NBA teams they rank a sterling first in points scored, but a lowly 28th in points allowed.

And notwithstanding their overperforming record so far this year, 16-10, it's illuminating to note they're doing all of this with a scoring differential of less than 2 points per game.

In the long run it might seem that they would be hoping that the vagaries of a coin flip suggested by that thin a margin would continue to smile on them.

Over the course of a long season, that's asking for a lot.

In the media accounts of this game it will be noted that the reason that Boston won was solely because Paul Pierce hit a money shot with but 4/10ths of a seconds left and A'mare Stoudemire's heroic answer to such came just an even smaller fraction of a second too late.

But I would maintain that's not why they won the game. They won the game because their earlier tenacious adherence to a fundamental put them in a position to win the game.

They were a perfect 21 of 21 in free throws.

That's why they won the game.

There are parallels to this in most every human endeavor. That is, putting oneself in a position to have the optimal chances of success.

A task much easier written than consistently done.

Victor Niederhoffer adds:

Shades of my friend Dr. Brett adds to the analysis of this game. The Knicks lost because of a personality disorder in that they gave up two technical fouls and lost possession and the 2 points. They keep high fiving themselves and showing off for their fans, and he coach allows them to explode their emotions on court. It is loathsome to see the coaches terrible strategy of helter skelter shooting holding back such a good team with the best player on the league on the team able to shoot from inside.

T.K Marks replies:

About the coach allowing them to explode their emotions on the court, check out the Jets in that regard. The coach there has allowed them to become the pariahs of pro football while the players on the other teams openly question what in the world are these guys basing their considerable conceit on. How can they theoretically be cocky when they haven't won a Super Bowl in over four decades. Haven't even come close. Now that is a textbook example of a collective personality disorder, a DSM code waiting to happen.

Presently the Knicks are an outside shooting team, attempting and making more 3s than anybody else in the league. As such, they will live and die by the hot hand.

That's unduly risky. A structurally flawed strategy, begs fate for an edge. Can only last for as long as fortune's fickle window remains open.

And by way of a market heuristic that might buttress the above point, over the educational years I've had mountains of my out-of-the-money calls expire worthless.

I love education.

Though I wish a little less of it would not be initially lost on me.

Brett Steenbarger writes in: 

The one thing I've learned being part of hiring processes at trading firms:

In life's racetrack, bet on the workhorses, not the show horses.

Distributions of returns, conditional probabilities of having a winning period after a losing one (and vice versa), performance under differing/changing market conditions: much of a speculator's psychology is revealed in their stats. Same for basketball players: assists to turnovers, number of times making it to the free throw line, offensive vs. defensive rebounds, etc help define the workhorses.



 Last night, we lost another baseball great, Bob Feller.

Ralph Vince comments:

He was here all the time, in this little town of Chagrin Falls, (along with a few other old-time MLB pitchers, none in stature to Feller). I don't know if he lived here, or just hung around here. This is the kind of place people come to just to hang. (God alone knows why. This is a bit of a pre-lapsarian place. At the local hardware store, if you need anything metric, you won't find it in this town. Need film? At the drugstore you can get Kodak, but not Fuji or Konika.)

He was not very well liked, not regarded as a pleasant guy at all.

Stefan Jovanovich writes in: 

And, why, pray tell, should it matter a tinker's damn whether the man was "well-liked" or considered "pleasant"? The man had the unfortunate habit of always telling the truth– about baseball and about this country. He and Wahoo Sam Crawford were two of a kind. 

Jack Tierney writes: 

This reminds me of my home town's only claim to major league fame, Jay Hook. Jay was the local hero who made it to the "bigs" but never made a big splash.

He wound up with the Mets and Stengel in the expansion draft and had the honor of pitching the first Mets' win ever. He was a graduate of Northwestern (thermodynamics) so could tie his shoes without help.

Jay's most notable accomplishment, though, (and maybe even the one that lead Stengel to ask "Can anyone here play this game?") occurred as he and another pitcher sat making calculations in the dugout during a game.

Stengel wanted to know what the hell they were doing.

Displaying a sheet containing a host of complex maths calculation Jay told Casey that they were assuming Gibson could throw a curve ball at 90 mph. The problem: Given that speed and distance between home plate and where Gibson released the ball, how many revolutions did the ball make?

I never discovered if they determined the answer as Casey snatched the paper and dumped it.

I don't know if this story ever made the papers but it was related to me by his father, Cecil (proprietor of Cec's Drugstore), over a traditional Sunday morning after-Mass vanilla malt.



In 1980, our family's life was changed by a drunk driver. My mother barely survived the act of this horribly irresponsible man….but out lives were changed forever because of his actions.

I have no tolerance for anyone who drives under the influence. This video (I believe from Australia…it's not the one from Britain that was making the rounds a few months ago) is a must watch for anyone (and especially your kids) who is thinking of drinking and driving. Your actions don't just effect your life, but the lives of many innocent bystanders.

Even though we've raised our children to not drink, I will show them this video so they can clearly understand that choices have consequences.
This video is graphic and heart wrenching. But it is worth a watch.

Peter Vinicius writes:

Oddly enough, the above reminds me of a fond memory. It has nothing to do with the important topic of drunk driving above. It's about my father.

No, he never injured anyone while driving and being addled by age, though in his latter years he was no stranger to wreaking havoc on the aplomb of strangers.

You see, he was what they call a live wire. Didn't get married till he was 39, though that hardly deterred he and my (younger) mother from having 11 kids. There's something to be said for any guy who still dutifully picked up the tab for college tuition when they're 80.

So once upon a time when he was in his mid-80s it was time for him to renew his driver's license, though mercifully he hadn't driven in years. So my mother takes him to the DMV, where he gets on line until the clerk behind the counter tells him to approach the window. Once there she asks him to read the eye chart, which of course he can't. Actually she probably had to ask him 4 or 5 times because he couldn't hear anymore either.

Those limitations all extraneous to the task at hand though as far as he was concerned, because there's no way in the world a guy like this was walking out of there without a driver's license. At least what he thought was a driver's license.

So once he had cleared the communication hurdle with the clerk, he called over the next guy on line, a total stranger, and right in front of the clerk nonchalantly asked the dumbfounded guy, "Son, what does that bottom line on the eye chart say?" I later found out that "Son" was about 60, but when you're pushing 90 everybody's a kid.

My cagey mother meanwhile is watching this deal unfold from afar because she knew full-well that immediate proximity would have run the risk of putting her apple cart in harm's way. Ever the stoic, probably figured this was a job for New York State, not her equilibrium.

So the young clerk figured out how to best handle the situation and politely instructed my father to proceed to window such-and-such for his new photo. Whereupon he was presented with a state-issued ID card that surely looked like a license, which was the government's idea all along.

It would have been an affront to his dignity to deny somebody like that something he's had for close to 70 years, yet there had to be some sort of mechanism in place to ensure that drivers were still capable of the responsibility of driving. I thought that they struck a nice and sensitive balance there by coming up with the ID card solution.



Just looking at the muni index funds can be a little misleading. The actual funds are bid down today a lot more than their NAV. Also munis seem to be a lot more affected today on the longer end of the curve (2021+)… though there are debatable interpretations of that.

Everyone seemed to react frantically to the Fed in early afternoon, even though it seemed to me to be exactly what one should expect at this point… "likely to warrant exceptionally low levels for the federal funds rate for an extended period." Did this really catch people by surprise?

Kim Zussman writes:

Here is updated ratio of California muni etf / Treasury etf (fairly well matched in duration, symbols CMF/IEF).

Still above the November low, but since then both munis and treasuries have falled down in price.


Ken Drees adds: 

I found this good article on this topic: 

QE 3 ?

Reasons for the Muni Selloff

1. Unwinding of the "sure-thing" Quantitative Easing trade
2. Selloff in bonds in general because of budget and inflation concerns
3. End of the Build America Bond program (BABs)
4. Increasing default risk

Of the above reasons, 3 and 4 are the most important on intermediate and ongoing basis.

BABs was excluded from Obama's compromise tax proposal. Hopefully it stays that way. I discussed why in Time to Kill Build America Bonds (BABs)

The short version is "Taxpayers are already on the hook for hundreds of billions of dollars of Fannie Mae and Freddie Mac debt. We should not extend the insanity to government guarantees of municipal bonds"

However, now that the government guarantee is gone, yields are poised to rise, especially with increased default risk rising.

Here are several examples of rising default risk:

a.. Detroit Mayor Plans to Halt Garbage Pickup, Police Patrols in 20% of City; Expect Bankruptcy, Massive Municipal Bond Turmoil in 2011

b.. Miami Commissioner Says Bankruptcy is City's Best Hope; Chris Christie Says New Jersey Careens Towards Becoming Greece

c.. Oakland California Bankrupt - Councilwoman Pat Kernighan Calls Rest of Council "Crazy and Irresponsible"

d.. L.A. Controller Says City Could Run Out of Cash by May 5

e.. Chicago's Mayor Daley Discusses Bankruptcy For City Pensions

All it takes is one brave municipality to lead the way and others will follow. When that happens, the baby will likely be thrown out with then bathwater. There is no reason to like Munis here.

By the way, bankruptcies are a very deflationary event.

Mike "Mish" Shedlock



 Here is an interesting case study on how to develop and sell a product– "Powerband Wrist Straps Forced to Retract Misleading Ads by Austrailan TGA Complaints Resolution Panel". However they utilised a slick marketing campaign– leveraged off an existing trend, i.e something that was already being worn, (those charity plastic wrist bands), added a cool factor, and said you would be a better sportsman, hero, person, whatever.

After a number of people complained to the Therapeutic Goods Administration and those claims were rejected on the grounds of the device not being a "Therapeutic Device" the issue was taken on by Professor Ken Harvey of Latrobe University who took them to task and escalated the issues to the TGA Complaints Resolution.

Marlowe Cassetti writes: 

The Australian Skeptics have challenged a lot of these frauds. They have a couple of videos on this here. Scroll down to Applied Kinesiology and Power Balance videos. The sad fact is that many gullible people all over the world have been duped by this crap. I know of two examples where sick people are foregoing real medical treatment to waste their precious time and money on this junk science. 



   Today is the anniversary of George Washington's death at age 67. He died in 1799, a few weeks before the new century.

I recommend John Ferling's new book, The Ascent of George Washington: The Hidden Political Genius of an American Icon. It helped this reader understand once again how utterly fatuous it is to claim that American democracy would be "improved" by the abolition of "labels"– i.e. political parties.  American liberty only exists because of the contest of parties. When Washington condemned faction, he was criticizing those groups who extort unprincipled concessions from their own political parties precisely because it literally corrupts the brand.



  It's paper-reading-Friday-afternoon, and an essay by Jonathan Weinstein (Northwestern B School) entitled, "Fairness and Tax Policy– A Response to Mankiw's proposed 'Just Deserts'" caught my eye.

The author makes an interesting reference to Shapley Values in the context of tax theory/policy. He writes that he's never seen Shapley discussed in this context, and I concur. Whether one is liberal or conservative, it's food for thought– and he gives an intuitive example of Shapley at-work (pun intended.)

For some spec-listers, reading this essay may be akin to swallowing a tablespoon of Cod Liver Oil. And when Weinstein makes a pejorative reference to Atlas Shrugged, Ayn Rand fans may find the essay akin to taking an enema. (Of course both palliatives can leave one feeling better in the morning.)

If you like to read papers that challenge your beliefs, spend 5 minutes on this…. I look forward to Vic's explanation why applying Shapley fails…

Stefan Jovanovich writes:

Professor Weinstein's bedrock premise (and Shapley's?) is that profits are produced by cooperation and are, therefore, collective property to be divided - i.e. taxed - "fairly", not uniformly.

The authors of our Constitution had enough commercial experience to know that the very definition of profit was tricky and that even the most dedicated collective would be tempted to become a non-profit in the face of an income tax. They knew that it was far, far easier to apply an excise - to tax transactions. The only debate could be over the price and it would be very hard for the seller and buyer to cooperate to evade the excise when only one of them would be saving on the taxes. The rich would pay more, even if the excise rate was uniformly applied; the only "unfairness" (sic) would be that everyone would be treated equally.

Rocky Humbert adds: 

Stefan makes a fair point that profit/income taxes will, ceteris paribus, cause participants to produce less profit/income. However, similar logic can be applied to almost all taxes…

The tax aspects of Shapley are controversial but not necessarily re-distributionist — and it's interesting that no SpecListers picked up on the nuance: Turning the entire argument upside down, instead of "individual contribution," the quantity could be "individual benefit." And if a player gets "less benefit" from government, a Shapley argument might show that the player should pay less in taxes. Weinstein was definitely not making this case, however, it's always fun to turn an argument upside down and find that the argument also works in reverse.

A way to think about Shapley here is in the context of a basketball team, where the team owner has a fixed salary budget $, and can allocate the money amongst his current and future players. The team owner and the players all want to maximize their personal outcomes, yet Shapley demonstrates that there is a allocation of $ amongst the players where COLLABORATION CAN ONLY HELP BUT NEVER HURT. Of course there are non-Shapley outcomes where things could be even better (and this is arguably the Adam Smith argument), but we also know that there are many sub-optimal outcomes that include show-boating/selfish players too. Basketball fans can think of several notable examples where a marquee player stayed with championship-contender team — even though he could have signed for more money with a non-championship-contender team.

Of course, a difficulty with Shapley is the calculation of "individual fairness" and "individual contribution" i.e. every player gets at least as much as he or she would have got had they not collobrated at all. A libertarian might argue that the marketplace is the best arbiter of individual contribution, while a liberal might argue that the market will fail at this calculation. A shareholder of a company that is paying its CEO gazillions of dollars while the stocks goes south might find himself a bedfellow with the liberal.



 We the specs talk a lot about survival and deception respectively. I decided to do some research on deception and associated clues as it impacts both topics. However, the real impetus for digging into this came from re watching the scene with Dennis Hopper and Christopher Walken in Tarantino's True Romance. At one point in the scene the aggressor, Walken, says,

Sicilians are great liars. The best in the world. I'm Sicilian. My father was the world heavy-weight champion of Sicilian liars. From growing up with him I learned the pantomime. There are seventeen different things a guy can do when he lies to give himself away. A guy's got seventeen pantomimes. A woman's got twenty, but a guy's got seventeen… but, if you know them, like you know your own face, they beat lie detectors all to hell. Now, what we got here is a little game of show and tell. You don't wanna show me nothin', but you're tellin me everything. I know you know where they are, so tell me before I do some damage you won't walk away from.

The scene itself is powerful but very dark and graphic. But the whole thing got me thinking, do there really exist a set of 17 to 20 pantomimes or any universally accepted set of rules to detect deception?

I did a little google research and found some articles which tended to identify the same culprits over and over: lack of eye contact, body language, lack of details, long pauses, defensive/offensive behavior, touching the face, nervous movements, pupil dilation, trusting one's instinct and intuition, etc. They quoted psychologists and interrogators but without much supporting evidence. Forbes had a pretty good article on the topic. But there existed no specific set of "laws" so I decided to go a little further and investigate academic papers and CIA/Law Enforcement style publications (the agency writes some incredible manuals). Apparently, at the municipal levels of police work the interrogators generally assume guilt from the onset. The higher ranking government agencies, when dealing with suspected terrorists for example, use techniques like waterboarding and various other fear inspiring methods which are of no use in everyday life should you enjoy life outside prison. Not much help there so I moved to academia.

Saul M. Kassin wrote a paper entitled "Human Judges of Truth, Deception, and Credibility: Confident but Erroneous" in which he says research on the subject has pointed to the fact that in laboratory studies people are generally right only 55% of the time (vs. the 50% coin toss) in detecting deception yet they are very confident in their abilities. Kassin says closing one's eyes and listening tends to result in more accurate lie detection as the cues generally come from, "pauses, hesitations, changes in pitch, and increase in speech rate." But this also assumes you aren't dealing with someone who just talks faster or with an accent (think NYC speech vs anytown, USA). How does one define the control group?

At U of Texas James Pennebaker has developed a linguistic writing analysis software program that is said to be able to identify liars (with 67% accuracy) by virtue of: 1. fewer first person pronouns (i.e. they don't take ownership) 2. More negative emotion words (presumably as they feel guilt) 3. fewer exclusionary words (but, except, nor). However, all of this would only work if someone would submit to a writing test (and had a decent command of the English language). Rachel Adelson in APA Monitor 2004 says deceivers without adequate preparation take longer to respond but those with a rehearsed story begin more quickly. There were some physical cues but the article wasn't that convincing. They also found verbal patterns alter for liars (voice pitch).

This all seems suspect as well since most people view public speaking as the bane of being alive. Seinfeld's joke that most people would prefer to be in the coffin to reading the eulogy comes to mind. Either way public interrogation undoubtedly changes people's methods of communicating. Even if innocent, I am fairly certain someone facing a life sentence would be a bit excited. Or in matters concerning large sums of money people often have difficulty remaining calm…is that broker trying to trick me or is s/he busy and flustered? In the end the whole thing is subject to confirmation bias like so many numerological claims. Simply put, you find whatever you are looking for just by virtue of the fact that you are looking for it. Is that person a liar or did his/her nose itch?! There does not seem to be a clear means to determine with any real degree of accuracy without a large amount of detail and cross examination.

Based on modern research, Tarantino seems to have just written exciting dialogue without any truth behind it. In an unintended twist, while this post hasn't done much to identify deception quickly and easily it probably helps those who would lie to hone their craft. The best laid plans…if anyone has any related info I would love to hear it.

Pitt T. Maner III writes:

A little time back there was a discussion of Ekman's facial research and whether left brain techniques can truly tell what someone is thinking or what they feel in their heart.

I think that reading facial cues though can give clues to deceptive behavior (maybe with the exception of emotionless sociopaths or people who have trained themselves to respond differently or with a poker face). According to Ekman there is a universality to how facial muscles express and reveal emotions.

For a nominal fee of $69 you too can read faces in 1 hour's time. To be tested ….

"METT Advanced will improve your accuracy, as it has more practice and training items-and a review section for additional training than the original version. It will take about one hour.

METT Advanced-Online only This training is meant for those whose work requires them to evaluate truthfulness and detect deception - such as police and security personnel, and those in sales, education, and medical professions . If you should achieve the minimum target score of 80% or higher on the post test, a certificate of completion will be emailed to you . A minimum score of 80% or higher will grant you a certificate of satisfactory completion, a score of 95% or higher will grant you a certificate of expertise.

You can continue to access the training for refresher purposes."

It would be interesting to be proficient in this area and to try to read all the CNBC analysts and stock promoters. There was a guy, for instance, who hammered Netflix last week and was so negative it was almost too much. Did he really believe in what he was saying? How can one be sure without researching his arguments? I guess he was right today …

Heh, and there is a TV show related to the subject. On tonight I believe. Haven't seen it but might be of interest.

LIE TO ME is the compelling drama series inspired by the scientific discoveries of a real-life psychologist who can read clues embedded in the human face, body and voice to expose the truth and lies in criminal investigations.

DR. CAL LIGHTMAN (Tim Roth) is the world's leading deception expert. If you lie to Lightman, he'll see it in your face and your posture or hear it in your voice. If you shrug your shoulder, rotate your hand or even just slightly raise your lower lip, Lightman will spot the lie. By analyzing facial expressions and involuntary body language, he can read feelings ranging from hidden resentment to sexual attraction to jealousy. His work gives him the knowledge and skill set to expertly deceive others as well as detect lies.

A Webmistress adds:

 George, you should check out my favorite blog– she is a true expert on detecting deception with a 99. something percent accuracy rate on high profile cases where she knew people were lying before the truth was known. She says there are no hard and fast ways to know if people are lying, and all the sites and articles that tell you things about how looking to the left or itching your nose or even using facial expressions alone to detect deception are totally misleading and off.

The way she usually analyzes lies I've found after reading all her blog posts for two years is she tries to see whether the things people say and the emotions they show on their face when they are talking about their crime make sense… like if a person is radiating a glow when they are talking about their child being killed by an intruder, they probably were not an innocent bystander in the crime. A parent who loved their child would remember that night as the most horrifying event of their life and the emotions they experienced during that event would come back to them as they remembered it and would show on their face. If they are experiencing joy for whatever twisted reason as they are remembering the event, then something is obviously off. A lot of times people's emotions do not match their stories. 

Also she analyzes what people say when they talk about a crime. When people are lying sometimes they don't make total sense because it's hard to lie…you are fabricating a story and you have to think and constantly censor yourself. But when you are speaking the truth from the heart, it just flows….So often people say things that don't make any sense or indicate what they actually did rather than what they say they did…

Those are just some things I see her doing, but she always emphasizes there are never any rules in detecting deception. The site is great–I've learned a ton from it. 

Stefan Jovanovich comments:

Penebaker and Kassin's investigations confirm once again that baseball is the key to finding the truth in life. If you square up a baseball every time, you will hit .500 (the high school batting averages over .500 are attributable to the poor quality of the fielding). When Ted Williams hit .400, he was, in fact, 8 for 10. A quality player hits .300 - i.e. squares it up 6 out of 10 times, one more than a coin toss. May we all hit .300 for these holidays and the years to come.



 In the markets and trading, it is often worth while to try and re set your position each morning mentally, before taking any course of trading action.

For example, on a upside break, if you are already long, and tempted to book, consider your square– you would probably be buying right here. Why not add to the position, rather than take the easy option of banking the cash. The need to produce 15% a year of trades that RUN, particularly on direction trading, it appears, is paramount to achieving your goals.



Range of bonds was only 4 times as great as stocks today. One still wonders what terrible collisions in the foundations of markets would be caused by a 5% yielding 30 year bond compared to 4.4 % today.

Jordan Neuman comments:

The Baa corporate bond yield is a better barometer. While spreads have narrowed, there is still room to tighten before they return to the glory days. While none of us (Rocky?) expect that, stocks could survive a 5% 30-year with the Baa rate where it is. That being said, stocks would be in trouble by this metric if the Baa would follow the 30-year's direction even a little.



 After Sunday services it began to snow. We spent an hour at the store, and when we came out there was a thick layer of ice on the windshield. In an hour conditions changed from 65mph to 20-40. The whole family was in the mini van so I had to take it easy. Also to complicate matters, it's much easier to drift and drive with rear wheel drive and a longer wheel base vehicle. I was stuck in the mini van with a Floridian wife that fears "black ice".

Of course the kids that it was a total blast. My teenager thought it was boring vs. driving a sports car, and even the big full size van is a blast to drive in the snow. I taught him last winter and we had a blast.

The most dangerous conditions are ice and wet leaves. It's when we go from wet to seemingly dry looking pavement then ahead where there is snow. Snow is easy to drive in vs ice. It's the transitions, the shift change from dry to wet to non salted ice to snow covered.

I was attempting to show the wife that on ice it's near impossible to move at all on a grade. As we all know overpasses are the worst. Yet it's safe to proceed at 20-25mph keep the motion in motion, since you can stop in a reasonable amount of time and the turn at 8-9 mph was a safe crawl, but what ever you do do not pump or slam on the brakes even with ABS. Look where you want to go, and like magic you usually end up where you're looking in a panic.

On wet pavement when it turns to black ice and you are blind to the transition, simply keep the motion in motion. Don't brake, do not over correct, do not panic. Once the vehicle is straight, you can then very lightly brake or coast reduce from 40 to 20 and gain ability steer, enough to lane change and coast, then brake enough to turn from 25 mph max ice speeds to the 9mph corner speed. Yet snow has very good traction. You can rock it 25-40, and use controlled throttle to turn stop smoothly so that the ABS doesn't even kick in.

At every transition in our 10 mile trek there were crashes just over the next peak or the next corner. I demonstrated how and why it all works after and during all the transitions. The wife was always in a panic state, especially when I was at 35-40 mph in the snow. My point was if the traction is good, the kids will drive 50, the people that know how to drive in snow will go 40, so you are in more danger crawling at 20 mph with people braking and turning to pass. Just look ahead for the transitions. Way ahead. I said, look, what if we lose control and spin, I can land a 747 on this HWY. There is no one behind us. There is zero risk. A big fast curve on dry conditions you could take at 200 mph+… I didn't even slow and she held on for dear life. In the big white I can take that at 65mph and drift a rally car all wheel drive I could take that at full throttle at 120.

One block from the house they missed a spot with the salt truck. It was down hill so I idled the van at 3-4 mph…"what are you doing now?" You can't see this? It's pure ice. My street..brick mail boxes line the road…kids at play in the yards…pure ice and there will be no more driving today as I can't get back up the hill out of the hood with the rear wheel drive fun vehicles.

It's the mouse with one hole trade.. There's no escape route even at 5mph, even though the snow covered roads 1 mile from the house are a pure joy to practice sliding, drifting, regaining control. It's great for the teenager and my wife to learn on. Snow covered parking lots are perfect! "Now you decide it's too dangerous to drive more today!" It's not too dangerous to drive today…it's to dangerous to drive in our neighborhood. "We need an all wheel drive vehicle" Yes dear. "All wheel drive with computer controlled traction. You can drive through anything." 

this video is exactly how we learned to drive as a huge open lot and let it rip.



 As this is only my opinion, we always adopted a very laissez faire approach to media materials in the house. Since the lure of the "Forbidden Fruit" is so great, we dispensed with any censorship and instead engaged in discussion why the lyrics of 50 Cent were so poorly written, the music bad, extremely crude and misogynistic (yet we never banned the music). Same thing with the TV show "Southpark," the artistic renderings of Playboy and certain websites.

Realizing that nothing was forbidden within an age appropriate setting, we faced no rebellion or major dishonesty on our son's part. Since the media is so pervasive, we did monitor what our son viewed and participated in, and managed to find ways to discuss the merits or lack of, in his media choices. We never told him that "Ludicrous is a bunch of crap and don't let me hear you listening to him or you're grounded." We did discuss the merits of what he saw and heard, the pros and cons. Not all rap music is bad, not all German Industrial Death Metal is bad, just as not all the content of Playboy is bad….In fact all of the aforementioned have very many positive things, I tried to concentrate on the good parts while comparing the bad parts with other things and values he knew was bad.

Somehow, kids are very resourceful and will find out about forbidden fruit, especially those children from strict or religious homes or homes where the children are under constant parental surveillance. Although this is anecdotal, I've noticed strict parents increase the allure of the forbidden, and this allows for the children not only to pursue the forbidden, but to need to lie about it to the parents creating a double whammy of dishonesty and the tragedy of leading a double life.

Our house was a haven for children from repressive homes, a place where frank discussion could take place without punishment, reprisal, or tattling to other parents. (On the other hand, we did tattle when we heard about activities that were illegal, immoral, or drug related). Our dinner table discussions were legendary, comparable to any salon in Paris, but the Boulevardiers being replaced with 10-17 year old tow headed kids. Honest, frank discussions about music, movies, current events, art, porn, and literature create a trust, a bond between children and parents that transcends any generational boundaries. As my son so eloquently told me, "The reason I never rebelled is because you never gave me a reason to rebel." I like to think that I had something to do to help my son become a world class free thinker, a son who actually had the courage to vote for Bob Barr while I wussed out and voted for McCain.



 The Government won't request more service revenues from Wall St. because the service code prohibits government entities from generating service revenues from themselves.

Stefan Jovanovich writes:

John Steele Gordon has a story about a friend who preferred "fairness" above all. He concludes it with these remarks:

We have lowered the marginal rates on high incomes four times since the inception of the income tax - in the 1920s, the 1960s, the 1980s, and the 2000s. In each case, the result was a much more prosperous national economy, lower unemployment, and higher tax revenues for the government. If you do A (lower marginal rates) four times, and four times, despite differing economic circumstances, B (increased prosperity) happens, a rational person might conclude, at least tentatively, that B is the result of A. Not liberals. As I said, high tax rates on the rich is a religious principle with the left. If the poor have to suffer because of it, so be it.

Gary Rogan writes:

I think it's important to remember that the socialist enemies of freedom have very clever strategies, some of which go back decades. That these socialist enemies are paying off their crony capitalist paymasters, who should not even exist as a matter of "fairness", and who in turn reward whoever they chose with their ill-gotten gains, should not be confused with the fairness of normal corporations paying whatever bonuses they wish without undue government interference or populist anger. The marriage of the socialists and their capitalist cronies is one of convenience because they have different end goals, and the socialists are happy to play up the righteous populist anger against their paymasters to promote anger against all capitalists. It's probably wise not to side with either of the two evil "spouses" in this marriage.

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