Sports equipment evolves the player…movement… and final strategy.

In the beginning, 1971, the racquetball was mush, and the strokes slow to push it around the old courts in winning rallies. The pros, like me, were string beans wielding tiny racquets.

Then in the 80s, the ball quickened and the strokes changed to power, with deeper contact and a bullwhip crack.

In the 90s, the pace of play was frightfully heightened by the superball with big-head racquets, crisper strokes, and squat players.

There have been three epochs. The early, lanky champs with push strokes were Bill Schmidtke, Bud Muehleisen, and Charley Brumfield. The intermediary fireplugs with power swings on a relatively fast ball were Mike Yellen, Dave Peck and Marty Hogan. The current bulldog elite are Sudsy Monchik, Jason Manino and the better of the rest who explode on shots like weightlifters at a bar. The power serve increasingly dominates over time, and the rally length and millisecond to ponder between shots decrease in proportion to ball speed.

The ball begot the stroke begot the player, and that's the history of racquetball. And, likely, any sport, military or industry evolves with equipment.

What can you do about this trend to improve your game? My play girdles all the game eras, so these solutions are from observations of ball, racquet and champ body developments, and matching my molasses stroke against the diverge of three swings of the 'Big Three' players in successive eras– Marty Hogan, Sudsy Monchik and Cliff Swain.

Each champ adapted with a stroke to meet the speedier ball, yet with commonalities. These shared elements are: 1) Fast set-up on the shot; 2) Quick swing, tending from linear toward circular; 3) Deep contact to allow the speeding ball; 4) Stroke power for ball velocity; 5) A closed racquet face to counteract the approaching topspin ball scooting along the hardwood.

The three model strokes by yesterday's and today's 'Big Three' players embrace all these requisites, with a gripping consistency near the butt low on the handle. This gives leverage a la holding a hammer handle bottom, 'closes' the racquet face to off-set an oncoming topspin, and allows a deeper contact where the face automatically squares to meet the ball.

 The trade-off of power boost for loss of accuracy is no longer debatable: the name of the new game is power, not bulls eye. To the contrary, I first honed accuracy as a novice, and gradually increased power, as portrayed in a daily practice Heads Up! drill with the Michigan State University hockey, wrestling and football teams. One player sat with his back against the front wall facing the service line, as the other dropped and killed the shot to a halo region around his head. The idea was to simulate tournament pressure and not blink. Eventually someone got bonked and the roles were reversed.

Now look at the three almighty unalike strokes of the Big Three, and match the salient points of quick set-up, quick swing, deep contact and power. These stroke variations in biological evolution (don't blink) are called adaptive radiation, so let's briefly look at each.

Marty Hogan's young stroke was ridiculed by the era's masters as an awkward use of raw power, even as they ate crow. Hogan's fulfills the requirements for a modern stroke by using a pendulum swing that contacts the ball deeper heretofore than anyone. 'The pendulum starts way up, 'as high as I can reach on the back swing,' he says. The mechanics are the more an arc uplift of, say, a clock pendulum, the greater the swing power. Marty boosts this force by suppinating (laying back so the palm is up) the wrist at the top of the forehand, and pronating (flexing the wrist approximately the opposite direction) at the top of the backhand back swing. It allows a very deep hitting zone -an extreme off the rear foot- that translates into a split-second extra set-up time with a stronger report. At his level, shades make the difference in brilliance.

Sudsy Monchik takes a new swing that, like predecessor Hogan, engendered a new crop of strokes across the country. 'Compact, close to the body and explosive, like a bull tossing its head,' he describes his swing. The grip for his forehand and backhand, as noted, is low on the handle with an extremely closed face. The swing is best described as classical explosive with precise timing. The odd thing is Sudsy may run the court in a crouched position as if in a horizontal mine shaft, chasing and hitting faster than most uprights.

Cliff Swain's success with a dissimilar stroke relies on early racquet preparation. His teaching clinic preamble and conclusion is, 'I hate to harp, but get your racquet up and back early'. Cliff is a praying mantis on the court, stalking prey, ball, and leaping to score. Where Hogan gains a precious instant with a deep contact, and Sudsy by scampering in a squat, Swain has already made a back swing- low, wrist cocked- like a gunslinger who replies without flinch, 'That was my draw, do you want to see it again?'

When the smoke clears on equipment, stroke and body type evolution, adaptive radiation is the driving force. This is the process in which one species gives rise to multiple species that exploit different niches, in a relatively short period of time. The changing ball has produced new anatomical champs exploiting forced new strategies.

Who's responsible for the speeded ball? The answer is the reason baseball prevailed over softball, sponge ping-pong paddles won out, and basketballs are highly pressurized. The ball manufacturers ultimately control a sport's evolution, racket makers fall in step… and it's all due to public capability and culpability The manufacturers hype action in sport to convince participants it's more fun, pressurized balls wear out and break sooner, and a fast game is easier for beginners, youngsters, elderly, and particularly ladies whom the males follow buying more balls.

The tendency in recent decades in all sports is away from analysis toward frenzy. The process is rapid and ongoing. My fellow animals, swing with the champs, and win!



 A couple of weeks ago, The Chair discussed a dinner he had with Dimson — and that Dimson noted the "long term rate of return for everything other than stocks" is around 2.8%."

This morning, Steve Landsburg articulately expanded upon one of my points regarding utility value– demonstrating that headline numbers regarding long-term returns can be horribly misleading. In particular, he addressed James Glassman's recent WSJ op-ed where he admits that his Dow 36,000 call was wrong. But importantly, Glassman's mea culpa was wrong for the wrong reasons.

Landsburg's essay reminds me of the adage: "There are sardines for trading. And there are sardines for eating.

Duncan Coker writes:

I have known a number of developers as friends from having once lived in a resort town. During the go years when they would sometimes present a deal to me for a small share, I would point out the implicit 5 to 10 times leverage, or the large share of sweat equity they usually wanted. They would always look at me like I was an uneducated amateur who did not understand the main unspoken premise of building. Build it and they will come is always the motto, and you do have to admire their optimism.

Kim Zussman writes:

"The truth is that stocks appreciate faster than houses precisely because a house does not just sit there; it provides shelter, warmth, and closet space every single day that you own it. Stocks need to appreciate faster to compensate for the fact that they don't provide any comparable stream of services. If stocks and real estate appreciated at the same rate (counting the dividends as part of the appreciation, as Glassman does), nobody would own stocks."

Margin issues notwithstanding, very few would choose homelessness to be in the stock market. A better comparison would be a rental house held as an investment - where the shelter utility is capitalized - vs (initially equivalent value) investment held in stock(s):

Over time, stock will pay dividends (or reinvest earnings, etc), and the investment will grow by capital appreciation + dividends Over time an investment house will pay rental income, and the investment will grow by appreciation + rental income - upkeep

The Case-Shiller home price index shows real house prices approximately flat (with considerable variability) over the past century, whereas the stock market is up. It would be interesting to compare rental property - including rental income - to stocks over the same period. In theory rentals should go up more, to pay for the aggravation of being a landlord.

Henry Gifford writes:

An important factor usually left out of such discussions is that houses can be bought on 80% or 90% "margin," with fixed interest rates, in effect, being a giant option on the US dollar, favorable to the real estate owner in times of inflation, when real interest rates can be negative.I think this is how most people who make money on real estate make money on real estate, although few talk about it this way. 



Kimber Road: A Serious Musical Comedy

Kimber Road is a spirited new satire on synagogue life and star [of-David]-crossed lovers in America and the Old Country by retired Cantor Harold Lerner.
Kimber Road opens in flashback mode in 1980, as key characters Rosa Leah and her papa, Cantor Moishele Bratzker, recall events of 40 years earlier, when Rosa becomes smitten with David, the son of a rival religious leader, Reb Sholom Finkelman. With the knowing persistence of the tough, magical matchmaker, Chaye Sur'l, the two opposite-family scions are with effort affianced. Not so fast: The arduous engagement is torpedoed almost instantaneously by a dispute between the two religious factions before a wedding can transpire. From there, the dispute flares to engulf the community, when the full-blown feud is confronted with an unexpected common enemy. Each congregant must sort out his reasons for where he or she stands.

Playwright and lyricist Cantor Lerner perfected his understanding of the rhythms and vaulting melodies of Jewish cantellation in 60 years of singing in and creating soaring music for synagogues in upstate New York. Themes addressed in the satirical musical offering–and the threats such modern-day concerns pose to the survival of the Jewish people, particularly in an environment defined by contemporary cultural assaults, generational cross-currents, and ubiquitous doubt–find their robust and pleasing outlet in the play. The large issues addressed through zesty humor and delicately restructured liturgical compositions by cantorial greats of the past, good-natured chiding, and acutely observed Yiddische zeitgeist provide an insider's peek at life in a just-yesterday bygone era. These provide meaty insights into some of the strains that cleave our generations today.

Although the theme of disharmony is necessarily at the centre of these conflicted relationships, Lerner and director Klavan deviate slightly from the iconic originals to create an opposition between the modern man or woman who "loves love" and the hard-fought images and values of a religiously and ideologically strict ancien regime. With the character of the parents giving way to the modernity of their offspring in the goldene medina, America, the invocations and definitions of the past fuse with the choral invocations of the opposing synagogue members' activity, and brushes over the aesthetic of the poignant musical satire as a whole, with its own repeated dramatic, plaintive and narrative motifs of loss and redemption. Klavan casts a dozen talented actors and musicians in roles that give each a chance to shine musically and, often, dramatically.
Serviceable plays about the workings of faith and its adherents are noticeably sparse. Those that manage to dramatize intergenerational disputes without losing the cohering thread are indeed smaller still.

As entertaining as is the plight of the youngsters who seek to be with those they choose, the true target audience is parents and adults who forget that under the temporary rivalries of place or community group, it is incumbent upon grown-ups to strive for understanding of the Other, even in one's particular religious stratosphere; to listen with open hearts to those we might dismiss or impugn for less-than-exalted reasons. Kimber Road is a flash we need to heed: Though surely society is partially to 'blame' for the occasional dysfunctions of our various groups, the miraculous effort of love and open-heartedness can heal the fissures that crop up and threaten to calcify our interactions.

Though the characters do not have extensive speeches on the stage, since the staged-reading production is a swift 90 minutes, they all come across as fully dimensional, without artifice or separation from people we all know. Lerner manages to sketch a character in a few lines of potent dialogue, and extend that reality with lilting music that combines the best of Old Country nigunim, cantorial liturgies, with a satisfying awareness of Broadway and contemporary music. And for his part, the director marshals the elements of Jewish weltschmerz, poignancy, wringing Polish pathos, Russian recognition and Talmudic tradition out of the script and tapestried music.

A wee caveat is that the name of this tuneful satire does not immediately convey to a prospective audience what delights are to come. I would have preferred a name with more gemutliche resonance to tease the theatre-goer with what joyfulness, humor and perceived story lies ahead. But with inspired and inspiring lyrics, melodies that stay with one and, thanks to a cast that is top-notch and professional, and an author with so many years of musical expertise under his belt, Kimber Road offers at once a resurrection and construction of beloved sounds and imminent sense that beguiles an audience, even in a reading. With a full-bore staged piece, this would be a complementary sidecar addendum to the likes of a Fiddler or even a folksy, re-purposed Oklahoma!



I'm floored that one of the most useful business books, Theory Z, isn't reviewed at amazon. The reasons may be the ugly title and unlikely author name Ouchi, but that's those are the only things wrong with the text that compares American to Japanese business practices. It turns out that Theory Z has evolved into a business term : "Theory Z is an approach to management based upon a combination of American and Japanese management philosophies and characterized by, among other things, long-term job security, consensual decision making, slow evaluation and promotion procedures, and individual responsibility within a group context…"



The suddenly Carmelo Knicks rise to the spotlight occasion tonight and actually beat LeBron, Wade, Bosh, et al., down there in Miami, dramatically raising future expectations.

Only to have those momentarily lofty expectations ultimately meet a foreverly futile fate. 

In charting terms, a basketball apotheosis of the big-time false breakout (i.e., $50 silver, 30-some years ago.)



The next meeting of the New York Junto will be on Thursday, March 3 at the Mechanics Institute at 7pm, ( 20 West 44 th St, NY, NY ) and Gary Johnson will be speaking on the path to prosperity and the solution to our problems. Gary is a man like Thomas Jefferson that not only vetoed 1000 bills when he was Governor, but is likely to say " I don't think that's rite " when refusing to help a favor seeker or " I think We can Fix that " when red tape gets in way and it is the rite thing. He's a man who is very handy, and he can put a motorcycle together or climb Mt Everest with a broken leg. Well worth hearing and all invited.



 1. Who Wrote On Gains in Productivity

One has been asked to guess the author of a stirring article on the gains in productivity, of goods not moved by physical means, using computers and software. Here is my response.

One must remember that that the putative author, the fake doc, in almost everything he does was a master of dissimilitude. His PhD thesis was a fake, as Larry Ritter confided to me on his death bed. (It was a series of Townsend Greenspan essays.) And his work at the Townsend firm, relying heavily on blast furnace usage, and pig iron deliveries, freight loadings, and newsprint lineage, (apparently only believed by the Sage), left him with no customers when he took the job at the Fed. Thus, one would aver with 99% prob that the document that Doc Zussman proffered was written by a ghost. Content analysis, a la Mosteller and Wallace, could probably prove that.

2. Flexionism of the Day

One has also been asked to opine on whether the economy would have stopped running, and the markets would have gone into oblivion, with no one being paid if the interventions and bailouts had not occurred. Here is my take.

A respected member of the list has averred that we'd all be out of business if a former brokerage, now a bank, he was nicknamed at by the chief flexion hadn't been bailed out or aided by the government. He states that if these two banks "had met the same fate as L, a public broker many of us use too, by the way. So you'd be broke." I have another hypothesis. To me, the entire market decline in October 2008, the 20% thing, was an effort by flexions to vigilante the market down so they could get more capital from the bailouts, loans, purchase of non-performing assets, 16 trillion buffer from the Fed et al, thereby facilitating a transfer of resources from the general common man to their pockets, cronies, and friends. Such a transfer and vigilante selling a la the bond vigilantes, would not necessarily be a conspiracy, and one would be sure that the former brokerages now banks key executives and their cronies in the gov, sincerely felt that transferring the resources to them was in everybody's interests. I would tend to feel the same way if I had an opportunity to get more capital to increase my future wealth and cushion and increase my bonuses and reduce chances of distress for my family. Hopefully, I would not mount the high horse about how like Sancho Panza in Don Quixote: "I was only thinking of you."

3. Recent Markets

The all seeing eye would have a field day if it were to write a baedecker of what happened in the market the previous week. Moves in every commodity have been of the order of 5%, sometimes in a day. What an opportunity for the strong to take the chips of the weak in markets like stocks, bonds, oil, grains, copper et al. The connecting links with oil moving inversely to stocks, and the dollar, and commodities, and directly with bonds proves that there is a web of markets. The problem is that the web is always changing. Completely the opposite of how it connected a few years ago. One notes that stocks have still not set a 20 day low in 7 months and that they visited on us, the first 3 consecutive declines in a row in 6 months, rite before a violent overnight move back to the old levels. Round numbers were broken galore, and the European flexions were ahead of us as usual. 



Speaking of fraud now being an honorable activity for the right (left?) cause how about this:

"US Gov. Software Creates 'Fake People' on Social Networks to Promote Propoganda"

The US government is offering private intelligence companies contracts to create software to manage "fake people" on social media sites and create the illusion of consensus on controversial issues.



 There's a difficult and annoying player we call Mr. Pick 'n Scratch in all sport and business whom I'm certified to describe, but first a true story.

I just escaped Amazon cannibals in the heart of the Peru jungle in '00, and was medivaced by military helicopter to Iquitos, Peru, where I slid out the copter to stagger into a waterfront bar because a keeper, whom I'd never met, was a rare gringo and I needed someone to talk to.

"I was held captive by the Mayoruna Indians, and this is my first contact with civilization in weeks.'

'Have a beer.'

'I don't drink'

'Have a burger; I served Richard Nixon.'

'Look, I'm not any gringo off the streets. I'm a professional racquetball player and author…'

'And I'm from New York City, and played the hard outdoor handball courts for decades.'

'So what?' I yawned.

'All right,' barked the barkeep, 'Let's have a game here, a verbal match, and if you are what you say, the burger's on the house.''

 "First serve…' he opened. 'Do you have a single teeny-weeny weakness in your game that I can pick and scratch incessantly?'

His boldness drew an honest repartee, "Sorry, there's not a single weakness."

"You're the winner!' he clapped my back. 'And welcome to Peter Gorman's Cold Beer Blues Bar.'

I've been a picker 'n scratcher since childhood in multiple sports and tasks, and claim it's blueprint to success for greenhorns to pros. Here's how to ferret a bidder's follies.

Study his gait into the court, hands during warm-up, and preferable a previous match to identify three major weaknesses… to key later. As you surmise, figure ways to exploit each. Hence, you pick weaknesses before the game, and make him scratch them during the match.

The universal glitches of Pick n' Scratchers hatch counter-strategies in this Pick 'n Scratch Chart:

Weak backhand… Counter with the drive serve, pass, and hone ceiling balls to it.

Slow reflexes… Play a power game of low serves, hard kills and low passes.

Poor ceiling game… Soft serve, and hit defensive ceiling service returns.

Inability to cover front court… Kill and pinch.

Poor conditioning… Test him in early game with extended rallies to determine if he can last an entire match.

Can't short-hop or volley… Soft serve him.

 Hot-headed, or has streaks… Slow it down with ceiling returns, time-outs, and control pace of game.

Fails to watch the ball behind him… Hit kills all day, or down-line passes.

Can't handle wall angles… Try Z-serves, around-world and Z-shots.

Uses soft serves with no hard service… Volley and half-volley the initial serves to ensure he never reemploys them.

Drive serves repetitively, with no second or soft serve…

Ceiling return his initial serves to test his ceiling game, which is usually suspect and yields set-ups.

'Chokes' in hairy moments… Bring the heat into close scores by drive serving and forcing play.

Dives and flicks ball up… Continue your kill attempts as the worst scenario is another set-up.

Wets the court… How did that get in there?

This chart isn't inclusive.

After identifying the imperfections, and exploitations, I like to enter the court and evaluate in the opening rallies if my pre-game analysis is accurate. The reasons: To quantify each flaw, to discover if the rival has a backup to cover his shortcomings (such as running around a weak backhand for a big forehand), and to gauge his early reaction to losing quick points in weak suits he must learn he holds.

One by one, I test the frailties, so by mid-game an overall strategic map unfolds. At this epiphany, relax, and decide either to pick and scratch him incessantly at one or more sore spots until it's all over, or to withhold and re-target the imperfections at crucial and game points.

Categorize the chart components for easy recount, in kind: Flaws in stroke, strategy, or general play. You may, as smart baseball pitchers, keep a journal of recurrent opponent defects with the player names in the left column, the 'picks' (flaws) in the right, and the 'scratches' in the middle.

Some of the top paddleball and racquetball pros had Achilles heels. Charley Brumfield dropped a few national titles with a fly-swatter backhand, and Marty Hogan's power game evaporated during a timeout after you sneaked a slow ball, or pricked the game ball with a needle from your sole. Champs Dave Peck, Mike Yellen, Steve Strandemo and Jason Mannino with superbly rounded games nonetheless went down lacking a specialty in a crux, like a crack ace or freak ball. The most seamless players I've met on the court are Mike Ray, Vic Niederhoffer and Cliff Swain, and, well, sometimes there's as fast a draw and you scratch your britches.

Practice like the pros your own weaknesses until there are none, and then practice your strengths to harden to tournament rigors. If you own a single stellar tool such as a booming serve or persistent ceiling game, then hammer it in early game to jump ahead, leave it, bring it back for big plays, and again for the final points to push the win.

Also, make a study of eclectic players from behind the glass or above the court, and ponder, how would I pick and scratch him to victory?

The first serve is struck! so begin gathering intelligence. Here, a master's experience shines, and you may earn it's no more difficult than to chew gum and swing, while watching.

There's no greater satisfaction in life than to meet and dismantle a superior athlete by funnelling shots to a-Keeley's heel. The next most stimulating thing is to watch a rival wither as he tests and finds no wise cracks in your game.



 Honest to God– the question of whether or not the Federal government had the right to impose "imposts, duties and tariffs" for any purpose other revenue collection was the central debate of American politics from the country's founding until the adoption of the 16th Amendment. The issue of protectionist vs. ad valorem import duties dwarfed even the question of slavery in the volume and scope of legislation and Congressional debate. I would argue that this "tariff question" even shaped the resolution of the argument over slavery itself. The "equal protection clause" owes its specific language to the very words that Secretary of the Treasury Walker and Joseph Story (probably our greatest legal mind) had used in their arguments used against protectionist tariffs. Those same men, along with Grant and many, many others, would have found the very idea of a "progressive" income tax an abomination because it violated what they considered to be the essential Constitutional principle– equal protection under law.

Congress should allow "no duty (to) be imposed on any article above the lowest rate which will yield the largest amount of revenue…..A partial and a total prohibition are alike in violation of the true object of the taxing power. They only differ in degree, and not in principle. If the revenue limit may be exceeded one per cent., it may be exceeded one hundred. If it may be exceeded upon any one article, it may be exceeded on all; and there is no escape from this conclusion, but in contending that Congress may lay duties on all articles so high as to collect no revenue, and operate as a total prohibition." - Treasury Secretary Robert Walker (1845)

(yet another cotton speculator):

"It is true, that the eighth section of the first article of the constitution authorizes congress to lay and collect an impost duty; but it is granted, as a tax power, for the sole purpose of revenue; a power, in its nature, essentially different from that of imposing protective, or prohibitory duties. The two are incompatible; for the prohibitory system must end in destroying the revenue from imports."

- Joseph Story [1833]

Commentaries on the Constitution of the United States



Shouldn't we be expecting a gust of dire prognostications mixed with some data very shortly providing justification for QE2.5/3? You know, "collapse is around the corner if we don't do this"…

The GS note on fiscal cuts was not enough, but a good first try!

Gary Rogan adds:

Flexionic symbiosis:

From the LA Times:

Goldman Sachs analysis says Republicans' $61 billion in cuts would trim
U.S. economic growth by half this year. Rep. John Boehner and others
reject the report.



 Their initial business model passed Blockbuster by and they did not meet the change. They couldn't. They are in bankruptcy. They are closing down stores.

I haven't been there for years after a "late charge".

Netflix passed them by with mailers, and now with streaming. Who would drive to a seamy dirty store to rent old movies? It's a good example of obsolescence.

In any case, back to the fray to personally hold up the entire market.



 I used to lecture on world travel: for one year's travel you need a passport, lonely planet guidebook, around-the-world ticket, and $10k. The money divvies as follows: $3k for the ticket valid for one year, and $20/day living expenses inclusive in 3rd world countries. My ratio of work (sub teaching): travel days is 1:4, making $100/day, $20 goes for expenses, and $80 is banked or buried. Ergo, I work 3 mo./yr., & travel the rest. In the past decade, the travel method has been to bounce continents seeing the sights, and get so frazzled that I must hole up in a Shangrila, like now in Lake Toba, Sumatra, for a few weeks. Before, it was San Felipe, prior Iquitos, & so on.



 From the description on the NY Public Library's site:

Darwin's Disciple, George John Romanes

Thursday, March 3, 2011, 1:15 p.m.

Stephen A. Schwarzman Building, South Court Auditorium (Map and directions)

Fully accessible to wheelchairs

George John Romanes (1848-1894), best known today to the intellectual community for founding the Oxford University lecture series still bearing his name (1891), was a major figure in the history of biology for his advocacy of Darwinian evolution as well as his contributions in animal physiology-discovery of a nervous system in invertebrates-and in animal behavior-recognition of the ability of animals besides humans to reason. But perhaps Romanes's greatest legacy is the support he gave Darwin when it was most needed.

After publication of Darwin's Origin of Species in 1859, Darwin and his work was under attack almost from the outset, not only by the religious establishment but also by scientists offended either by the theory itself or by its primary mechanism, natural selection. Darwin and his theory needed support from other naturalists, and Romanes became a strong advocate for Darwinian evolution in the decade preceding Darwin's death in 1882, and the years before his own death in 1894, thereby filling the vacuum left by evolutionists who disagreed with Darwin on the mechanism by which species evolve.

A former Writer in Residence in the Library's Wertheim Study, Joel S. Schwartz is Professor Emeritus of Biology at the City University of New York, where he served on the faculty for forty years. His scholarly interests have focused on nineteenth century natural history, on the development of natural history, and on how maritime exploration stimulated discovery in the natural sciences. He has published numerous papers and delivered many talks on Charles Darwin, Alfred Russel Wallace, Thomas Henry Huxley, and other eminent Victorian naturalists. His book, Darwin's Disciple: George John Romanes, A Life in Letters, was published July 2010 by Lightning Rod Press at the American Philosophical Society. Currently, he is Contributing Editor of the Darwin Manuscripts Project, based at the American Museum of Natural History.



I could have sworn I heard the market take a breath on the low of the mini SP a moment ago.

Maybe not one for day traders or position holders, but maybe for scalpers, the pause can mean indecision. No doubt this can be measured and worth more on a meaningful move.



 IMHO, the oil price spike is about inelastic delivery. So they release from the SPR [Strategic Petroleum Reserve] … what happens if hoarding develops as I expect?

My work indicates that consumers are oblivious to the current implications. The cognitive dissonance is off the charts. They may talk, but they've done little about it. As an example, look at Prius sales. Not hard to find them on lots here in CA.

That SPR flow gets absorbed quickly. On the other hand, I'm looking at this as a possible new car cycle.



 Kindly advise Uncle Howie that he is more than welcome back from his Lakers odyssey now that the Knicks have suddenly become relevant again. The modern NBA is a two-star game in a five-player sport. The Knicks now have their two stars, all of which now puts Mike D'Antoni on the hot seat as his Croesus roster just ran him out of excuses.

Howard "Uncle Howie" Eisenberg responds: 

People forget about how great Billups is. He was the heart of the Pistons teams that got to the NBA and Eastern finals annually and then lifted the Nuggets from mediocrity (even with Carmello) to the West finals. He is a 90% foul shooter, superior 3-point shooter and great in the clutch. The Knicks are a 3 star team! They should be competitive with anyone– except the Brooklyn Nets who will augment Laker castoffs Farmar and Sasha with all of their #1 draft picks and the rubles of their Russian owner.



 With the recent price action across the board on ag futures, why would one be surprised to have a day or even a week like that? I’ve been expecting something like this for a couple of weeks and am hedged so it doesn’t matter anyways.

Much to the chagrin of most, markets can’t go up every day. Fact of the matter is that the price moves in the ags can be just as violent as any moves in the metals, but people get complacent, thinking that corn is only going to have a 3 cent range.

People from other markets getting into grains, thinking they are “easier” and making mistakes like going long corn into the crop report etc. Ceres is much like the mistress except his treatment is more like a prison rape.



 There's something about the recent Knicks trade that I believe has important market implications. As is well known to anyone who watches basketball, one of the most ineffective players in th game is Gallo. He plays the game the way our grandfathers did, completely immobile, taking half of his shots from downtown, never getting a rebound, and demoralizing all of his teammmates with fast shots that are rebounded by the other side for quick baskets, taking all the force out of any attempts to play good position basketball from this teammates. While he's in the game, the Knicks can always be counted on to lose, driven into oblivion by the force of fudamental basketball from the other side. Reminds me of a doubles game in tennis where there is a weak stroke on the other side, and you know you can win by just concentrating on the weak persons' stroke in a pinch. (might I remind you here that the signer was never below 1 in 4 years of college tennis doubles at a reasonable school, thereby countering in part the well known and admitted fact that his knowledge of basketball is well below average of his colleagues here).

Okay, naturally during the trade talks, there was much hemming and hawing by the Knicks. "You can have anyone in trade for Melo, but whatever you do, you can't have Gallo. He has so many intangibles, like his smile's and struts to the crowd after he hits one of his three's and he's only 22 and getting better every game et al). Just like Brer Rabbit when he was captured by Mr. Fox and Mr. Bear, and he said "whatever you do, don't throw me in the briar patch).

Naturally, the one thing that the management and the teammates wanted the most was to be thrown in the briar patch, and have Gallo taken in the trade. Once the Knicks achieved that acceptance by the other team, they were free to make the trade because instead of giving away something of value, they were giving away something of terrible negative worth).

 The market is the same way. Often one reaches a situation, where there is one terrible thing happening, one backdrop that everyone is afraid of, that is keeping it down. For example, it can't go up while interest rates keep going up. Or it can't go up while there is tension in the Mideast, or while oil is up, or in the case of a panic drop while a big counterpart has not yet gone under, like long term, or the Leeson when everyone knew he was long the Nikkei, or the british petroleum underwriting after Oct 19th, 1987 crash. The examples are endless.

The situation may best be seen in Popperian terms. Given that the prevailing view is that the market can't go up while situation "A" is happening, the hypothesis is incapable of changing. There is no revision of belief possible. Everyone says like Brer Rabbit and Gallo, the market can't go up while interest raters are high et al. If interest rates fall for a day or two, i.e the market goes up while NOT "A" is happening the belief still is out there. Nothing has changed the basics. The next day it's back to the old game of highly negative the first opportunity the fear can be flamed.

The only thing that can make the market turn on its tail, get the weather gauge back, is if the market goes up when interest rates go up and are high et al. So the one thing the market needs is exactly what it fears, a dose of high interest rates et al, a failure of the british petroleum underwriting concession, the failure of long term, the capitulation of barings et al, before it can go up big.

Like the gallo trade, the one thing that the market needs when it is in fear is a day that it can go against the fear, have the fear realized with no undue consequences and then a reversal of fortune can happen. This is why panics, and escalations in world tension are invariably so likely to create a big change in what had been the big direction of move in the moving averages the previous period.

We should thank Gallo for allowing the Knicks to win again, and showing us why this recent escalation in oil prices is so bullish, and when the next time the market goes up on increasing oil, the market will be as free to win as the Knicks are now, even though they gave away the Gallo into the briar patch et al.

Of couse, this theory must be tested. And it's a variant of the only thing that the Palindrome got right in his 100 books (but that's another story).



 22 February 2011

Editor, Slate

Dear Editor:

I enjoyed Timothy Noah's review of my colleague Tyler Cowen's book "The Great Stagnation" ("Don't Worry, Be unhappy," Feb. 21). But Mr. Noah oversimplifies Cowen's thesis by suggesting that Cowen measures an innovation's merit by how much employment it creates.

It's true that Cowen notes that (as Mr. Noah reports with dismay) "the iPod has created fewer than 14,000 jobs in the U.S." But immediately after noting this fact, Cowen rightly observes that "we should APPLAUD the iPod for creating so much value with so little human labor" [original emphasis].

Mr. Noah is wrong to suppose that the value of innovations is found in the number of workers they employ. Consider agriculture: the many innovations in that arena over the years - such as mechanized harvesters, chemical fertilizers, and bio-engineering to increase crop yield - have dramatically REDUCED the number of people employed in agriculture. Would we be remotely as wealthy as we are today if it still took nine of us to feed every ten of us?

Economic growth is overwhelmingly the proximate result of innovations that allow fewer workers to produce more output - thereby releasing that most precious of all resources, human labor, for use in producing goods and services that earlier were too costly to produce.

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030



 Yesterday's across the board collapse of ag futures is a very serious move. Lock limit in most grains etc.

It looks like wheat and soybeans started to roll over a few days ahead of cotton. The nearby is down almost twice the daily limit, and the rest are all locked. It certainly is unusual and may be a solid confirmation.

Steve Ellison writes: 

Has the "realizing market" begun? Roy Longstreet in Viewpoints of a Commodity Trader said that some of the best profit opportunities are in realizing markets, when price is driven by the market's realization of some fact. For example, stock investors realized in 2000 that most of the Internet companies that had been valued on clicks or eyeballs would run out of cash long before they could become profitable.

Russ Sears writes:

The agri oil boom bust is a spiraling cycle. Oil goes up lowers economy growth, commods like grains go down but then grains substitute, grains go up oil countries populace go hunger/revolt oil goes up, less economy growth but …the cycle is becoming clearer.

Gary Rogan replies: 

Russ, I appreciate the explanation, this is very helpful. On the other hand, the original contention was that this is now a "realizing market". Has the market suddenly figured out this spiral, in the sense that oil going up will definitely (in the economic, not speculative sense) cause agri price to go down because the middle east is on fire? A case can be made that fertilizer prices or agri fuel costs are more important than some destitute people becoming even more destitute b/c of high oil prices and what, not eating any more? Or that raging inflation can manifest itself unpredictably in various commodities, or that transportation costs will raise import agri prices. I'm not sure this is equivalent to everybody figuring out in March 2000 that the Internet emperor was a bit on the under dressed side. 




Directed by Dennis Dugan

Cast: Jennifer Aniston, Adam Sandler, Nicole Kidman, Brooklyn Decker

Not sure how many laugh-factory films can evoke a premise of Scottish novelist and poet Sir Walter Scott (1771-1831), "Oh what a tangled web we weave, when first we practice to deceive," but this 2 hours evokes the line again and again (in the head of this quondam English lit teacher, anyway).

On a weekend trip to Hawaii, plastic surgeon Adam Sandler (Daniel) convinces his loyal assistant, Jennifer Aniston (Katherine), to pose as his soon-to-be-divorced wife to cover up the useful.horizontalizing.device of a wedding band with no marriage behind it, a perpetual fiction Dan uses for quick trysts without cloying stay power. Here, now, he is hoist on his own wedding-band petard with his much-younger Gen Y girlfriend, Palmer, newcomer looker Brooklyn Decker (apparently, Mrs. Andy Roddick, real life).

In an effort to land the stunning blond he has fallen for after a dissolute near-career of bedding countless women on a false premise of cheating on some unnamed wife, Daniel embarks on a cascading escalator of just-barely plausible lies, embroideries and more fabrications that necessitate his assistant's also going along to substantiate the fictions. Nicole Kidman, as obnoxious high school "frenemy" Devlin, necessitates another small vortex of further lies, so Jennifer/Katherine can prove she has, after all these years, amounted to something other than her nerdy loser former self.

Aniston's two kids are handily roped into the Potemkin 'marriage' mirage for ballast-demanding Palmer, played outstandingly by Bailee Madison (fabulous) and Griffin Gluck (with an overactive bowel obsession), both hilarious. Sandler's pock-marked jerk of a brother, Dolf, an amazingly funny Nick Swardson as a near-sighted German sheep-vendor, 'not-that-Dolf Lundgren,' and a variety of cameo loons make this among the funniest films of the year: SNL alums Rachel Dratch and Kevin Nealon appear for hilarious character-bits that are ROTF spot-on. Kidman as annoying 'chum' Devlin and her supercilious, too-perfect husband add competitive back-story to the front and center tale.
Initially reluctant to see this film, we gave in, seeing the crowds hustling in to the best seats. Even my consort-a serious man not given to tolerating the ridiculous or dopily workmanlike-laughed. Non-stop.

Caution: There is always the danger of a too-enthusiastic review making the reader or prospective viewer cynical: I ain't gonna laugh; she can't make me go to this. Avoid that unlovely cynicism.

You emerge from this sun-drenched craziness as if from a costly spa. Your insides and major internal organs have been energetically worked over by the chortle mechanism triggered repeatedly, as this goofy winning script unfurls with its piled-on tangled untruths and their unexpected web of consequences. Endorphinically refreshed, you are ready for sushi or adult beverage of choice.



 What is the one thing everyone needs but cannot afford, hence the single string to control a person, family's & society's lives? Health insurance. If overpriced, it cuts out the middle class– the rich afford, the middle class teeters in ill health, and the poor get it free with enough time to wait in hospital lines and pick up bugs. The ramifications of unaffordable insurance are sundry: one frets about getting ill, and so becomes. Aspiring youth are forced out of entrepreneurship into gov't, military & corporate jobs w/ benefits. I saw it daily while teaching– inability to go to the hospital for a spider bite, etc, and the students geared study away from books to cultivating relationships to get jobs w/ benefits. My SED class (severely emotionally disturbed) had many cases of the brightest kids & parents who invested their children in the class to get instant, free health insurance, and to build a future family breadwinner in the welfare system. Further, is it stupid to earn less salary to fall into a low income bracket for free health care, like many do? Long ago, I quit contributing to escalating monthly insurance premiums, and used cheap, comprehensive traveler's insurance while globetrotting, and now travel w/out it exclusively in third world countries where medical/dental/hospital fees are about 1/50th USA. e.g. I get a physical & medical workup on arriving and leaving S. America for $50; a tooth crown reground and re-pegged on the spot in Mexico for $5; and the local Sumatra healer/doctor here just treated a stomach ache with a broad leaf massage for $3. I like to say, don't point out a fault w/out a solution, but i don't have it for American health insurance.

Ralph Vince writes: 

I use Medix when abroad, having researches the various travelers insurance plans some years ago, it seemed the best to me. What I find interesting, is that it is less than half what I pay for insurance in my own country of the US.



One flexion activity is creating an artificially steep yield curve. This translates to the high bank margins which are created not by the value they add as in other businesses but by the friends they keep at the fed and treasury. I heard Hugh McColl speak several years ago, (a non flexion man of respect) founder of NCNB now Nations Bank, sum up banking activity as "renters" of money. The rents are artificially high. And those rubes that have to save for a rainy day like myself write checks every month for privilege of doing.



 I thought this blog post called "3 Things To Do as you Watch Manufacturing Die in America" was very good.

Stefan Jovanovich replies:

I think this solution will be far, far worse than the supposed problem. What Mr. Elkus and others are advocating is the same kind of imperial preference/discriminatory tariff legislation that pushed Britain and eventually the U.S. into 2 world wars after half a century of material progress that our current age only comes close to matching. Affirmative action for industries will be as thoroughly corrupting for the country's economy as it has been for schooling, and it will produce the same result– public wealth destroyed for only the temporary private advantage of those best able to define themselves as victims of "unfairness". It really is time that the United States accept economics' greatest single practical discovery– the paradox of competitive advantage– and abandon the idiocies of mercantilism once and for all. Keynes was not wrong for wanting to see societies solve the problem of chronic underemployment through make-work; it remains the only solution– as Goodwill Industries proves every day. Almost everyone can do some work, but not all work can be profitably done. Keynes was right to urge us to provide charitable employment so that people could earn incomes, but he was as wrong as Gary is now in suggesting that governmental power could create profitable employment for all.

It is the same fallacy of all monopolies– the one that labor unions offer even now: let us have the monopoly authority of the law to set our own prices. Whether you jigger the terms of trade directly through an industrial policy or a collective bargaining monopoly or indirectly through conjuring tricks with the currency, the result is the same: a con that does nothing for the poor but provides a great deal of wealth for the people put in charge of shuffling the cards. Charitable employment has to be paid for out of profits, personal incomes and personal and business savings.

Keynes's solution, the labor movement and Gary's proposal are all attempts to do the job on the cheap– either by finding the money for it in a monopoly printing press that allows currency to be nothing but credit or by legislating higher wages/profits for favored aka "essential" works and industries. The deficit spending in these methods ends up being paid for by the "ordinary" (sic) citizen, by inflation and by increasing the cost of living beyond what it would be if the foolish citizens were allowed to buy goods priced by competition alone.

Now, regarding the fact: Mr. Elkus' story about the VCR is pure hip-hop-hooey. The American producers of tape recorders– AMPEX, for example– didn't lose out to the Japanese in the production of VCRs because of MITI; Matsushita and SONY had already won that race on their own. In broadcast production equipment RCA lost because Mr. Sarnoff decided that his company should invest its capital in trying to compete with IBM in the computer business instead of reinvesting its profits into its core broadcasting business.

Gary Rogan writes:

Stefan, I would not subsidize any specific industries at all. I would impose the kind of tariff you like. In addition, for "'habitual violators" of common norms of ethical behavior, like those who don't respect intellectual property or require technology transfers as a condition for join ventures, etc. I would impose additional tariffs that would be reduced to zero as soon as a specific set of demands was met. Deal with countries, not industries. It's unfortunate that the government, with all of its inherent corruptibility, would have to be involved, but I don't see any alternative as I don't believe it's reasonable for individual companies to fight foreign governments. My main point in posting this article was not to provide a solution though, but to document one more time that whatever has been going on has not lead to a good outcome. It's a judgment call, I believe that a serious country has to have a competitive bag of technological tricks to remain stable in the long term. I don't have any specific preferences for the areas other than weapon technologies where those tricks need to be located (like the famous "green" technologies of the future or chip-making machines mentioned in the article), but once again one can make a judgment call that the deterioration has gone too far to right itself without extreme measures.

Would having sane fiscal and monetary policies and getting rid of excessive regulation do the trick? Perhaps, but the change would have to be pretty quick and pretty extreme, and how likely is that? At some point you have to ask yourself: was South Korea completely stupid for shielding itself from foreign competition as it developed from a wasteland similar to the worst South American examples into a global technological powerhouse? Is EVERY non-competitive (call it mercantilistic if you'd like) behavior that China is undertaking bad for IT economically? And would a country like say Egypt or Ghana develop any appreciable standard of living any time soon if it somehow managed to establish a completely "fair" bilateral or multi-lateral trade regime with a number of advanced industrialized countries?

Stefan Jovanovich responds:

Thanks for agreeing about the ad valorem tariff, Gary, but if you also allow punitive tariffs for "habitual violators" the excise will quickly become as corrupt as the criminal code and the income tax law. Yours is precisely the argument in favor of economic virtue and against economic sin that Roosevelt (Teddy), Wilson and Chamberlain (Joseph) made in the support of imperial> preference and discriminatory tariffs; and there is little question that their greatest "success" was convert Germany's "threat" of making better> aniline dyes and offering better, cheaper passage across the North Atlantic into the first of the 20th century's several holocausts. If we are going to learn any "lessons" from history, surely we ought to learn that one: countries should never, ever make ultimatums to one another. I can't accept your historical assertions about South Korea and South America. The ROK's comparative success came from its competitive advantage in skilled wage rates, the same competitive advantage that Germany and Japan had after they too had been reduced to rubble by catastrophic war. The relative failures> of Argentina and other South American countries in the 20th century were attributable to their adopting the very type of "protective" legislation> that you are recommending; the result was, as we both know, pure disaster. Yes I do think Egypt and Ghana would quickly develop an appreciably greater standard of living if those countries adopted an ad valorem tariff, free capital flows and a banking/monetary system based on specie reserves and currency convertibility. That is precisely the path that Singapore took when it adopted 19th century trade laws and made its currency freely convertible into the U.S. $ which was then as good as gold. Enterprise> produces wealth; rules against "sin" and for abstractly defined "virtue" whether in trade or in life only reward lawyers and the other official> definers of what is good for the public.

"Prisons are built with stones of law, brothels with stones of religion" (William Blake).

Gary Rogan continues: 

Stefan, perhaps you should read "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism" by Ha-Joon Chang who, as it happens, hails from ROK. He is a friend of Ian Fletcher who wrote the article I posted. You may change your opinion> about what caused their current highly advanced position in the world economy and how poor they were when they started. I think he under-emphasizes the role of culture, but it's instructive to go through his view of how ROK and many other countries developed their economies. 

Steve Krisrock writes:

With 40% first dollar taxes in the USA, I don't buy any argument that small companies can compete against companies overseas who don't have the social security, unemployment, workers comp, insurance, and hoards of state and local taxes plus the democrats grab bag of taxes BEFORE they make something…go east to Asia that where wall street has found a new home to rebuild…and leave the scumbags from Chicago romi manual with those that want to destroy American power like Soros.

Tell me about property rights when the EPA seizes drilling areas, shuts down plants at both the state and locality… How about the Homeland Security not enforcing the rights of American landowners on the borders, or the fish and wildlife putting fishermen out of work for things like global warming? I'd rather be in China and borrow their money and take the risks of seizure than with the American wackos who create these ideas at places like Rutgers…how about the debasement of American citizenship by allowing hispanics in at a 100% rate bringing with them all the corruption and vote buying that comes from their cultures and stealing our healthcare…we have far too many laws and far too little protections. A man shooting an eagle can spend more time in jail than a rapist in San Antonio…such property protection…

Don Boudreaux writes:

As burdensome, annoying, etc., as U.S. taxes and regulations are, the benefits of operating in this market remain huge– so large that they outswamp the benefits, for many firms, of moving to places with lower taxes and fewer regulations.

Property rights in the U.S. RELATIVE to most other places are secure; corruption here is relatively mild; our internal market is enormous and untariffed.

And the facts speak: inward foreign direct investment in the U.S. continues to lead the world.

By the way, here is a good review by Ed Glaeser of Ha-Joon Chang's book, Bad Samaritans.

Ralph Vince writes:


I beg to differ that we get products cheap. On the contrary, I find profits always flow upwards, profit margins are not shared with the consumer unless forced to by competition. The ONLY benefit I see of imports is that it forces competition *.

But if profits created by cheaper labor flowed down to the consumer, that head of lettuce would cost me a dime, those big Nike shoes of Justin Beaver's would cost 5 bucks instead of 150.

-Ralph Vince

* consider the dumping that occurs in the US historically has only lowered prices temporarily– the long run effect, a hypothetical. Consider tires from China which now are prohibitively tariffed. The benefit of tire dumping in the US was, ultimately, short-lived to the consumer. Rather than domestic manufacturers becoming competitive at home with the dumpers here, they merely got lawmakers to collude against the consumer and removed competition by tariff.

Gary Rogan writes:


Certainly the Nike business model is to make for pennies and sell based on the image. That is NOT the WalMart model though. I'm not prepared to argue based on solid data but it is my impression that at least until very recently WalMart has passed a lot of the savings to the consumers regardless of where they sourced, but of course sourcing from China wound up being their favorite model. I would also suspect this to be true in other low-end clothing and home decor retailers. Like everywhere else, branded products are quasi-monopolies and will sell differently than commodity (in the sense of easily substituted) products. If everybody can import socks from China it's unlikely that the competition will not force some retailers to sell them at cost plus a small margin. If there are ten or more domestic sock manufacturers and no imports the situation will be the same except the higher costs will be reflected in the higher price. Obviously imports lower the cost, but I don't see the dynamic being all that different than if we only had a totally free domestic market surrounded by a mote.

Any argument that sooner or later there will be only a small number of domestic monopolistic suppliers would apply to the international market as well.As I mentioned, I'm not for product-targeted tariffs, at least not at the present stage. Perhaps something called "raw materials" could be exempted but that's about it. I'm also under no illusion that domestic manufacturers will not typically raise prices as high as the market will bear if imports are restricted in any way. I do think that Stefan's favorite tariff is a better source of fully funding the government than income taxes, but I also believe that if we chose to enforce intellectual property rights domestically, we should enforce them internationally, and through higher tariffs.

The same should apply to other thuggish behavior as in "if you want to sell here you get a local 51% partner and you transfer all technology to him, and MAYBE we will let you sell for some undetermined number of years". And if a country chooses to impose a tariff higher than our tariff on ANY product category we should impose at least an equal tariff on ALL products from that country. No discussions, no negotiations, just automatic action. If we determine that there are some monkey business-type restrictions on selling ANY product category in a particular country, we immediately impose a tariff ON THE ENTIRE COUNTRY to compensate for the inconvenience. I do realize that there is a lot of opportunity in the latter category for corruption, but those are the breaks.

Believe me, I understand the beauty of totally free markets. I just don't understand the logic of pretending that having a population of a billion people trading with us via some crazy rules controlled by a handful of people and us just taking what they are shipping here totally on their terms constitutes a free market.

Stefan Jovanovich adds:

Open Trade and Food Prices

Percentage Share of Household Spending on Food, 2008

United States                                         6.9
Ireland                                                  7.2
Singapore                                            8.0
United Arab Emirates                            8.7
United Kingdom                                    8.8
Canada                                                 9.1
Switzerland                                         10.2
Australia                                              10.5
Austria                                                  11.1
Germany                                             11.4
Sweden                                               11.5
Denmark                                             11.5
Netherlands                                         11.5
Finland                                                 11.9
New Zealand                                        12.1
Hong Kong, China                                 12.2
Qatar                                                     12.7
Norway                                                12.9
Belgium                                                13.0
Spain                                                     13.2
France                                                  13.5
Greece                                                 14.0
Malaysia                                              14.0
Japan                                                    14.2
Italy                                                       14.2
Kuwait                                                  14.5
Bahrain                                                 14.5
Estonia                                                 14.6
Slovenia                                               15.0
South Korea                                         15.1
Portugal                                               15.6
Czech Republic                                     15.6
Hungary                                               16.3
Slovakia                                                16.6
Israel                                                     17.7
Bulgaria                                                18.2
Uruguay                                               18.5
Ecuador                                                19.0
Latvia                                                    19.0
South Africa                                          19.8
Argentina                                              20.3
Poland                                                  20.3
Lithuania                                              21.8
Chile                                                      23.3
Saudi Arabia                                         23.7
Mexico                                                 24.0
Taiwan                                                  24.0
Turkey                                                  24.4
Brazil                                                     24.7
Thailand                                               24.8
Costa Rica                                            25.7
Croatia                                                  25.8
Iran                                                        25.9
Turkmenistan                                        27.1
Colombia                                              27.6
Russia                                                   28.0
Bolivia                                                   28.2
Peru                                                      29.0
Venezuela                                             29.1
Dominican Republic                              29.2
Bosnia-Herzegovina                              31.1
Macedonia                                           31.5
China                                                     32.9
Romania                                              34.3
Kazakhstan                                         34.9
Uzbekistan                                         35.1
India                                                      35.4
Guatemala                                          35.5
Tunisia                                                  35.7
Philippines                                          36.7
Vietnam                                               38.1
Egypt                                                     38.1
Cameroon                                             38.4
Nigeria                                                  39.9
Morocco                                                40.4
Jordan                                                  40.7
Georgia                                                40.7
Ukraine                                                42.1
Indonesia                                             43.0
Belarus                                                 43.2
Algeria                                                  43.8
Kenya                                                   44.9
Pakistan                                               45.5
Azerbaijan                                            46.9

Source: USDA

I think we are now in the realm of horses and water and drinking. The not-so-subtle point here was that Singapore and the Emirates - those agricultural powerhouses - had among the lowest food costs in the world because they had open trade laws. I am going to end my contributions to this discussion on a (warning: aural pun coming) sour note. The rush for imperial preference that led to World War I began with the German Empire agreeing that foreign grain and milled flour would be subject to prohibitive tariffs. This was done so that the value of the Prussian nobility's estates would be preserved and braten would only be served with rye bread (the only grain that could be grown in the lands on the shore of the Baltic). There is no proof for this speculation, but I have always thought that a great deal of the appeal of Hitler's plan of Lebensraum to the German public was its implicit promise of good, plentiful, inexpensive pastry flour. That seems far more probable than the idea that a promise of free land would by itself appeal to a population that had long ago left the farms for the towns and cities and had no desire to return to them, even if agriculture was an "essential" industry. Having now made a really bad joke and played the Hitler card, I surrender.



 The more one studies the markets, the more one is convinced that the hallmarks of a con are very useful in unraveling the possibility of making a profit. In this regard, I found the article "Con Ed" which features the insights of Todd Robbins, where he talks about spotters, the 3 h's of cons: hide, hype, and hate, and the direct relation between misery and the extent of cons to be helpful. I find that prices often have the hallmarks of con when they break through a barrier, showing you that it has overcome a difficult hurdle, and thereby gaining trust and confidence. Also, the spotter, the person that makes you confident by showing you his trust in the deal. So many CEO's, analysts, and newspeople play that role.

The article features the common adage that you can't cheat an honest man, or the related it's always the greed of the mark to get into something with an unfair advantage as a important precondition. How much evilness lied in most of the victims of the Catskill, Palm beach, Riviera, Long Island con who all must have thought that they could front run the market making operation downstairs. The importance of giving the mark excessive praise, which in most cases would be a short term profit, and is related to the principle of ever changing cycles would be another one.

The whole subject of flexionicism as a variant of the big con needs to be studied and quantified.

Sam Marx writes: 

The missing data for such a study are the successful con games that are never discovered.

There are probably a load of Ponzi schemes still operating.

In fact a Ponzi scheme, with luck and some skill, could turn out to be a big winner for both the manager and "investors", especially in a bear market.

In a successful classic con game, at the backend, there is what is known as the "blowoff" where the victim has lost a bundle, doesn't realize he's been conned, and actually is convinced he has to keep quiet about it or he'll wind up in jail.

Henry Gifford writes:

My favorite book on cons is The Gentle Grafter, a collection of O'Henry's short stories on the topic.

Many entertaining scenes of con artists arguing over whose specialty is more moral and noble, and the entertaining justifications they come up with, meanwhile constantly conning each other.

George Parkanyi finally asks: 

What is a flexion anyway? I see the term used here liberally, and it seems to have nothing to do with the dictionary definition (which has to do with bending limbs). And is "flexionic" even a word?

Gary Rogan elucidates:

This is Victor's explanation:

From the book The Shadow Elite by Wedel, Ganini. Former fed officials. Former high treasury officials with private access to the sqaush courts and executive dining room. Presidents of colleges, former and current, who worked at high positions in the treasury and fed staffers privy to the daily conference calls at which all upcoming releases are discussed high executives on Wall Street, who are consulted about the economy for their feedback by the treasury and the fed. Big owners of newpapers from Nebraska who dine on coke and dairy cream. Counterparts and their operaitve from other central banks that our treasury and fed discuss the upcoming policies and release with on a need to know basis so they will not be surprised and will know how to act and put things in perspective for their flexionic pursuits a home. Operatives within the agencies that prepare the numbers and especially those who make final adjustments on them.

Rocky Humbert writes:

I agree that unquestionably, and right under everyone's noses here, absent the savoir vivre of Madoff, that there are many Ponzi schemes still operating. One good whoosh will shake them out here (I am aware of one which I am certain of, massive in size, and I can only laugh that this one is still out there prowling in the deep).

Unlike Madoff, these other funds are not primarily comprised of Jewish investors (in truth, Madoff did have some Arab soverign wealth fund money too, but the majority of it was from the Jewish community) so when these monsters explode I would look for an entirely different reaction this time.

We were speaking of cons on a previous thread in a related list. I predict after this next manager explodes, the investing world (not necc "the public," we're not talking about hoi polloi here) will wake up and realize that if the manager has access to the money– it might be a con. Managers do NOT need access to the funds.

Sam Marx adds: 

I believe that it was in Barton Biggs' book Hedgehogging that Biggs described a club of money managers, large investors, etc. that he belonged to that would share financial information unknown to the public. But if anyone related information that was to the divulger's advantage and detriment to the divulgee (new word?) the divulger was blackballed.

Would this be considered part of the "Shadow Elite"?



 I don't know if any specs in London are coming to my performance this Friday, but anyone coming may wish to print out the lyrics to the piece, since there may not be room on the concert leaflet.

Other info: 7pm start. From Bank station walk down Cornhill past Finch Lane, and St Michael Church is on the right opposite the Cooperative Bank.

After the concert, I will likely be in a local pub for a little while.

There will also be a piano recital (including my Andante in Eb) the following Friday evening, in Lauderdale House, Highgate.



 Here is an explanation of the possible causes of the very destructive New Zealand earthquake (from a post-doc at U of Chicago) and its relationship to previous seismic activity.

Some of the typical effects of soil liquefaction are:

1) loss of bearing strength;

2) lateral spreading;

3) "sand boils";

4) flow failures;

5) ground oscillation;

6) flotation; and

7) settlement.



Here's a good article in Farm Journal that has many elements that, when applied with common sense, will allow one to discern the rudiments of grain trading from a fundamental standpoint. Whether or not it makes one profitable is up to the individual.



And thus, most of this month of consistent gains wiped out in an hour in Europe with Mr. Round of 3000 standing solid as a stone wall attracting with irresistible force.



While the equity market making machines sleep, markets become more logically reactive to news catalysts?



Extreme monthly declines in SP500 are preceded by rising or falling markets?

(don't look until you guess)


The mean of the 20 worst monthly declines in SP500 (1950-present) is -10.7%; the mean of the prior 6 month period was -4.6%:

One-Sample T: mo ret, pr 6mo

Test of mu = 0 vs not = 0

Variable   N       Mean     StDev   SE Mean          95% CI               T
mo ret     20  -0.10739  0.03419  0.00764  (-0.12339, -0.09139)  -14.05
pr 6mo    20  -0.04606  0.14976  0.03348  (-0.11617,  0.02403)   -1.38

Extra credit:

After a many month stock rally to 3 year highs, when the middle east
catches fire:

a. buy the dip
b. sell the dip
c. skip the dip and take a trip (thanks to professor Leary)

Russ Sears writes: 

The S&P has not quite hit its 3 year high and may not soon.

But looking at the previous points where S&P hit a 3 year high on the close and had not hit a previous 3 year high for at least 6 month prior from 6/53 to present there were only 17 such instances. It appears pretty bullish on the surface, see the comma delimited data below. I got 1038 new 3 yearly highs, that the 6 mnth prior cut-off boils down to only 17 seems to also imply bullishness, but how sure how to do such a significance test. This extra credit for the stats majors.

For the following 21 trading day periods (mnth) after a new 3 year high with no prior new 3 year highs in the previous 126 days (6 months).

stdev,2.39%,4.37%,3.50%,3.29%, 2.83%,3.82%,5.1%,5.1%,7.9%


positives, 14 , 8 , 14 , 12 , 12 , 10 ,14,13,13

1st mnth,2nd mnth,3rd mnth,4th mnth,5th mnth,6th mnth,sum mnth 1-3,sum mnth 4-6,sum mnth 1-6



There is no greater thrill than hitting a freak ball, the shot that has no precedent, and defies repetition. I've struck four in as many decades.

The first was in a national paddleball tournament at Flint, Mi. against the remarkable Paul Lawrence. We were neck-and-neck in the second game when I hit the ball, and was surprised when the wooden face flew off the handle into the right front corner for a rollout. Lawrence ducked, returned my shot, and I stood waiting with an eight-inch handle in my fist. I choked down, and the astonished opponent banged back my return. I struck again, as did he. My third shot reflected awkwardly off the 6" handle for a skipball, but it got me thinking after the national title that anything can happen on the court.

The second decade was at another paddleball nationals witnessed by Jim Easterling among the gallery. An opponent's shot reflected hard off my paddle that set the paddle into a helicopter spin on a 4-foot shoelace for a thong. Hinders were nonexistent those days, so play continued as the paddle whirled. The ball came back, and I hit it squarely with the whirligig. 'I wiped my eyes,' says Esterling, 'And nudged the guy next to me,' as the rally advanced.

Still later, I played in a pro racquetball nationals at the Las Vegas Tropicana with a glass exhibition court and gallery of sports gamblers. I arrived from desert camping with a Chevy van full of tarantulas, ready to play. That was the year dark horse Davey Bledsoe raked the field to take his sole national title, and I was one of the clods.

In that Bledsoe match, the ball flew over the court into the gallery behind the glass back wall. The ball struck someone on the head of the hungover audience, who bounced it into the court as I walked obliquely within the service box. It arched high over the back wall where I glimpsed it's reflection in the dark glass… without glancing thrust my hand behind my back and caught it as neatly as a catcher. No one blinked, except Bledsoe.

The fourth decade saw the best crack ace in history. Whereas the previous three freak balls spawned from skill, this was luck. It was a Michigan finals in 40's Ann Arbor courts with hanging chandelier lights and barnwood walls. I tapped a lob serve that arced high into a chandelier to upset a rain of earlier lobs stuck atop onto the court, giving the receiver a choice of which to return. 'Court hinder!'; yelled the ref, so I served another lob just below the blinking chandelier that dropped swiftly to the left rear corner. The ball split the crack between the floor and sidewall… and stuck.

'Ace!' yelled the referee, as I ran to the crack serve where my rival on hands on knees was trying to wedge it out with his handle. A fair player, I screamed, 'It hasn't bounced twice, play it!' and kicked the ball out that my startled foe chased lest it bounce again He failed, and I went on to win the tournament.

 There's no way to practice a freak ball in a trillion years; don't be an oxymoron. However, there is way to call yourself lucky. Practice being alert on the court always, don't give up on shots, and put in long hours. Every few years you too will know a rare freak when someone shouts, 'Lucky shot!' After four of these, you'll amble off asserting, 'It happens all the time,' which it does.



 I read this article called "Where Have The Good Men Gone?" recently, and found it quite interesting. Here is the beginning:

Not so long ago, the average American man in his 20s had achieved most of the milestones of adulthood: a high-school diploma, financial independence, marriage and children. Today, most men in their 20s hang out in a novel sort of limbo, a hybrid state of semi-hormonal adolescence and responsible self-reliance. This "pre-adulthood" has much to recommend it, especially for the college-educated. But it's time to state what has become obvious to legions of frustrated young women: It doesn't bring out the best in men.

Between his lack of responsibilities and an entertainment media devoted to his every pleasure, today's young man has no reason to grow up, says author Kay Hymowitz. She discusses her book, "Manning Up: How the Rise of Women Has Turned Men Into Boys."

"We are sick of hooking up with guys," writes the comedian Julie Klausner, author of a touchingly funny 2010 book, "I Don't Care About Your Band: What I Learned from Indie Rockers, Trust Funders, Pornographers, Felons, Faux-Sensitive Hipsters and Other Guys I've Dated." What Ms. Klausner means by "guys" is males who are not boys or men but something in between. "Guys talk about 'Star Wars' like it's not a movie made for people half their age; a guy's idea of a perfect night is a hang around the PlayStation with his bandmates, or a trip to Vegas with his college friends…. They are more like the kids we babysat than the dads who drove us home." One female reviewer of Ms. Kausner's book wrote, "I had to stop several times while reading and think: Wait, did I date this same guy?"

For most of us, the cultural habitat of pre-adulthood no longer seems noteworthy. After all, popular culture has been crowded with pre-adults for almost two decades. Hollywood started the affair in the early 1990s with movies like "Singles," "Reality Bites," "Single White Female" and "Swingers." Television soon deepened the relationship, giving us the agreeable company of Monica, Joey, Rachel and Ross; Jerry, Elaine, George and Kramer; Carrie, Miranda, et al.

But for all its familiarity, pre-adulthood represents a momentous sociological development. It's no exaggeration to say that having large numbers of single young men and women living independently, while also having enough disposable income to avoid ever messing up their kitchens, is something entirely new in human experience. Yes, at other points in Western history young people have waited well into their 20s to marry, and yes, office girls and bachelor lawyers have been working and finding amusement in cities for more than a century. But their numbers and their money supply were always relatively small. Today's pre-adults are a different matter. They are a major demographic event.

John Watson writes:

As a member of the generation Dr. Zussman is describing, he has it totally wrong, but then again most people over age 35 don't understand us, nor do they have a clue.

Countless tomes have been written about our generation and most are wrong. Philosophers ever since Plato have been complaining about the laxness and laziness of the following generations and I expect this trend to continue until the Revelation or whatever the disciples of Dawkins believe. As I'm fond of telling my father (who, like you, doesn't get it either), we will get it right, the economy and world will muddle along, and I will still choose his retirement home. As for the debt crisis, as my dad says, nobody's going to pay it in real dollars anyways, so why worry, life will go on. Things will go on as always, except the media is managing to have a bit more control and people who take them seriously will get frightened by all the editorial.

As for addressing Dr. Zussman's shared article, one thing that really sticks out is it has an anti-male bias which I find very strange. In answer to that, I work quite hard and am preserving two languages and cultures most modernists consider irrelevant. I don't find many females in my field, and it's impossible to recruit them beyond doing restoration work, which is a different discipline. I am quite serious about my studies and future, and most of my associates and fellow students are just as serious as I am. We are not all dilletantes as described in this essay, and all of us are rather serious. We are your caretakers in your dotage and nonage, which should be stressed.

Anyways, what the article avoids mentioning is that the Asians are completely taking over academia, which is something I've noticed since I was 14 years old. That is the real issue that needs to be discussed, and my dad has theories but you'd have to ask him as I am not willing to go on record quoting his radical ideas regarding the Asians. There is a paradigm shift going on that is the most important discussion, that everyone just dances around. Dr. Zussman, you wouldn't happen to be a French intellectual would you?



I had a nice dinner with Dimson and he told me that the long term real rate of return for almost everything he's studied outside of stocks is 2.8 % including art, housing, and stamps. He points out that bond prices seem to show much more momentum than stock prices, and doesn't believe there's a drift in bond prices. I always learn something from him.

The previous day I had dinner with Martin L. Leibowitz of "inside the yield book " with Homer, and he pointed out that in many cases it's better not to show earnings at all than to show earnings because if you show them, you might get a p/e attached to it. He's a great fan of musicals and we saw The Festival of Song together. I have much to learn and I enjoy making new friends.

Also learned a lot from a visit with TK Marks who told me about how the locals could cushion enforcement actions, the importance of being on the settlement committee, and who is on it, and how a 25 million loss on a barrier option against a former brokerage now a bank was handed and handled and the fine related thereto derived. I have much to listen and learn about.

Rocky Humbert comments: 

These ultra-long term real return results are fairly consistent with the published research on the subject and there are good explanations for why collectible prices (and housing) track demographics and population growth over long periods of time.

However, these results are a bit misleading because they do not take into account (1) transaction costs; (2) tax policy; (3) personal utility/consumption value; (4) generational investor preference.

Any honest collector will acknowledge that round-trip transaction costs of between 10% and 20% should be expected. Hence it can take 5 to 10 years just to recoup the vig (in real terms.) This represents the auction house premium, dealer/broker commissions and other fees and expenses. One should also add annual insurance costs of between 0.25% and 1.0%. Mitigating this is the fact that the collector/owner hopefully gets some intangible utility/pleasure from gazing at the asset — and this value is unquantifiable. So, I'd argue that the ultra-long-term real return is actually much greater than the measured return that Dimson cites (because of the utility value of ownership.)

One must also consider present and future tax policy. I submit that some portion of the gold price ascent over the past decade is attributable to more aggressive global tax enforcement and the loss of Switzerland as an anonymous safe haven for cash. Similarly, some portion of the decline in real estate prices must be attributed to a generally rising real estate tax burden. The use of technology for tax authorities to monitor/intercept cash transactions has never been greater, yet the ability of tax authorities to monitor the transfer of gold and collectibles is no different today than 100 years ago. This bodes well for assets that can be invisibly transferred.

What's most striking about all of this research is the generational mean reverting nature of returns. It seems to take about a generation for investor preference to reach peaks and troughs — the current inflation debate is a good example of this. Hence, anyone who bought gold in 1981 has a lot in common with the guy who bought a Miami condo in 2006. And anyone who is buying big pharma stocks today has a lot in common with the guy who was buying small cap value stocks in the 1990's. It seems to take 10 to 20 years for the fundamentals and investor preference to shift. While Keynes noted, "In the long term, we're all dead," there are important lessons here for what we SHOULD be buying (big pharma/nikkei) and what we should NOT be buying (Green Mountain Coffee, Netflix, 30 year bonds) for our children's UGMA accounts.

Stefan Jovanovich writes:


Such common sense advice will earn you the rewards of (pick one or more): (1) scorn, (2) disdain, and (3) outright rejection. As you might have guessed, that makes me eager to join your club . JNJ, SNY and MRK are my favorites. I think a combination of big pharma and small biotechs/instrument companies together makes sense. GILD, RTIX, ANGO are the other end of my barbell. To double the bet, I am also invested in MDT, PMC and GILD - which fit neither category. Those 9 companies are nearly half of the ones that are on my current "Top 20". Here are the others:


The 20th pick is Cash– which remains, by far, my largest investment– as a cowardly lion proxy for being short commodities and bonds.

All the best.


T.K Marks writes:

Rocky's mention of collectibles as an asset class brings to mind an informative Tom Wolfe book that I read many years ago, The Painted Word.

Inside which he skewers not only the monopoly of modern art theory, an oligarchy of opinion makers comprised of a handful of collectors, dealers, critics, curators,and auction house operatives, but the pricing paradigm of works as well.
Wolfe's criticisms were contemptuously tossed aside as rank philistinism by established interests, however much they had to lose. Be that as it may, he raised some interesting if provocative questions about the commoditization of aesthetics and the art world's version of the settlement committee.

It works like this: An emerging or posthumously appreciated artist's works are quietly acquired on the relative cheap. After which, a web of vested interests pull off the art world's version of the time-honored pit trading version of banging the close. That is, waiting till the last possible moment in a trading session and then faux-frantically bidding for everything in site. Provided, of course, one has the fiduciary wherewithal to do so.

One might reflexively think that such an ad hoc distortion would revert back to the mean in ensuing days. But homeostasis doesn't necessarily always happen as a matter of course with physical commodities, as ersatz drift can be plausibly manufactured over time. Including relationships in cross-market terms. So why should the works of an artist that are somehow treated by the seeming cognoscenti as fungible a good as exchange-grade soybeans or silver be any different?

Or for that matter, how is the work another artist thought to be from a similar school not affected in cross-market terms?

Wolfe's thinking would have it that in both cases of abstract art and silver futures there's a lot of leverage involved. With metals one lays out margin. But in art, one may buy a work at auction way beyond estimates from one of the big houses. They just banged the close.

Rather loudly actually, and by doing so drove up the value of their quietly accumulated inventory.

They also did it on margin. Say one supposedly lays $50m for a work previously thought not to fetch nearly as much. It would be wrong to assume that a check was written by the acquiring party in that exact amount, as the auction-established value of the work is now used as collateral to secure the purchasing loan.

So something with no underlying intrinsic value other than the artful arbitrariness of a few is deemed as good as the full faith and credit of the U.S. Treasury.

At its worst, it's a not-so-opaque way of creating value out of whole cloth. No less a curious way of legally shifting large piles of money from one entrenched interest to another.

One is reminded that long before Tom Wolfe considered these very same questions, Norman Rockwell did so as well. It may be the definitive portrait of irony, the cover of a Saturday Evening Post from back in 1962.

First brought to my thankful attention from Prof. Pennington some years ago under the auspices of this colloquy, it leaves one thinking: Does the nattily attired gentleman see Pollockian splashes of brilliance, does he see a related investment opportunity, or is he merely the picture of high-brow posturing?

There are some situations in life that one can know enough about to realize that it's probably impossible to know the rest of and this is probably one of them.



Left-handers comprise about 10% of the total population, but I think they account for a greater proportion of the better participants in all sports. The reason is that athletes hone their skills and strategies against the most available fodder, righies. In racquetball, there are some things you should know, that a southpaw intuits in his mirror world of playing against right-handers, to gain back the edge. Sit back and prepare yourself: This article contains both tips and related quirks.

Certain serves and shots work better against lefties. Your down-line drive serve to the backhand becomes a deathblow to the southpaw receiver. I use one spot about six feet from the right side wall to hit a medley of three drive serves off the same stroke motion for deception. The first is a drive right along the wall to his backhand, the second is a drive-Z right, and the third is a drive left that surprises him provided it doesn't come off the back wall before the second bounce. These are really the only serves you need in a serious game against a left-hander, and the usual variation is 50% drive right, 30% Z-right, and 20% drive left, though you can tinker with the recipe.

If you find him scrambling more for one of the serves, raise that ratio. If you fault the first serve, use the Z or lob for the second, unless you're particularly confident about the drives. A final note is that the Z-serve, especially well into the intermediate skill level, is tailor-made for use against a lefty (and vice-versa) because it's simple to strike, allows large margin of error, and gives additional angle due to the extra reach and positioning within the service box nearer the right side wall. Practice until you can hit 9-of-10 Z's perfectly. Vary the Z's velocities and heights to prevent the opposition from forming a rhythm or volleying the return.

Return of service against a southpaw enters a new dimension since your more naturally strong cross-court backhand now pulls the shot hard to his weaker and shorter reaching backhand. (The backhand stretches about a foot less out, or up, than the forehand because it must reach across the body.) The ceiling, pass or cross court kill all work, though fundamental service return strategy advises you to be able to hit the ceiling shot well before progressing to the pass before learning the kill.

In the rally likewise, you can direct cross-court passes with greater margin of error, as long as the ball doesn't rebound off the back wall. When a lefty begins to 'cheat' to cover your cross-court passes and kills, keep him honest with a kill to the other front corner (straight-in or pinch). Cross-court ceiling returns and ceiling rallies are also usually easier than down-line. Try for a spin on the inside of your hit ball that causes it on reflections off the ceiling, front wall and floor to angle straight toward the back wall rather than hop into a side wall. The best way to improve passes and ceilings for use against future left-handers is to drill at perpetual cross-court passes, or ceilings, or mixing the two, against a lefty.

Southpaws, as mentioned, generally come with the foregoing tips already parcel to their game plans due to a past of playing the 'mirror game' against right handers. In course, it will help righties to understand how to better play lefties by imitating the serves, returns and shots that they use against you! I once went against a lefty who lost point after point against my Z-serve to his backhand. Finally, he turned and smiled at me from the service box, and hit the same Z to my backhand, and I was compelled to display the definitive return, a volley. I couldn't serve him another Z for the entire match.

My expertise in writing this article is as a developing ambidextrous player. For the past year I've played primarily southpaw due to an arm injury, and in earlier years entered tournaments right-handed in pros and left handed in opens. I hope to see other aspirants at the first Ambidextrous Championship, whenever that may be.

Why play lefty? Obviously, upon reverting to your dominant hand, you'll start beating lefties more handily, plus there are other benefits: 1) You teach yourself to be a teacher by having to learn strokes from scratch. 2) You're able to pick up more informal games in tapping a new pool of lesser players for competition. 3) Rallies are up to three times as long for speedier, better workouts. 4) It's a fun challenge! 5) Monumental insights to your normal strokes pop up during the learning process. 6) You can alternate hands in successive games to last longer on the court. 7) It's backup if you injure the main arm during a match. 8) You can enter more events in a tournament. 9) It's a way to continue to play while resting chronic inflammation in the dominant elbow or shoulder. Swing away, southpaw!

I was said to have the game's best slow-ball backhand, and when I finally started to believe it, I attributed it to writing extensive longhand throughout life. The backhand movement of the pencil across the paper repeats tens-of-thousands of strokes and lines, using the same fine motor and visual components as the racquet stroke. The first thing I did after deciding to become ambidextrous was to switch to writing mirror image, right to left, to more quickly gain a lefty backhand. The next move was to turn books upside down so that the print flows right-to-left as Arabic, Chinese or Hebrew, and I've read the last 300 books in this fashion. It trains the eyes to become 'ambi-visual' in tracking print, ergo balls, from right to left. This aids the right-hander's backhand stroke, since 80% of serves and shots on the court travel in that direction. Our daily world is seeing so much print flowing from left to right, that you should never again explain away your cheesy backhand with bogus excuses until you've learned to track the ball better from right to left. That can be the solution to your next tournament win. Next, I wrote 1000 pages of an autobiography Catman Keeley: The Adventures of a Lifetime on an upside down monitor, like the one I'm looking at now.

Least you think there is something odd about any of this, I wish to advance that Leonardo da Vinci kept journal notes in mirror writing that his peers called 'secret code' to prevent theft of ideas. I rather think he just wanted to balance aspects of his life. Da Vince was many grand things, and foremost an anatomist who must have understood the premise for visual balance from his dissections. Mammalian eyeballs removed from their sockets are as ping-pong balls with muscle attachments about the sphere causing it to turn and twist, plus a colored iris made of muscle, and a lens with muscle attachments for accommodation of vision. Seeing is as much lifting weights as curls and presses. If you read only in the conventional direction of left to right, the eyes become muscularly unbalanced and will trace moving objects such as balls weakly from right to left.

The other profits from reading and writing backwards include greater stamina (in turning the book at 30-minute intervals from upside down to right side up), relief from eye, neck and back strain due to prolonged reading or writing, writing class notes that no one will want to borrow, coding, and reading the newspaper simultaneously from across the table with your mate.

 There's sufficient ado over left-right brain dichotomy to make Leonardo roll over in his grave, however the classic Drawing on the Right Side of the Brain is worthwhile. I once offered to teach (where I was also coaching racquetball with the methods) a college course on The Art and Science of Mirror Reading and Writing but was thwarted by the dean, so I may write a serious book with the same title in mirror print that comes with a mirror bookmark for transition. I presently sub-teach middle and high school, and write assignments on the black boards in mirror image, causing the girls to use their compact mirrors to read to the rest of the class until they're all fluent in a week. Wonderfully, most middle-school students turn books upside down and read immediately, high school females typically do the same, but males stumble over words. Male athletes are more persistent at the task in believing that it helps them see a baseball, basketball, etc. better. The principal summoned me to his office once to ask why so many students about campus were observed reading their texts upside down. I explained the benefits of the habit for sports to the chief, an ex-boxer and wrestler, who asked for a personal lesson on mirror writing.

I'm a proud self-taught dyslexic who often sees 'tixe' and doesn't know where to go. An eerie thing happened one stormy night a few years ago while reading in a coffin lined with electric blankets to make a comfortable bed. I was teaching myself to read via an optical-quality mirror Lewis Carroll's Through the Looking Glass and came upon the passage of 'Twiddle-Dee and Twiddle-Dum' that's written in actual mirror image! I bolted straight up and shut out the light.

Am I right? There are many tips and related quirks in this essay to combat the plague of left-handers, while paradoxically encouraging you to become one. By now, it's evident that playing lefty is a new frontier that many will realize, that writing mirror image is a first step in that direction, and further that reading upside down aids visual tracking. Now the best southpaws march in. .

The All-TimeTop Ten Leftys:

1. Cliff Swain – Six-time world champion.
2. Mike Ray - World Champion, smooth and consistent, with the best overhead.
3. Bud Muehleisen – The first world champion, and great all-racquets athlete.
4. Brett Harnett – Two-time Pro Player of the Year, and hit almost as big as Swain.
5. Steve Serot – Power southpaw in the days of slow balls, who finished #2 to Brumfield.
6. Craig McCoy – A top pioneer pro with stylish and smooth strokes, similar to Mike Ray.
7. Bruce Christansen - His lefty power serve took out Brumfield at one pro national.
8. Kane Waselenchuk - The young Canadian is talented enough to move up the list.
9. Mike Guidry - A top singles and doubles competitor for over a decade.
10. Steve Mondry - Great forehand, and carried Hogan to two pro doubles titles.



 When I was a 28-year-old retired veterinarian, I spent the year sleeping in a coffin. It was simple, pine and lined with electric blankets against the icy Michigan winter nights. It was also the logical progression from an on-and-off career riding boxcars around America. Before that, I built a hermetic crate in a garage to shield the light from sensitive eyes. In a prior nightmare power shortage in an Auckland House of Mirrors, the doors kicked open one-by-one until a janitor bashed the real one. Early on, beloved mother opened my Xmas boxes-inside- boxes to a final love passage. Bless her understanding heart for allowing me to keep a pet pocket worm.

The recent idea of digging a burrow, moving in, and observing my fellow creatures evolved from a besotted visit to an Anchorage bar where drunks gradually became aware that in place of the usual bar mirror stood a wall-to-wall glass window. It permitted a menagerie of rhesus monkeys to cavort on spruce branches, and every few minutes bemuse us drinkers. We were each others' floorshows.

I just put the finishing touches on my burrow at Sand Valley, and urge visitors. I meditate and type six-feet beneath the desert floor with a western diamondback doorman named Sir. It's cool, quiet and airy with one side open and a stair to the surface. No mammal near the tri-section of California, Arizona and old Mexico digs a deeper burrow. I like to think Captain Nemo turns in his grave. The twist is an open wall of ¼" hardware mesh flush with the vertical dirt. A half-dozen species of reptiles, rodents, scorpions and my fetching trader rat, Band-Aid, so far, scuttle in auxiliary tunnels off my main bore, and peek in.

Sand Valley, California is a 10-mile round sandbox crosscut by dry washes and ringed by 600-foot Mountains. A single track from the town of Blythe leads an hour pursuit to the pristine circle where seven residents survived the '06 summer that decimated 30% of the population. The blistering heat, and adjacent Chocolate Mountain Bombing Range where daily jets pepper 1000-pound bombs leaving gaping craters, are the other reasons I built the hideaway.

Too far-flung for a backhoe, imitators do well to start with a pick and shovel. Stake with string a 8'x12' plot, and don thick gloves. Toss the initial 4' layer of dirt far from the burgeoning hole to make space for deeper gravel… One hundred hours later, come-along a 10' trailer over the cavity, and gently drop it. Install the tires as vertical retaining walls, add 4'' well pipe as a retaining roof, pile on mattresses, a foot dirt tier, and plant a cactus garden for camouflage and tweeting birds. The annual fixed expense is $30 property tax because the county plane camera can't see the land improvement.

The virgin den is equipped with a computer, solar, bookshelves, and a desert waterbed as emergency storage. A 55-gallon drum air vent is too small to access large bosoms, and I prefer slim girls dating back to the coffin. The creatures lurking outside the view screen think me no queerer than I them.

The lessons from living six-feet under are: Never laugh at anyone else; Laugh at yourself; and Jump at life like a Jack-in-the-Box.



 Andrew Jackson was the first "Westerner" to be elected President (every President before him had lived in either Virginia or Massachusetts) and he had no sympathy or empathy for either Indians or Brits. By 1829 the "Indian question" was only a memory for Massachusetts and Virginia (which had already killed all but a very few of their natives) and respectable Americans on the Atlantic Coast had already made their peace with the Brits over the War of 1812 in the same way that enlightened Americans quickly decided that our Asian communist enemies were really not so bad (burning the White House and Pol Pot notwithstanding). In that regard Jackson was like Ronald Reagan; he persisted in seeing the traditional enemies of America as enemies. Even worse, he had thought enough about economic questions to have his own opinions even if they were not the ones that "sophisticated" Americans had learned by rote. Jackson's anti-elitism was based on common sense observation, not anti-intellectualism. Clay, Webster and Biddle did not have any claim to know more than Jackson did about finance; in fact, of the 4 men Jackson was the only one who both made and kept a fortune. Their fundamental assertions were the same as those made by our most recent two Presidents and Secretaries of the Treasury, the Federal Reserve Chairman and Board and, until recently, the majority of both houses of Congress: that credit should be managed and controlled by the Federal government. In insisting that Constitutional money should be kept separate from the credit system, Jackson was making the same argument that Grant made: if you allow a central bank to make money and credit interchangeable, then enterprise becomes politics and the people, both rich and poor, suffer if they are not "connected".



 Smiling boy

Why are the kids of the farflung Indonesia islands full of joy? They are cold water people, most never having touched warm, and know nothing better. They are rice eaters, and know nothing else. The family unit includes relatives, and often the acceptable concubine, crammed into stilted lean-tos in the jungle. They attend three weekly hours of English through high school. It's irritating to work a lifetime at being content to stumble on children without the facial structure to frown. Over and over, I ask, why are you happy? The younger ones shrug and smile without insight, and the older ones explain, "I know nothing else."

Other Photos

1 smirk in door crack

2 rainbow

7 helmet girl

8 pancake smile

9 radiant sisters

10 girl with scooter

12 smile slime

13 three monkeys on a barrel of gas




Directed by Jaume Collet-Sera

Cast: Liam Neeson, January Jones, Diane Kruger, Aidan Quinn, Bruno Ganz, Frank Langella

The ubiquitous trailer for UNKNOWN captures a nightmare many fear: What if we are suddenly non-persons in a life we seem not to control or belong to?

Taking an Olympian view over this nail-biter thriller, casting had to be all important; in some important roles, it is cunningly counterintuitive. Some people are always good guys—Jimmy Stewart, John Wayne, Harrison Ford (most of the time), Sandra Bullock—and some people are bad (usually men with unfortunate complexions, uneven features, insincere rictus smiles or dysfunction of one or both eyes, legs, or other bodily part).

Here tall, handsome, accomplished Dr. Martin Harris (Liam Neeson) [A] arrives in Berlin with his gorgeous wife, Liz (January Jones, the stunner from Mad Men) for a professional convention of botanists. Very quickly, events take a disorienting turn, as Harris/A cabs back in a heavy snow to the airport for a forgotten piece of luggage, while his wife checks into their 5-star Hotel Adlon. He experiences a major accident that puts him into a coma. Luckily, it is Berlin, not Lesotho, so medical care is both swiftly competent and available in [accented] American English.

East Berlin and West Berlin sites are melded as backdrop for this homeless, placeless, stateless person. Car chases of unusual ferocity utilize the U-Bahn and Museum Island, edgy Friedrichshain-Kreuzberg and Studio Babelsberg (the world's oldest major film studio, a century old)—during which we cannot conceive of our man managing to elude the assassins who murder a number of earnest if subsidiary characters every few minutes, in hospitals, corridors, stairwells and garages.

His attempts to rejoin his gorgeous wife, a shoo-in for a latter-day Grace Kelly, at the swanky conference repeatedly meet with perplexing…stonewalling. She politely fails to recognize him, and points to someone else (Aidan Quinn, obviously not embodying one of his more ardent romantic roles) as her husband, Dr. Martin Harris [B]. Our man, now out of hospital, unshaven and dumbfounded, is pursued at every turn by would-be menace, scalpel-thin Germanic thugs with icy cheekbones who could double for James Bond nemeses, as he manages to escape from them sans passport or identifying documents, handicapped by disbelief from everyone he meets. Why? What do they want from him?

It does not help that snow is falling, he speaks no German, the Brandenburg Gate and vestigial relics from WWII, plus the Germanic obsession for documentation, offer chilling subliminal prompts.

How can he prove he is who he is? The audience is no more informed than the protagonist, and we root for him as he dredges up colleagues back home to call, rakes through papers to find something he can use to prove his identity. A photo, a book, anything. Bruno Ganz, ex-STASI, appears as Herr Jurgen, the feared East German secret police who until recently instilled terror into the blood trees of anyone coming into physical proximity. He is now a Berliner without a particular calling, as his keen brain and intuitive understanding of wrenching information from victims is no longer prized. Ganz is a marvel, as brilliant here as he was in The Reader (2008), inhabiting his rueful ex-torturer's persona without fireworks, but with minimal-maximalist conviction.

Returning to the meme of casting tells, the observant viewer notes how beautiful his cabbie, Gina, had been (Diane Kruger, Inglourious Basterds, 2009; National Treasure, 2004). Clue: You don't waste beauties in bit parts of rescuing the protagonist with a tire-iron and then forget about her. Frank Langella hoves into view in the latter half. Another key player. A versatile actor's actor given to textured, complex oil paintings of characters (Frost/Nixon, 2008; Wall Street: Money Never Sleeps, 2010), there is more here, too, than meets the casual eye.

While reflection reveals a number of truck-sized holes in the story, producer Joel Silver sums up the cat-and-mouse, the reason this genre of film stays around so long. Audiences live vicariously in trying to figure them out. "This film gives you both worlds. It's a ride that keeps you on the edge of your seat" … and keeps you guessing.



The day-to-day progression of the SP500 has been nearly a perfect straight line for the 5 months since Sept 15, as seen when regressing SPY daily closes vs day number in the series [i.e. regression with a linear trend]:

Regression Analysis: Adj Close versus days

The regression equation is Adj Close = 111 + 0.190 days

The regression equation is
Adj Close = 111 + 0.190 days

Predictor      Coef      SE Coef       T      P
Constant    111.231     0.249     446.69  0.000
days          0.19006  0.003841   49.48  0.000

S = 1.22719   R-Sq = 95.9%   R-Sq(adj) = 95.8%

The slope of 0.19 shows the precise angle of the non-ballistic trajectory; about 2 SPX points/day. Set your sights accordingly.



 Say you're a little perplexed by a slow creep-up in commodities last few sessions. On the one hand, most commodities have been now climbing day-in day-out for months - so naturally a contrarian, or value seeker would look to be a seller. On the other hand, you are not really getting a tremendous spike, a blow-off into which to sell. So here comes Cotton to your rescue!

You see, Cotton just nearly tripled in the two-quarter period. Obviously, it's a top-of-the-needle daily war of attrition right now between the Longs and the Shorts in that market. Margin hikes by the exchange, price-limit moves adjustments and all that jazz… So watch closely; and the moment that Cotton finally reverses - there will be your indicator that the drift is changing in commodities. Whether it will be orchestrated (in Cotton) by one or another power-party - the jig will be up that, temporarily, Bull market deflation is favored by someone with influence

Ken Drees writes: 

A friend just called me this morning saying he heard on Glenn Beck radio about cotton and clothing price hikes– I would be in the cotton correction camp, if I traded this item–usually when a not often talked market is in the news it's time to consider exit door locations.

Anatoly Veltman reponds:

Because of likely limit lock-down in many of the sessions– the outsiders will be confused as to "real" dimension of price changes and balance-of-power day to day. My point was that someone not taking position in Cotton per se– will still get a hint of shifting wind for all of the inflated markets! Remember that today's markets are arguably the most manipulated in decades. Thus, it's doubly important to be tipped-off as to when the flexions decide to loosen the upward pressure valve.

Rocky Humbert writes: 

I think Anatoly's focus on cotton as a "tell" is misplaced. I think the entire commodity complex is keying off of Netflix stock (NFLX). As soon as the farmers stop watching videos and get back on their tractors, Netflix stock will crater, and so will the grains…

(Calculating the R-squared between Netflix and one's favorite commodity is left as an exercise for the reader.)

Craig Mee adds:

Talking to a mate in Singapore today in a trip to the sunny island, and he mentioned a farmer in China, who has stock piled cotton: "he has 6 tonnes of the stuff, taking up every inch of his shack, stock piling with price where it is, no interest in selling." I suppose why would you, with price ferociously in the one direction. Though two questions remain, is this a trait of the Chinese race in general… accumlate accumlate… and for such a specie position…is it another reverse market indicator?



 Back in 1992 I read Peter Lynch's book "Beating the Street". It's a fun book to read; he explains how he came to recommend ~20 stocks in that year's Barron's "Roundtable". As the years passed though I kept noticing that stocks that he had recommended were falling by the wayside. One of them, Sun TV and Appliance, was a retailer in Columbus, Ohio, where I was living at the time, and not too many years after the recommendation, Sun crashed and burned. Similarly I noticed bad things happening to Supercuts, which he recommended, and more recently Fannie Mae and GM both fell to zero-ish levels. So I've long suspected that overall his picks might have been sub-par, or a disaster, even.

Today I finally got had the time and energy to test it. I know this is breaking the rules, but please refer to the attached spreadsheet, only 10 kB. The spreadsheet shows Lynch's 18 stocks (I excluded one stock because it traded in London and another because it was a "Class B" share, and I couldn't figure out what ticker to use in my database) and their tickers as of 1/31/1992.

Many, actually most, of the stocks did not continue as going concerns until today; they were either acquired, bankrupted, or whatever. I believe that my database (MarketQA) does a reasonably good job of giving my a terminal value, but beyond that I didn't attempt to find out what happened to each stock.

So the spreadsheet has a column for "months as a going concern", i.e. how long the stock lasted after 1/31/1992 until it was acquired, bankrupted, or whatever. Stocks that survived until now have lived for 229 months. The next column, "$1 grew to" tells you how much money you'd have if you invested $1 and held until the firm ceased as a going concern. The last column gives the compound return over the period as a going concern.

Lynch didn't do badly at all. The average stock grew $1 into $4.24. On average the stocks "lived" for 141 months as going concerns, and I did not give Lynch any credit for reinvesting the moneys after stocks died off. However there was an enormous variation among the stocks. Five of the 18 stocks lost more than 90%, but four multiplied your money by a factor of 10 or more.

The big winners were in the thrift / S&L stocks–on average they grew $1 into more than $8, and without them the average performance of the remaining stocks is not impressive.

Lessons? I guess these results give a pretty good feel for the wide variation in returns of individual stocks over long periods. It may also be surprising that stocks have such finite lifetimes, even when they work out well–e.g. First Essex turned your $1 into $20 before it fell off the radar about ten years ago, presumably after being acquired. Lynch himself always emphasizes that the occasional "ten bagger" can make up for a lot of sins elsewhere in the portfolio, and that definitely played out with his picks.

(If you can't handle spreadsheets, here it is as text, but I have no idea whether it will format properly for you.)

ticker as of 1/31/1992    company name    months as a going concern    $1 grew
to    compound annualized return while a going concern
GH    General Host    72    $0.80    -3.6%
PIR    Pier 1 Imports    229    $2.88    5.7%
SBN    Sunbelt Nursery    74    $0.03    -44.7%
CUTS    Supercuts    57    $0.72    -6.7%
SNTV    Sun TV and Appliance    82    $0.03    -40.0%
EAG    Eagle Financial    75    $6.34    34.4%
FESX    First Essex Bancorp    145    $19.57    27.9%
GSBK    Germantown Savings Bank    35    $3.67    56.1%
GBCI    Glacier Bancorp    229    $12.70    14.2%
LSBX    Lawrence Savings Bank    229    $10.54    13.1%
PBNB    People's Savings Financial    66    $3.97    28.5%
SVRN    Sovereign Bancorp    204    $1.03    0.2%
TLP    Tenera L.P.    139    $0.00    -42.8%
GM    General Motors    226    $0.01    -23.7%
PD    Phelps Dodge    182    $10.64    16.9%
CMS    CMS Energy    229    $1.74    2.9%
FNM    Fannie Mae    229    $0.04    -15.5%
COGRA    Colonial Group    38    $1.67    17.6%

       average    $4.24

Steve Ellison writes:

The median stock turned $1 into $1.70 and had a 4.4% CAGR. I got similar results when I checked stocks suggested by Jim Collins in Good to Great. A small number of big gainers made the portfolio as a whole above average. Maybe there is a lesson here.

Tim Melvin comments: 

If you study Mr. Lynch's results much of his success was a result of playing the mutual thrift conversion game. His fund had deposts in just about every mutual thrift in the country so he could buy the conversion offering. Almost universally these stocks were HUGE winners. That game is very much back to life today as new regs are pretty much forcing many thrifts to convert…..most can be bought after the offering at a still sizable disocunt to tangible book value.

Charles Pennington writes: 

Of the four "ten baggers", two would have gotten stopped out at very disadvantageous (roughly break even) prices…

I would have guessed that those conversions had limits on how much stock a customer could buy, and with those limits in place, how could they make a dent in the performance of a large fund?

According to the Cramer book ("Confessions.."), which is very entertaining, much of the good performance of his fund was also due to holding thrifts, but he almost went under when redemptions threatened to force him to sell those very illiquid stocks.

Apart from the initial "pop" after a conversion, I don't see why thrift stocks would continue being cheap. Isn't this a very well-known idea, given that I've heard of it?

Victor Niederhoffer writes:

Now the professor is going to compute the market value of the individual stocks and tell me that the average market value of the ones that went down 100% at inception was not different from the average market value of the ones that were 10 baggers and kept him from reading books. 

Charles Pennington responds: 

The Chair's point is that most of the 10 baggers mostly started out as impossibly-small-to-buy stocks, and that is correct. Here are the 10-baggers and their market caps in January 1992:

First Essex (FESX) $21 million
Glacier Bancorp (GBCI) $32 million
LSBX $12 million
Phelps Dodge (PD) $2.6 billion

The only non-micro cap is Phelps Dodge.

Here are the January 1992 market caps of the stocks that lost nearly 100%:

SBN $60 million
SNTV $109 million
TLP $30 million
GM $19.9 billion
FNM $17.7 billion

George Coyle writes: 

Food for thought since I don't have access to data, certain funds and firms have size restrictions on what they can buy due to position sizing, liquidity, etc. It would be interesting to see if stocks which crossed over a given level in market cap ($100mm, $500mm, $1bb) subsequently saw inflows or outflows by virtue of qualifying as new investments for bigger buyers or being kicked out by virtue of falling below an acceptable cap level. Also, there are legal filing consequences of holding positions over certain sizes so I imagine patterns exist which are very real as firms alter position sizing to avoid regulatory filings (and ultimately position size disclosure on a non-quarterly basis). It is a bit of a momentum study meets the analysis below but with a legal/fund guideline slant. I believe Factset tracks historical cap sizes with some reasonable degree of accuracy/frequency but I no longer have access.

Phil McDonnell writes:

To throw a few stats on the table I am posting links to some work done by Eric Crittenden. He is a momentum quant with BlackStar Funds. He argues that trend following must work because long term stock distributions have very fat tails. He also argues that the negative fat tail implies that stop losses must work. One of the charts shows a huge right tail of three baggers or better. Another shows that all gains come from 20% of the stocks.
I have had the chance to review several of his studies in progress and Crittenden seems to do it right. He uses total returns and avoids obvious pitfalls like survivor bias etc.

Charles Pennington responds:

It seems kind of silly that they take this indirect route — "lots of big gainers and lots of big losers, therefore use stop losses". Why don't they just test the performance of some simple stop-loss rule? Jason proposed a trailing stop of 50%. That sounds ok to me. Then, whenever you're stopped out, use the proceeds to buy an equal weight (cap weighted) of the remaining stocks. Does that outperform or under-perform the equal-weight (or cap weighted) index?



I just finished browsing the 2012 Federal Budget Proposal. If you believe the Economic Assumptions, Dow 36,000 is a no-brainer. But see my comments at the bottom.

Here's the link. see Table 2-1

Here's the meat:
2012 Real GDP = 4.0%
2013 Real GDP = 4.5%
2014 Real GDP = 4.2
2015 Real GDP = 3.6%

2012 CPI = 1.8%
2013 CPI = 1.9%
2014 CPI = 2.0%

Wages & Salaries:
2012 Growth rate YOY= 5.8%
2013 Growth rate YOY= 6.5%
2014 Growth rate YOY = 6.5%
2015 Growth rate YOY= 6.2%

Average Tbill rate:
2012= 1.0%
2013= 2.6%
2014= 3.7%
2015 = 4.0%

Average 10 year rate:
2012 = 3.6%
2013 = 4.2%
2014 = 4.6%
2015 = 5.0%

I don't have a crystal ball. And it's certainly possible to have nominal GDP growth of 6-ish percent. However, the historical anamoly would then be in the interest rate forecasts. Since the 1950's, and except for two very brief recessionary periods, the 10 year Treasury yield has ALWAYS exceeded the year-over-year change in real GDP — with the average (eliminating the 1975-85 inflation) — being about 200 basis points. So, if you accept their real GDP forecast, the interest rate forecast is implausible. And if you accept their interest rate forecast, their GDP forecast is implausible.


Ralph Vince writes:

Out of curiosity, maybe George Z can chime in, are these GDP assumptions typically unrealistically rosy?

George Zachar obliges: 

Well, since you asked…

2013 Real GDP = 4.5%
2013 CPI = 1.9%

That gives us NOMINAL GDP of 6.4%, which happens to be the high end of the range going back two full decades.

Not bloody likely given the current configuration of economic, demographic and political forces.

Wages & Salaries:

2013 Growth rate YOY= 6.5%

With existing slack/low participation rates? No way.

I think these figures were calculated by guesstimating what they could publish without folks bursting out laughing…and then multiplying by 1.2.

Rocky Humbert comments:

 Might I suggest that the interesting reactions to my post regarding the 2012 Budget/Economic Projections should cause some introspection.

As I noted, the projections seem historically improbable and incredibly optimistic — but just like that Goldman Sachs economist who projected the outlier of 6% or 7% growth this year — they are NOT impossible. And if they turn out to be even close to correct, the upside in the stock market could be mind-boggling. That was my point. And for the umpteenth day in a row, Mr. Market is again voting for the improbably bullish outcome even though GZ's helpful comments have much better odds!!. See this old post.

I cannot overlook that Mr. Rogan in his replies, yet again, mistakes ZeroTruth (excuse me, Zero Hedge) to be a source of wisdom. It's particularly ironic when Mr. Rogan writes "to be an intelligent liberal today is to actively promote lies" when in fact, actively promoting lies is the essence of Zero Truth's business model. A question for Mr. Rogan: Why is the propaganda on the White House Website more troubling to you than the propaganda on Zero Truth website? Perhaps you only object to "lies" when they are from someone who doesn't share your idealogy?

One of these days the stock market will decline. And cotton will go down. And we'll have another recession. I only wish that I was smarter so I could know when that will happen. I don't know. And that's why I always hedge my bets. And that's not just bearish hedging. It's bullish hedging too. And I'm glad I'm hedged bullishly right now!!



 Saw the Oracle get the Medal of Freedom yesterday. Will this enhance his stock?

Scott Brooks writes:

Another question: Who, on that stage, was truly deserving of receiving the Medal of Honor? I know there was at least one person on that stage who deserved the award for personifying what America is all about…..Stan "The Man" Musial. One of the 5 best baseball players of all time and a man who has lived to high standard all his life. He exemplifies what America should be….do the best with what you have and treat others with honor and integrity.



The attached plots log(SP500) monthly for the then-current Fed funds rate (1954-2011). Various dates are marked:

1981: Peak Fed rate of 19%, following a period ranging as low as 4%, with relatively range-bound stocks of the 70's

1984: Stocks rose as the rate fell from 10% to 8%, punctuated by a pause as Fed rate jumped and declined again around 1984

1989: Stocks rose as the rate declined from 9 to 6%, rose more as the rate went from 6 back to 10% in 1989, and continued to rise as the rate fell from 10% to 3% in 1993.

2000: The vertical rise in stocks from mid-90's to 2000 occurred while the rate stayed around 5-6%

2000-2011: Rates varied from 6% to the current zero, while stocks were substantially stuck over the decade. The back and forth in stocks and Fed rate over this decade approximates a line with positive slope: high (low) rates with high (low)stocks, which fits with a market-fixated FED (easing/tightening when stocks fall/rise).

The little vertical line between 2009 and 2011 is stock drop and rebound during the unprecedented (in this series) zero fund rate regime - giving the impression the FED might like to move things out of the endzone in order to keep playing.

Bud Conrad writes:

What a confusing way to present data. The usual Fed Model compared earnings yield against  interest rates like the 10 year Treasury.

The conclusion is that lower Treasury yield supports stocks (through lower earnings yield (higher P/E)).

The only indirect indication in this chart is that as the Fed funds dropped, stock went up, sort of. (Negative slope after 1981).

Kim Zussman writes: 

The point of plotting this way (stock per fed funds rate) vs other conventional published methods was to see what, if any, correlation Fed rates have with stocks. The Fed can and does vary this rate, but not long rates and not stock earnings.



 Probably forever, roughly every week, Barron's has an article about a few big cap stocks that they say are pretty good bargains. What's different about the articles over the past year or two though is that they seem really compelling. That's true even now, after a big market rally.

This week's article is about drug stocks. Typical of the stocks they mention is Abbott, listed with a p/e of 10 on 2011 earnings and a 3.9% yield. All of them–Bristol Myers, Lily, Medtronic, Merck, and Pfizer–have similar numbers, yields higher than the 10-year treasury and P/Es around 10 give or take. They also list some European firms, AstraZeneca, GlaxoSmithKline, Novartis, Roche, and Sanofi-Aventis, that look even cheaper. E.g. AstraZeneca is at a P/E of 7.3 and yields 5.2%.

The point of the article is that some of the firms could help shareholders if they would do some restructurings, spin-offs, break-ups, but what struck me instead is that they are look surprisingly cheap as they are. Seems to me that a lot would have to go wrong for these to do poorly compared to bonds over the next 10 years.

Vince Fulco writes: 

That has been David Einhorn's contention for some time at least on PFE. I.E. the bad stuff is already well known.

Bill Humbert writes:

I suspect this situation of high dividends will continue for some time, but the causes are not being dealt with. The system, by which I mean the internal processes used in drug discovery, is broken.

All that is being done is shuffling managers in and out. Each old set of managers floats off on their golden parachutes. The new managers talk and talk but do not make real changes to return the system back to the productive way research used to be done. The industry will slowly decline, have more M&A, and golden parachutes, until eventually the internal research organizations are disbanded.

PFE is already chopping internal research hard. The big pharmas are turning into development and marketing organizations and will shed research completely. Once they all do that, it will be fascinating to see where they will get molecules to develop.

The biotechs are hurting bad. More than a few went under, and many of the remaining ones have had their research organizations corrupted by the amazingly stupid management practices of big pharma. Lots of big pharma people went to the biotechs and wrecked them, too.

Check this out. Some data on the drug industry:

Figure A: # new drugs by year

NME = new molecular entity (new drug, although its structure could be closely related to that of an existing drug, i.e., a me-too drug)

The industry is about half as productive as it was 10-15 years ago.

Figure B:

Pfizer R&D spend

"You can see that Pfizer's R&D spending has nearly tripled since the year 2000, but that cumulative NME line doesn't seem to be bending much. And, as Munos points out, two (and now three) productive research organizations have been taken out along the way to produce these results. It is not, as they say, a pretty picture."

Alston Mabry writes: 

As long as it's the weekend and we're kicking around stock ideas…consider TEVA: They will get huge new opportunities from the blockbuster drugs coming off patent, and they've been growing revs and earnings like crazy. They play well to the "rising cost of healthcare" theme, and they are global. You're buying growth, though, not dividend.

Dan Grossman writes: 

1. The Barron's article makes no sense. If a company is about to lose half its earnings because the patent on its most profitable drug is about to expire, how does it help to sell off products or a division where earnings are not expiring?

2. Teva is in much the same position as Big Pharma. While known as a seller of generics, more than 30% of its earnings come from its non-generic multiple sclerosis drug Copaxone, which will soon face generic competition itself resulting in disappearance of these profits. Only Teva has been a lot less honest about this than Big Pharma.

John Tierney writes:

….The problem is that they have failed to deliver any important new and important blockbuster drugs for years.

Right on the money. Some blame, though, must be placed on the FDA. This story from the NYT elaborates:

Medical device industry executives and investors are complaining vociferously these days that the industry's competitive edge in the United States and overseas is being jeopardized by a heightened regulatory scrutiny.

The F.D.A., they and others say, appears to be reacting to criticism that its approvals for some products had been lax, leading to a spate of recalls of some unsafe medical devices, like implanted defibrillators and hip replacements.

Device companies have been seeking early approval in Europe for years because it is easier. In Europe, a device must be shown to be safe, while in the United States it must also be shown to be effective in treating a disease or condition. And European approvals are handled by third parties, not a powerful central agency like the F.D.A.

This article follows another that the Times published (which I can't find at the moment) last week revealing that the two drugs most commonly used for surgical anesthesia are both made only in Switzerland. The drugs are no longer being made available since Arizona, running short of the primary drug, bought some from an independent supplier, and subsequently used it in an execution– a big EU no-no. As a result, Novartis, with no control over their customer's distribution, is refusing to sell any more in the states.

The article concludes by noting that venture capital spending on the medical device industry in the US dropped 37%. Yet billions and billions are sitting on the sidelines ready to pounce on the next techno-dweeb with a social networking idea. 

John Tierney adds: 

The study, covering 2004 through 2010, found the overall success rate for drugs moving from early stage Phase I clinical trials to FDA approval is about one in 10, down from one in five to one in six seen in reports involving earlier year.

Roger Longman comments: 

Guess I sort of agree.

But issue is that while downside isn't huge, the likelihood of some price decline is possible while near-term upside unattractive since tied so closely to successful product launches. BI is only company with really great recent news (launch of Pradaxa, which will likely be a blockbuster) — but BI is private. Bayer/J&J got great news on recent competitor drug — but launch some time away and by then BI will have sewed up most of the new prescribers. Novo could do well, given extremely successful launch of Victoza — but success probably priced into the stock. NVS has Gilenya (innovative small-molecule MS drug) but reports are that it's had a troubled launch because hadn't solved the neurologists' problems with cardiac monitoring when starting the therapy.

He's right that people could buy them for the dividends but I'd wonder if the potential downsides in the stocks might not negate the effects. Stuff can and will go wrong. Merck, for example, has lost a significant chunk of the future value of SGP acquisition thanks to poor launches of Bridion and Saphris, disadvantages of boceprevir vs. Vertex's telaprevir, and — the cause of its most recent stock problem — failure of vorapaxor (most important drug in SGP pipeline).



 Several of you began with relatively small sums of capital and made fortunes, got published, became your own boss, etc. (or so it seems based on posts here and material on the internet). This doesn't seem to happen as much anymore. Most Horatio Alger style stories these days begin with well established offshoots of big firms and too often end in handcuffs. I can't think of any instances of people started with a $5k credit card advance or loan and a dream in the past twenty years (except non-market stories like Facebook which is probably why compu sci is becoming so popular again).

Even those with multi-year consistently profitable track records with good alphas are having difficulties raising any reasonable sums of AUM. And turning $50k into $1mm let alone $20mm seems to require incredible risk or a time machine. Most biographies of successful people that I have read (whatever the field) tell stories of men and women who lay everything on the line and suffer any obstacle (lost spouses, prolonged poverty, living in a taxi while subsisting on ramen, etc.) to achieve their dream. Perhaps this is still the formula. But it seems the odds are stacked up against the would-be market entrepreneur more now than in the past with the current environment and many of the great success stories came in a period of unprecedented market rise. So, to those on the list who have achieved the improbable what would you recommend to your children or other interested parties regarding how to become a success in the markets these days while remaining personally solvent and without taking undo risk when in an era where raising external money is difficult with a good track record and impossible without one?

Charles Pennington comments:

Gladwell writes a lot of wrongs, but I think he has a point in this article . He says that often entrepreneurs have images as swashbuckling risk-takers, but in reality, at the time when they made their crucial decision(s), the circumstances were such that the decision was not all that risky.

Vince Fulco writes:

The authors (really Andrew) of the book I mentioned a few weeks back; "Panic" by Andrew Redleaf and Richard Vigilante, go in depth to the point Prof. Pennington is making. They point to the backgrounds of real entrepreneurs who seemed like risk takers but in point of fact often had years of experience before venturing out on their own.

Location 837-838 on kindle:

"…In the real economy we see all the time people being paid for hard work, for perseverance, for insight, and for experience. But it is all but impossible to observe anyone being paid for risk. It is easiest to see this starting with some extreme cases. There are many heros among the great entrepreneurs. It is almost impossible to think of one who got paid for taking risk. The more brilliant the entrepreneur and grand his achievements, the less true it seems. Was Alexander Graham Bell paid for the risk he might not invent the telephone? Nonsense, he was paid for inventing it. Was Edison paid for the risk that he might not invent a light bulb, or for actually inventing it? Henry Ford was not paid for taking the risk that he might not be able to build a car affordable to "any man of good salary"; he was paid for actually doing it. In the extreme case, even insurance companies, as the great Frank Knight pointed out almost a century ago, are paid not for accepting risks but for transforming genuine uncertainty–will I be in an accident?–into statistical predictability–some percentage of drivers will be. Even the flying Wallendas were paid not for their risks but for their skill. Dead acrobats don't get a piece of the gate. Acrobats who risk and fail are less popular than those who succeed despite undertaking greater and greater challenges…"

"…the deeper we look into these men's lives, the more difficult it is to justify the notion that 'risk taking' explains their achievements and rewards. The very notion of risk disappears into incoherence. What are the risks of not inventing a telephone (or a light bulb or an automobile)? Do we mean the odds against doing so? The odds against whom doing so? Anyone or the men who actually succeeded? If the odds against success are the measure of risk and hence reward, why were these men, who were good candidates to achieve these things and thus took less risk, so well rewarded?…"

"…Or by risk do we mean what the entrepreneur had to lose? But the more dramatic the story, the more we see that in their most productive years these men had very little to lose and enjoyed what they were doing far more than most men enjoy their own work. It is at least as true to say that they were 'at play' as to say they were 'at risk'…"

Jan-Petter Janssen writes: 

I won't call myself successful yet, but I do know a recipe for success in today's world.

1) Work and save money in a high income country.

2) Relocate to a low cost, tax free country.

1->2) Exponential growth for the savvy speculator.

The mining sector in Western Australia pays extremely well (you should be able to make $100-$200k). Since there are not many temptations in the Aussie outback (except playing the didgeridoo), you will see your bank account grow in tandem with your salary. After a few years you can take your money and move to one of the low cost, low tax countries in South East Asia.

Join me, Coyle!



Is this NYT editorial by David Brooks not merely a modern restatement of the beliefs which [were popular for a while in the 1930s,] then essentially spawned Dr. Terborgh's refutation of productivity end-times in "The Bogey of Economic Maturity" (1945)…

…which is to say, a reiteration of the assertion that, with the plains and frontiers having been occupied (circa 1920), that no economic growth was left to be had?

90 years of industrial, manufacturing, biotech, internet, financial, and etc. growth says otherwise.



Last week:

Close > Open as well as Close > Close_prev_week for S&P Futures, Gold Futures, Long Bond futures and behold also the Dollar Index Futures!

Who is bluffing? And how?

105 Bluffs since 1st Jan 1990 to date wherein Friday to Friday close of SP1, US1, GC1 and DX1 was higher.

       T+1 Bonds Stocks Gold Dollar
       Mean -0.1090 0.0190 0.0753 0.1489
       SD 1.4624 0.0011 2.3219 1.2472
       Avg Pos 1.0443 0.0190 1.7733 0.9865
       Avg Neg -1.1182 NA -1.5872 -0.8848

A "bluff" as defined above has NEVER Produced a negative return in SP1 in the following week! Why?

Jordan Neuman writes: 

Is that an average 1.9% gain for the S&P?

Victor Niederhoffer asks: 

What is this pattern?



 Can anyone comment on how Python compares to R as it pertains to trading testing/analysis? I already know R and am not seeing a lot of added benefit to learning Python vs becoming more proficient in R but I am probably missing something.

Phil McDonnell writes:

You could probably do almost anything you need in R. So adding Python not much of an improvement. I would say that the two languages are very different in how you approach a problem. R is much more oriented to telling it to operate on a vector of numbers or a times series or matrix object. You can do those types of operations very easily and efficiently with only a line or two of code. but if you try to write your own FOR loop to write up a procedure to do the same thing it will run shockingly slowly– something like 30 times slower. But usually there is a way to write the code up as a vector operation without a loop.

Python is more designed to be a procedural language where you write your own loops and procedures. It is designed to be efficient at that and gives you more low level control but at the cost of more lines of code and more detail from the programmer.. 



 They are not parked outside of Barclay's Capital….where you can buy some new ETN's based on the Barclays "Turn of the Month Index Family."

This isn't an April Fools Day Joke! (I'm now inspired to approach Barclays about licensing my Westmister Kennel Club Stock Market Indicator — which is unquestionably also "more efficient … than a traditional buy-and-hold approach." But efficient for whom?)

See more here:

The Barclays Capital Turn of the Month Index Family (TOM™ Index) has been constructed to enable investors to access equity indices in a more efficient way than a traditional buy-and-hold approach. The Barclays Capital TOM™ Index family is based on the TOM™ Strategies that provide a transparent and easy to understand mechanism which hypothesises that the performance of the stock market depends on the trading day during the month

The Barclays Capital TOM™ Long Index invests in the relevant underlying equity benchmark Index on the close of the 4th business day before each month end and closes this position 3 business days after the same month end. The Long Index is not invested during the rest of the month. The TOM™ Long index is available in price return, excess return and total return versions.

The Barclays Capital TOM™ Long/Short Index takes a short equity position on the close of the 11th last business day before each month-end and closes this position on the 5th last business day before month-end. It then takes a long position Index on the close of the 4th last business day before each month end and closes this position 3 business days after the same month end. The long/short index is not invested during the rest of the month. The Barclays Capital TOM™ Long/Short index is available in price return, excess return and total return versions.



 I had not seen a westerner in a month of traveling Borneo, Sulwesi and Sumatra, all lesser visited Indonesia islands. The method has been to bus and ferry around each island, take a $3 room in a village, and strike out on a sidewalk til it ends, and delve into the jungle. Once the path reached a rusty cable chair that I gave a try hand-pulling across a roaring river. Waterfalls are drinking fountains. The orangutans, bigger than locals with arms longer than mine, were lured in the wild by bananas. The 9' albino tiger is a bit of a cheat shot from 3' away while stalking a baby carriage at a zoo.


Cable chair

Cable chair with passenger

Jungle drinking fountain


White tiger Saigon zoo



 There's probably no better comment on the state of "capitalism" in this country than that the pivotal issue and the sturm-und-drang slowly mounting around the NYSE being taken over by Deutsche Bourse seems to center upon a "bastion of American capitalism falling into foreign hands" (Aside: A business that essentially operates as a monopoly is a bastion of American capitalism? On second thought, perhaps.) and not, as it should be, what price is being paid vs. the current share price, and if/how shareholders stand to benefit in terms of economies of scale, marketing benefits, etc.

T.K Marks writes:

Regarding the foreign acquistion of the New York Stock Exchange, should there be any dissenters on the Board of such they should insist on writing into the contractual terms that any deal include an agreement in principle that the aquiring party should dig even deeper into their pockets and buy another New York namesake of note, the Mets.

That should be enough of a poison pill.

Should the terms of a such an arrangement not seem at first blush to be entirely above board, the irony lost upon them would be understable to those who have never toiled on an exchange floor.

To those who have worked on the floor and still don't get the above, a closer reading of Dante's Inferno may be in order.

Most specifically, the Fourth, Eight, and Ninth circles.

Those boys out there in Chicago are already saddled with the Cubs. They've suffered enough. Given the circumstances, throwing the Mets in as a rider to any Big Board deal would be cruel and unusual gamesmanship.

A compromise should be in order: Should the Germans in fact be serious about buying the NYSE, as a goodwill gesture they should agree to take Mike D'Antonio off New York's hands as well.

The Germans in turn could unload him to the Dallas Mavericks and get Dirk Nowitzki back.

Sounds like a complicated international negotiation, but then again only a coach with as little regard for fundamentals as Mike D'Antonio could somehow get The Hague involved.




The slope of the yield curve between say 0 and 2 years has soared since October, the 2-year yield going from ~0.35 to ~0.85 with short term rates still zeroish.

Seems like that's discounting an awful lot of hikes by the fed over the next year or two.

This is bait to see if Rocky will tell me what it means.

Victor Niederhoffer responds: 

Before the erudite polymath sets us straight, I can tell you that it means the expected average of the funds rate for the next 2 year is 1.70%

Rocky Humbert takes the bait:

Last April, the 2 year note reached 1.11 (0.85% last). So, we're still about 30 basis points below last April– which incidentally was a great time to short stocks and buy bonds… One obviously wonders whether we'd be 30 - 50 basis points higher right now but for the QE2 ??

Vic is correct, but there's a nuance because the mean is different from the path. The last six Fed Funds futures from June 2012 to Jan 2013 predict fed funds at between 1.00% and 1.83%; and the front of the Fed Funds strip Feb11 to Feb Sep 11 all have Fed funds between unchanged So the "steepness" is mostly in the back contracts. That is, Mr. Market believes that the fed will not move until late 2011 or early 2012 at the earliest. And then it will tighten 200 basis points fairly quickly. I think the market is consistent with Pimco's most recent stated view…

It's really hard for me to get excited about a 2 year note at 0.84% when the CPI is running at more than double that. And, the MIT Billion Price Project is predicting an accelerating CPI over the next few months.



 "A bank of the United States is in many respects convenient for the Government and useful to the people. Entertaining this opinion, and deeply impressed with the belief that some of the powers and privileges possessed by the existing bank are unauthorized by the Constitution, subversive of the rights of the States, and dangerous to the liberties of the people, I felt it my duty at an early period of my Administration to call the attention of Congress to the practicability of organizing an institution combining all its advantages and obviating these objections. I sincerely regret that in the act before me I can perceive none of those modifications of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the Constitution of our country.

The present corporate body, denominated the president, directors, and company of the Bank of the United States, will have existed at the time this act is intended to take effect twenty years. It enjoys an exclusive privilege of banking under the authority of the General Government, a monopoly of its favor and support, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange. The powers, privileges, and favors bestowed upon it in the original charter, by increasing the value of the stock far above its par value, operated as a gratuity of many millions to the stockholders.

An apology may be found for the failure to guard against this result in the consideration that the effect of the original act of incorporation could not be certainly foreseen at the time of its passage. The act before me proposes another gratuity to the holders of the same stock, and in many cases to the same men, of at least seven millions more. This donation finds no apology in any uncertainty as to the effect of the act. On all hands it is conceded that its passage will increase at least so or 30 per cent more the market price of the stock, subject to the payment of the annuity of $200,000 per year secured by the act, thus adding in a moment one-fourth to its par value. It is not our own citizens only who are to receive the bounty of our Government. More than eight millions of the stock of this bank are held by foreigners. By this act the American Republic proposes virtually to make them a present of some millions of dollars. For these gratuities to foreigners and to some of our own opulent citizens the act secures no equivalent whatever. They are the certain gains of the present stockholders under the operation of this act, after making full allowance for the payment of the bonus.

Every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent. The many millions which this act proposes to bestow on the stockholders of the existing bank must come directly or indirectly out of the earnings of the American people. It is due to them, therefore, if their Government sell monopolies and exclusive privileges, that they should at least exact for them as much as they are worth in open market. The value of the monopoly in this case may be correctly ascertained. The twenty-eight millions of stock would probably be at an advance of 50 per cent, and command in market at least $42,000,000, subject to the payment of the present bonus. The present value of the monopoly, therefore, is $17,000,000, and this the act proposes to sell for three millions, payable in fifteen annual installments of $200,000 each.

It is not conceivable how the present stockholders can have any claim to the special favor of the Government. The present corporation has enjoyed its monopoly during the period stipulated in the original contract. If we must have such a corporation, why should not the Government sell out the whole stock and thus secure to the people the full market value of the privileges granted? Why should not Congress create and sell twenty-eight millions of stock, incorporating the purchasers with all the powers and privileges secured in this act and putting the premium upon the sales into the Treasury?

But this act does not permit competition in the purchase of this monopoly. It seems to be predicated on the erroneous idea that the present stockholders have a prescriptive right not only to the favor but to the bounty of Government. It appears that more than a fourth part of the stock is held by foreigners and the residue is held by a few hundred of our own citizens, chiefly of the richest class. For their benefit does this act exclude the whole American people from competition in the purchase of this monopoly and dispose of it for many millions less than it is worth. This seems the less excusable because some of our citizens not now stockholders petitioned that the door of competition might be opened, and offered to take a charter on terms much more favorable to the Government and country.

But this proposition, although made by men whose aggregate wealth is believed to be equal to all the private stock in the existing bank, has been set aside, and the bounty of our Government is proposed to be again bestowed on the few who have been fortunate enough to secure the stock and at this moment wield the power of the existing institution. I can not perceive the justice or policy of this course. If our Government must sell monopolies, it would seem to be its duty to take nothing less than their full value, and if gratuities must be made once in fifteen or twenty years let them not be bestowed on the subjects of a foreign government nor upon a designated and favored class of men in our own country. It is but justice and good policy, as far as the nature of the case will admit, to confine our favors to our own fellow-citizens, and let each in his turn enjoy an opportunity to profit by our bounty. In the bearings of the act before me upon these points I find ample reasons why it should not become a law.

It has been urged as an argument in favor of rechartering the present bank that the calling in its loans will produce great embarrassment and distress. The time allowed to close its concerns is ample, and if it has been well managed its pressure will be light, and heavy only in case its management has been bad. If, therefore, it shall produce distress, the fault will be its own, and it would furnish a reason against renewing a power which has been so obviously abused. But will there ever be a time when this reason will be less powerful? To acknowledge its force is to admit that the bank ought to be perpetual, and as a consequence the present stockholders and those inheriting their rights as successors be established a privileged order, clothed both with great political power and enjoying immense pecuniary advantages from their connection with the Government.

The modifications of the existing charter proposed by this act are not such, in my view, as make it consistent with the rights of the States or the liberties of the people. The qualification of the right of the bank to hold real estate, the limitation of its power to establish branches, and the power reserved to Congress to forbid the circulation of small notes are restrictions comparatively of little value or importance. All the objectionable principles of the existing corporation, and most of its odious features, are retained without alleviation.

The fourth section provides " that the notes or bills of the said corporation, although the same be, on the faces thereof, respectively made payable at one place only, shall nevertheless be received by the said corporation at the bank or at any of the offices of discount and deposit thereof if tendered in liquidation or payment of any balance or balances due to said corporation or to such office of discount and deposit from any other incorporated bank." This provision secures to the State banks a legal privilege in the Bank of the United States which is withheld from all private citizens. If a State bank in Philadelphia owe the Bank of the United States and have notes issued by the St. Louis branch, it can pay the debt with those notes, but if a merchant, mechanic, or other private citizen be in like circumstances he can not by law pay his debt with those notes, but must sell them at a discount or send them to St. Louis to be cashed. This boon conceded to the State banks, though not unjust in itself, is most odious because it does not measure out equal justice to the high and the low, the rich and the poor. To the extent of its practical effect it is a bond of union among the banking establishments of the nation, erecting them into an interest separate from that of the people, and its necessary tendency is to unite the Bank of the United States and the State banks in any measure which may be thought conducive to their common interest."



The Ditch Digger's Daughter is the best book I have read in many, many years. I swelled up, reading it, choked up and cried.



 Season of the Witch

Directed by Dominic Sena Reviewed by marion ds dreyfus

In Season of the Witch, one of the sillier sword-and-seal Hollywood products of the season, a daring duo of Crusades-deserters, hangers-on and a priest literally stop the Black Death with just their side-swords, a Latin missal and their shaken-but-unstirred faith in Deity. (But really, isn't it really about whether we should try Khalid Sheikh Mohammed in civilian court. So saith moi, anyway.) As it opens, Nicolas Cage and Ron Perlman, Crusaders with an anachronistic stream of nonstop cynical repartee, kid each other nonchalantly about the number of enemies they'll slay—buddy badinage that continues across a violent montage of the greatest Crusade hits of the 1330s and 1340s. That youthful cockiness gets a rude moral awakening (finally) within 15 years, in the face of a battle toll that includes blameless women and children. Would Christ honk in admiration of this? So they desert God's Army, abandoning battlefield for the Bubonically scarred countryside, its boil-bubbled icky faces and mass graves of plague-ridden corpses. Sorcerer's Apprentice, this ain't. But even that, starring the ubiquitous Cage, wasn't.

But neither is it Mad Max. It's a road flick, in which our Transit Irregulars transport a suspected witch to a monk stronghold. Its temperament is carefully studio-neutered, taking no greater casualty than Cage, too resolutely contemporary. When playing an ornery magician or a Middle Kingdom warrior, he reads like an L.A. bar-habituee in medieval drag. Period film is not him. Well, what is him? His capacity for crazy, his alacrity—and natural ability—to inhabit volatile characters, like the leads of Guarding Tess (1994), Adaptation (2002) or The Bad Lieutenant (2009), to their scruffiest ends. In paycheck plums like this, he's cocooned into impotency by studio dictat. As though he's force-fed Prozac to keep his real, unstable self back in the cloakroom producing soggy readings devoid of oomph or Oh-my.

Time-extending set pieces, from a wolf attack to a midnight chase through a mud trench, fill out the simplified 2-hour pitch. Together, the film exploits the libretto of medieval cinematic tropes. There's a ghostly, fog-foliaged forest; rickety bridge crossings; medieval witches who appear at first glance luminous, incapable of a nasty thought. Ditching the Dark Ages in attitude, though, it's assidulously anti-clerical, an unapologetic middle finger to Rome.

Pre-Renaissance Catholics also serve as surrogates for modern-day Americans, particularly military-class (amplified by Cage's tale about an unscrupulous recruiter). The film acknowledges compromised heroes, more or less unethical killers. Despite its suggestions of ambiguity, Season is 'good guys that have Him on their side' and a righteous mission. Like our War on Terror, the problem is never their objective (high-concept) but leadership and execution (Oy). Cage–and the viewer, us, by implication–insist on the 'witch's' right to a 'fair trial,' whatever that meant 600 years ago, but by denouement he can't



Can the truly enormous rise in the use of derivatives, complicated options, and highly structured financial instruments really have made a [corresponding] contribution to economic efficiency? - A Former Central Banker.

It's hard for most people, especially senile ones above 6' 6'' to understand that distribution of product is as important to well being as production. The Russians always had bad weather. The ability of people to invest in the stock market through ETF's and index funds, and to hedge through options would easily be just as important as a move from cassettes to head phones.

Rocky Humbert writes: 

This is a great topic, and I'm not qualified to express an opinion. But that never stopped me before.

It's not immediately obvious to me why ETF's should necessarily cause higher (and lasting) economic growth than say, "old-fashioned" index funds. Except in an academic paper, of course. What economic growth comes from the ability to trade a basket of stocks continuously…as opposed to say, at the close only? Is there any empirical evidence (except theoretical) that the growth rate of the economy has improved since the introduction of ETF's? I wonder whether it's even possible to study such a thing? Certainly, much of the growth from housing that was attributable to the mortgage "innovations" was not lasting, but was instead a zero/negative sum game. But does that prove anything?

I accept that when one reduces the costs of moving capital to productive places, that savings should find its way into more productive activities. And theoretically, the ability to hedge should improve productivity too. And liquidity should reduce hurdle rates TO A POINT. But at what point are there diminishing marginal returns — and does the transfer of risk from party A to party B *always* result in economic growth and a better standard of living (especially when taking the government's interventions into account).

Remember, finance is not an ends to itself. Rather, it's simply a vehicle for getting capital to places where it's needed.



 "Progress is cumulative in science and engineering but cyclical in finance"
-James Grant

Which part of this claim is more likely to be untrue?

JAB says it most briefly, "when you progress far enough, you arrive at the beginning". Very long term cycle he has in mind when he says this. Is progress in Science and Engineering really cylical? Does a new discovery or a new principle come by only after leading to unbearable frustrations as in expressed by "necessity is the mother of all invention?"

Perhaps we will all agree the cycles of finance are far shorter in span than those of Science and Engineering. Why?

Steve Ellison writes:

The scientific method leads to cumulative progress. To be tested scientifically, a proposition must be falsifiable. Are the Black Eyed Peas superior to Beethoven? There is no objective way to answer that question.

Much science is governed by unchanging physical properties, unlike finance. Once it is established that one can construct a heavier than air flying machine, later innovators can be confident that will continue to be true and move on to improving designs, for example increasing speed. There are no flexions able to change the characteristics of the atmosphere to prevent planes from flying.



"Every thing secret degenerates, even the administration of justice; nothing is safe that does not show how it can bear discussion and publicity…The danger is not that a particular class is unfit to govern. Every class is unfit to govern."

-Lord Acton (1834-1902)



 1. For the early evening when you wanna dance and set the mood:

My Midnight Confession - The Grass Roots

Brandi (You're a Fine Girl)
- Looking Glass

Everybody's Talking
- Nilsson

You Can't Hurry Love
- Phil Collins

Toes - Zac Brown Band

Kiss Me - Sixpence (None the Richer)

2. Time to slow it down and hold your sweetie tight!*

Vincent (Starry Starry Night) - Don McLean

Somewhere Over the Rainbow/Wonderful World - Israel Kamakawiwo?ole

3. Songs to close the deal!!!!!

Make You Feel My Love - Bob Dylan

Angel - Sarah McLachlan

Unchained Melody - The Righteous Brothers

4. For those that want to reminisce on Valentines Day

Night Moves - Bob Seger

What Might Have Been - Little Texas

Times of Your Life - Paul Anka



 "Sonderling won only 5 points off Tsgona's service in the decisive third set, but four came in one game for the final break of the match." Thus Sonderling won winning only 5 of 20 points on Tsonga's serve. The market was down 15 of 20 intervals but ended up in the period.



 Despite the fact we're in the market "that doesn't seem to go down" the issue remains whether or how new affects markets. There are several alternatives: 1. Positive news pushes markets up. and vice verse. 2. News does not affect markets. 3. The reaction to the news is usually a) right, or b) wrong. My theory is 3(b), the reaction tends to be wrong. Last week news of Egypt occurred at a time when the markets were pushing to new recent highs. The market has been rather new hungry and reactive since the massive government meddling with the financial system and probably rightly so. But I am not sure why the news from Egypt is good for equities in the US. Sure its a bell for freedom and all, but it brings much uncertainty to many markets.

The second theory is the Teenage Ninja Turtle theory such that when I go out of town for a few days the market drops. Do you remember the classic scene "What if, What if??". It did last month. I'll be out of town later this week. What if?

Rocky Humbert writes:

It's not new information per se to which markets may react. Rather, it's new information versus current perception(s) that may cause prices to move. This phenomenon operates at many different levels– including the purely psychological– which can then cause feedback effects which amplify the change.

Since Mr. Sogi chose the "news" from Egypt to elucidate his point, it seems apt to reference the stock "Blue Nile" (ticker=NILE) Despite the "good" news from its namesake, this stock dropped about 12% on Friday because of disappointing quarterly results. Who said that a rising tide (or in this case, "river"), lifts all boats???



13 February 2011

Mr. Randy Erwin

Buy America Challenge blog

Dear Mr. Erwin:

Thanks for exporting to my household a link to your Feb. 12 blog post "Record Crushed: U.S. Trade Deficit with China - $273 Billion in 2010 - Biggest Ever Between Two Countries." In it you write that "We can solve our country's economic problem ourselves by changing our buying habits just slightly and buying American more often. The average adult consumes $700 per month in imported goods. If we could reduce that to $517 per person per month, we would have no trade deficit at all. With no trade deficit, we would likely have 3-4% unemployment. All we need to do is reduce our consumption of imported goods 25% to have jobs again in this country. That will secure our long-term economic future (a.k.a. our children's future)."

I've some questions for you.

- Because "buying American more often" means buying low-priced imports less often, Americans' spending power will shrink. Americans will then have less money to spend at the movies, at local restaurants, on premium cable-tv packages, and the like. How do you know that the job losses that result from contractions in these industries won't offset whatever job gains emerge in other industries from "buying American more often"?

- At least half of all U.S. imports are inputs used for production here at home by American firms. So if American firms substitute more costly American-made inputs for lower-priced imported inputs, many American firms' costs will rise. These firms will lose market share. How do you know that the job losses that will result from these firms' contractions and bankruptcies will not offset whatever job gains emerge from "buying American more often"?

- Because every dollar of America's trade deficit is a dollar invested in the U.S. economy - investments that overwhelmingly expand the volume of America's productive capital assets above what this volume would be without these foreign investments - eliminating America's trade deficit will likely result in a net reduction of investments in the U.S. economy. How will less investment "secure our long-term economic future"?

I have other questions, but I'll content myself with asking only the above three.

Sincerely, Donald J. Boudreaux

Professor of Economics

George Mason University

Fairfax, VA 22030



 Finally Mike D'Antoni is getting a good pantsing from the media for not winning. But no one seems to feel towards him the way we all feel to a person using a fixed system, e.g. a trend following system, or a moving average system, or a swing system, with stops that's bound to fail.

His system is the problem, not the players or their heart. When the whole idea is to run down the court and shoot the first 3 balls you can, you dishearten the whole team. The shots are random. The rebounds go to the other side. The idea of fighting to get in position goes out the window as there's no time for any real play, and the other player is going to get the ball. I still say it started with Patrick Ewing who played the same game from the 80s that Carl Braun and Sweet Water Clifton did in the 1950s as opposed to the inside game that wins for all the other good teams where they take high percentage shots.

The Knicks are great for showing you how to lose in the market. They should be watched. The coach's excuses are the same as the system players are when he loses. "We didn't play smart," he said last time. "The fans should stop cheering for Melo." It's exactly like, "the market never acted that way before," or "the announcement of the Mubarak quitting made the stocks go up". I have a copy of Alibi Ike and Horseshoes by Ring Lardner at my side, but it was a lot funnier than when the coaches actually had a plan that could build a win rather than this sardonic, know it all who demoralizes his players the same way a trading manager would if he followed a Hendry system.



 Thought this would be of interest to the Chair and other followers of Captain Pollard…

HONOLULU — In the annals of the sea, there were few sailors whose luck was worse than George Pollard Jr.'s.

Pollard, you see, was the captain of the Essex, the doomed Nantucket whaler whose demise, in 1820, came in a most unbelievable fashion: it was attacked and sunk by an angry sperm whale, an event that inspired Herman Melville to write "Moby-Dick."

Unlike the tale of Ahab and Ishmael, however, Pollard's story didn't end there: After the Essex sank, Pollard and his crew floated through the Pacific for three months, a journey punctuated by death, starvation, madness and, in the end, cannibalism. (Pollard, alas, ate his cousin.)

Despite all that, Pollard survived and was given another ship to steer: the Two Brothers, the very boat that had brought the poor captain back to Nantucket.

And then, that ship sank, too.

On Friday, in a discovery that might bring a measure of peace to Captain Pollard, who survived his second wreck (though his career did not), researchers announced that they have found the remains of the Two Brothers. The whaler went down exactly 188 years ago after hitting a reef at the French Frigate Shoals, a treacherous atoll about 600 miles northwest of here. The trove includes dozens of artifacts: harpoon tips, whaling lances and three intact anchors.

The discovery is believed to be the first of a Nantucket whaler, one of an armada of ships that set sail during the early 19th century when the small Massachusetts island was an international capital of whaling. It was a risky pursuit that led sailors halfway across the world — and sometimes to the bottom of the sea.

"Very little material has been recovered from whale ships that foundered because they generally went down far from shore and in the deepest oceans," said Ben Simons, chief curator of the Nantucket Historical Association. "We have a lot of logbooks and journals that record disasters at sea, but to be taken to the actual scene of the sunken vessel — that's really what is so amazing about this."

The discovery was, in some ways, as fortunate as Pollard was cursed.

The Two Brothers — which was bound for the newly opened Japan Grounds after whalers had fished out the Atlantic and parts of the South Pacific — was long known to have sunk on the night of Feb. 11, 1823, off the French Frigate Shoals.

Full article at NYT.



It's Not Comfortable Being A Contrarian:

A contrarian investment approach, by definition, purposefully repeals that innate longing, which makes it far from comfortable or fruitful, for a while at least. Recall it was during the height of the 1990s tech bubble when Louis Rukeyser famously dumped analyst Gail Dudak from his panel of market "elves" on "Wall Street Week" for her bearish forecasting; the market peaked just four months later.Or consider that a decade ago there was little interest in commodities and emerging markets — both of which went on to years of strong gains even before the fundamental arguments became clear. Far from being celebrated or followed , contrarians are more often ridiculed or simply ignored.

To understand what a contrarian is, it's important to know what they are not. We mistakenly think of any investor fighting the tape as being contrarian. If the market drops, so the thinking goes, it's because the public is selling, which is exactly when the opportunistic contrarian steps in. Yet as we wrote a few years back, the law of supply and demand is also that of demand and supply. Markets are just as likely to drop because there are too few buyers as they are if there are too many sellers. Just because the market dips, it doesn't mean the public is jumping out.

And being a contrarian isn't about what you buy, it's about how you think. To that end, he shouldn't focus on the worst-performing stocks – quite the contrary.

Here is the full article



I found a very inspiring poem today, but alas,it was uncredited. I found so many lessons in life as well as markets that I felt compelled to share it.

If you think you are beaten, you are;

If you think you dare not, you don't.

If you'd like to win, but think you can't

It's almost certain you won't.

If you think you'll lose, you've lost.

For out in the world we find

Success begins with a fellow's will:

It's all in the state of mind. 

If you think you're outclassed, you are:

You've got to think high to rise,

You've got to be sure of yourself before

You can ever win a prize.

Life's battles don't always go

To the stronger or faster man,

But sooner or later the man who wins

Is the man who thinks he can.

Dylan Distasio comments: 

Thanks for sharing, Jeff. The author is Walter D. Wintle.



 Listening very occasionally through this streak to Byron Scott explain how his team is trying, and that injuries have decimated the team, and that some young talent is getting a lot of NBA minutes– the same theme over and over in every interview and post game radio show etc. No emotion from Scott—

Then the mild mannered Scott lost it after loss number 26– to tie the all time losing streak in any pro sport. Maybe he realized that his name will forever be tarred by this streak and maybe he will never coach again. So maybe he finally got angry enough to hold closed door half time and after game team meetings. Maybe he finally coached. I will not understand the fans– it was pandemonium like we won a championship– we won a game, the first win since Dec 18th when they beat the Knicks in OT.

This win over the Clippers was at home in OT. JJ Hickson had one of the best games of his career and the cavs were tenacious on defense. Prior to this game announcer, Joe Tate– who is probably the best play by play announcer in the NBA, gave his first phone interview after heart surgery and rehab. He fell ill after never missing a game in some numerous years last year– coincidentally right around the time of Lebron James' "decision". I thought that Tate was not going to make it and that his last announced game was last season's dissapointing end. But now there is hope and a fresh start. Before the game Joe was asked about the cavs coach and Tate said that Scott was the man to lead the Cavs into a turnaround to the upside.

Whatever it was there was a spark and a fire not seen on the court in a long time– and it wasn't one dominating ego, there was TEAM last night.



 Kids Believe Literally Anything They Read Online:

Anyone can publish anything on the Internet. Despite that, children aren't taught how to evaluate the reliability of information they read there. As demonstrated by a recent study, this is true to a shocking extent, and there may be dire implications for the future of today's young people….Donald Leu, professor of education at the University of Connecticut, selected 53 of the best readers from seventh grade classes in low-income school districts in South Carolina and Connecticut.

The page in question was devoted to an animal called the Pacific Northwest Tree Octopus. Yes, a tree octopus – an aquatic animal that allegedly lives in trees.87.5 percent of the seventh-grade subjects judged the Web page to be "reliable." More than half went so far as to call it "very reliable."

Victor Niederhoffer writes:

The octopus is very smart and could climb a tree if food were there, and it could get back to water in due time. One at the British Museum did that after opening its locked cage each night. That is one reason I am very abstemious in my eating of octopus.

Mark Schuetz adds:

It is a little disappointing that the article singles out the younger generation and web pages (Title: "Kids Believe Literally Anything They Read Online") instead of consumers in general and any form of media. As hinted in the subject, one wonders how many adults who worry about kids' "Critical Evaluation Skills" while browsing the internet would at the same time find a TV news segment about the tree octopus fascinating. Compare how sources are more often cited in Felix Salmon's blog than on CNBC– not to mention the comparison of number of factual inaccuracies (and subsequent public corrections) when comparing the two.

Similarly, compare reading one of the Economist blogs paired with browsing the much-hated Wikipedia ("Anyone can write anything! Horrible!") to gain a perspective about world events to watching Fox News.

Perhaps instead of shaking their heads in shame about 7th graders and targeting the internet, the article's author should consider how people of all ages watch segments on television or read their local paper, or really consume any type of media.



 Before one is seduced into buying some five year, one should remember that the average real-yield for five-year notes (versus cpi):

Over the past 10 years: +103 basis points

Over the past 20 years: +215 basis points

Over the past 30 years: +321 basis points

Over the past 40 years: +240 basis points

Currently: 1 basis point.

Instead of buying a five year note, one's time may be better spent watching the scene from Das Boot when the U-boat sinks to crush depth. The sounds of the hull pressure is an apt soundtrack for the current contortions of the yield curve. Despite the bearish observations above, if life follows art, the bond market may be able to surface noch einmal by blowing out the ballast tanks after the refunding … and then limp home…

Tyler McClellan writes:

Well, the geometric return to t bills for all developed countries int he 20th century was about .5% .

The return for longer dated bonds was about 1%.

Over the past 30 years inflation has gone from 10% to 2%. By definition then, monetary policy was sufficient to lower money rates of inflation. Negative real returns to bonds were consistent with modest inflation in the developed world for a 20 year stretch of the twentieth century. And historically the incredibly high real money rates from 1980 to 2000 were more anomalous than any low real rates today or in the past.

Let me make my observation another way. How do you make money being short a two year bond unless short term interest rates are raised? Isn't a five year bond a two year bond plus a three year bond?

By the way, one trade I do like because it is not that negative carry unlike other flatteners, is a real yield curve flattener. (Or just outright buying twenty year tips if they get back to 2%.)



 I finally stumbled across a constant that may explain a high female to male birth rate among certain remote peoples of the world.

In and around Iquitos, Peru at the headwaters of the amazon, it's said that the birth ratio is 3:1, but my observation of thousands of people on the paths & streets is that it's closer to 2:1, nonetheless statistally significant. Explanations offer everything from soil to diet to genetics, but I think it has to do w/ a high genocide among the recent past population from e.g. combat, malaria, cannibalism & so forth. Now here in Lake Toba, Sumatra among the Batak people there is also a remarkably high ratio. I was told it's 3:1, but in observing perhaps 1000 Batak of Lake Tabo it's closer to 4:1.

Yesterday I motorbiked the 100km ring track at 10mph around the remote Toba island that's the center of the Toba tribe, and by rough count among the 500 school children who each yelled gleefully, 'hello meester', the ratio was 5:1. the locals offer no explanation, but complain of the male dearth. I've been beleagured to get married, and to their friends. The locals believe the birth factor lies in the female rather than male, though I was taught that genetically males choose the sex.

The cafe owner where I just ate has a string of 5 female children, and it is common to run to 7 before a male is produced. Everyday a husband runs off with another woman in hopes of producing a son to carry on his family name; if she doesn't birth a male after a few, then he tries another. I wont get married, but am not shy about exploring other aspects of the situation. No solid explanation emerges from the talks, but there are definite constants among both the Peruvian, Amazonians and the Batak for the disportionate birth ratio. It so happens that each race is at the top of the world (in the 100+ countries traveled) for hardiness– I stated this before discovering the birth ratio. By hardiness, I mean strong physical superiority, with a slight mental one also (being related to physiology). The Batak kids look like Arnold Schwartzneggar at age 8, and then grow up. Both sexes among the Peruvians & Batak, but particularly the females, are perfectly proportioned, comely, and among the hardest workers in the world. Their stamina and resistance to discomfort at work or play is outstanding, and I trained for decades to reach that level that the kids of both places own. Diet, soil and water are not commonalities, nor exactly is environment, for the Peruvians live in a low jungle & the Toba Batak in a high jungle surrounding a volcanic lake. Both races are highly sexual, however the Amazonians are relatively promiscuous while the Batak dont practice much before marriage. The only constants, besides strong physical appearance & beauty, appears that each race emerged from cultures that in recent history had a high death rate for various reasons. For the peruvians it's malaria & jungle beasts, while for the Bataks it's fleeing from the mainland to a remote harsh burg. Both recently practiced cannibalism.

Somehow it all seems to have made the female more fertile for female births, like calico cat where only a few males may service a female preponderance to propagate the race. It makes sense evolutionarily, but not genetically unless one looks at calicos where a male birth is rarer. One explanation about calico cats ican be found here, and about the Batak here.



 It certainly is an interesting "debate" being carried viz the precious metals. Two thoughts nag at me when I watch metal news or read analyses: (1) A lot of the people who argue that gold is a bubble right now seem to be people who traded gold back in the 80s and 90s, when the only people who traded gold were in Chicago, New York, London and Hong Kong (exaggeration, but you get my drift); and back then gold never did much, so any big move must be a bubble. Which leads to (2), that many common folk in Asia have decided they want a hard currency, whether their government provides them one or not, and that this de facto hardening is something the folks with the old gold-trading mindset have a hard time grokking. Excuse me, but that leads to: (3) "There is no inflation", but there is actually quite a bit of inflation, just not here. However. though China may be serving as a global inflation sink, they are *not* cut off from the global metals market.



 Chess, like the game of bridge (just look at those guys at the bridge tournaments), I have noticed, is an addiction. In fact, the older I get the more evident it is to me that all of human behavior is under the gravitational influence of people's panoply of addictions (and, virtually everything is an addiction– not just drugs, alcohol, etc. Look at that "CraigsList" congressman who resigned yesterday, or the guys who has just discovered the leverage available– bridging the gap to his dreams– of long options, or young people who just get their driving license– all of human activity is an addiction of varying degree).

And I think the pursuit of satisfying these addictions permeates all of human behavior– and is in large measure a reason why people often act very illogically (Kahneman and Tversky were right– it's just that oftentimes I think the illogic of human beings does NOT have a hidden economic benefit.

Sometimes……our plumbing doesn't make it all the way to our fixtures.

Good stuff to keep in mind down on the shop floor).

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