In the summer reading vein, I very much enjoyed Alex Berenson's first novel, The Faithful Spy, with his main character, John Wells. The next two books in the series, The Ghost War and The Silent Man, were very good, too. The next book, The Midnight House was just okay, and Berenson's most recent effort, The Secret Soldier, is unfortunately a failure.

Jim Sogi writes:

My son turned me on to the spy series by Vince Floyd, including Transfer of Power, The Third Option, Extreme Measures. The books are surprising well written current historical fiction with three dimensional characters with full backstories and touching personal details. The bad guys are complex but the series has a decidedly non PC attitude, so that's fair warning. Its good entertainment though and hard to put the books down. Great for airplane or vacation reading. The main character is an assassin but has realistic doubts and feelings. I briefly compared it to Clancy, but it is astonishing how the technology just a decade back seem so archaic and outdated. I have them downloaded to Kindle for iPad.

David Hillman writes:

And given our particular interest in markets here, one might enjoy the David Liss's "Benjamin Weaver" series. Set in early 18th Century London, Weaver is a former pugilist and highwayman come "thief-taker", i.e., private detective. The son of a Jewish Portuguese stock jobber, his cases involve intrigue and deception revolving around the relatively newly formed stock exchanges, combinations, Bank of England and corporate giants of the time.

Liss' has also written "The Coffee Trader", set 50 years before in Amsterdam, the locus of which is cornering the market in the newly discovered "coffee fruit" and "The Whiskey Rebels", set in America just after the revolution focusing on the attempts of those whiskey rebels on the western frontier attempting to bring down Alexander Hamilton and the Bank of the U.S.

Liss began by writing his first Weaver novel, "A Conspiracy of Paper" while a doctoral candidate at Columbia. All are well written and offer looks at finance and markets, many pretty familiar, not to mention murder, a large cast of ne'er-do-wells, prostitutes and a pretty frank look at the cultural and social biases of the time. He even has a Watson-like sidekick for Weaver, Elias Gordon, a likable bounder of a Scottish surgeon given to bleeding and such, who also schools Weaver in scientic method and probability. A lot going on, fun and good stuff.

The Collab writes: 

William Gibson plays with the theme of pattern recognition in his technologically edgy, subversive books. One of the books, in fact,is called "Pattern Recognition." I have devoured all of them as soon as they come out. The newest one, "Zero History," contains the throwaway insight that when/if someone succeeds in aggregating order flow, the market will cease to exist. Hubertus Bigend — not a hero or a bad guy, but rather a nexus — is one of the most fascinating and ambivalent characters in fiction — comfortable with unpredictability, glinting Bertelsmann, Ralph Lauren and Goldman Sachs.



 Or as Arnold Kling of Econlib puts it, "Somehow, we could ratchet up spending by hundreds of billions at the drop of a hat. Reducing spending by less than $100 billion becomes Armageddon."


9 April 2011

Editor, Washington Post 1150 15th St., NW Washington, DC 20071

Dear Editor:

Suppose that in a mere three years your family's spending - SPENDING, mind you, not income - jumped from $80,000 to $101,600. You're now understandably worried about the debt you're piling up as a result of this 27 percent rise in spending.

So mom and dad, with much drama and angst and finger-pointing about each other's irresponsibility and insensitivity, stage marathon sessions of dinner-table talks to solve the problem. They finally agree to reduce the family's annual spending from $101,600 to $100,584.

For this 1 percent cut in their spending, mom and dad congratulate each other. And to emphasize that this spending cut shows that they are responsible stewards of the family's assets, they approvingly quote Sen. Harry Reid, who was party to similar negotiations that concluded last night on Capitol Hill - negotiations in which Congress agreed to cut 1 percent from a budget that rose 27 percent in just three years. Said Sen. Reid: "Both sides have had to make tough choices. But tough choices is what this job's all about" ("Government shutdown averted: Congress agrees to budget deal, stopgap funding," April 9).

What a joke.

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



 Last weeks Junto was interesting, Greg Rehmke spoke about Charter Cities  the Hanseatic League and work done by Paul Romer.

It was a very informative talk and there was a great deal of discussion. The talk centered on the economic benefits of a small (not national) economic zone similar to Hong Kong or Singapore with limited regulation and low taxes in order to create incentives for economic growth and prosperity. He referred to them as "Global Cities". One very interesting side point raised by a member of the audience was that the attraction to cities of members of rural populations usually meant that those who migrated toward cities were moderates and this migration left radical elements in rural areas unchecked, leading to the proliferation of fundamentalist ideals throughout rural areas in Byzantine, Middle Eastern and Caucasus states. My take was that "moderates" meant those looking to improve their lot and therefore seeking and unafraid of change, leaving those elements not interested in change, improvement or the future behind. I found that idea particularly fascinating.



"so 200 or 300 dollar oil is in the cards"

$300 / barrel * 84,000,000 barrels/day * 365 days/year

= $9,198,000,000,000 / year
(USD 9.2 trillion every year!!!)

In comparison:
$58 trillion = World GDP
$14 trillion = US GDP

I wonder what the sheiks will do with all that money? Even more empty Dubai skyscrapers? A second man made world (the 1st is sinking)? Fuel yet another commodity / stock / real estate bubble?

Such a price, and the following wasteful relocation of resources, is not sustainable if you ask me.

Even $125 gives me the shivers…



 Just read Murray Raphel Remembers, a great heroic autobiography by a man who loves life, his family, friends, customers, business. He was always ready to go the extra mile to do something new, and is a pioneer in public speaking, direct marketing, supermarket marketing, Atlantic City development, and small business retailing.

Five of his marketing rules are: everybody sell. Easier to get repeat business than new business. Your customer asks "what's in it for me?". Find out what the customer wants and give it to them. Winners do things now. 90% of bus comes from old customers or customers they recommend.

The rules about repeat business show why building up a customer base, the old time mailing list, or new fangled eyeballs is a tremendous asset. Shows why internet was not a bubble among other things. Also would suggest interesting hypotheses about the movements of price relative to open interest. The importance of price moves with reduced open interest for example rather than increased. Well worth reading about a heroic man, and a friend, the son who once was my President and forced me to throw Monroe Trout out compared to himself among other heroic contributions. The importance of having a good woman behind you also exemplified.



A problem with waiting and caning is that it can occur once every seven years, and if you try to catch the falling knife, you can elicit a 20% drop in a week like in Sep 2008. The falling knife occurs often in telescoped time with individual stocks. But no evidence that buying these worst performers leads to superior return is possible without a precise contemporaneous as was, non- retrospective file.



It was nice that like the finale of a symphony in sonata form, the final measures recapped and coalesced the entire themes from the previous movements. Friday's move was the same in range as the entire week, and its up and down recapped all the previous Mon, Tues, Wed, Thurs reversals and return to the origin, and then it closed where it started the previous Friday open. Floor traders and conductors would love such movements.



 My home is built on land carved out of what was once a large, hilly, wooded urban park. The property undulates a ways from the back of the house, slopes down about 30', flattens into a glen, then rises to a ridge about 50' in height. The area is populated with tall elms, poplars, birch and ash with a few pines, locusts and other native trees in the mix.

A small herd of about a couple of dozen whitetail deer share these woods with the human residents. The area provides great cover for them. It's also a good source of food, and they forage around the house and surrounding woods most days.

It is well known that deer actively feed in the early morning, at dusk and on moonlit nights. Many evenings around dusk, weather permitting [by that I mean temps > 0 degrees, no rain or blinding snow, and wind less than gale force], I walk out onto the deck to contemplate, drink a glass of wine and/or smoke a good cigar. This is also a perfect time to observe the deer feeding in the woods on shoots and leaves of woody plants which they generally do in groups of about three to six.

Having grown accustomed to humans, they wander the neighborhood, frequently stopping to stare though a kitchen window and regularly can be spied walking single file down the middle of the street without trepidation. But, when feeding, the deer are alert and wary and they move stealthily through the woods, often freezing at unfamiliar or sudden sounds and scents. At times, they'll spook and move with dispatch, covering a great deal of ground very quickly, only to freeze and look around the glen three times. As they feed, they tend to cluster withing a few yards of one another. Safety in numbers, I guess.

Often, one will stray from the group for a while, then others follow and they cluster again. Rarely does one that strays return to the group. It is almost always the other way around, as if the stray was the point man or was scouting the next stop on the buffet. When they move as a group, it is almost always single file. One might characterize the movement of these observed groups as being in fits and starts, and along paths from node to node.

Observing deer in the forest at dusk is not an easy task. If they move quickly, one can hear a rhythmic rustle of leaves and try to use that sound to locate them. Unfortunately, it's not unlike the sound of the gray squirrels frolicking, so one can easily come up with nothing but tree-rats by using that method.

And, deer have evolved to blend into the natural habitat, even in winter when there is no foliage. In color, they are very similar to the gray-brown bark of trees with mossy highlights, making it very difficult to discern the deer among the vegetation. Walking to an observation point, standing very still and staring into and through the stands of trees produces very few observations, even if the deer are in relatively close proximity, so well do they blend in. But, one can increase one's chances if one thinks a little differently.

What I've found works nicely [for me] in locating these particular deer unaided by optics is to look for specific shapes.

The trees in the habitat are strongly vertically oriented, except those that have fallen to the forest floor. Deer, on one hand, have long slender legs that at a distance look very similar to saplings or small diameter tree trunks. In other words, they are vertically oriented and virtually invisible. On the other hand, deer bodies are long, thick and horizontally oriented.

I've found that peering into the woods, focusing on a small section at a time, attempting to distinguish horizontal shapes approximately the size of a medium tree trunk, i.e., a couple of feet in diameter, from the vertical noise is a pretty effective method of finding a deer among the trees. Even though their coloration is nearly identical to the forest of tree bark that surrounds them, while standing, the deer cannot hide their predominantly horizontal bearing. And, except for the few fallen tree trunks, there are far fewer horizontal shapes in these woods than vertical, and virtually none at three to five feet from the ground.

The trick seems to be to focus first on any horizontal shape rather than looking for the complete shape we know to be 'a deer'. The latter offers too much distracting information and angles that more easily blend in to the cover, while the former allows one to drill down to the basic configuration by immediately eliminating a great deal of superfluous data.

Last evening, using this method, it took about 30 seconds to find four feeding deer hidden on the side of the ridge. Thinking through this feeding and discovery technique while watching them feed, I wondered if good market or trading opportunities cluster. Or if they are fluid, moving sometimes with stealth, sometimes with abandon. Or if they hide among lesser opportunities, camouflaged and appearing to be something they're not. Yes to all, I suppose.

But, I wonder if the better question is, when looking for the profitable side of a trade, or the right stock, or the market's path in amongst all the possibilities, we might not be well served as often as not by looking for the horizontal shapes among the vertical.

A couple thoughts before closing;

1. This post is not about deer hunting, about which I know less than zero.

2. BP = d/ [1+ square root of p1/p2], Reilly's Law of Retail Gravitation………..(stats on the table.)

Victor Niederhoffer writes: 

Brilliant post by Hillman. Reminds me of L'Amour's story similar to the godfather Bastian where a master leader of rustlers teaches his son every thing. First thing he has to learn after fixing the faro wheel and shooting straight and of course boxing is to catch a deer by the tail the way Indians do without the deer knowing your there. 

David Hillman writes: 

The Indian way conjures up thoughts of the little guys trying to grab the tail of the flexions, just to get a little piece of the action before the flex notices you're there and kicks you in the face. 



 The path is very key in markets. And I have been remiss in not taking into account the road that is taken by a market rather than concentrating on just it's last x maneuvers. "The road is better than the inn," as they say. If He Will, Let that be the heroic thought for the day inspired by Rocky, as one is being beat up markets today, and must confine ones attention to current activities rather than heroes from the past or current.

Ken Drees writes: 

Carlos Castenada–who wrote the Teachings of Don Juan, A yaqui way of knowledge– comes to mind here when through a vision of true seeing explained that the way to clearly "SEE" and understand a tree for example, was to concentrate on the spaces between the branches, the spaces between the leaves, and then one can fully see the tree's truest form and dimension and uniqueness. Similar to the post on black and white with color as an attract function that eliminates the true picture structure– the cheapened eye seeks the easy answer, look its just a tree.

The market's rode is like the leaves or the branches, what lies in between these daily prints that have not been touched may truly indicate the path.

Pitt T. Maner III writes: 

Which is somewhat similar to being able to draw. You have to look at an object in a different way and see the spaces and judge the proper proportions.

One of the first exercises using the following method from Betty Edwards is to turn a picture upside down so that it is unrecognizable to the left, judgemental side of the brain and then try drawing it—it is pretty amazing what you can do. Perhaps there are benefits to be gained from additional exercises for the right side of the brain as well as the left.

I am not sure how it can be applied to stock picking but the results are impressive for the before and after drawings shown and draftsmanship is a useful skill to have.



 The Ball brothers were on p. A3 of today's Investor's Business Daily: "The Ball Brothers Bottled Can-Do Spirit In a Jar. "

The article describes not only their self-made creation of a manufacturing success, but also the great benefits they produced & gave to the community at large.

Pitt T. Maner III writes: 

I used to buy cases and cases of Ball jars (everything available on the store shelves). The supermarket checkout ladies would laugh at me and ask what I was canning.

"Contaminated soils, Ma'am" The change in expression on their faces was priceless.

Ball jars are very useful for screening for petroleum-impacted soils in the field. You fill the jars up half way with soil, cover the top with aluminum foil, put the ring back over the foil, let them sit for a couple of minutes and then use a field organic vapor analyzer (OVA), PID (photoionization), detector to sample the air in the headspace of the jar.

There are many more uses for common products than one would think.



The chart of the S&P 500 this week looked very much like what an uninformed member of the public would think a random walk looked like, but was actually a highly nonrandom pattern of repeated reversals, at least until late Friday afternoon.

The biggest move all week occurred when an easily predictable aftershock, that should by the theory have already been priced in, occurred in Japan.

Bruno Ombreux writes:

On monthly returns for sure.

I remember when I was a MBA student in finance class the teacher wanted to show us that the market was random. He displayed a chart of the real DJIA side by side with a chart of a random walk, then asked the class to pick the real stock market. 150 people choose the random walk and 2 of us, that includes me, picked the real stock market.

By the way, you need balls to go 2 against 150 in an MBA classroom.

I think there are other things at play here. 150 people getting wrong get be attributed to the guys being lemmings, and 2 right guys can be attributed to us knowing the chart in advance (we were among a few with previous trading experience).



Who is hero for day today? I want to say something about the world's second biggest faker taking "bold steps" but one must find a hero to counterbalance.

Phil McDonnell writes: 

Here is the internal memo from the West Virginian:

He could be a hero too. He was a co-developer of S, the statistical programming language that many of us use. Conceptually it is very similar to the open source R.




 A good friend told me, "The longer you live, the closer you are to dying." I got a good laugh from that one.

Ken Drees adds: 

or, "Life, its designed to kill you".

Victor Niederhoffer comments: 

There is great deep truth in this as applied to markets. Although like the micro organism the body likes to let into the body, a slow death is programmed so that the maximum of chips can be obtained from you, and other poor fool humans will maintain hope so that they can sustain the similar microorganisms that will appropriately sap away the life of other market players. Thus, what started out as a joke has all too much applicability. The purpose of the Market. Ha, it's to take away the chips from the weak, so that the flexions and other top feeders can prosper. That's a terrible but beautiful thought, I think.



Hello everyone.

Spoke to a 65 year old Checker player in Florida also with a most of the year residence in Paris. He travels all the time and he has never worked. I assume inheritance by him or his wife. I did not ask.

He recently was in SF and notes the Chinese are coming over and buying up every Chinese stamp they can. Chinese stamp prices are on the rise.

Take a unofficial poll: how many of you actually think this govt shut down will actually occur?

Note oil and that yellow metal and silver on the rise today as world unrest continues.





 Having watched Burns' Civil War for the third time again this week, what is most captivating about the soldiers on both sides is their uncommon valor, their steadfast bravery in the face of the mini-ball, their dedication to their generals, their love of country, their display of honor, what remarkable traders they would have made. historian Shelby Foote strikes one as a very likable character, his ability to tell stories and his passion for the subject matter. one wonders if messrs. Burke or Jov might comment on the historian's works and recommend a reading or two.

Stefan Jovanovich writes: 

Mr. Foote was a delightful man, and he was - like all smart Southerners - truly gracious and charming. I don't share his enthusiasm for the valor of the soldiers because, having been a member of my generation's children's crusade, I think Mr. Foote underestimated how much the bravery was simply the ignorance of the young. Mr. Burns has it all wrong about the "love of country"; no one, other than the few "regulars" from the peacetime U.S. Army, fought for "their country". They fought for their state. The units' battle flags and banners do not even mention the United States or the Confederacy. The idea that soldiers were dedicated "to their generals" is close to laughable. All the stories about people in the lines shouting praise to Grant and Lee are highly suspect; they all come from staff officers' memoirs. What is indisputable is that the "common" (sic) soldiers had a deep regard for one another. The veterans' organization formed after the Civil War/War Between the States were not officers' organizations like the Society of the Cincinnati but fellowships of all veterans. The revolutionary American idea of "one man one vote" has its origins in those veterans' organizations; it was the first time that privates' ballots counted as much as colonels'.

Mr. Burns is a great movie maker; but that is and always will be a back-handed compliment where history is concerned. Movies ain't life, and documentaries never tell the truth when all the people in them are safely dead. What you get is the Chatauqua story of the past.



We have received a review [4 page pdf] of David Cannadine's book Mellon: an American Life , Knopf, 2006



The old bull on trolley was spotted at Trinity Church, and immediately all the stocks he used to bull up went up 5% on the thought that he was ready to do it again (even though he had gone bust 5 years before and was living in a bowery flophouse where Grandpa Martin might have met him seeking out entertainment.) An earthquake in Sendai was registered, and stocks immediately dropped a 1 % and bonds went up 1 % on the idea that Morse was back.



Hero for the day submission.

Found via the TED Blog:

The invention that unlocked a locked-in artist: Mick Ebeling on TED.com

The nerve disease ALS left graffiti artist TEMPT paralyzed from head to toe, forced to communicate blink by blink. In a remarkable talk at TEDActive, entrepreneur Mick Ebeling shares how he and a team of collaborators built an open-source invention that gave the artist — and gives others in his circumstance — the means to make art again.

approx 8 min.



 Dear Collab,

I put money where my mouth is and shorted some nice brk /b the other day and with the luck of the Irish, finally his bubble has burst to my credit. Amazing how little it takes for your friends to turn on you. We can take second fiddle to no one on being the most prevalent detractors. I am hopeful that these transgressions are not the tip of an iceberg, and doubt that everything is corrupt from the top. When the head might be considered a faker or poseur, every one might desire to pull the wool on everyone else's eye. It's also the natural consequence of buying all these firms without any infrastructure and buying companies based on a 5 minute balance sheet review and getting a feel for the executives' integrity over a coke or big mac. An owner of a business needs incentives. And when Warren precludes that the incentives can be displaced into fraud. In retrospect when W. said "my trigger finger is still very itchy", the very sexual utterance of a depraved egomaniac, the handwriting was on the wall, as he took a tour of India to ferret out other acquisitions that his European travel agents arranged. Let us hope the "agents" did not take a cut on that one also.

A quote of Warren's that captures everything about him is this:

"You can sell your business to Berkshire, and we'll put in in the Metropolitan Museum; it'll have wing all by itself, it'll be there forever. Or you can sell it to some porn shop operator, and he'll take the painting and he'll make the boobs a little bigger and he'll stick it up in the window, and some other guy will come along in a raincoat, and he'll buy it".

How could everyone have been conned to think that only he can give a business a good home, and that the fake notion that they will leave everything the same after selling to him is not a snare and delusion. Who else could have said that and not been escorted off his stage by his family or partners immediately for his own protection. I could see Beethoven or Verdi saying it, but fortunately a concertmaster or his assistant Schindler was always around to escort Beethoven off when he broke the pianos or was 10 measures behind the orchestra because of his hearing or choleric temper.



The BBC did a report on Dec 9th, 1969 on the computerization of the banking business. The report addressed all the modernization, reductions of workforce, the new technology, and the convenience of new automated banking systems. They realized that many clerical positions in the bank would be eliminated, but they also mentioned that many thousands of people would be needed to make computers, service them, etc. Although their future in 1969 seemed rather far fetched, today's reality has greatly exceeded that report.



Very interesting post on Buffet from the "accounting watchdog" Francine McKenna. She writes:

On the way to writing this story, I realized some disturbing things about Berkshire Hathaway and how Buffet runs it. So anxious are some to annoint gurus, sages, and oracles, that they overlook some of the worst corporate governance practices I have ever seen. And Buffett's Berkshire doesn't like to be told how to do its accounting, either. I'm writing about that next for Forbes.



 All this chatter about interstate highways reminds one of the late CBS newsman Charles Kuralt's observations of such.

He felt strongly and not without reason that they should be avoided by the curious as: "Interstate highways allow you to drive coast to coast, without seeing anything." Felt so strongly about it that he was able to carve a tidy little career out of the notion:

…When he persuaded CBS to let him try out just such an idea for three months, it turned into a quarter-century project. "On the Road" became a regular feature on The CBS Evening News with Walter Cronkite in 1967. Kuralt hit the road in a motor home (he wore out six before he was through) with a small crew and avoided the interstates in favor of the nation's back roads in search of America's people and their doings…

from wikipedia.

Stefan Jovanovich comments: 

In Bardstown, Kentucky there is a surviving piece of the other Bible Belt highway - the Wilderness Road. It has survived all the traffic because (1) it was build out of cobblestones and (2) the newer, better roads built during the Turnpike boom took a different route into town.

About the cobblestones: these are not the lovely smooth rounded ones that still survive in the pavements of some Eastern cities. They are truly rough pavement - the stones were not trimmed but simply set tightly in place, on edge. Walking the road is like hiking on the side of an old farm wall tilted up at one end; the grade and the stones get you in shape for the after-effects of the bourbon.



 When I coach basketball, what I emphasize is defense and boxing out. Here's why…..

Everyone wants to be LeBron or Kobe and do all the acrobatic scoring. The reality is that most of the kids will never be able to do all the fancy moves that those men do. Nor will most of the kids be prolific scorers. So take the road less traveled and do what no one else is really doing.

Do the dirty work. Not every kid can be a prolific scorer, but every kid can be taught to play tenacious defense. Since the vast majority of kids are unwilling to do the non-glamor work, it pays to be "blue collar worker" on the floor.

Every kid can be taught to be the vicious and feared rebounder on the floor…..no matter what their height. Watching youth games today, it very apparent to me that kids are NOT being taught how to box out for rebounds. Proper rebounding, done right, is a team effort so that THE TEAM can get the rebound. If I do my job right, and my team mates do their job right, and rebound caroms my way, I'll get the rebound. If I do my job right and my team mates do their job right and the rebound caroms away from me, MY TEAM MATE will get the rebound.

And contrary to popular opinion, basketball IS a contact sport. And the contact happens during the rebounding process. When done right, rebounding should be painful for your opponent, and over time, create fear in his mind. When that ball is shot, rather than him looking to get into position, he will be looking for you to avoid getting your hips shoved into his groin/thighs, or avoid getting your elbow shoved into his rib cage. He needs to know that challenging you for a rebound is going to hurt. Even guards play a key (and painful….for the other team) role in rebounding….remember, not all rebounds fall under the basket for the big men to grab. Lots of them bounce off the rim hard and end up away from the basket where the guards can grab them.

Most every kid can be taught be aggressive and dive into every scrum and tenaciously attack every loose ball. Whenever one of my kids bleeds, I make a big deal out it by praising them and thanking them.

I also teach my kids that unless I tell them otherwise, they get 4 free fouls a game……so use them wisely. No stupid fouls. If you are gonna foul someone, make it count. Never trip them or tackle them, never upend someone on a break away. But use your elbows and use your hips.

This is the path that will lead kids to a position on their high school, probably lots of playing time and maybe even a role as a starter.

Coaches love players who are willing to leave a little "red DNA" on the floor.



 My family had a great adventure on an ski mountaineering expedition to the Ruth Glacier in Denali National Park Alaska last week. We stayed at the Mountain House.  We were skiing several objectives in the area and had good weather. We could see Mt. McKinley close by. The primary danger was falling into a crevasse in the glaciers. The glaciers are 3 mile acres, 30 miles long, and 4,000 feet deep. I read a number of books on crevasse rescue, bought gear, practiced and headed into the wild. It's quite amazing how much one can learn from books. We flew in a ski plan from Talkeetna 50 miles into the wilderness and were dropped off with our supplies of food and wood for 5 days. We had to melt snow for water.



 Pictures don't get better the longer you're around the subject. The magic goes. If I go to Delhi, I get off the plane and I start photographing because days later it all starts to look normal.

Market analogy–once you know what your looking for, you will know straight away if there's a trade there. That's why I can't teach anyone, why I'm not a big education man. I think they're a bunch of parrots all learning the same thing.

Market analogy– too much education directs everyone in the same place. You need to be creative in your own right.

Because black and white gives you the message immediately. Colour's a warning thing. Berries are red so that the birds know to eat them. When they're green they don't eat them. When you look at a colour picture you see the colour before you see the message.

Market analogy– don't concentrate too much on the details, just get with the form.

Here is an interesting conversation with notorious photographer David Bailey for more insights on this topic. 



There are those who not only find baseball a most apt metaphor for life but also in the best interests of the propagation of the species.



My best friend, Jeff, runs a filter/HVAC business and specializes in cleaning the HVAC units of small businesses. He cleans the units on a recurring schedule….a very nice business model.

I have found that Jeff, is a pretty good "tell" for the economy. When his business is hurting, the small business world is hurting. He says that he sees a notices drop off in business, speed of pay from his customers and his ability to land new clients when gas prices get above $3.00/gallon. Every increase in the price of gas thereafter has a noticeable negative impact on his business.

His business is down. His customers are paying more slowly. He hasn't picked up a new customer in several weeks. More than the usual number of customers are going out of business.

Contrary to what you hear on the news and from DC, the price of gas has a very immediate and negative effect on what happens on main street when it goes up too much.



Samuel Smiles. His great self help book is great for children and parents who wish to teach self esteem and self reliance in their kids.

Phil McDonnell adds: 

The book itself is available here from Project Gutenberg.



Composing in an art studio, I have tried a few ways of showing music alongside paintings. What I am thinking of for the next occasion in June is to put my music on the wall as flattened scrolls, to be read from left to right.

A notice would tell people to text a code to a number, which would result in them automatically being sent an MMS message inviting them to hear the piece on their phone. This would give an immediate, independent and private experience, preferable to the jukebox programs I have been using till now (which needs me there all the time to tell them what to do), and preferable to giving them links to online sources (in the context of an exhibition).

I have found out how to send music files to phones - the missing link for me is how to set up a service which responds to the person sending a text message code, which is common in business (e.g. talk radio auctions "text your bid to this number . . ." so I wondered if anyone on the List can shed light on how to do it.

Another approach which comes to mind involves those mysterious square boxes which look like Aztek patterns, but which I gather enable a smartphone user to point their device at the pattern and then be directed to a weblink, which I would of course ensure led to music - has anyone information about said patterns (I have only been noticing them for a few months)?

Dylan Distasio comments:

Hi Laurence,

I can't really help with your first question, but I can hopefully point you in the right direction on the second.

The Aztec looking patterns you're referring to are what is known as a 3d barcode. There is pay software that will generate these, but it sounds like for your purposes, this free web barcode generator will work. It lets you enter a URL and will generate the corresponding barcode for you to print, copy, etc. When users scan it with their phone camera and barcode software it will translate back to the url.

Hope that helps!

David Hillman elaborates: 

 Not to nitpick nor be contentious in any way, but to be precise, as I wrote Laurence off list this morning, the Aztec codes, including the QR code to which Dylan refers, are in fact what we in the industry refer to as 2D barcodes, i.e., they're constructed to contain data in the X and Y axes and are read by 'imaging' the code rather than 'scanning' it.

The difference is that, in imaging, an image of a 2D code is taken and decoded into digital data, where as in scanning, light emitted by a laser [typically] is shown onto the code, then reflected back to the scanner, where the difference in the reflectivity between the spaces and bars is measured and decoded.

The more traditional barcodes one sees, e.g., UPC codes found on retail product, are referred to as linear or 1D barcodes, i.e., the data encoded therein can be read only along the x axis by scanning and decoding the variations in the vertical bars and alternating spaces.

One might correctly observe that a linear code has a second dimension. Yes, technically, there is the y axis. But, data cannot be encoded vertically in a linear code, thus, we refer to a code's dimensionality by the number of axes along which data may be endcoded and stored. Think of chess. A traditional board has both an x and a y axis. 3D chess, however, having a z axis as well, is played in 3 dimensions. So it is with barcodes.

In addition, there are 'stacked barcodes' which are in fact a series of linear 1D barcodes stacked upon one another along the y axis presenting the general appearance of a 2D code, when in fact, it is not. Because these are 1D, they can be scanned rather than imaged by passing a laser slowly across the code from top to bottom.

There are indeed 3D barcodes, also called "bumpy barcodes", but those must have dimension beyond the x and y axes, i.e., a z axis. Therefore, for a barcode to be 3D, it must be embossed on [or depressed into] a surface in a process called direct part marking, or DPM, so that all three axes are present. 3D codes are then read by special devices designed to detect variation in height as well as along the horizontal and/or vertical axes.

There is another twist, though, which is the addition of color to a 2D barcode, including the QR of which we speak, which gives that code another dimension, however non-spatial it may be. I believe the use of color on QR codes was pioneered by the Denso Corp. of Japan, but I do not deal with them or their products, so I cannot speak informatively to that technique.

The Aztec code in question was developed in 1995 by Andy Longacre [quite a brilliant fellow, btw, a mathematician and pretty fair operatic singer] of Welch Allyn, a company with which I dealt for many years prior to its being subsumed by Handheld Products and that then by Honeywell a few years back.

That code as well as all other varieties are referred to as 'symbologies' and there are scores, some more or less industry specific, e.g., UPC used in retailing, while others are more widely utilized. The most widely used 2D codes are the 'matrix' codes, but Longacre's code, which is now in the public domain, was one of the first.

The advantage of adding a dimension to a barcode, from 1D to 2D, or from 2D to 3D, is that each added dimension greatly increases the amount of data that can be encoded. For instance, while a 1D code may hold 9 or 10 digits in a horizontal inch or two, a 2D code that requires less real estate than a postage stamp may hold 200 to 300 characters, and a 3D code in the same space may contain thousands of characters.

It is also important to understand that while imagers designed to read 3D and 2D codes can read a 1D, a laser scanner designed to read a 1D linear barcode cannot read a code with more than one dimension. It is critical in designing a system or application to ensure that a proper scanner is employed. The consequences of not doing so should be obvious.

That said, as far as I know, there are no smart phones currently capable of imaging and decoding what we in the industry call a 3D code. Given that new technology is released at the speed of light and I am not a telecom guy, there may well be some of which I am not aware. However, there are many phones very certainly capable of imaging a 2D code, including the one I wear on my belt that sports such an application.

The crux of the issue here is that when planning to use barcodes there are a few things of which one needs to be aware.

1. Barcoding isn't rocket science, but it can be complex and takes expertise to get it right. Seemingly inconsequential factors such as too much ambient light, refraction of reflected light, the angle at which scanners are held, inadequate contrast of the bars and spaces in a code, and near-invisible abrasions among many others can all make the difference between success and failure.

2. There are many people, including trained IT folks and engineers, who think #1 is BS. Among these are the many who call a pro to fix what went wrong when they tried to do it themselves and failed. DIY can be frustrating, not to mention extremely costly.

3. There is much misinformation regarding barcoding out there and the lingo is often misused, even by some quasi-professionals.

Otherwise, it appears Dylan has done his homework and the online barcode generator he has referred looks as if it may work nicely for Laurence given one's understanding of what he wishes to do. The only argument I have with the reference is the use of the term 3D barcode instead of 2D to refer to QR, which one sees referenced incorrectly on any number of websites, but it is still incorrect according to AIM [Association for Automatic Identification and Mobility, the preeminent trade organization] standards.

It may seem like a small point, but I make it given the 3 above items and in the hope of saving potential confusion and frustration in Laurence's endeavour, which, FWIW, I happen to think is brilliantly conceived and is something I'd love to experience.

One other thing learned in almost 25 years of doing this. Paraphrasing Dave [Richard Dreyfuss] Whiteman in 'Down and Out in Beverly Hills' speaking about owing his wealth to manufacturing coat hangers……barcoding ain't sexy, but somebody's gotta do it and it keeps a nice roof overhead.

Still, there are wistful moments during which I think it might be a bit more fun and exciting to be an international jewel thief. It's always about risk/reward, n'est-ce pas?



 Does not the cascading avalanche of negative publicity about the wrongness of the sage's mojo prove my point that "if you put a beggar on horseback he will gallop"? What is the classical story behind that?

Pitt T. Maner III responds:

The expression is said to be Irish in origin but its first appearance in literature as quoted by Chair appears to be in "The Anatomy of Melancholy" by Robert Burton. (Part 2 Section 3 Member 2). The Latin quote from Tully or Cicero that Burton quotes below means "Nothing is more annoying than a low man raised to high position".

"A beggers brat will be commonly more scornful, imperious, insulting, insolent, then another man of his rank: nothing so intolerable as a fortunate fool, as c Tully found long since out of his experience. Asperius nihil est humili, cum surgit in altum: set a begger on horseback, and he will ride a gallop, a gallop, &c. ……………… he forgets what he was, domineers, &c and many such other symptomes he hath, by which you may know him from a true gentleman."

(page 20).

The classical reference might be to Bellerophon and Pegasus:

Bellerophon felt that because of his victory over the Chimera he deserved to fly to Mount Olympus, the realm of the gods. However, this presumption angered Zeus and he sent a gad-fly to sting the horse causing Bellerophon to fall all the way back to Earth. Pegasus completed the flight to Olympus where Zeus used him as a pack horse for his thunderbolts.[21] On the Plain of Aleion ("Wandering"), Bellerophon, who had fallen into a thorn bush, lived out his life in misery as a blinded cripple, grieving and shunning the haunts of men.



 I know that there have been posts not long ago on great books for kids regarding business. My seven year old son has been showing a keen interest in the idea of business and particularly in entrepreneurship. I was wondering if readers of this site might share the names of books or other resources that might assist me in fostering this in his development. The kid wants to make money!

Mark Schuetz writes: 

Hate to bring up a touchy subject, but I think it would be fun for kids to read about Buffett starting out. Definitely an interesting story about how he went from a paper route, to repairing pinball machines, to buying and renting a house, and so on, and SAVED money the whole time instead of spending it. It doesn't even have to be Buffett– maybe a kid could relate more to reading about famous businesspeople/investors when they were young and how they developed even at a very young age. It could inspire kids to think about more current ideas for themselves (very few will be interested in repairing pinball machines).

An editor writes: 

When I was a kid I really enjoyed the book The Toothpaste Millionaire about a 6th grader who starts a business selling toothpaste and becomes very successful. 

Victor Niederhoffer recommends: 

Self Help by Samuel Smiles, The Incredible Bread Machine, The Little Red Hen, Letters from a Self Made Merchant to his Son, by Lorimer.

John Floyd adds:

Toothpaste Millionaire

The Girl Who Owned a City

Gibbons Burke adds: 

This is an oldie but a goodie: The Richest Man in Babylon by George S. Clason. Many meals for a lifetime in this book.

Another good one for personal development skills helpful in business is Og Mandino's The Greatest Salesman in the World.



 Burton Fulsom in his book The Myth of the Robber Barrons shows that many of the great industrialists of the 19th century, the ones that didn't get government help like Harriman and Fulton, but the independent productive geniuses like James Hill, Cornelius Vaderbilt, The Mellons (My friend Dan Grossman wrote a great review of the recent Mellon bio), and the Scrantons and the Rockefellers were great men who opened up new vistas of consumer benefit and weath.

It totally disproves the myth that has the world in its grip, and things like the Palindrome who calls them crook capitalists. We know who the crook capiatalists are today, and they're not the men like Steve Jobs, and many others.

Who else would you nominate as the opposite of the cronies? Let us come up with some good ones in honor of Rocky's Humbert's request for us to honor the creation of value.

Alston Mabry writes:

Deng Xiaoping and John Doerr.

Also here is something interesting from the original foreword to The Robber Barons, by Matthew Josephson, first published in 1934:

When the group of men who form the subject of this history arrived upon the scene, the United States was a mercantile-agrarian democracy. When they departed or retired from active life, it was something else: a unified industrial society, the effective economic, control of which was lodged in the hands of a hierarchy. In short, these men more or less knowingly played the leading rôles in an age of industrial revolution. Even their quarrels, intrigues and misadventures (too often treated as merely diverting or picturesque) are part of the mechanism of our history. Under their hands the renovation of our economic life proceeded relentlessly: large-scale production replaced the scattered, decentralized mode of production; industrial enterprises became more concentrated, more "efficient" technically, and essentially "coöperative," where they had been purely individualistic and lamentably wasteful. But all this revolutionizing effort is branded with the motive of private gain on the part of the new captains of industry. To organize and exploit the resources of a nation upon a gigantic scale, to regiment its farmers and workers into harmonious corps of producers, and to do this only in the name of an uncontrolled appetite for private profit — here surely is the great inherent contradiction whence so much disaster, outrage and misery has flowed.

…and from the Foreword to the 1962 edition:

In the crisis years of the 1930s economic intervention by the Federal Government was employed on an unprecedented scale, not only in the interests of human welfare, but also to regulate and control the masters of capital who, by their excesses and bad leadership, had helped to bring about the debacle of 1929-1933. At that period a critical literature also arose (of which the present work may perhaps be taken as an example), providing background material to the men of the New Deal.

Of late years, however, a group of academic historians have constituted themselves what may be called a revisionist school, which reacts against the critical spirit of the 1930s. They reject the idea that our nineteenth-century barons-of-the-bags may have been inspired by the same motives animating the ancient barons-of-the-crags—who, by force of arms, instead of corporate combinations, monopolized strategic valley roads or mountain passes through which commerce flowed. To the revisionists of our history our old-time moneylords "were not robber barons but architects of material progress," and, in some wise, "saviors" of our country. They have proposed rewriting parts of America's history so that the image of the old-school capitalists should be retouched and restored, like rare pieces of antique furniture. This business of rewriting our history — perhaps in conformity to current fashions in intellectual reaction — has unpleasant connotations to my mind, recalling the propaganda schemes used in authoritarian societies and the "truth factories" in George Orwell's anti-utopian novel 1984. 

Sam Marx writes:

Every time I'm in NYC going up the ramp at Park Ave So. I see the statue of Cornelius Vanderbilt and I'm reminded of how he created a shortcut to California by way of Panama.

After the California '49 discovery of gold, increasing the migration there, he cleared that thin strip of land in Panama, placed boats on the Pacific side and transported passengers by boat from NYC to Panama, horse and wagon to the Pacific and then by boat to California, thereby saving the long and dangerous trip across country or around South America. No robber baron in that endeavor.

Pitt T. Maner III writes: 

How about Ray Kroc? McDonalds in the news for hiring 50,000 new employees this month.

Kroc created a new kind of fast food with McDonald's, implementing Henry Ford's assembly line idea into his restaurants. He also utilized standardization, a business tactic that he used to make sure that every Big Mac would taste the same whether a person is in New York or Tokyo. Kroc also revolutionized the art of franchising, where he set strict rules on how the food was to be made. These strict rules also were applied to customer service standards with such mandates that moneys be refunded to clients whose orders were not correct or to customers who had to wait for more than 5 minutes for their food. However, Kroc let the franchisees decide their best approach to marketing the products. For example, Willard Scott created the internationally recognized figure known as Ronald McDonald to improve sales of hamburgers in the Washington, D.C. area. Kroc established various foundations for alcoholics, and also started the Ronald McDonald House foundation.

Jeff Sasmor writes:

A later Vanderbilt created one of the first concrete roads in the nation, the Vanderbilt Motor Parkway . Some remnants remain, my wife and I used to bike on a part of it that I believe still remains between Cunningham Park and Creedmore hospital in Queens NYC.

Allegedly the VMP was the first road designed for autos only.

A much later Vanderbilt, a great^n granddaughter, used to work for me and my partners in the early 1990s, but got fired because the wife of one of my partners got jealous of her good looks.

Jeff Watson writes: 

 Jay Gould was my favorite robber-baron, although he was deeply flawed, and a vile and disgusting cheat. One could say that Gould had an inner drive and a pronounced sense of pluck. Getting his speculative stake from the ashes of the Panic of 1857, he astounded the financial world with his decades of manipulations. His railroad corners were amazing. His attempt to corner the gold market resulting in Black Friday was something out of a novel, His bribery to influence legislation was legendary. His chicanery with using forged stock certificates set the bar for all other cheats and swindlers. He controlled Western Union. His corners in the Chicago commodities markets were equal to those of Armour, Cutten, and Gates.. As bad as he was, he still managed to combine a bunch of railroads together and creating value by achieving a better operating scale. I have problems with the way he treated the help, but at that time, laborers were very shabbily treated. Finally, when Gould died, he had an estate of $75 million dollars, so he must have done something right.



Let's face it: the beggars that can make the greatest return per unit of input are pretty woman. I believe I am not alone in always giving double to such a one. The wife of a winner of a prestigious economic award, friendly to the former Harvard president, would probably qualify as a prime examplar here, but strangely no pictures of her appear on the internet.



Here's a magnificent 18 minute talk from Ben Goldacre who's taking on bad science, dispelling ballyhoo.



This Thursday, April 7, junta at 7 pm at The Mechanics Institute (30 W. 44th street) will feature Greg Rehmke talking about the road to prosperity. Greg has been instrumental in student debate uplifting for 20 years, and is one of the most uplifting and most original speakers we have had at the junta. We are looking forward to a lively augmentation, and all are invited.



There have been extreme 10 day highs in SP on 106 occasions since 2010 and 39 10 day lows. Would this ratio not be a good concomitant of whether a bull or bear market exists (assuming for a moment that such a thing exists)?



 There was an interesting interview on CNBC this morning with legendary hedge fund manager Michael Steinhardt who used the moment to slam the Sage, opining on the Sage's hypocrisy, his fakery, his (Steinhardt's) relief that the time is near when the world finally sees the real face of the Oz of Omaha. Mr. Steinhardt also commented on today's hedge fund industry, the Fed, and other topics which actually made interesting a CNBC interview. The interview should show up in CNBC's Squawk Box archives for those interested.



They gave me a drubbing on my shorting of DAX and long SP in two previous trading days. But still without evidence that it is good, with the ratio at a 20 day high against me, I refuse to surrender. Regrettably like most things uncovered, the trade looked great in sample. But as soon as I found it, I've been tracking it for a year now actually calculating the ratio myself by hand, a feat helped by my ability to do mental math with 4 figure squares now, which I'll be performing at Rand's wedding, and the out of sample results, show nothing at all. Indeed a positive serial correlation. There is nothing so sad as a theory confronted with the facts.



Advanced apex predator skills described. (A good picture shown with the article.)

from a New Scientist story on "How Whales Hunt":

Some killer whales are adept hunters, but picky eaters. New observations of "pack ice" killer whales roaming the waters off the Antarctic Peninsula show they dine almost exclusively on Weddell seals, which make up just 15 per cent of the seal population.

Robert Pitman and John Durban at the Southwest Fisheries Science Center in La Jolla, California, documented how these killer whales, or orcas, cooperatively stalk their prey.

Often, one killer whale pops up to identify a Weddell seal perched on an ice floe (shown), then alerts others in the area. A group – up to seven were observed – then charges the floe, spawning waves that wash the seal into the sea. Finally, the whales surround the seal, tiring it before they drown it by pulling on its hind flippers.

Genetic studies suggest these pack-hunting, seal-eating killer whales make up a unique species, distinct from other varieties that feast primarily on fish or minke whales.

Anton Johnson write:

The seal's expression says it all.



As they say, if a donkey flies, you don't complain that it didn't stay airborne longer than it did. Still, I can't help but complain about these asses.


4 April 2011

Editor, The Wall Street Journal 1211 6th Ave. New York, NY 10036

Dear Editor:

Two cheers for Senators Max Baucus and John Kerry for supporting freer trade with Colombia ("The Colombia Trade Deal: A Different Kind of Jobs Bill," April 4). A third cheer would be in order had not the senators relied upon a wholly mistaken reason to justify this particular move toward freer trade.

In their essay, U.S. imports and American consumers are mentioned a total of zero times, while U.S. exports and American producers (such as farmers, firms, and workers) are mentioned 23 times.

While pandering to economic ignorance often wins votes, it's distressing to see such pandering - even for a good cause - in your pages. Trade's benefits are measured in imports; the more the better. Exports are the costs of getting these benefits. In a truly ideal world - one quite the opposite of the ostensible ideal of Messrs. Baucus and Kerry - we'd continually receive cargo ship after cargo ship of automobiles, MP3 players, foodstuffs, and countless other valuable imports in exchange for our export of a single toothpick. Alas, it's unfortunate that foreigners in fact are so prehensile that they demand lots more than one toothpick in exchange for the stuff they ship to us.

The senators' argument for freer trade in this particular case undermines the larger effort to persuade the public that free trade is to everyone's long-term advantage - an advantage that is measured by increases in what we're able to consume and not by increases in what we must sacrifice.

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 2203



 We might witness something very historical in a few days. There is a good possibility the nearby month of corn will trade at a higher price than the nearby month of wheat.

Rocky Humbert writes: 

Perhaps the futures market is awakening to the fact that a box of Corn Chex cereal is already more expensive than a box of Wheat Chex cereal.

More seriously, during the summer of 1996, the price of Chicago front corn exceeded the price of Chicago front wheat. This also briefly occurred in late 1983/1984 as well as June 1977 and June 1969. In 1969 and 1977, this unusual occurence foretold an important bottom in the grain markets. In 1983/84 and 1996, it foretold a top in corn.

So while it's unusual to see Chicago Corn over Chicago Wheat, it's not unprecedented. Also, as Jeff will attest Minneapolis & Kansas hard wheat is at a large premium to Chicago wheat and corn would need to rise another 25% to close in on that spread.



 If someone could relate the 10 most important ways to be a successful beggar and somehow rate the big CEO's on how they fare on this, perhaps it would be a good way to pick investments these days. Certainly the basketball player, and the [deleted pending resolution of offer and counteroffer] would be high up there, and the heads of the certain institution from areas that are renowned for their ability to compromise would have many lessons to teach, and juicy stocks ripe for investment. The head of a metals company renowned for its low cost elevators in my day was a butler and this would seem to be very ideal training in the absence of a school for beggars in this country. How to generalize?

Gary Rogan writes:

They can't really beg and retain any illusion of authority. They have to prostitute themselves to the regime while plausibly (somewhat) appearing highly enthusiastic and supportive.

Some of the skills:

-Be able to speak with passion and conviction about complete nonsense, generally in the collectivist/green future and similar areas.
-Be able to deny obvious truth with passion and conviction in public, such as the real motivation for any help from the government.
-Regularly show up in Davos.
-Express a great deal of concern for various oppressed constituencies, at home and abroad and describe at length how the company/CEO are helping them.
-Be excited about creating jobs, especially "good" jobs, "skilled" jobs, "green" jobs. Talk at length about how the US needs to be a country that "builds things".
-Be able to motivate a large number of employees by any means necessary to contribute the government political candidate.
-Invest heavily in a number of "relationships" in DC to create wide-spread support for bailing out the company.
-If the company is a conglomerate that owns any media properties turn those properties into the echo chamber for the regime.
-Infrequently offer mild criticism of the regime while emphasizing the silver lining.
-Get involved as advisers to the various regime commissions.
-Hire former regime members.

Steve Ellison writes: 

Maiming: In one country I visited, there were many beggars, who served an important role in their religion by giving the faithful opportunities to do good deeds. Many of the beggars had been purposely maimed by their handlers in order to attract more alms.

Spinning a yarn: When I first worked in the big city as a young man, I was stunned by how many panhandlers there were. Locals informed me that the Republican president was to blame. I saw the same panhandlers day after day, but every once in a while somebody would approach me with a sad story. One woman rode the subway telling everyone she needed to get to a hospital for a medical procedure but needed money to get there. I occasionally would be approached by someone claiming to be a stranded traveler who needed money to get home.

Performing unwanted services to create a sense of obligation: The last time I went to the Los Angeles airport, I was approached as I walked out of the terminal by a woman who asked if I needed help finding anything. I said I just needed to find the shuttle bus for rental cars. She pointed out where it was (it was right in front of me, and I would have found it myself within five seconds) and then asked for money. Squeegie men and charities that send preprinted address labels are in this category, too.

Feigning virtue: I know people who have offered jobs to people holding signs saying, "Will work for food". None of the sign holders have ever shown up to work.

John Tierney writes:

10 attributes which get the alms seeker off to a good start:

1. stresses that the company is concentrating on "giving back to the community"

2. actively involved in and/or seeking out green initiatives.

3. putting increased emphasis on organic growth, but always has an eye-out for M&A opportunities

4. working hand-in-hand with government agencies/NGOs to address hunger/AIDS/climate change

5. supports and serves on advisory boards of outfits like Breast Cancer Awareness, Habitat for Humanity, Thurgood Marshall Scholarship program, anti-vivisection league, and Sierra Club

6. never misses annual meetings at Davos & Jackson Hole; always has time for interview with CNBC and others; dresses casually, but not ostentatiously for same, addresses interviewer by first name…refers to this year's meeting as "one of the most exciting" ever

7. rarely indulges in short-term predictions, instead devotes most of his time to long term initiatives (which he'd like to discuss, but, at this time, is premature); sees things improving slowly but surely

8. believes the Fed did the right thing - might have made a few small errors but, generally, moved decisively at a critical time. Country will bounce back, always has.

9. bailouts, QE1 & QE2, though regrettable, were necessary for the preservation of the financial system.

10. insists the public will realize a "healthy return" on bailout funds

Vince Fulco writes:

Not to be forgotten, the institutions that pound their chests with pride in their ad campaigns using misinformation as JPM has been doing recently re: the X number of mortgages (400M as I recall) the company has modified in 2010. "In order to do our part and assist ordinary consumers get back on their feet…" is the approximate spirit of the ad. Needless to say, for better or worse, in early consultation with these companies, the administration & Treasury planned for a 4-5X number of alterations.

Gary Rogan adds: 

Basically, the main requirement for being a CEO today is excelling at credible hypocrisy.

Russ Sears contributes:

Here are a half dozen more.

1. Beg for federal money for your customers. This should allow your prices to double what they put in. Plus the room for undetected fraud goes up. (See higher education and Medicare, medicaid and first time buyers tax credits). This way you get the best of both worlds, customers thanking you for making it affordable and tax payers footing the bills.

2. Give away your product to third world countries with tax breaks so that the Feds will extend the favor by lengthening your patent protection in US. Again gratitude for sticking it too us.

3. Have the government make it illegal not to be insured, and then make sure your product must be paid for by insurance. (car, health, PMI etc) Again with the government involved raising the easy of defrauding insurance companies.

4. If you are captured by the unions, make the government give only union shops a chance.

5. Use your size to get tax breaks as incentives, use your popularity to have the citizens build your stadiums.

6. Make sure that court system understands that with all the lawyers you hire, you are the ones keeping the judges in a job. Bringing regulatory capture to a new level, too big to prosecute.

World traveler B.K. writes: 

I've seen countless mutilated beggars in India, enough to make you want to cry coins to them. However, the practical advice is not to give: "In India thousands of children are being mutilated annually. The joints of their bones get injected with bleach. Infection is the result and amputation follows. Eyes are stuck out as well. …"

However, the greatest beggar I ever saw was an armless man in the NYC subway with a sign around his neck, 'Please give to buy drum set.'

George Parkanyi writes:

That may well be, but I look at it this way– who am I to judge? I once gave a leg-less homeless man a ten-dollar bill. Well he just absolutely lit up into a beautiful smile, looked me straight in the eye and said "God bless you!". That blessing hit me like a sonic boom. I felt it physically, and walked away feeling like I received much more out of that exchange than he did. Make of that what you will, but it had a huge impact on my outlook on life, and how we relate to each other. 

Marion Dreyfus writes: 

I saw the same mutilations and deliberate crippling in Nepal. Hundreds of kids tottered after Westerners, begging and making mewling sounds. If once you gave you were encircled and could not advance another step until each and every child had gotten coins from one. 

Art Cooper writes:

One of my favorite Sherlock Holmes stories is "The Man With the Twisted Lip," an exceptionally successful London street beggar, who gave his benefactors psychic value for their alms.

Pitt T. Maner III writes:

Here is an article on organized phony beggars. Those who donate must be able to differentiate the individuals worthy of a helping hand:

"Certain persons posing as social leaders have been running the racket of beggary. We are busy in gathering necessary evidence to initiate criminal action against them," Ramalingappa said.

He claimed that at few places the "beggary business" was going on a "commission basis"

and whenever the officials conducted raids, the beggars escaped from the clutches of law and also alerted others over mobile phones.

"Whenever the beggars in disguise are arrested, lawyers rush to get them released," Ramalingappa said. Most of these rackets thrive in and around well known pilgrim centres and religious places where people generously offer to beggars. He said an awareness programme will be launched to impress upon people that beggary should not be encouraged.

Stating that no proper rehabilitation of "genuine beggars" has taken place anywhere in the State, Ramalingappa said a comprehensive survey on the conditions of beggars will be taken up soon. There are 914 beggars including 168 women in rehabilitation centres all over the State. Steps were being taken to set these centres in order.



BLS data was used for the attached chart, which plots % of population employed 1948-present (Employment population ratio, %, age 16 or older).

From the late 1940's to the late 1970's, % of population employed varied in a tight range between 55% and 58%. Starting in the late 1970's, % employed moved to a higher regime, staying above 60% from 1987 until 2009. The recent decline which began in 2007 dropped % employed to about 58% - a level not seen since 1983.

Major declines corresponded with recessions, as marked: 1980-83, 1990-92, 2000-03, and 2007-present.

The regime change to higher % employment could have occurred for many reasons, including more women entering the workforce, deferred retirement, and less business cycle volatility. Is the recent drop a move back to the lower regime, or simply a temporary recession-decline in the higher regime?

Fred Crossman comments: 

You wrote:

From the late 1940s to the late 1970s, % of population employed varied in a tight range between 55% and 58%. Starting in the late 1970s, % employed moved to a higher regime, staying above 60% from 1987 until 2009. The recent decline which began in 2007 dropped % employed to about 58%– a level not seen since 1983. Major declines corresponded with recessions, as marked: 1980 83, 1990-92, 2000-03, and 2007-present. The regime change to higher % employment could have occurred for many reasons, including more women entering the workforce, deferred retirement, and less business cycle volatility. Is the recent drop a move back to the lower regime, or simply a temporary recession-decline in the higher regime?

Kim, my humble reason for higher employment trend is more consumption and more debt incurred by American since late 70s, early 80s. Americans needed the money for a larger home, second home, second car, etc, basically greater spending and consumption– to pay off more more debt. (top chart). top chart also parallels greater debt incurred by American.

Lower chart of declining GDP (parallels a declining savings rate and wages that have not kept up with inflation). Average American less wealthy (very top class now is wealthier with government help, however, that is another topic). Also, going off gold standard encouraged more central bank money printing to inflate away federal debt. Also now takes more debt for every dollar in GDP gain.



 The main attribute for a successful CEO these days is to be a good beggar. The good beggar has to pretend that without the alms, he would be totally helpless. Also that he previously did very good work.

The big CEO's who clustered around the treasury and were able to beg trillions from the fed and the treasury to ward off bankruptcy in those days were masters at this. The training in beggary was not limited to the US CEO's who brought up the terrible calamity of the Reserve fund breaking the buck (with the potential unrealized loss of 100 million the holders of their 5 billion). But the Europeans were even bigger borrowers than the US banks and companies. The ability to pledge about a trillion of worthless assets to the Fed to get loans when they were on the ropes is something that will have repercussion undreamed of and unintended for many generations. Mainly it reduces incentives, and makes you want to throw in the towel.

The training for CEO's these days should be a course in how to beg. I'm told you have to pretend to be productive, willing to work, and well dressed. Presumably having been previously employed by the alms giver or having a job for him or his family in the future is also helpful (the palindrome always told me that whenever he went to Washington the first thing that the operatives wanted to know was whether their son made a good impression when he applied for a job). A reading of Bertold Brecht and listening to Kurt Weil in the Three Penny Opera would be recommended. A trip to India with a required visit to the museum of Thuggery, to study their methods would also be in order.

Wouldn't this be better than the required courses at the HBS that now displace so much more fruitful learning in how to beg that the most successful CEO's should take.

How could this all be quantified, and what profit making opportunities are suggested by this?

T. Humbert writes:

The above echoes some parallels about how the revenue model of the Church operates. In such, the pastor acts a "collector" of sorts, though his methodology of addressing (read: creating) accounts receivable is a little more subtle than that of the traditional practitioners of that old-world craft.

Rather than the overhand rights and nastily-swung bats of the rough-and-tumble boys, the most effective of the Roman collar guys eloquently whack one senseless if otherwise unscathed with the moral imperative thing to best ensure compliance with donation terms.

And always when others are around so as maximize peer pressure leverage of a most compelling nature.

P.S. I'm on an Amtrak tonight slowly rolling from NY to San Francisco. I don't mind flying at all, but I love trains. How it costs 3x more than a jet ride that could get one there in a tiny fraction of the time I have no idea….Oh, that's right, the government runs the trains…Silly me. 

Tim Hesselsweet writes: 

Different tax rates for different companies/industries and the nature of the provision/loophole that influenced it.

Subsidies for agriculture

Energy subsidies: see this link for 1995 article 

Tax write-offs that support tech

Financial bailouts (overt payments + benefits to front-running fixed income in tarp etc.) + is there a cost of capital advantage to being to big to fail in public markets

I doubt there's much regulation of consumer related business, but there is for financial, energy, defense, health care. Quant measure would be federal agencies overseeing industry, the more oversight the more big cap favored over small cap.

Knowledge of legislation and tax treatment best. Tax rate is one proxy for legislative advantage but that doesn't account for subsidy or other measures that create unequal playing field.



 We need a systematic ranking of companies by the flexionism of their CEO's and then we can quantify and look at future performance which of course in the past is highly correlated positively, but with our baedecker maybe the situation will change.

Gary Rogan writes:

Flexionism is a two-edged sword. As much as it helps companies, it also hurts some in a similar way that "low-income" welfare eventually ruins its recipients. I've never researched this statistically, but I concluded for myself early into the current flexionic golden age that sheer size matters more than before. A company has to have critical size to be able to protect itself against the government by fighting back, bribing, or pure flexionic behavior, and in a less significant way amortize the cost of compliance with regulations over a larger productive base. In the good old days size helped too by making the company stronger in many ways, but also hurt by making it a target and also reducing it's ability to react to change. All these things remain, but the necessity to deal with the aggressive, totalitarian-lite government is shifting the balance, in my opinion, towards very large companies. 

Russ Sears writes:

When your worth is built on your political contribution, you can quickly be thrown under the bus when the winds change directions. Size brings more internal enemies and jealous and greater chance of collapse from within.

Gary Rogan replies: 

True. My point really was that size is less fleeting than flexionism when the winds suddenly change. From this perspective I prefer Pepsi to GE: both are large and quite flexionic, but Pepsi will not collapse when the government turns away from wind turbines and financial bailouts.

I strongly agree that a large multinational has a lot of advantages these days, being able to escape the reach of the US government and not as exposed to its collectivist policies are more important than ever. Those who use flexionism as a defense strategy are preferable to those who are actually living the flexionic life at the core of their business. He who lives by flexionism will eventually die by it, but simply saying the right things in the right places is likely to be less traumatic long term, when things change, they'll start saying something else. 



1. VIX went up for a couple of days, then proceeded to go lower still

2. TVIX is an odd beast. It is new - just started trading Dec 2010. Here is a regression of (daily change in) TVIX vs VIX from inception:

Regression Analysis: TVIX versus VIX

The regression equation is TVIX = - 0.0102 + 0.860 VIX

Predictor       Coef   SE Coef      T      P
Constant   -0.0102  0.00297   -3.45  0.001
VIX            0.8597  0.04250  20.23  0.000

S = 0.0274052   R-Sq = 83.1%   R-Sq(adj) = 82.9%

Of note: The daily change is NOT 2X VIX- more like 0.86. Even more interesting the intercept coefficient is negative and highly significant. ie, on (extrapolated) days when VIX change is zero, TVIX change is -1%. This ongoing loss is also seen in comparative chart (attached), and would appear to be another (now common) ETN contango/roll tracking problem.

The advice that TVIX is short term is no joke.



 One is reminded of Victor Hugo's The Man Who Laughed where people in Spain, one believes in the 13th century, (albeit Cervantes didn't write about it) were purposely deformed and trained as deformed so that the rest of the population would not succumb to envy of the flexions or in general be unhappy with their relative lot. Perhaps Mr. Jov will set the record straight.

Art Cooper writes:

Here is a link to the Monty Python skit in which John Cleese plays an Oxford-educated village idiot. When a villager walks by, Cleese acts like a mentally-defective clown. When no one else is around, Cleese speaks to the camera in a highly educated tone, explaining the importance & usefulness of the traditional village idiot to the mental well-being of other villagers.

Bo Keely writes:

One must study the village idiot to discover just what cards he holds. Every town has its hunchback, dwarf, ostensible retard or combination who is the resident savant. Here in Toba, Sumatra it is a cerebral-palsied man sitting next to me doing the town accounts on the computer. In your post 'Grassroots Jungle Economy' the village idiot poisoned the town like Sweeney Todd with coconut sweets from his sewage fed coconut tree. In 'Village Idiot' the hunchback in the key Surfactio, Mexico RR junction is the secret liason to a daily dozens of illegal Central Americans riding the Mexican freights to milk the USA economy. Anyone pushed by a physical or mental deformity from out under the Bell Curve is to be seriously reckoned with.



 Stiglitz's massively egregious factoid (without which his entire argument ends up in the historicist circular file):

"The vast inequalities that seemed so troubling in the mid-19th century— inequalities that are but a pale shadow of what we are seeing in America today."

The NY Times did a very useful study of inequality a few years ago; they measured personal fortunes against the wealth of country. Of the 30 wealthiest Americans in our country's history exactly 3 lived in our present age of inequality: Sam Walton, the Oregano and Paul Allen's former friend. All the others accumulated their fortunes in that golden age of social equality– the period before WW I.



 I can't believe I have amnesia of a mononucleosis loss against the two-time national racquetball champion Bill Schmidtle. He swung a merciless forehand and impotent backhand that given a stronger backhand and patience was licked in every previous and subsequent match. I could scrape a (slow ball) ceiling shot along the left wall all day to his backhand until he miss-hit to yield a plum setup. I could hit a baseball cap in the left front corner 50% of the time from deep court, and went to a cigarette pack as a target. I had learned to 'float' the ball along the air mass hugging the floor depending on the court temperature so it virtually could not skip into the floor.

The mono month was nutty. It started when I fell on my face running on the Pacific beach one day, got up and went to the racquetball Doc Hannah. He returned the next day with a lab report, 'You have the 2nd worst case of mono in the history of San Diego County. I writhed in a bed kindly provided by multiple-national champ Bud Muehleisen's mother for one month listening to the top song 'There's got to be a morning after', till one morning I felt well and got up.Doc Hannah prescribed one month of ceiling balls hit to myself to prevent a relapse, that I did daily in increasing blocks of half-hour sessions until I owned the second best ceiling game in the world, behind Charlie Brumfield. I entered the first tournament with muscle memory for no more than the ceiling stroke, as spectators' heads bobbed up and down counting upwards of 40-shot streaks against lefty Dave Charleston. I won in three, but lost the tournament famished from the exercise.

It must have been after that that I dropped the match to Schmidtke; I don't remember. He never beat me again, though others did.

The practical game strategy with the slow ball of the early 70's was to soft serve to initiate a ceiling rally followed by an error that the rival killed. This was the tedious method of the sport's early greats- Muehleisen, Charlie Brumfield, Steve Serot and less so Jerry Hilecher, Rich Wagner, Steve Strandemo, Benny Colton, a young Marty Hogan, Steve Mondry, Trey Sayes and the rest of the top 32 in the nation who sooner or later travelled to San Diego to graduate with the best. It's a rare person who climbs ranks without personal exposure via viewing or playing against the experts.

Victor Niederhoffer was an exception in taking his first racquetball into the court after winning a world squash championship, bouncing the ball once for study, and proclaimed to a witness, 'Now I'm the national racquetball champ.' He nearly was, soon beating Hogan in a Las Vegas thriller, and most of the field, before losing to Harlem Globetrotter Ron Rubenstein.

When the ball speeded up in the mid 70s, so did the players' mentalities. They became squat and grovelling close to the hardwood for repeated passes and killshots, and new champions like Hogan, Peck and Yellen emerged. The big sponsors- Leach and Ektelon- deftly grasped that a livelier ball meant females, grandpas and youngsters could play making it a sport for the masses, but it ruined it at the pro level.The athletes got meatier and meaner in a competitive way, and racquetball evolved into what you see today: blazing serves, driving returns, average 2-shot rallies, and you could put a table across the court 4'off the floor that the ball rarely rises above.

We lanky, meditative champs nonetheless passed the trophies and money purses with tooth and claw defeats. When the fast ball guys with big serves and shoots that required a fast game to win soaked the tournament balls in hot water before entering the court, or enticed the tournament director to store the whole batch in the sauna until plucking one-at-time for each match… we slow gamers retaliated in ingenious ways. Strandemo switched balls during timeouts with a molasses batch in his gym bag. Steve Mondry secreted a razor blade in the tongue of his hi-cuts and bent over to tie his shoe in the service box, and sliced the ball. And I used a hypodermic needle from vet school to deflate to even things out.

Losses with determination are the stepping stones to victory.



 Three Game Styles

There are three game styles: honesty, cheating, and gamesmanship. I was too ignorant to cheat in the racquetball and paddleball pros, and tried eight times in winning seven national singles championships during the sports' golden decade of the 1970s… in retaliation to like. The formula was if a rival cheated the first time, let it slide as an oversight; the second time politely point it out; and the third time cheat back or trim his the earlobe with the next shot.

There are three approaches into the court or any sport or business. The traditional was play hard and the best man wins. The second method is win at all costs, tantamount to a war. There isn't necessarily anything wrong with an anything goes contest, however it groups you with birds of the feather. The third is the most fascinating and irritating, gamesmanship. This is bantering and bending the rules, manipulating the ref and hypnotizing the crowd to gain an edge on the court.

The best gamesman in racquetball history was my nemesis Charlie Brumfield, a genius attorney who applies his techniques in the court of law and routinely gets thrown out by judges for quoting Perry Mason or must stand behind a screen before the jury box. The problem is there were no judges as racquetball referees, and hoarse traders earned a point for each cheat and shenanigan until a straight player gave away 10-points in each 21-point game.

There are a hundred tricks. Intentional long servers control the game pace and double the length of matches- the better delayers loft the serve out of reach to the back wall for a long 'fault', and it rolls to the front corner to be fetched at an amble. You squeeze or wet the ball before serving to make it knuckle and slide. A sweating receiver lingers in one spot until a pool forms, and the next time serves into it. Physical intimidation in blocking opponents or the ball, striking him with the racquet, ball, elbow, or in combination agitates. The 'donkey kick' was in vogue where a player jumped and kicked backward into the foe's midsection to propel himself to front court. Before a national doubles championship an ex-professional football player approached to wish me well, and quickly slammed my head against the wall. He tried to wish himself well in the match but it didn't work.

The best strategy against a Yankee operator, given a spineless referee and a conscience not to fight him, is stoicism. A strong stoic cuts the gamesman's edge by 70%. The breathing room opens an opportunity to run him with superior shots until he may no longer talk. There has never been a dumb gamesman.

Sooner or later the luck of the draw brings on the cruellest strategist and you get fan support. They heckle the clown to fair play, or threaten him during timeouts. There's no need for that. An opinionated girl in the San Diego gallery once sat through the glass in the left rear corner and flashed her underwear every time Charlie Brumfield went for my passes.

I used to quantify wheeler-dealer moves. When Brumfield threw his racquet cover into the court to hit his opponent's racquet, it was worth the first point. When handball best Paul Haber entered the court wearing boxing gloves and pounded the glass perimeter as the fans outside ducked reflexively, it earned the first game. When Muhammad Ali leaned against the rope and gasped expletives it won the heavyweight crown.



 The musical and movie Billy Elliot is the perfect musical for our age. In terms of its guaranteed to make a million nature. Here are the main characteristics.

It shows Margaret Thatcher and conservatives to be mean spirited and stupid. It portrays business in a very bad light, as all the coal companies seem to be interested in is profits and exploiting the workers. Despite the plight of the workers, the coal company tries to displace attention by claiming it's a clean energy company. It portrays gender equality and cross dressing in a highly favorable light. It has kids in the first scene and last scene dancing and singing. The music and dance flows naturally out of the activity because the story is about a kid who wants to be a dancer. It has raucous loud music by Elton John that is part and parcel of the generation that wears ear phones all day to listen to rock music on their phones or computers. It shows the workers to be kind hearted souls, who would sacrifice anything to do a good turn, like giving up their meals to send Billy to the royal ballet tryouts. It is anti police, showing them beating up the strikers for no reason. It is pro union showing that the picket lines are a defense against extreme cruelty and child labor, not an attempt to prevent other non-union workers from working there. It has a million spinoffs in the form of merchandise and promotions for sale that buzz from the 100% good reviews can tap into.

No wonders that aside from Jersey Boys this has to be the most successful show on Broadway of recent years.



 Amazing arrogance in D'Antoni: "I have no problem with Stud and Antony looking for each other as long as they don't overdo it." My goodness, what a personage.

T.K Marks writes:

In a pre-game tv interview D'Antoni did something that the certain star player(s) could very easily take as a gratuitous and not-so-subtle slight. Pointedly claimed that the Knicks' recent bouts of ineffectiveness originate from a lack of "intensity" in the lockerroom, whose custodian of such is presumably part of the job description of one or both of the two guys getting paid $20m/per, and not his own on-court strategies and schemas. That would seem to invite antagonism between himself and certain parties. Found it unduly undiplomatic.

Must say though Uncle Howie is rather perspicacious in these NBA matters. He's been touting the potential of the Nets' nucleus all along. As I had not seen the Nets perform at all yet this season couldn't get over the stellar talent of their big kid, Lopez, and that newly acquired point guard, Deron Williams. That team would appear to be a few players away from being a very formidable outfit.

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