When the second 30-minute bar of S&P 500 futures pit trading has been
an inside bar, as happened today, the rest of the day has been up 12
of the last 20 times.

Date Change 10:30 to close
12/13/2010 -0.2%
12/31/2010 0.5%
1/7/2011 -0.3%
1/31/2011 0.5%
2/4/2011 0.2%
3/3/2011 0.6%
3/11/2011 0.9%
4/19/2011 0.4%
5/12/2011 1.0%
5/25/2011 0.2%
6/2/2011 -0.1%
6/8/2011 -0.4%
6/22/2011 -0.7%
6/23/2011 1.2%
8/17/2011 -1.4%
9/9/2011 -1.2%
9/23/2011 0.8%
10/4/2011 3.7%
10/25/2011 -1.1%
10/28/2011 0.4%

Average 0.2%
Standard deviation 1.1%
N 20
t 0.91
Avg of all 10:30 to close since 12/10/2010 0.0%



 The current monthly issue of American Dry Cleaner had this comment from a dry cleaning plant owner:

"The advent of valet dry cleaning businesses that rely on local plants to process the work may look like a good thing for a slow plant, but they are only a Trojan horse. Enabling someone to enter the business with little to no upfront capital expense is a death knell. The services enter a market taking business away from the plant operators with the "sale" that they will bring more business to you, but the operator is getting only a fraction of the price, usually half. A route does not cost 50% to operate, but most plant owners are too lazy to start their own route. We as plant owners must stop enabling people to cannibalize our markets. If someone wants to enter the dry cleaning business, make them pay all the costs that you incurred as a plant owner, not just the cost of a van."

The idea that "capital" - i.e. money spent - deserves a rate of return seems to be an inescapable article of faith among us all. Why else would economists still be discussing "the natural rate of interest"?

BTW, If you do a full text search of the English translations of Das Kapital, you will find that the word "distribution" recurs again and again but only with regard to "capital" and "profit" , never once with regard to goods and services. The words "advertise" and "advertisement" are similarly absent. "Advertise" is found once, in a mention of a Dr. Harvey who was selling recipes for weight loss to "the bourgeoisie and aristocracy" in the 1880s; and the word "advertisement" is found once, where Marx compares child wage rates to "the advertisements" that use to appear in American newspapers" for slaves.

Peter Grieve comments:

I often see the Marxist rot in unexpected places. It seems like a very, very bad sign. Once a tumor has metastasized…



 Read this: the idiocy of Larry Summers.

The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending.



 "Suddenly Soros"

[to the tune of Suddenly Seymour]

Lift up your bond
You know that I cara
Here, mark my message
Wipe that market away
Show me your book
Dirty black longing
I know things were bad
But now we are straight

Suddenly Soros
I'm standing astride you
You don't need no longshot
Don't have to report
Suddenly Soros
Is here to provide you
True liquid funding
Soros' is your friend

Nobody ever
Treated EU kindly
FEDdy left early
BUBA is sore
I'd meet any flexer and
I'd follow him blindly
He'd write his swaps
And I'd say "More"

Suddenly Soros
Is standin' behind me
He took down the orders
He won't transcend
Suddenly Soros
Is here with a warning
Spoos under performing
Soros' my friend

Tell me this predation lasts till forever
Tell me your good times are clean washed away

Please understand that its still
damn enlightnin'
For losers like I've been
It's so great to say

Suddenly Soros

Suddenly Soros
He trustified me
He securitized you
Suddenly Soros showed me the plan
Suddenly Soros sold into your plan

Earn now and be poor
That bad trade's inside me (you)
With spoos underperforming



 Aussie economist discusses economists influencing Minsky.

Behavioral Finance Lecture 10: Minsky’s Financial Instability Hypothesis via Steve Keen's Debtwatch by Steve Keen on 10/30/11

In the first half of this lecture, I discuss the economists who influenced Minsky–Marx, Fisher, Schumpeter and Keynes–as a prelude to outlining Minsky’s Financial Instability Hypothesis. (PPT File: Debtwatch Subscribers ; CfESI Members )

Having outlined Minsky’s Financial Instability Hypothesis, I explain the mathematical model I developed of it, on the foundation of Richard Goodwin’s “Growth Cycle” model of capitalism. (PPT File: Debtwatch Subscribers ; CfESI Members ).



 Seems like a couple years ago this site had a discussion on sleep each night. Scott, you posted on this I think?

Note tonight H. Cain gets by on four hours a night. Is this a plus for a candidate?

 Scott Brooks comments:

As long as he gets what he needs.

I can only make a few days on 3 - 4 1/2 hours of sleep before I need a night of power sleep. If I can get 6 - 7 1/2 hours of sleep a night, I'm usually fine.

It's also a function of what you're doing with your life, too. I'm up at the farm right now bow hunting. When I'm here, I usually work pretty hard, so I need a bit more sleep. Something about being out on the farm taking in the fresh air that makes me a little more tired at night.

But everyone is different. The key is find out what you need and make sure you get it in 90 increments (+/- a few minutes on each side of the 90 depending on your personal sleep cycles).



 I took the young man child to work this AM. I realized I have no idea how to drive in heavy fog. We never raced anything in the fog. Let's call it 200 feet max, the ability to see a brake light ahead for danger. I was shocked to have cars passing me doing some 80MPH. I thought if they knew the risk they were taking…Then I realized I have no idea how far this car takes to stop from 55mph. All I knew is that in a couple hundred feet I could stand on the brakes hard, let off them, hard right and motor through the grass at some 25MPH to avoid disaster. (Last thing you want to do in fog is to stop in the road and get rear ended, you need to get off the path).

I figured out that driving on the HWY in fog is too dangerous. The slower side roads with traffic lights is the way to go. One thing racing cars taught me is how dangerous speed can be, even slow race speeds from 250mph at 70-80MPH it's slow motion but the crashes are the exact same as at very high speeds. There is nothing you can do. But if your at sub 40MPH there is everything you can do to avoid destroying your equipment.

What amazes me this year, after all these years of trading, is I am still learning how to avoid bending up my accounts. You'd think your at a safe speed after running 200+ mph all week, your cruising along at an easy 65mph on cruise and you have no idea how to drive in the fog. You must drive to get to your destination. The route and speed you take, just a tiny change in pace and route is a profitable one and avoids a disaster.



 The win of the Cardinals in game 6 of world series combing from one strike away from losing in both the 9th and 10 inning of game 6 is very similar to the win of Djokovich over Federer in the open where he came from one service return away from losing to Federer in the semis'. Both the Djokovich and the Cardinals went on to win the championship. It should give us all hope that fighting to the end is possible, and can snatch victory. It should also teach us never to let up.

I have often seen people give up in the market when one strike away from total disaster, when winning was still possible. Also, much more common the trader who's ahead and relaxes. What did the Rangers and the Federer do wrong in the last service and strikes to give the other side the chance to snatch victory away? How can you and your kids prevent that from happening to you?

James Lackey comments:

In racing we are taught to attack get to the front and go as fast as you can go, push, push, push. However there is one small problem.. Its not that you relax or take a victory for granted.. Oh no.. Its not like traders that are afraid to lose so they book the week month or year and do not take any risk at all. Racers always push, push, push, but it's quite rare to take on a new big risk with a lead.

When we are going as fast as the bike or car vs the track can go.. it's rare to find a new line on the track that is faster when your in the lead at the end of the race. Its much easier to be in a close 2nd and judge your very aggressive risk taking, vs the leaders times on the track. The best ever is when a winless one is leading and thinking too much and the champion is hot on his tail, showing him a wheel in every corner. Hi kidm I am on your 6. From 3rd you can see both lines of the track. If the winless one chokes and bumps the champ you have the double edge.. you know the fastest and 2nd best line on the track and they were forced to slow down for a corner. Its the old joke of life, you win with experience, you gain experience by making mistakes. Mistakes cause losses.. A loss can be you could have won the race but finished second. In the markets there seems to be no shame in finishing way out of the top ten.. All the shame is from blowing up, losing more than X%.. The joke is if your 99th and up small, all your funding may be pulled. Your result is the same, your out of a driving job.

Which to any racer is not winning, at least one day or one qualifier race of a day in a long season. What drives me nuts about the markets is traders walk around and brag they have never lost. The joke is if you do not win or finish in the top three on the podium often in MX your sleeping in the trailer. If you win your sleeping at the Ritz. I am not a big fan of sports where men that finish 99th make millions. I look at it all if your top 3 your great… even once in your life that is awesome.. If your top 10 you get to sleep in the hotel. If your 11th 20th in the USA your sleeping in the trailer. If your 99th and your prospects do not improve by next season.. even if you do not crash and blow up , your done get a real job kid. The results are the same, with out winning, your done.

Mr Vic's examples are for the best in the world. I have never been in the position to be top two in the world and have it all go down to the last race. Yet, for the life of me I can't imagine any man, team or organization not laying it all out there for the win. There is no shame in finishing 2nd at that point and the only risk is blowing it from being too aggressive. I cant find fault in any man that is too aggressive going for the win and losing. Then again, I have been trained to go strait for the lead and push. I hate to attempt a comeback from way behind. There is too much risk for disaster. We do try to take losses like men. The most difficult is being stuck in the pack with all the indecision and not knowing if you have what it takes to get to the front for the race. One bad move and your going to 99th, with severe injuries after being run over by the field.. Even with savings your out for the next season as the injuries are too severe to over come.

There are usually happy endings to all racing stories. The best comebacks stories are from guys off injury, very strong, well rested, but an under capitalized privateer. Any top 10 finish is considered amazing by all. Its one of those times in a career where your satisfied with anything but first place. Only men that have won will understand this next line. It's the only time your happy.

Winning brings all the pressure to continue, therefore your never satisfied. Finishing 2nd is frustrating. Fourth is the worst plate you can run. Tenth is some what motivating as you know the ten kids sleeping in the trailer want your hotel room and are going to do what ever it takes to run you over to get to the top.



Scientists have come closer to creating artificial life and it's only a matter of time before they do.

What are the moral/market implications here?



 From Bruno's quote from Steve Coleman:

Money is not real in the first place, it is an agreed upon concept, in fact just another idea. This particular idea has no value unless everyone agrees on its worth.

The price of money is inflation and none of us individually determines what that price will be. That is something we do in the aggregate by our spending on the total available goods and services offered for sale. Rather we use a uniformly accepted medium of exchange to determine the value of everything we buy relative to money, which for individual purchases is a constant. It is the buyer's claim on some of the stock of available goods and services and in making a purchase one determines the worth of a particular purchase relative to the value one places on all other potential purchases. So when Coleman performs, etc. he sets a price of his production relative to the value of all other goods and services and what people are willing to pay for his performances, etc. is based on how they relatively value that product, not what the price of money or its worth is.

If an artist gains much satisfaction from his or her creative expression they may well be willing to continue to do so even if society is not willing (or able) to pay for it. That is no reason for the artist to refuse payment if it is offered and he or she are otherwise willing to perform or give away/sell their creative product to those particular buyers.



 How is a 50% Mark Down on the Par/Redemption Value of a Bond NOT a Default?

[Ed.: for background information see for example Greece Default CDS Failure to Trigger ].

 Stefan Jovanovich continues: 

 "You don’t need everyone buying CDS to expect it to pay out, you just need a buyer of last resort who’ll make it pay out. You don’t need tons of short sellers to root out fraud, but you do need to allow short selling so that one or two clever and capitalized short sellers can bet against the frauds. You don’t need all the buyers to think the price is right, just the marginal buyer. Greek CDS “works” only in the limit case, only for a non-bank investor who’s willing to be a jerk and run a certain amount of politico-PR risk. But that doesn’t mean it mostly doesn’t work. It means it entirely works."

From a post by Matt Levine.

At the risk of being the jerk who still doesn't get it, the tape is not the world. The short sellers win because there is, in fact, a fraud - Baldwin-United, Enron, etc. really do not have the money or assets that can produce future profits even though their books say they do. Even without short-selling the fraud would ultimately produce the lovely worthless securities losses that can be deducted against ordinary income. The tape would catch up with the world.

With CDS for sovereign debts it seems that "the world" is what the financial authorities define it to be, not the reality of Greece's solvency. I can understand that people will continue to trade CDS because there is, in fact, a market for them; what I do not understand is why anyone believes "the market" in this case has any reality other than a virtual one.

Gary Rogan comments:

Stefan, there is a real reality that

(a) by itself Greece can't pay off it's debt

(b) there are all kinds of people that want to do something to improve it's ability to pay it off.

In this sense Greece is not Enron and the reality is not virtual. There is this strange technical point of what happens to the CDS's if "everybody" voluntarily accepts a 50% haircut, but even the resolution of this point is real, not virtual, so if you buy both the debt and the CDS's something real will happen if you hold the debt to maturity.

Stefan Jovanovich responds: 

There are two problems with this scenario:

(1) everybody will not voluntarily accept the haircut in the CDS market; somebody will want to collect in full from a counter-party because the sovereign debt that is being swapped has done a half-default.

(2) Greece's sovereignty does not guarantee its solvency -someone holding even the new debt to maturity may find themselves receiving less than par. That is the contingency that the hedging instruments were supposed to protect the buyers against.

Gary Rogan writes: 

True, but none of this is virtual any more than the currency in circulation is virtual, which is what you seemingly claimed/asked. There is posturing going on, and I'm sure fraud depending on how you look at it, but there is real money involved and those with the best information, and to a lesser degree instincts, are making real money. Can you imagine what a smart European flexion getting the information in real time can do? Sooner or later we are talking about real money.

 Stefan Jovanovich writes:

Some of us are old enough to remember the collapse of the commercial paper market around the failure of the Penn-Central. Perhaps the Z-Man and the others who are out there making money while us Social Security recipients are busy typing can answer these really naive questions: how long did it take for the non-financial commercial paper market to revive and did it, in fact, revive? I have no doubt that there is real money involved; there was real money involved in the commercial paper market and then…. it was all gone. Currency is virtual but it has legally-enforceable exchange value.

My naïve question was - and is-what is the legally-enforceable exchange value of a credit default swap if "credit default" never, ever happens. If the insurance company can rewrite the policies, with blessing of the insurance commissioner, the buyers for that insurance may decide to go elsewhere for their risk management. I know there is supposed to be a chair for everyone in the room except the last guy; but the history of markets is that some people stop betting on finding a seat while the music is still playing and "everyone" knows the game will go on forever.

Gary Rogan says:

Does it really matter to anyone not playing if sovereign Credit Default Swaps disappear from the face of the earth? It's an iffy concept in the case of US treasuries anyway. Who will be there to pay if off in the world where the US defaults? It's not like you won't be able to buy earthquake insurance in the East Bay, so put your mind at ease Stefan.

Stefan Jovanovich continues:

I never know when Gary is teasing. Earthquake insurance is no longer offered in California by private insurers because the insurance commissioner allowed homeowners to collect on damages from earth movement - which is a chronic problem in coastal California - even though that risk was specifically excluded from the coverage. As a result you must now buy your insurance from the State of California which, of course, people decline to do - given this sovereign's solvency. As to why it matters, the disappearance of what has been the primary tool for risk hedging may have effects as large as those that came seizing up of the commercial paper market. We owe those once in a generation bargains in 1974 as much to the inability of firms to borrow short-term as we do to Watergate and oil price surge - perhaps more.

 Ken Drees comments:

What is the percentage of uninsured homes and businesses in the earthquake probability zones? (guestamate is ok)

I find it ironic that the overdue earthquake area people are living by the dice roll.

Stefan Jovanovich responds: 

According to the Insurance Information Network of California, fewer than 12% of the state’s home owners had earthquake insurance last year, and fewer than 10% of businesses had the coverage.

I don't see the irony. Some risks are not worth the cost of insuring. This is one of them.

Russell Sears comments:

Perhaps I too am naive, but I thought this was obvious: If the messenger will not agree with the rues, extend and pretend, then they must be shot. Currency CDS /hedging /insurance contract was sacrificed for the sake of the Euro.

While there may be some value in the litigation options, currency CDS's going forward are a dead market are they not? Just like structured securities, if you cannot trust the contracts for being truthful, (in a practical everyday sense of the word, not legal twist) then they are dead.

Are we willing to live with liquidity of MBS and currencies being at the mercy of those sovereigns that still have some semblance of confidence in them? Can these sovereigns keep these bottomless guarantees "off-balance sheet" without it cracking them? The market seems to be saying for now, "yes".



 Last night at a fund-raising event I met the chairwoman of the local classical orchestra. They have been struggling financially for years, and worse lately even though the second recession in three years ended this week.

She told me the musicians make $150-250 per day–and I didn't tell her this was about half of what a dental hygienist makes. We lamented that the symphony's efforts to interest young people in classical music had largely failed, and wondered why there wasn't greater interest in classical music. As this lady hailed from a formerly socialist / currently mafia part of the world that gets people kicked off spec-list, I explained that in free capitalist markets financial resources gravitate toward areas of greatest demand. Thus classical music is not much in demand by the majority of people, and marketing to them will not get results.

Afterwards we went to a nice restaurant and had dinner near the bar. The place was very busy–which seemed surprising for a weeknight just after another recession. Apparently the internet age speeds us up. We had a good view of the bar, as well as the two cute hostesses in their twenties. Nearby an older single model with colored hair and unbuttoned shirt was seated at the bar. You could tell because he wore a diagnostic shibboleth that used to be much more common: a necklace with a dangling gold-plated razor blade.

He kept stopping the cuter blond hostess and chatting with her. At first she was too busy, but eventually she heard him out for about five minutes; politely listening and making good eye contact. Suddenly grandpa handed her $100, saying "take this for your four year old".

When I was little an old Jewish man gave me a penny. I quickly did the inflation calculation and realized a value transaction had occurred, and that free markets would never die.



The USDA, in a cost cutting move, is cutting some agricultural reports, 14 of them to be exact. None of the reports are major commodities, but they include honey and sheep. Personally, I applaud this move and hope that the USDA gets completely out of the reporting business and leaves matters entirely to the private sector.

Critics complain that there will be less information to go around with the ending of the reports. I humbly suggest that the end result will be more accurate data available because the private sector has an incentive to make the data as accurate as possible.

Feds tighten belt by cutting agriculture reports



 Quick 2 minute video

Hats off to Mr. Lack.

 Vince Fulco comments:

I have always thought race car drivers professionalism and grit have been terribly under appreciated. Growing up I was partial to the European racing scene (formal courses and rally events). To think one has to stay constantly focused at great speed while riding in an extremely noisy environment (no insulation) and sometimes arm's length from the engine and transmission belting out tremendous amounts of heat (wearing nomex fire retardant suits/underwear) while constantly strategizing makes trading seem downright easy in comparison.

I remember a story about Porsche's Derek Bell (as I recall) who was in the final laps of the 24 Hours of Lemans when his transmission started to fail losing grip with its gears. On his last visit to the pits, someone got the crazy idea to pour a can of Coke into the transmission tunnel giving it just enough stickiness to make it through the race. Not sure if their version of urban legend but amusing nonetheless.



 "The Darwin Economy: Liberty, Competition and the Common Good"

Professor Frank draws comparisons between Adam Smith's "invisible hand" theory and Darwin's innate understanding of competition. As a pioneering naturalist and not an economist himself, Frank states that Darwin helps describe the economic reality of our current world much more accurately than Smith's and predicts that Darwin will be seen by most economists as the intellectual founder of their discipline within the next century. The book expands on this theory, elaborates on how Darwin's theories relate to our current situation, and how Darwin's insights can help us in the future.



 It's amazing that in 60 years, a better product than white out to remove ink has not been found. Why is that? The white out smells, takes a long time to dry, is easy to spill and has thickness that requires a woman's touch to apply correctly. One recalls that the best experts on tree climbers were not the foresters or the scientists but the tree work companies themselves that taught everyone else how to climb.

In general the businesses know how to solve problems like this infinitely better than the academics as we see so often in our field. There are many companies that produce and dispense ink. What do they use to clean up spills and why can't this be applied. I am going to have Aubrey test if anything common works with his Kosmos chemistry set which I brought from Germany to the US. So I could use their great German sets to teach Galt since I couldn't understand their chemistry.

All the chemistry sets these days are in the form of games as kids apparently don't wish to read a manual and trial and error it. What other products needs a solution in the real world that industrial manufacturers have already solved for their continued profitability and ability to meet competition and provide proper conditions to their workers.



"The Failure of Models that Predict Failure: Distance, Incentives and Defaults"


Statistical default models, widely used to assess default risk, are subject to a Lucas critique. We demonstrate this phenomenon using data on securitized subprime mortgages issued in the period 1997–2006. As the level of securitization increases, lenders have an incentive to originate loans that rate high based on characteristics that are reported to investors, even if other unreported variables imply a lower borrower quality. Consistent with this behavior, we find that over time lenders set interest rates only on the basis of variables that are reported to investors, ignoring other credit-relevant information. The change in lender behavior alters the data generating process by transforming the mapping from observables to loan defaults. To illustrate this effect, we show that a statistical default model estimated in a low securitization period breaks down in a high securitization period in a systematic manner: it under predicts defaults among borrowers for whom soft information is more valuable. Regulations that rely on such models to assess default risk may therefore be undermined by the actions of market participants.

 Gary Rogan comments:

Were the participants "allowed" to fail, sooner or later none of this would have been an issue. Were there not a government market for subprime loans to begin with this problem may have never developed in the first place. If the government didn't push for banks to make subrime loans this would be much slower to develop, if at all.

The government gave this problem the first push and then enabled, encouraged, and forced it all the way through. And that is how capitalism, red in tooth and claw, failed. Time to do some occupyin' of Wall Street.



 Publius made his first appearance on this date in 1787 in the New York Post and Daily Advertiser.

But, far more important, it is the anniversary of the opening of August Belmont's IRT in 1904.

The links are to the Library of Congress' QuickTime files for a movie of the ride from 14th Street to 42nd Street (1905).



With Stocks up 3.5% and Bonds down 3.% the ratio of Stocks to Bonds has increased by 6 .5 % today and a nice 20 percentage points since the terrible beginnings of the month. The wisdom of those who allocate based on the ratio is shown. And it's a quasi-Gannian moment with the anniversary of October 19, 1987 being [followed by a] tremendous extreme but the other way.



 I drove down the driveway of my Crossville, Tennessee farm, Pamelot, at 5:20 a.m. It was partly cloudy and the air was moist. Ahead was a long drive, one of the longer I have ever embarked on. My mission consisted of several components. On board my 1997 Ford Expedition were the cremains of my Dad, Douglas Parisian. I was headed to a small town in northern Minnesota, a town on the White Earth Indian Reservation where we are members, the town where he was born and raised. I was going to hold a small memorial service and place his remains in his burial plot. After leaving MN I was to head west to gun antelope and visit with clients in Montana, departing back home after the first day of the 2011 deer and elk rifle season. The drive into Nashville, west on I-40 was rather quiet. I kept my eyes scanning for deer in the headlights while this is what I was looking up to. Dad was with me.

I wanted to get through Nashville before traffic got heavy and the clouds thickened as did the ground fog. I didn’t intend to push the trip and wanted to enjoy the fall colors and cherish the memory of my Dad who passed away on June 9th at the age of 88.

To celebrate our last “spin” as he liked to call our trips together I kept a picture of him up front. As the morning dawned it was great to see him smiling with me through the colorful fall beauty of western Kentucky and wondered what a highway patrolman might inquire about with his picture sitting up close and personal. Alas, no troopers were able to get into my checkbook on this trip.

I stopped for a fill-up 376 miles down the road and was making good time. Kentucky turned into Illinois and there were plenty of dead whitetails along the way. Taking pictures with my iphone while driving was not the smartest thing I have done but it worked. Dad was with me. I saw one bomber of a whitetail buck that had lost his life to an Interstate collision and the IL highway department workers had placed him and many others on a flatbed trailer. The road carnage continued the entire trip as the hormone levels build into the peak breeding season. Pushing north into Illinois I thought I could make Rockford near the Wisconsin border about dark-thirty but the cruise control at 72 was working perfectly and Wisconsin was an ideal place to get some sleep.

The next morning I met a great friend at Dicks Bar in Hudson, Wisconsin for some eggs and coffee. Telling the waitress I like my java like I like my girls was a hoot. Hot and quiet wasn’t what she expected to hear. I am told Dicks Bar is the oldest bar in Wisconsin and it’s a gem for tall tales and rich history. Walking out after a delicious breakfast I looked up to see a mature bald eagle overhead. Dad was with me for sure. I kept pushing and MN was at its usual fall self. Beautiful. Heading across our great nation is a treat. I try to avoid the Interstate fast food franchises and duck off into small towns and coffee shops where the locals hang. I’d rather tip the locals and get some laughs than listen to somebody with little ambition ask me if I want fries with that.

In Illinois they talked crop yields and deer hunting. In Wisconsin they talked the Packers and deer hunting. Everywhere there was disdain for the shmuck congress-critters running the show in Corruption, D.C. The wind mills in northern Illinois are growing in number. So too are the deaths of migratory birds. As a birder there’s not much we can do. The green revolution continues but at what cost? The next couple of days were a blur. Meeting with many of my Dad’s friends and family were a bit emotional. I had put together a formal “speech” that I was going to present at the grave site service but had to abandon that. Just couldn’t seem to get through it without tears. The day was clear and cold.

Wind chill was near freezing as we stood at the grave site and I made the executive decision to keep things short and simple. Dad didn’t want a military funeral though as a pilot in WWII he well qualified. He didn’t want a fancy service nor people crying. Dad wanted a celebration of a life well-lived. There was nothing more in life that he wanted to accomplish. He was a great Dad and a great shot with his Remington .30-06. The last deer hunt we were on together when he was 78 he tipped over a small muley buck at nearly 300 yards and when in his early 80’s an old family friend invited him to come to his farm and maybe shoot a deer. Dad went alright. He went for a walk and killed two to fill his tags and was never invited back again which he laughed about.

He said they shouldn’t have invited him if they didn’t want dead deer! As the older ladies were shivering in the freezing wind I kept my words simple at the cemetery. I spoke about how I admired my father. I spoke of his generous nature, his humor, his dedication to the care of his wife and my mother, who for 8 long years lived under very trying conditions in a nursing home due to a terrible stroke. I closed by saying I loved my father. It wasn’t until my hands and knees were on the ground pouring his remains into the hole after everyone departed that my emotions ran out of control. Daylight found me heading west into North Dakota and still avoiding whitetails on the prowl. I missed a nice buck east of Fargo, ND by feet. Twenty-three miles west of Fargo a big cow elk wasn’t so lucky. She lay dead on the Interstate median and the bloody road didn’t allow seeing what type of rig hit her but I bet it was a big rig. It was hard to imagine an elk herd that close to Fargo but they were animals of the plains way back when.

The cycle continues today. As morning broke the sight of thousands of Canadian geese filling every pot-hole, picked corn field and lake was an added plus. I never saw a duck hunter or duck hunting rig on that Sunday morning. The harsh north-west wind would have made for tremendous creepage and easy “strategery” in filling a mixed waterfowl bag. Western North Dakota is on fire with the oil business. If you are young, fit, drug-free and want to make some serious money I suggest you head west. North Dakota is where it’s at. Oil rig work starts at over $26 per hour and there isn’t enough infrastructure in place to handle the demands for all the people needed to drive the boom. Getting into Montana was a relief so I stopped to take this picture.

Unfortunately I also picked up a good amount of litter that previous camera carriers had left behind. I can’t stand litterers and people who toss trash in the back of pickups counting on the wind to blow it out should be slapped silly. If you are one who pulls that crap consider changing your ways. We are all in this together. We all live downstream.

At my destination in Montana the first order of business was to sight in my rifle. I love shooting my hunting rifles and memories of dads words always with me. Hold and shoot on 3. Hold your breath, zero in on the target and fire in about 3 seconds as you refine your aim. The next morning I started hunting antelope. On foot. I killed a lot of antelope in my teens in South Dakota, some in my 20’s in Montana, a few in my 30’s, a couple in my 40’s and one with a bow and one with a rifle in my 50 ’s. I am no stranger to antelope. I left the truck at 8 a.m. Here’s a picture of my rifle that I hunt with. That is a 2.5×15x56 Swaro on a BAR .243. Nice glass for sure. No more gun or scope will ever be needed in my lifetime and a lucky son will be the beneficiary. I like to use the sun and wind to my advantage and my first day out I only saw 3 antelope on the ranch I was hunting. No bucks. I logged about 12 miles and by 2:30 was tired. It had turned warm and I had miles to get back to my rig. I should have had my .20 gauge and shot Hungarian partridge and sharp-tailed grouse . Never saw a single Sage grouse while in Montana. Maybe they are going the way of the buffalo. Let’s hope not but it’s not pretty. By day 3 I believed what everyone was telling me. Montana sold more antelope licenses than they have antelope.

Between disease and the disastrous winter last year things look bleak across eastern Montana. Out of the several ranches I hunted I saw very few speed goats where 10 or 15 years ago there were hundreds. They are tough animals and only indigenous to this continent. I hope they eventually recover in number and that the good boys and girls at the state game offices in Helena, MT do the right thing and cut their revenue stream over the next few years. The antelope need some help and fewer does and fawns being shot will help. The coyotes, eagles and cats will always get their fair share. That is how they are built. I finally lucked into some decent numbers of ‘lopes on a ranch I had never hunted and after some conversation with the ranch owner I was in business. No money exchanged hands, just the request that I get a goat to get rid of a mouth that competes with his cows for food. That I could do. After spending a good part of the morning watching antelope with my great spotting scope, (thanks Dad, that was a great gift) I kept coming back to a plain weird goat that I had spotted on an adjoining ranch in 2008 when bow hunting. He was very old, huge in size for it being a month after the antelope rut and had some amazing horn structure.

I knew he would make a great mount but I kept glassing looking for something out of the ordinary that would be a typical buck but to no avail. This freaky goat was going to hopefully get hit with a 58 grain bullet going a mile per second at the muzzle. These old guys are old for a reason. They have a sense about them. Like my Dad. Spending his career in law enforcement Dad could get it figured out pretty quick when things didn’t add up. I think I have some of that sense in me but in the stock market. Once in a while you will get hurt, beat up and banged. Good sense and savvy prevents the massive blow-ups. Experience is a great teacher and with 30 years in the market it isn’t getting easier. High frequency trading has changed the game. The little guy on Main Street is being picked off by Wall Street. And the regulators. But that has nothing to do with killing antelope so back to speed goats.

As this old beast was getting a drink shortly before noon I got a great look at his horns. Wow. He bedded as usual, smack dab in the middle of a doe herd. He was about 302 yards out. I waited some and decided to make my move and in a bit, the does were up and he was moving away. Anyone who has spent some time with antelope just knows how older bucks will keep their bodies going directly away from any danger and this guy was no exception. He just kept moving directly away as the does were not overly alarmed but he was keeping the does between me and something amiss. I kept on him waiting for the instant when he might turn and present an opportunity. His mistake was in turning. At the crack he folded faster than Bill Clinton headed after an intern.

In my book he’s a trophy. A trophy to have survived several harsh MT winters. I don’t have a clue what he might score and care less. To me, inches on an antelope are how thick you want the steaks cut. With that mature black face and neck patch he should look great with a wall mount in semi-sneak style. I’ll share that look in about 5 months when I get to see the real deal. In the heat I took him immediately to a guy I trust in the next town over, about 70 miles away. As the MT youth big-game season had started a young hunter downed his first deer ever and brought it in for processing. His father is an outfitter so he probably had a great crack at killing a magnificent buck but this young man is to be congratulated on downing this brute! Wow, what a beauty.

I won’t bore you with any more of the details about the next couple of days I spent scouting for the big game opener as I have deer and bull elk tags yet to fill when I head back to MT over Thanksgiving with my two sons who have deer and cow tags.

Here is the country I hunted on opening day.

As in stocks there are a million ways to lose money. In elk hunting there are a couple million ways to not put a tag on a trophy bull. About a half hour after daylight I missed a big bull at 50 yards walking away from me in very thick jack pines. Pure missed the shot I attempted. A great bull in his summer “home”. With the rut over he had broke off the cows and come home. I had him scouted perfectly. He didn’t follow my script. He won last Saturday. Dean got beat. Dad would have laughed.

When I would tell my Dad I missed an animal he would always smile. He said you can’t eat tracks. Hopefully with a small amount of my Dad’s cremains in the pocket of my hunting jacket he can be with me when I head back in the hills I love to try to kill that bulls daddy in a month. Dad never gave up, even in the end. Neither will I. May there be big bulls ahead to make Dad smile.

The reason why I'm not President is because on the second day in office I’ d be asking the Head of the Joint Chiefs, “what do you mean we ran out of missiles?”

my website



In less than a month, by virtue of modern technology, the story went from near-certain Greek government default and coordinated/global ECRI-vetted recession to……. this. [Just for fun… Stimpy cartoon, 3 minutes]



 A Spec notes: I have found that markets are moving in the direction of the announcement to an inordinate extent recently. And relates it to who knows what and the sneakers he sent the fake Doc and the book he sent to Patrick Ewing, the most sullen player to ever put on baggy long shorts, asking these two to change places. But Rocky is doubtful and demands to see the evidence.

Philip J. McDonnell comments:

Personally I am waiting for Occupy the White House. But that is not likely to come from the ACORN backed OWS movement. The Chair can use me as a human shield. But in a sense I agree with Rocky but for a different reason. I assume you are speaking of a significant correlation regarding such pre announcement movements. The practical problem is that all one can really assert is that someone figured it out in advance. For example the jobs number can be gamed by looking at the number of jobs posted on Monster.com or even craigslist.org. If the market moves in advance is it because someone leaked or someone legally gamed it using a little cunning. Personally I lean toward the conspiracy/leak theory as more likely but it fails the legal hurdle of proof.

The other problem is that legal standards require proof beyond a reasonable doubt, but we trade on mere correlations alone. We also know that correlation does not imply causation but it is usually good enough to trade on.



 To the tune of "When I was a lad…" from HMS Pinafore.

Sir George:

When I was a lad I ran Quantum.

We traded in the Dollar and the German bund.

Then I bet against the Pound with such great glee

That I made a billion overnight so famously.


He made a billion overnight so famously.

Sir George:

I wiped up the floor with the BOE

And now I have opinions on the whole world scene!


He wiped up the floor with the BOE

And now he has opinions on the whole world scene!

Lord El:

At the IMF I made such a mark

That I went from Smith Barney straight to Harvard Yard.

With some great timing, I quickly left that job,

And now I'm here at PIMCO where we own the bond.


And now he's here at PIMCO where they own the bond.

Lord El:

I got myself to PIMCO so skillfullee

And now I have opinions on the whole world scene!


He got himself to PIMCO so skillfullee

And now he has opinions on the whole world scene!

Sir George and Lord El together:

We give our interviews in expensive suits

And boggle all the doctors at the institutes.

We're working on the Fed and the ECB

And winding up the Germans oh so skillfullee!


They're winding up the Germans oh so skillfullee!

Sir George and Lord El together:

We're winding up the Germans so skillfullee

And talking our own books against the whole world scene!


They're winding up the Germans so skillfullee

And talking their own books against the whole world scene!



A song I wrote probably in 1988 or so while working at NCZ:

(to the tune of Bad Bad Leroy Brown)

Well on the West Side of Manhattan,
There's a trader with lots of fame
The markets fade,
When he begins to trade
George Soros, is his name
Well, Soros, he's a TRADER,
He loves to take a chance,
He trades the swiss and yen
whenever he can,
He moves markets with just one glance,

And he's the Big, Bad Quantum Fund,
Trading Volume it's number one,
Bigger than Tudor Jones,
They move markets all alone,

Now Friday, bout a year ago,
Stocks went way down low,
George said, why,
I'm gonna buy,
Cause upward they will go.
Well the market crashed that Monday,
But Soros was filled with mirth,
The Fund was down a BILLION BUT, he still had
HALF of his net WORTH.

And he's the Big, Bad Quantum Fund,
Trading Volume it's number one,
Bigger than Tudor Jones,
They move markets all alone,

Now Soros, for a billionaire,
his thinking is a bit bizarre,
He talks about nothing but equality,
As he's riding in his fancy car.
He spends a lot of time in China, now,
Says he's opening the markets there,
He says he's doing a service for our Asian friends,
But in the profits, George will share,

And he's the Big, Bad Quantum Fund,
Trading Volume it's number one,
Bigger than Tudor Jones,
They move markets all alone,

Now the Quantum fund was in need of help
Goerge wanted it to earn more cash,
A man called Victor said,
It's your fault,
That you lost it in the Crash.
George he hired a trading genius,
Krieger was his name,
He's an Indian Guru,
But it didn't help,
Cause he lost money just the same

And he's the Big, Bad Quantum Fund,
Trading Volume it's number one,
Bigger than Tudor Jones,
They move markets all alone,
Yes he's bigger than Tudor Jones,
He moves Markets All Alone

Victor Niederhoffer sends:

(To the tune of Suddenly Seymour)

Suddenly Soros
       wrote in the FT
       That he sees weakness
           In the S & P
               Soros and El Erian
                   are bearish on spu's…

etc. etc.



One is never better off talking their book.

True in so many ways:

If you speak of a position you hold, not only peers smirk you are talkin' your book, a pressure builds up that starts seeking what you spoke must happen. Rabbit holes of all sorts get clogged and only one remaining open is your forecast. Bad trading.

If you speak of a position you could have taken then too much pressure comes from peers that you may be talking your own book while its not true. Pressure gets released that you are not going wrong if forecast is wrong and then the pressure also becomes immense if you are really right but don't have the position.

Trading or talking well are both rare abilities on a stand-alone basis and definitely a feat when done together well.



Allow me to bring your attention this article:

"The Psychology of Music and the tuneR package" by John Myles White, which deals with both the R programming language and music, two favorite subjects of mine.



 Yesterday I had the privilege of heading downtown with Presidential candidate Gary Johnson to OWS [Occupy Wall Street]. My interest in going was to gauge whether this is truly the new sans-culottes (as some have said) or a fading parade for social misfits.

The stench of un-showered bodies and marijuana was overwhelming. No surprise there. Protesters held signs with phrases like: “I Love You” and “Compassion”–and other vacant blanket statements with premises rooted in ill-defined feelings of entitlement. I tried engaging one woman in her 50s in a discussion about Social Security and various entitlements. After underscoring objective facts about the insolvency of our current system: taxing the 'rich' more would barely cover the interest on the national debt, etc. the cheeky response I received was: “Well, I simply have always been on the side of the underdog–that's why I’m here.” (She also said that “I meant nothing to her” as someone who could possibly support a Republican, Gary Johnson).

Tally 1 for the social misfit theory.

Just when I was about to throw in the towel and head home there was a woman who stood out in the crowd. Wheelchair ridden, yet she was unabashedly moving herself around through protesters. She repeated: “You are in the wrong place; you should be on the doorsteps of the politicians. It’s not Wall Street that is the problem. It’s the government bureaucrats.” – razor-sharp insight. She came over to ask me who Gary Johnson was.

We spoke. Elizabeth was a homeless woman from Midwood, Brooklyn. She had many health problems over the course of her life; including recently cancer. It took me a couple of minutes to realize that –despite her misfortune– this woman was remarkably rational. It was clear that she had at least a partial grasp on the moral imperative we face, while at the same time was living proof of it. And she was appropriately self-conscious of this fact.

During our conversation she revealed that Medicaid paid $32, 000 for her wheel chair. It didn't work. Then Medicaid sent another; costing the tax payer an additional $32,000. That one stopped working the same week that she received it. She boldly conjectured that this money pit abounds because bureaucrats don’t care — not their money. If this wheelchair corporation wasn’t able to so intently lobby their government representative, they wouldn’t have received the contract with Medicaid. This brand of moral hazard — bleeding tax payer money, costs us dearly.

OWSers, it’s your money too. Or is it?

Protesters not only want to have this continued; but, they’d add to the calamity with Obamacare. She told me the taxpayer had been previously supporting her in a $383,000 a year nursing home. What she really wanted was to live modestly in an apartment. Doing this would instead cost the taxpayer $70,000. She was first denied the (70K/yr) ‘Section 8’; but, was then ordered to receive it from a NYC judge. Shortly after receiving court order, she was sent a letter from the NYC housing authority (signed by Sheldon Silver amongst others) stating that the judge had no authority. In fact, she showed me all of her legal documents to support her claims. Almost anything I asked about she could back up with hard numbers or legal notices.

We discussed Obama’s initiatives and the so called “shovel ready” projects.

Whether she knew it by name or not, Elizabeth seemed intuitively aware of Bastiat’s Broken Window fallacy. For instance, she told me about a massive ‘street cutting’ project on Ocean Avenue in Brooklyn. What were they fixing? Upon inquiring, the workers told her that there was no reason for the cutting. One could think this is a predictable cocky response from a tongue-in-cheek worker who simply didn’t want to be inconvenienced by a wretched woman. But after weeks of investigation, she came to the (highly probable) conclusion there really wasn't any problem to fix. It was yet another Keynesian Obama initiative to create work. Students of the Austrian school understand why this is wrong. Elizabeth does too.

Toward the end of our discussion she paid me a compliment: “If this man follows your line of thinking, he’ll be successful.” I smiled and assured her that the Governor and I have discussed some of these issues. “Tell him to go to Midwood. I’m going to tell the Rabbis all about him.”

We thanked each other then headed in opposite directions.



Interesting study from the US Treasury (2007):

Income Mobility in the U.S. from 1996 to 2005

Some excerpts:

• There is considerable income mobility of individuals in the U.S. economy over the 1996 through 2005 period. More than half of taxpayers (56 percent by one measure and 55 percent by another measure) moved to a different income quintile between 1996 and 2005. About half (58 percent by one measure and 45 percent by another measure) of those in the bottom income quintile in 1996 moved to a higher income group by 2005.

• Median incomes of taxpayers in the sample increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. Further, the median incomes of those initially in the lowest income groups increased more in percentage terms than the median incomes of those in the higher income groups. The median inflation-adjusted incomes of the taxpayers who were in the very highest income groups in 1996 declined by 2005.

• The composition of the very top income groups changes dramatically over time. Less than half (40 percent or 43 percent depending on the measure) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of the individuals in the top 1/100th percent in 1996 remained in the top 1/100th percent in

• The degree of relative income mobility among income groups over the 1996 to 2005 period is very similar to that over the prior decade (1987 to 1996). To the extent that increasing income inequality widened income gaps, this was offset by increased absolute income mobility so that relative income mobility has neither increased nor decreased over the past 20 years [emphasis added]



Yesterday's move from open to 940 was the greatest decline in the history of markets. A mere 1%. But it is a tribute to the mistress that she likes to keep the wheels of commerce moving in a direction consistent with the forces that she doesn't often greet the hopeful speculator with more than 100 dow points down in the first 10 minutes. It is also helpful to the margin clerks one would think. But that's part of the point.



A Congressional Budget Office report released today shows that from 1979 to 2007, after-tax income grew by 275 percent for the top 1 percent of households, compared with 18 percent for the bottom 20 percent. Bloomberg News.

Great example of the regression fallacy. Ones that happen to be in top 1% in 2007 necessarily grew more in % than typical person, much more than ones in bottom 20%.

Allen Gillespie adds:

And isn't that also true for trees, the top ones pulling nutrition from the bottom ones and growing from the inside out and higher simultaneously. Hence, why utilities as regulated monopolies are the most stable - they have eaten all the competition.

Stephen Stigler writes:

A reaction to the report which says "A Congressional Budget Office report released today shows that from 1979 to 2007, after-tax income grew by 275 for the top 1 percent of households, compared with 18 percent for the bottom 20 percent."

First, it is not clear what they actually did, but you can be pretty sure they did not find what the item says. That would involve following a very large number of people and their individual after-tax income over a 28 year period, and I do not believe such data are available - and even if they were available there would be a serious problem of definition - do they mean top 1% in 1979? Or top 1% in 2007? These were not the same people - in fact, some of the top 1% in 2007 were in the bottom 20% in 1979, including probably Steve Jobs.

So what they probably did was just take the average after-tax income of the top 1% in 1979 and compare to that of the different group of people who were top 1% in 2007. Now, as I say, these were different people by and large, with an unreported overlap to be sure.Some in the 2007 group would be testimony to the opportunities that allowed them to improve from even the bottom 20% in 1979, a change that some might think possibly admirable and certainly non-discriminatory.Other problems are that the bottom 20% includes not just the undeniably poor, but also the young and not yet successful, and the comparison at the top compares the pre-Reagan tax cut era (when there were huge incentives to keep income out of the tax calculation), to the peak boom year when rates were relatively lower and the incentives to hide income much less.

This is not really a regression effect, but a different type of selection fallacy. Had they really taken the top 1% in 2007 and followed them individually back to 1979, similarly with the bottom 20%, that would have produced a regression effect. But I doubt they could do that. Anyway, who cares what Mark Zuckerberg was making in 1979? He was born in 1984!



 When a stock goes down big, the bears gang up on it. For no more reason than they could gang up on any other stock. But whatever the company does, the good isn't enough and whatever is bad anywhere is magnified 100 fold.

Further, the danger of looking at files that are not as of the time of announcement without changes should be emphasized.

And Andy Lo 's point about Compustat never being the same because they change all the time is also underlined. I am reading a book about chronic bears and it is the worst book I've ever read. (One was asked to review it). But they are great at spreading bearish news about stocks at conferences and among their friends. It doesn't take much to start a stampede. People are descended from the oxen, as beautifully limned by Galton.

I thought silver cheap at 14 bucks. But my friends in the pit remembered it at 3 bucks and told me it seemed expensive to them even after it had dropped from 40 to 14. I made the same mistake over and over with other stocks I've owned. Part to blame is studies that show the worst perform the best. Many of these studies I now believe are terribly biased. Also to blame is the natural tendency to try to get part of someone's hide.

Gary Rogan comments: 

It seems to me that most things based on some novel, original ideas once hit rarely recover, but things based on execution, or the economy, or something very common and prosaic, or that have a long and previously successful history, often do recover.

It is also often impossible to tell which category the thing belongs to once it's a little old and complicated, and old things do get totally obsolete but the newer something is, it is obviously more high risk/high return. So this is all obvious, but somehow undifferentiated studies that predict what happens to the worst have to be separated into novel/"old school" components.



 Does anyone have this in PDF? The Amazon hardcover is 300+ dollars.

Propaganda Analysis: a Study of Inferences Made from Nazi Propaganda in World War II

Jonathan Bower comments:

Here it is:

Scribd: The-Jewish-Enemy-Nazi-Propaganda-during-World-War-II-and-the-Holocaust

You can read it for only $21.

William Weaver responds:

That's the problem, there are a lot of books with similar titles, but the one I'm looking for is by Alexander George, written in 1959. The Gladwell article 

(Open secrets, Enron, intelligence, and the perils of too much information [10 page PDF])  that Jeff Watson mentioned referenced the book and it seems like an interesting read. Here is the Amazon listing:

Propaganda Analysis: Study of Inferences Made from Nazi Propaganda in World War II [Hardcover]

Alexander L. George (Author)

ISBN-10: 0837166306

Out of Print–Limited Availability. 

Bill Rafter writes: 

Regarding out-of-print books, some dirtbags have been identifying those books in a local library that are both (a) in demand, and (b) out-of-print. The dirtbag then advertises the book on Amazon as "used" for a substantial sum, say $150, or in your case $300. If someone orders the book the dirtbag then goes to the library and borrows the book.

A few days later he goes back to the library and confesses as to having lost the book in a fire or flood and pays the library their lost book fee, which might be $25. At that point he has paid the library for the book and cannot be charged with selling stolen property. And you as the buyer cannot be charged with receiving stolen books. But the whole thing really stinks.



After what I heard on NPR this morning I would say the Cards are doomed. It appears to me that they are looking for a great excuse in case they lose.

NPR was gleefully reporting a good excuse. It turns out the bull pen did not warm-up the pitcher for the guy that hit the double, like the coach called for because, get this, they did not hear what Coach La Russa said on the phone. Great excuse! That was painful to hear.

Here is the story

newsfeed: world-series how-the-st-louis-cardinals-got -all-mixed-up

Why does this matter?

In the heat of a grueling marathon I've learned that once you are searching for an excuse in case you lose, you sure will.

George Parkanyi writes:

 To your point, one of the biggest chokes ever was the Ottawa Senators going down to the Toronto Maple Leafs a few years back. They were leading the series 3-2, and the 6th, clinching, game 1-0 late in the third period. Toronto had been completely shut down to that point. Toronto got one penalty, and right after, another. What a glorious opportunity for Ottawa -a 5 on 3 power play! What did they do?

They didn't even go into the Toronto zone, they passed it around and just generally wasted time to eat up the clock. But there was still about 8 minutes left to go in the game. I still remember jumping off the sofa and literally screaming at the television "What the ^*&&*% are you doing, you idiots!!!!" Sure enough, playing not to lose, they gave up a late goal to an energized Toronto, who then won the game in overtime and also won the 7th game after that.

That game is etched in my mind as the poster-child example of why you don't play not to lose when you're in a competitive situation. I remember this when I play soccer, and never play more conservatively when we have only a 1-2 goal lead no matter what stage of the game. My philosophy is keep doing what got you there. That's also why I absolutely HATE late-game prevent defenses in football.

 Peter Saint-Andre comments:

 The Wikipedia page about baseball points out the following:

clock-limited sports, games often end with a team that holds the lead
killing the clock rather than competing aggressively against the
opposing team. In contrast, baseball has no clock; a team cannot win
without getting the last batter out and rallies are not constrained by
time. At almost any turn in any baseball game, the most advantageous
strategy is some form of aggressive strategy."

Some form of aggressive strategy is always advisable in investing, too. You can never simply run out the clock.

 Stefan Jovanovich writes:

And, for racquet sports, even more so; they are the only hand to hand combat sport where you cannot be saved by the bell or blame the loss on the manager or the rookie who tried to steal second. Speaking of extraordinary sporting events, did anyone see what City did to Manchester United? Remarkable. Lazio's loss is Manchester's gain.


Scott Brooks comments:

This is not completely true of baseball. In little league, most (all) games have a time limit. So there is a strategy to playing to the clock. The home team always got the last at bat (unless they were ahead) after the cut off point.

So if we were the home team and were ahead and the cut off time is approaching, we would make the inning last as long as we could. We'd have our batters run the count up. We'd have them step out of the batters box between pitches. We'd call time out several times, etc.

All to ensure that the opposing team didn't get another at bat. Sure we'd have gotten another at bat after them if they tied the score or got ahead of us….but why take the chance.

Peter Saint-Andre responds:

So is the lesson that little-league investors think they can run out the clock, but big-league investors know they don't have that option? :)

 Scott Brooks writes:

Whatever league you're in……..

……Know the rules and use them to your advantage so you can win. I don't
care what the rules are, just make'em clear and let me play/coach/invest.

As Vince Lombardi said, "The object is to win, to beat the other guy"





I understand third hand the Senator called for a buy in gold Friday last, and so congratulate Larry Williams for yet another great call.

Anatoly Veltman adds:

Of late, there is significant tie-in to world's strongest major currency: Yen. Yen was mired in tight range for over two months - and finally broke to new record Friday. Significantly, Oil prices reacted first - helped by the equity markets - on Monday. Finally, Gold caught up today.

In my view, the only real surprise here: Oil acting faster than Gold. I think I've observed this for the first time since Oil failed from its $147 grace three years ago. Oil may be taking back over from Gold, and one should be monitoring WTI's advance to $100.00 closely.

I speculate that around that exact event - we shall again get a signal for Gold direction! Just a heads-up, agree or not

Ken Drees comments:

I was just thinking that oil started running vertical after an oil dictator is killed and Iraq soldiers are to be returned home—and that there have been no real headlines in mainstream financial tv — oil snuck up on us???. Also gold which has been quiet spikes as well dragging gold stocks higher–and these groups mark the tail end on the rally troops from this October's large run up. Is the run over and the heavy weights oil and gold just signalling end here or starting a bigger fundamental lone push story related to Mideast and euro future madness–do oil and gold now decouple from stocks???

Momo stocks now being shot at point blank range always a bad sign in my book–when you can't suck any more juice out of the core you just throw it behind the woodpile.

netflix, amazon , apple (bruised), fslr, etc.



I call your attention to this article:

Risk on the rise as political leaders give in to mob rule

By Ray Dalio, President, Bridgewater Asssociates Inc.


[link requires registration]


We are in the midst of a deleveraging, we are nearly out of [fiscal and monetary] ammunition and we are at each other’s throats. … being at each other’s throats is our biggest problem.

[In such situations ] frustrations increase, the established ways of doing things come under attack and frustrations over the ineffectiveness of government creates the perceived need for someone to gain control of the mess. Plato spoke of this dynamic. It was the reason Hitler was elected in 1933.

Matthew adds:

Mr. Dalio recently appeared on Charlie Rose . [37 minutes].

Tim Melvin writes:

This much publicity is inevitably followed by "bad things".

Philip J. McDonnell comments:

I agree with Tim. The tone of Mr. Dalio's screed is strongly doom and gloom.

I am guessing he is bullish though because he urges cooperative action.




In the quest for the truth and the elimination of ballyhoo, one must get through all the BS to find the kernel of truth. Here is a very important glossary of mathematical mistakes that are commonly seen in the popular culture and often repeated as the absolute truth.


It would be an interesting exercise to see what we can add to the list, either in the popular culture arena, or market lore.

 Ralph Vince comments:

 How about (cultural ballyhoo) "After all, we're a very litigious society!" (this is usually accompanied by the reminder of some anonymous woman scalded by coffee at McDonalds being awarded an amount so ghastly that poor McDonalds will have to make up that amount against the rest of us somehow!)

I would posit we are not litigious enough. One need only sit in any municipal court or state appellate court for a couple of hours and see the litany of individuals being hauled before the altars of justice by the financial institutions or the paint manufacturers whose lead was ubiquitous, or any other host of entity vs the individual going on. Truly, I almost NEVER see an individual as plaintiff in one of these unless they are going after another individual. The vast majority of what goes on in the courts WE PAY FOR are actions brought by those who do not pay for these courts, against our neighbors.

Yet, our class action rights are eroded under our noses repeatedly and recently. The only ones in favor of so-called "Tort Reform," are the insurance companies. The medical professionals who think they will financially benefit by this are delusional. The delusion is further propagated to the hoi polloi under the even falser notion that the medical community will share these newfon legislated riches amongst us.

 Rocky Humbert writes:

 After reading this, it's unclear to me whether Ralph is in favor of, or opposed to, tort reform.And, arguably, he's guilty of a bit of cultural ballyhoo here. He writes, "The only ones in favor of so-called "Tort Reform," are the insurance companies."At a macro level, it's not obvious why insurance companies should necessarily support tort reform (or even care about it.) Insurance companies raise premiums to offset the costs of litigation. Their profits (the combined ratio) are the "spread" between premiums earned and the settlements paid.

If the costs of litigation decline, so will premiums — and if there were serious tort reform, it might actually damage insurance companies, since their products would no longer be required!!If there were no tort litigation, insurance companies might go out of business en masse!!! The visible and direct costs of litigation (to which Ralph alludes) are minuscule compared to the invisible costs. The invisible costs include the innovation and investment which are forgone because of the FEAR of litigation; the incalculable dead weight loss; the practice of defensive medicine which wastes resources (and which applies to other industries as well).

"Loser pays litigation costs" combined with allowing third parties to finance and benefit from winning litigation — would be a fine first step towards balancing the scales between plaintiffs and defendants. But to suggest that insurance companies actually want tort reform ignores their raisson d'etre.

 Stefan Jovanovich comments: 

 Ralph omits the largest part of the litigiousness of our society, which I pray will be largely eliminated some day - the criminal justice system. Since misdemeanors rarely go to trial, they will be absent from the municipal court dockets; and state appellate courts are usually not the best venue for criminal appeals (the Feds are usually better) so Ralph may not have had a chance to see how much of the "justice" system is about law and order.

A visit to any Superior Court or Federal District Court would probably change his view; at present, the largest single obstacle to an individual seeking civil damages is that their right to a speedy trial is non-existent.As one defendant put it, "The United States of America versus Alphonse Capone! What kind of odds are those?"

 Ralph Vince responds: 


I'm not an attorney — and I AM a little over-impassioned about the subject, so don't be surprised by my phreneticism here on this subject, ok? I am utterly opposed to this (altogether speciously misnomered) "Tort Reform," idea!

Where you say ". If the costs of litigation decline, so will premiums," I could NOT disagree more. When the Bankruptcy Act of 2005 was passed (presumably, among other things, so that the costs financial institutions were having to suffer as a consequence of personal bankruptcies not be passed along to the rest of the peons like me) did we see credit card interest rates reduce as as result? Did we see banking fees come down? No, the margin gained by such legislation accrued to the banks.

Profits ONLY flow upwards. Those paying down here do not participate in profits. If we did, those $150 running shoes made in Jingalia would only cost us about ten bucks.

The notion of a frivolous lawsuit is something cast in sand, and something the courts can deal with already via sanctions, etc. Just try to get an attorney to take a patently frivolous lawsuit to court — or see what happens if a non-attorney attempts one pro-se. They will be clobbered by the courts.

In fact, I say to the average Joe F. Blow out there, just try to take his NON-frivolous lawsuit to court. Go see how easy that is. Go see what the typical attorney will require of you up front. He is already, effectively blocked from the system, Bleak-Housed out from the very courts his tax dollars pay for. And again, if you take from people their venue for settling disputes in a civil manner, they are then likely to settle them in an uncivil manner. What is wrong with allowing people the venue of settling their disputes?

Our courts are NOT clogged incidentally. These are not a natural resource of finite size. If we need more courts — set em up. More insane judges. No problem. Homer Simpson is a little sick of sitting at that control panel at the nuclear facility, he can sit on on the bench for us.

Finally, when I speak of profits only flowing upwards, I don't mean it with respect to tort reform alone. The notion is integral to the specious arguments we are subject to every day to try to stifle our abilities of thinking critically for ourselves (I am not referring to you personally here, you seem to do so quite well except when it comes to your interactions with women). We hear repeatedly how free trade brings the cost of goods down (taking away US jobs) or how if we don;t have illegals picking our produce that tomato will cost 5 bucks.

Nonsense. Perhaps there is a scenario, but I cannot think of one wherein Joe F. Blow benefits because the cost to producers is reduced legislatively. To do so but taking Joe's right to settle his disputes — against individuals AND entities — away from him, is the real crime.

 Stefan Jovanovich responds:

 Neither Ralph nor I is an attorney, but I am guilty of having been one in California for nearly 4 decades. I stopped being one when the State Bar of California decided that it has absolute jurisdiction over any commercial transaction of my companies simply because I was an officer of the court. What that meant in practical terms was that any business partner or even customer could claim I owed them a fiduciary duty as a lawyer even if our dealings were purely commercial. As W.S. Gilbert put it, "here's a pretty mess". Eddy's Mom and I decided that resignation was the better form of valor. It took us nearly 2 years from the Supreme Court's clerks to decide we really meant it; the last letter we have from them is one suggesting that we might want to reconsider because we would be losing all the member benefits - i.e. access to State Bar of California credit cards and life insurance.

The greatest obstacle to "the average Joe F. Blow" is the current system of pleading; it is archaic to a degree that would astonish Lincoln or any other railroad lawyer of the 19th century. David Dudley Field would not be amused, especially since his reforms were adopted in Britain with much greater success than they have been in the United States.


http://en.wikisource.org/wiki/The_Mikado/Here 's_a_how-de-do

 Ralph Vince writes:

Stefan, we evidently live in different universes. I routinely get called to jury duty in Cuyahoga County, Ohio, losing a week every two years. This is a court for monkeys.I have been through that system on the wrong side. Ex-parte rulings, convicted judges, FBI swarming, lower court transcripts LOST going to the appellate courts, corrupt clerk of courts, corrupt sherrif's dept., (all have plead guilty), routine over-charging of defendatns hoping for the routine, gullible jury, etc.

I will tell you what I tell the prosecutor in voie dire. "There's no way in hell you will get me to convict my fellow man of anything. Bring in the DNA evidence, the video, of this child-molesting cop killer. I wont convict anyone here in monkey court."Then….the resultant litany of threats levied upon me. I do my week and I go home. At least where I am here, in this universe, there is NOTHING WHATSOEVER about "Justice."



One wishes to give a heads up to three fine performances lately. Rorianne Schrade played the Gounod Liszt Faust Waltz at a concert Sunday at Weill Hall that was the finest bit of piano playing I have ever heard. Couldn't stop crying.

Infinitely better than Van Cliburn . Made me think of Laurel's performance of Schulz-Evler's transcription of Blue Danube Waltz, equally magnificent. Also, Aubrey passed his third grade Stanford Math exam. And Galt gave a fantastic duet with uncle Roy at Rand & Adam's  wedding.



The fatal bullet may have been fired by a Libyan rebel but it was NATO (ie, US planes and technology) that attacked Qadaffi's convoy leading to his capture and killing. Since when do the usually objective members of SpecList think it wise and appropriate policy for the US to go around assassinating leaders of countries we have not declared war against? And how would we feel if the situation were reversed, if Iran were working to assassinate our President instead of just the Saudi ambassador, or if it had been established at the time that Castro's Cuba was behind Oswald's assassination of John Kennedy?

Second, after Qadaffi was shaken by the violent US removal of Saddam Hussein, it was clear Qadaffi and the US made a deal that Qadaffi would give up his nuclear weapons program and refrain from causing trouble in neighboring countries, and the US in turn would not attack Libya and Qadaffi. Do we want the US to be known as a country that reneges on such highly mutually advantageous types of agreements?

In retrospect Qadaffi would have been wiser to complete his nuclear weapons program. Then, like North Korea and possibly Iran, he would have been far more immune from US attack.



Best book of the year was "Myth of the Robber Barrons", second best one, about finished, is "Destiny of the Republic" its about much more than crazy Charley Guiteau…a historical thriller; learned a great deal.



One of the absurd aspects of the efficient markets work is the idea that the variance over the weekend should be 4 times as great as from an ordinary close to open , as there are approx 4 times as many hours for news to come in, and everyone knows that news is random. It gets me to thinking about the current market moves, where a new idea, doubtless engendered by flexions and those feeding information to the media has come into play. It's the headline in a European paper that moves the market a fast x % in a second . The financial times and the guardian and the average German paper are candidates. It's another one of those worthless things that are designed to part the public from their money.

Yes,I know but what is the average variation from hours to hour. And is there any tendency for the news to be biased in one direction.

Here's a count
hour        big rises big declines    stand dev

800 to 900        39      49            3.4

900 to 1000      83      80            4.5

1000 to 1100     91      96             4.7

1100 to 1200     48      72            3.7

1200 to 1300     23        40            2.9

1300 to 1400     31      46          3.1

1400 to 1500     47      51            3.5

1500 to 1600     67        74        4.1

1600 to 1620      7        7        1.6

Thus, we can say that the news tends to be most newsey from 9 to 1000 and 1000 to 1100, and from 1500 to 1600. ( all G.M.T) and that there is not much news around lunch time, and that bad news tends to come from 1100 to 1400.

We see a variance ratio of 2.5 between the 1000 to 1100 move and the 1200 to 1300 move , close to a 1 in 20 shot.





The Nikkei 225 (Singapore) is a contract to buy or sell 500 times the Nikkei index in Yen . Margin is 281000 Yen . Tick size is 5 so one tick equals 2500 Yen + or -. volume is approximately 50000 contracts a day.

Today's Range was:  Open      Hi        Low       Close

                                 8695      8705    8655      8685

My question is with a range of 0.57%, how can the public be induced to trade enough to do the wrong thing ? I would think this query could be generalized to other markets. How does it relate to required margin? I wonder if the momentum and the swings in markets are related to their between and within market volatility for example. Perhaps this is a naive question, but I believe it might be good to start with basics like this.



A good friend of my daughter asked me for advice on the best way of winning a man's heart on a first or second date.

I told her to use the Jennifer Flowers Gambit (the surprise erotic interlude when stopped on a drawbridge) or the Lee Raziwell gambit (listen intently to everything he says and ask about his expansive greatness), or the Leona Helmseley Gambit (pretend that there is another suiter waiting for you that evening so you have to leave at 11 pm as nothing inflames a man more than competition) but I feel that others here are more sapient in this area and others and I  would appreciate your insights.

An Anonymous  writer comments: 

My conclusion is that the number one sign of a good long term relationship with a woman is based on the quality of her relationship with her father.

I am basically engaged to be engaged with a woman, and the emotional commitment on my end happened after a dinner where much of the conversation was her describing her relationship with her dad, and how he helped her with her math and physics homework, and then they would walk to the store for a treat, etc, and just the general way that her face lights up when talking about her dad.

So anyway, that's what worked on me. Perhaps she should try it.

/my 2 cents

 Gary Rogan responds: 

This sounds like good advice and the father thing is pretty well-known, but I'm just amazed that you have made some conclusions about long-term relationships after having dated women in around ten countries over two years. 

 Pitt T. Maner III comments:

Well then there are some who base decisions and strategies on a few minutes of observation. The HFT of the dating scene—your most important impression—the first 3 seconds!

 José Bonamigo shares:

From Forbes Magazine:

The mating practices of human beings offer a reason for thinking beauty and intelligence might come in the same package. The logic of this covariance was explained to me years ago by a Harvard psychologist who had been reading a history of the Rothschild family. His mischievous but astute observation: The family founders, in 18th-century Frankfurt, were supremely ugly, but several generations later, after successive marriages to supremely beautiful women, the men in the family were indistinguishable from movie stars. The Rothschild effect, as you could call it, is well established in sociology research: Men everywhere want to marry beautiful women, and women everywhere want socially dominant (i.e., intelligent) husbands. When competent men marry pretty women, the couple tends to have children above average in both competence and looks. Covariance is everywhere. At the other end of the scale, too, there is a connection between looks and smarts. According to Erdal Tekin, a research fellow at the National Bureau of Economic Research, low attractiveness ratings predict lower test scores and a greater likelihood of criminal activity.


Best regards from Brazil


 Gary Rogan inquires:

 After a while this degenerates into just socially dominant and not necessarily intelligent men. This modified effect can be readily seen in the Charles/Diana coupling, at least in the older Prince William. Of course how did Charles come about if the theory is correct? 

 Stefan Jovanovich comments:

Trusting Forbes magazine on stories of family history is more than a bit like buying a Degas ballerina sculpture from Toby Esterhase's Soho gallery. The notion that the 5 founding brothers were "supremely ugly" is part of the standard viciousness of the portrait of the Jewish banker as Shylock that survives to this day. There is no evidence of any special ugliness in their portraits.






The Rothschilds married money - the Ephrussis, the Guggenheims and the Oppenheims. One suspects that, as in most things, the question of beauty was left to the beholders.

In the 19th century the great minds were certain that criminal behavior could be predicted by examining the bumps on people's heads. It should hardly be surprising that we are back to estimating future viciousness by measuring the asymmetry of human features.



 Jim Wildman comments:

I would say that she can't on the first or second date. Winning someone's heart in a deep, lasting way, takes time. Anyone can fake interest for a while. What about when she is sick? When he is grumpy? When life intrudes on the lovers? Are their hearts still connected?

Granted, I haven't dated anyone for over 3 decades, but I have watched 3 daughters struggle with guys..

 Marion Dreyfus questions:

My question:

And some may find this offensive–

Does the ubiquity of pornography, specifically for the ones who purvey it day and night (I understand that equals a LOT of the male population), make falling in love with and making love with real women –including the physical aspects of affection–much more difficult than it used to be before every late-night channel offered a raft of such virtual substitutes for real relationships?

Rocky Humbert comments: 


(a) Korean BBQ. Nothing excites a man more than watching a lady handle chopsticks amidst an open flame. Alas, times change. Woo Lae Oak has gone out of business. http://nymag.com/listings/restaurant/woo-lae-oak/

(b) Take whatever advice a parent provides, and do exactly the opposite.

(c) Que Sera, Sera

(d) http://www.datingish.com/695368212/how-to-win-your-guys-heart/

Score 1 point for picking the right answer. Deduct 1/4 point for picking the wrong answer.

 Bill Rafter writes:

When you are fishing, you need to match the bait to the fish. Striped Bass like clams, but Bluefish and Flounder will eat anything, so you might as well use bunker. Think of it this way: a young lady would wear one kind of dress on a date and a different dress when meeting the young man’s mother.

If a man is 25 or younger he is probably only interested in one thing and he is not looking for lasting qualities. Not that there’s anything wrong with that. The interlude on the drawbridge is something he will never forget. A woman with an interesting job is attractive as long as it does not threaten him.

At some time the man starts to look for additional qualities in a mate. Maybe because of pressure from his parents he starts to think of having a family. Then he starts looking for someone who might be a good wife and mother. A schoolteacher is attractive in this case.

In foods, women are attracted to chocolate whereas men are attracted to cinnamon.

 Tim Melvin writes:

I told my daughter in response to a similar question that anything won so easily or quickly likely had little value in the long run. She should be herself at all times and the man who liked and fell for that woman was likely a better match. I taught all the tricks her old man had used over the years to win fair lady specifically so she could avoid them.

 Jose Bonamigo responds:

My intention with the Forbes extract was not to present solid evidence, just a likely explanation for couples like Charles and Diana (a common combination), as Gary pointed out.

Looking at the portraits it seemed to me they were "regular" uglies (just kidding)…

For a more scientific approach, at least in the physical part of dating:





What is the definitive answer as to how we can learn from the best way to catch a man about how to catch a good market move?

 Debra Belanger Kettle responds:

Well now that you put it this way.

1.) I suggest that one pays attention to the stocks that could care less if they are purchased or traded. The quiet ones. The non volatile ones.(the best, most stable women are thriving and so busy enjoying their lives they don't really worry about being snagged, they have more men in pursuit than they can usually manage or have time for.) They are the best catches. They don't dress to necessarily impress or seduce, they don't have to.

2.) If the idea of competition stirs interest, don't get seduced, investors might merely be competing with each other when they should be focused on learning about how the market moves and what she needs at the moment. The male or investor might miss something big being divulged or demonstrated when he worries about the competition. The conversation/connection with the woman or the market must be sustained fully.

3.) Men can NEVER be caught. Men fall in love first. If a woman tips her hand in this regard she is done. Men are suspect if something comes too easily. Unless he's a narcissist and imagines that he is irresistible or invincible. It doesn't hit him immediately that he has to have her. If a stock gains lots of attention it will probably lose it's momentum soon and is probably just flirting with you or using you to create competition for the man she truly wants. Real interest from a woman is steady and climbs deliberately, carefully, without much frenzy. Watch out for those stocks and when you find one commit.

Bottom line. Tell your daughters to develop their own lives. This is intoxicating to a healthy man, to a man worth having. And as far as my loving Ayn Rand. Clarification. I love her quote on femininity. Just because she can define something as clean as two plus two does not imply she is a great mathematician. Truth be told, I love Hugh Laurie, (House MD). He is brilliant, tall, not easily manipulated I hope, and has a British accent. This combination makes my knees go weak.If he were a stock he would require careful management, not wild abandon straight out of the gate. But I digress, relationships whether they be stocks or people are neck up jobs. Yes, the heart knows things the head knows nothing of. But the head must lead or stupid decisions are made. Marriages that are too emotional might last but don't thrive. Many also don't last.

In my practice I have had 5 women marry in the past 3 years following my advice to immediately start dating at least two other men when she finds one she might like to spend her life with. (something I don't apply to my own life because the thought of 3 dates a week would seriously cramp the time I need for my true loves: dancing and reading). So initially, the plan is genius to create a dating sperm war, so to speak. I will keep you posted on how these connections fare over time. Men who seem invigorated by the competition might be more interested in the game than the woman. Do investors play the stock market, each other, or both? To me it seems the best products are won by trusting the relationship and ignoring the competition or lack thereof.

My best advice to women( the stocks)………..keep busy with your owns hopes and dreams. Grow, thrive, develop. Interesting, happy women, women worthy of committment are never at a loss for male attention.My best advice to men….. Just listen. Pay attention to her more subtle moves. Like women, the market speaks softly of her secrets and will reveal them when you might least expect it.Not only will a good woman not make you feel manipulated, she might also make your life richer.

Gary Rogan writes:

The Market Mistress wasn't quite fulfilled And simply bored with the orders filled. Her soul was yearning still to feel the fire That came along with passion and desire.

And mortal fools that tried to play her game Were also boring, they were still the same While she was different and waiting to seduce A worthy challenger while tightening her noose.

She glanced at her reflection in the sky, A moving cloud. What was there to try To bring to life a plan that would attract The challenger she needed so to act?

Should she stay still or gently throw the dice, Surprise the world a little once or twice? Or steadily reward the fools until They felt they understood her steady will?

She smiled and shook the world until it screamed. It's time, she thought. It worked, or so it seemed. The crowd dispersed and to fulfill her soul

Her charming prince appeared to take the fall.

Jason Ruspini comments:

The suitor is judged against others so one answer is the fed model, which is very appropriate for the Hegelian Rand passage where the essence of femininity is defined as the worship of masculinity. But that was uncharacteristically subtle of her.. In markets and outside of tautological symbols, A is indeed not-A at the margin. Is the USD just the USD? Why would one complain that increased correlations are invalidating one's "fundamental" work on a stock when those dividends are constantly being re-discounted, not to mention developments in the whole rest of the stock universe making the suitor more or less attractive on a relative basis.

Do people who say that stocks are too volatile even have any quantitative basis for what the volatility should be given all these cross-influences?
Regarding today's action and that of the last few years, it is much easier to tell the temperature than to predict where specific particles (policy officials) will go.



Connections, connections connections…what does it all mean?

"A small, tightly woven network of companies, mostly banks, wields disproportionate control over the global economy, according to a new study. To the thousands of protesters swept up in the global Occupy movement, it may seem like a case of science confirming the obvious. It’s based on a few extrapolations and assumptions that are open to debate, but the overall findings shed some light on the intimate ways 21st century capitalism works — and how those functions can undermine the entire system. "


We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.




To everyone who has apparently joined OWS and is complaining about HFT, please just write your congressmen asking for a transaction tax so that we can more effectively make the list poorer or be forced to become trend-followers. Sorry for the rudeness.. one is agitated.

Anatoly Veltman comments: 

Deeper than just HFT: combination of flexionism and HFT.

Economy needs capital market participation: momentum speculators and long-term value seekers. Participants became disenchanted due to above combination, feeling markets are rigged. We're in catch-22 now, where stock market only advances on money printing; then panics on realization.

The speculators of this List have always sought to compete in rich diverse environment, where they could do their work and outsmart crowds of amateurs or pseudo-professionals - within near-perfect zero-sum! Alas, the crowds have so totally dispersed. To be more precise: speculative money has left the traditional, "regulated" U.S. arenas. It currently resides elsewhere -where we are outsiders

John de Regt writes:

I've always been happy to play the game of buying low and selling high, having perhaps seen potential value not generally recognized.

My earlier reference to the big casino derives from my view that the proportion of fundamental investors to buyers and sellers with no interest in fundamental investing has changed. A great deal, perhaps too much (depending on your perspective…), of the buying and selling these days, hence market moves, has nothing to do with investment.



Years ago we used the weather as a anecdotal guide to describe the markets and attempt to predict. I went on about air temps, humidity (water grains) pressures to make engine power. Radiant heat for the intraday markets, like sun on the race track or track temps for traction. The gist was how to make more power and when and how to use it. Yet, in heavy weather in racing or trading most have more power than the track can hold.

The get the joke was and still is that small investors have a bit of an edge over the big fish in sloppy or heavy weather days. The gist is simple, we can move quickly and the big boys can't. When its beautiful, those with the most power have the edge. A very strong, steady up market those with the most money, can deploy their huge reserves and win the race. The smaller traders must use leverage, a tonne of leverage to make a living wage in a small range but strong and steady market. The big fish know this and we see little duststorms in the markets. It may cause the over leveraged spec or racers to make a pit stop at best or crash and burn.

I can see and tell the difference in most forms of racing or trading Not that any of us can't tell who has the edge in the trading world. They make money every single day and rarely if ever have a huge trading loss. The form for specs is either we make small money almost every day and have too many huge losses…or brag about never had a huge loss, but seemingly do not make much on balance as they take little risk.

When the rules boards set the parameters for the next season, we all scramble to adjust. For trading it can be a simple margin shift. For racing that is a change in engine specs to reduce power for safety and or to keep the costs of racing down. Perhaps in trading these shifts in margin rules cause as many bad accidents as they cause in racing.

If they lower the power of the race car, we will find another way to go fast and win. We will use aerodynamics and ofcourse, they always change the rules the 2nd race in the season. My gauche, they are going just as fast as last year with less power. How that is done is suspension tech and taking downforce out of the cars. All cars have wings, whether you can see them bolted on or not. A trunk lid can be a wing and normally you will see a spoiler bolted on the car to cause the pressure over the lid to push the car down for traction. The size and shape of the roof changes how the air moves over the rear of the car.. On an Indy car it is obvious. They have wings.

If the rules boards lower the engine power, rule on how much downforce you must have in the car and or how much wind you must push (aero drag) this forces the race car drivers to run in the draft. What isn't obvious is how fast 1-2-3 or 10 cars can run in a draft until you get them on the track. What looks good on paper or in the wind tunnel test, can be a disaster waiting to happen in a real live race.

The most dangerous situation is when only a two car draft is the fastest. A single car is some 2-3 seconds slower than a two car draft, yet three cars is slower than the two.. This causes the 2nd driver to tuck under the lead car. He cant see. The 2nd cars driver's job is run on the tail of the lead car all day long. He fights all day not to lose his drafting partner. If he does lose the draft, he is solo and can't run with 2 other cars to make three as that is slower and breaks up the 2 car draft. He is a dead duck as a solo race car and so is his old partner. It will take them 2 laps to recover top speed. That is only if they all have the same power and must run full throttle all the way around the race track. Let's call it 600HP. Where 800HP they would have to let off the gas before the corners or lose traction.

Now what is seemingly dangerous is a single car that can run 235MPH lap speeds solo.. Oh my gauche they will be going too fast in the draft, maybe 255! So, they get them to run 215 solo.. but then they run 225 in a pair and 229 is the best pair.. Now the best pair is going some 14 MPH faster than a solo car.. Throw in a dust storm, the driver in 2nd, tucked into the draft, has no idea the lead car is about to get off the gas and he spins him out and they both crash.

That is not the real problem, they are all pros, the best in the world.. The real problem is no matter how hard a driver tries and no matter how worn out the other cars tires or brakes are at the end of the races..its almost impossible to pull out of the draft and slingshot past for the lead with an underpowered race car…well….almost..

When you pass a truck on the HWY you can feel the turbulence… But there is a spot right before you pass the truck where a side draft feels like its going to suck you over into the semi.. At 200+MPH that same side draft is used to shoot past a car. That side draft in open wheel racing which unlike stock cars if they touch, two open wheels make contact, one race car can be shot up into the air.. When all have the same power the same set up its like trend following.. one little hickup causes a jam and the chain reactions, cascades, cause a big pileup and at times, loss of life.

Now if all cars had 750 or 800 HP and could go 235 on good tires but had to slow down when on old worn out tires by letting off the gas and perhaps tapping the brakes at some point during that race, the engines power would be a huge help in completing passing in racing. The regulations to keep the power down for safety, actually cause crashes! Its not unlike dry powder in trading during a duststorm on the prairie… or those years where we are all pinned full throttle long… a little zig and zag is required..others are hitting the brakes and have no horsepower to recover their momentum. Those with the reserves can stand on the gas and have the power to overcome the pack.



How to quantify similarities between such "mountains" [i.e. price charts] ?

1) Decide trailing periods and criteria to be used - YTD performance > X, last 5 year performance > Y, etc
2) Build universe/database of similar companies for each year
3) Build correlation table to confirm
4) Build composite model
5) Look at forward if-then test

In my experience, the bearish case on high momentum names, frankly any name, is best fundamentally analyzed as a move from Blue Oceans to Red Oceans and along with general market trends. Blue oceans situations tend to be P/E unconstrained, consistent growers, etc http://www.blueoceanstrategy.com/ but once we move into the Porter world of Competitive Strategy then P/E becomes constrained which leads to compression. Generally, there are subtle clues - RIMM announced a move into consumer markets where AAPL played- so the business market was saturated - NFLX CFO left when the stock was below $200 on its way to $300. They started focusing on cost strategies, changing the story from new subscriber adds. I haven't followed GMCR that closely - but is there a competitive threat that is changing the marketplace - are they experiencing a strategy change - that's the key question.

Solar existed on subsidies granted by bankrupt governments, so it has to compete with more economic alternatives. Hence, the president's loan issue.

Stocks have to compete with bonds, so stocks crashed in 1929, 1987, 2000, 2008, etc

EK lost to digital photography.

My worst mistake ever came from Able Labs - a generic drug maker - had 26 NDAs pending, huge margins and a new lab in NJ - problem: small reference to litigation in the SEC filings that later turned out to be because they were getting their margins by diluting the drugs - stock went from new high list to opening down something like 86%, where I sold before watching it go to $0 in 30 days. Subtle clues. They are really important if one is making the bearish case.

in reply to Victor Niederhoffer's comment:

Strange similarity  between those two [NFLX and GMCR] to a person who looks at it as
two mountains of different heights with similarly looking crests
relative to the peak.

Query. How would one quantify similarities between such mountains?
And once quantified, what is best way to see the predictive value of
such similarities. I am reminded of the cotton traders most famous
trade. He noted that 1987 looked similar to 1929. then he knew it was
going to have a crash. The drunk man saw the same similarity and started
out long that Monday, and then sold. Between the two of them, they were
enough to trip the portfolio insurance to sell.

Query. How ridiculous can you get without quantifying the two
questions I asked? I say it wasn't that similar to 1929 as compared to
other years. and also that the ones most similar to a given few years of
bearishness, in the past, the less is the relation between past and
present. i.e. no predictive value to start.

Gibbons Burke comments:

There is another model which incorporates a similar gradual buildup with no appreciable change, then catastrophic breakdown, like the straw breaking the camel's back. A simple model is dropping grains of sand onto a surface. A pile builds up. With each grain the pile gets higher and higher, in an orderly fashion and is stable, until the angle of repose gets to a critical point, at which the next grain of sand sets off an avalache. Similar but subtly different. The concept is known as "self-organized criticality", and I suppose it may have some relevance to how bubbles build up and then collapse:


Christopher Tucker writes: 

See also Slope Stability Analysis Methods:


A similar criticality phenomenon is Flashover:

(quoting the wiki - http://en.wikipedia.org/wiki/Flashover )

A flashover is the near simultaneous ignition of all combustible material in an enclosed area. When certain materials are heated they undergo thermal decomposition and release flammable gases. Flashover occurs when the majority of surfaces in a space are heated to the autoignition temperature of the flammable gases (see also flash point). Flashover normally occurs at 500 °C (930 °F) or 1,100 °F for ordinary combustibles, and an incident heat flux at floor level of 1.8 Btu/ft²*s (20 kW/m²).[1]

another is Phase Transition: (from http://en.wikipedia.org/wiki/Phase_transition )

A phase transition is the transformation of a thermodynamic system from one phase or state of matter to another.

see also Crystallization: http://en.wikipedia.org/wiki/Crystallization

see also Nucleation http://en.wikipedia.org/wiki/Nucleation

see also Vitrification http://en.wikipedia.org/wiki/Vitrification

Gibbons Burke responds: 

I was lucky to be in the right place at the right time to capture a flashover in a fire near my home (in 2006) in New Orleans:


 Stefan Jovanovich comments:

The sad fact is that the firefighter community still has no agreement on how to deal with flashover risk. They have not even settled on the question of whether to use a wide fog or straight stream!!!!!


The best teacher I ever had (an instructor at the Navy's Damage Control School in Philadelphia), said that the Navy were the only firefighters who had figured out how to do something besides spray and pray - i.e. use foam to suffocate fires and inert gases to secure the fuel lines - and even so there was a fatal tendency to believe that all you needed to do was get a big enough bucket. He pointed out to the class that the greatest risk of the Forrestal fire turned out to be the water from the firefighting itself, which almost capsized the ship and washed away the retardant foam.




Dear Steve,

Hope you are well. A statistical problem has come up. The idea of comparing two charts, in this case Netflix and Green Mountain Coffee. I wonder if statisticians have a way of handling this problem. I've seen some books on statistics on place but never this problem of comparing two mountains as to their similarities. I wonder if you could refer me to the proper area. I asked a geologist whether they have a way, and apparently they take into consideration many physical factors. I am going to enclose the chart separately.

Stephen Stigler replies: 

Hi Vic,

Any statistical model would have to have a dynamical model for the mountain. It could be an empirical model, like if you had a sequence of mountains, as with predicting sunspot cycles or tides. But it would either need a number of examples (not just two) or a very strong math hypothesis. You might be able to generate a set of examples if you focus on a telling feature, like one day descent of x% after trading within + or - y% for z days.

Hope all is well with you & yours!



Pitt Maner comments: 

 A geomorphologist would have to consider many factors in trying to interpret how the hills and valleys were formed, the timing of such, and what they might look like in the future. Erosion is a key but it can occur at differing rates within a range of timescales based on rainfall, climate, vegetation, composition and homogeniety of the rocks, fractures, landslides, river sediment carrying capacities and as noted in the article below—Slope . There are instances, however, where the rate of erosion at the surface is offset by the continuing forces of uplift (denudational isostatic rebound for word lovers).

There are rules of thumb— with the higher slopes and steep mountain ridges eroding quite quickly —E. Himalayas at a whopping 2 to 3 mm/yr, as example.  But those erosional rates will change over time to meet new equilibrium requiremen ts.

"I don't think we'll ever find the single smoking gun of erosion," says Portenga, "the natural world is so complex and there are so many factors that contribute to how landscapes change over time. But as this method develops, we will have a better sense of what variables are important — and which are not — in this erosion story."

For example, it has been a truism of geology for decades that rainfall is the biggest driver of erosion. Semi-arid landscapes with little vegetation and occasional major storms were understood to have the greatest rates of erosion. But this study challenges that idea. "It turns out that the greatest control on erosion is not mean annual precipitation," says Bierman. Instead, look at slope.

"People had always thought slope was important," Beirman says, "but these data show that slope is really important."



From page M49 of this week's Barron's:

The median price/earnings ratio of the 30 Dow stocks using 2011 consensus estimates is 12.3; using 2012 estimates it's 10.8.

NOT A SINGLE STOCK in the Dow 30 has a p/e greater than 20, whether using 2011 or 2012 estimates.

Meanwhile the 10-year is yielding 2.18%.



Gentlemen, unless your honor code keeps you from writing a program and co-locating to join the HFT club, what then are you waiting for, if the HFT has an edge for life. I have been racing one form or another ever since I was 10 years old. I can assure you that if too few have the edge they will change the rules. If they do not change the rules its only a matter of time until everyone has the same machines.

…"as if" it matters much or at all… As my drag racing instructor once taught me on the introduction of school, "everyone looks for the big edge, its the many tiny edges that add up to a razor thin edge, that, with some luck you can win a championship".

The best advice my dad gave me on racing, "son, no matter how much they cheat or race dirty, if you get a big enough lead no one can take you out". That was after leading one of my first dirt bike races when I was 12 years old and was taken out by a dirty rider. That was the only time I ever threw my helmet. The gist of Dad's words after my helmet toss, "I do not care what happened, and listen real close son. If you ever throw your helmet again there will be no more racing, got it?.



 Deception theory often refers to the eight basic emotions communicated through facial expressions: anger, fear, sadness, joy, disgust, curiosity, surprise, acceptance. Are these emotions manifested in markets? Are they predictive? Do they change? Is the theory of deception useful for studying, understanding and predicting markets?

I am reaching a point where I am frequently asked to give lectures on markets, a point usually related to about 3 to 5 years before one receives a bevy of awards, which is usually a year or two from the awarder's estimate of your death. I think I will try to develop a theory of deception from biology and game theory that will substitute for my usual talk on music and markets, which takes tremendous physical and financial resources, and is similarly poignant to the audience.

Alan Millhone comments: 

Dear Chair

Most master checker players notate (record moves) while playing. A few would write down the wrong move and let their opponent see what they record on their game sheet — then they move elsewhere. I can see where this might disrupt their opponents thoughts.

Are there traders who position one way for all to see then do otherwise ?



Anatoly Veltman writes:

Within the 1980s COMEX floor hierarchy, there was the Price Committee. Say, Gold traded 364.0-364.5 closing range. If I were going home short, I'd ask my influential broker, who was on that committee, to make sure day's settlement price is fixed at 364.2; if I were Long, I'd ask for 364.3. Sounds trivial– but when I carried 3,000-lot positions, it would put instant $30,000 in my pocket, day into day. I can only imagine shenanigans in the OPTIONS after-pit, where they settled hundreds of different strikes daily– and some might have carried 50% price discretion!

In any case, here comes the punchline: shrewd floor operators, who didn't carry overnight positions but loved to push Gold around during pit trading– kept tab of post-bell haggling. One fateful day, seeing Gold gap way against my position, they kept pushing the trend all day just to cause me margin liquidation. That one-day loss swallowed all of the settlement-print windfall collected for the year. 

Jordan Low adds: 

In Blink by Malcolm Gladwell, a game of chance drew cards from two piles. The bad pile that lead to losses was avoided at some point consciously, but the subconscious detected that pattern before the conscious. I, of course, tried to measure my sweat, heart rate etc before each trade. Am I deceiving myself on an opportunity when I am just trying to get a gambler's high? I couldn't find anything useful except that hearing the news is negative to my process. Reading subtitles and skipping the music is probably better. Perhaps there might be technology to read the general emotions on TV using facial recognition one day.

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

This idea of yours, Victor, reminded me of a book I recently finished, River of Doubt. It's an interesting account of Teddy Roosevelt's post-presidential, near-fatal adventure into unknown portions of the Amazon. While much of the story revolves around the encounters, challenges, and actions of the discovery team, significant portions tell an interesting story of Amazonian flora and fauna adaptations.

Some of these occur over large portions of the region, others might exist in an area measured in square yards– almost all, though, occur with incredible rapidity and are developed to attack very specific prey. As one might expect, within another very short period of time, it, too, is the prey of a newly evolved predator.

Of the different adaptations briefly encountered in the book, the one that aroused my curiosity the most is called "masting." I had never before heard the term and subsequently looked it up and did a little research:

Mast is a noun… that refers to the accumulation of various kinds of nuts on the forest floor that serve as food for… animals. The process… is known as masting…. it is not a continuous process, but rather is cyclic. Approximately every three to five years certain trees produce prodigious quantities of nuts; in between the "masts" they will produce almost none. "There are two elements of the economy of scale hypothesis for masting variability: First, predator satiation - by producing a gargantuan nut crop, the predators become satiated [and enough] nuts will survive to succeed in propagation. The predator population is held in check during the non-mast years. Second, [p]ollination efficiency - masting trees are wind-pollinated…from staminate to pistillate flowers, a rather precarious and random process…it is therefore advantageous for them to fill the air with pollen from many trees at the same time.

The masting trees' surreptitious and unpredictable flowering, as well as the feast-or-famine results experienced by its "predator" classes might parallel some of the actions/consequences of the flexions as they periodically feed and starve the lesser fuana.



 People often come up to me and to many other contributors to this site also, I'm sure, with a remark like, "Doctor Niederhoffer, I just wanted to tell you that I read your book and it is the key foundation for all my trading. It got me into the futures markets. I've made millions from applying your methods. It led to a really happy life and family situation. And I just wanted to thank you. I just read your book over again the ninth time," et al. After thanking them, I always have to refrain from telling them the story of Hans Sennholz , who received a similar welcome in Houston at one of his lectures. "Proffsa, do you knooo how much mona we made from yer book on silver? 800 million". Hans answered, "And you know how much money I made? Twenty five dollars." Why should I disappoint my well meaning, would be friend with the facts of life about my own trajectory and road to Babylon et al?



In SP500, the last two calendar weeks rose about 8.2% and the prior two weeks dropped by almost 7%. Going back to 1950, identified 14 instances in which two consecutive up-weeks gained at least 5% (for two weeks), and the prior two weeks were both down and lost at least -5% (for two weeks).

For these 14 big reversals, here are the following two week returns:

One-Sample T: dip 2W

Test of mu = 0 vs not = 0

Variable   N    Mean     StDev   SE Mean          95% CI            T      P
dip 2W    14   0.0183   0.040     0.0106     (-0.0046, 0.0412)  1.73  0.108

10/14 up, but NS vs zero due to high variance. One notes the prior instance marked a long term bottom March 2009:

Date       dip 2W
03/16/09     0.096
01/28/08    -0.033
10/14/02     0.019
10/01/01     0.002
10/19/98     0.066
12/14/87    -0.008
08/16/82     0.085
10/05/81    -0.023
12/22/80    -0.023
10/14/74     0.022
07/13/70     0.005
10/17/66     0.034
12/02/63     0.004
07/02/62     0.011



How is it a boon to investors to get screwed on every transaction by people with better information? Mind you, it's not that they worked harder for more information about a companies prospects, they just paid a lot of money to get an unfair edge.

I know the standard response is "liquidity" but I also know that such liquidity disappears the second the "liquidity providers" aren't guaranteed profit. The normal justification for the money earned for providing liquidity is that it is a service and that risk is incurred.

With HFT it's just a guaranteed screwing over of everybody.

And people wonder why investors are buying gold and silver.



 For those New Yorkers that haven't seen it, there is an interesting IBM exhibit in Lincoln Center.

Located on Jaffe Drive at Lincoln Center in New York, the THINK exhibit combines three unique experiences to engage visitors in a conversation about how we can improve the way we live and work. Data wall

Visitors approaching the exhibit are drawn in by striking patterns displayed on a 123-foot digital wall. The wall visualizes, in real time, the live data streaming from the systems surrounding the exhibit, from traffic on Broadway, to solar energy, to air quality. Visitors discover how we can now see change, waste and opportunities in the world’s systems. Immersive film

Inside the exhibit space, visitors step into a media field composed of 40 seven-foot screens. As the screens come to life, visitors discover a 12-minute immersive film. A kaleidoscope of images and sound surrounds them. They are enveloped in a rich narrative about the pattern of progress, told through awe-inspiring stories of the past and present. They are inspired to think about humankind's quest for progress, and about making our world work better, today. Interactive experience

At the conclusion of the film, the 40 media panels become interactive touchscreens, transforming the space into a forest of discovery. Visitors can explore our quest to see more—from clocks and scales to microscopes and telescopes, RFID chips and biomedical sensors. They learn how maps have been used to track data, from early geographical maps to the most recent databases and data visualization platforms. They interact with the models used to understand the complex behaviors of our world—from weather prediction algorithms to virus spread simulations. They hear from leaders of world-changing initiatives about how they built belief. And they read about some of the most inspiring examples of systemic progress around the world. Each touchscreen also gives visitors the opportunity to provide their point of view and learn what others are thinking.



This is an article about a 100 year old man completed a full marathon in Toronto. What more can one say about this uplifting, heart warming feat.



A good way of estimating someone's life expectancy is by the frequency and number of awards he receives.

Gibbons Burke adds:

A friend observed, after my uncle, international champion at the age of 20 and an Olympic Gold Medalist (Sailing, Acapulco, 1968), tactician for Ted Turner, drinking pal of fellow Star-boat sailors the kings of Greece and Spain, and frequent collector of silver trophies in Gulf Coast regattas his entire life, dropped dead one Monday morning of a heart attack at the age of fifty:

"Everyone is allotted a certain number of heartbeats… Buddy lived in such a way that he used up his quota."



 The Three Musketeers (1921 film), a 1921 silent film version starring Douglas Fairbanks
The Three Musketeers (1935 film), a black and white RKO version featuring Walter Abel
The Three Musketeers (1939 film), a comedic version starring Don Ameche and the Ritz Brothers
The Three Musketeers (1948 film), an MGM production starring Gene Kelly, Van Heflin, Lana Turner, and June Allyson
The Three Musketeers (1973 film), and The Four Musketeers (film) (1974) a two-film adaptation starring Michael York, Oliver Reed, Frank Finlay, and Richard Chamberlain
The Three Musketeers (1993 film), a Disney production starring Charlie Sheen, Kiefer Sutherland, Chris O'Donnell, Oliver Platt, and Tim Curry
The Three Musketeers (2011 film), a 3D version of the film starring Logan Lerman, Ray Stevenson, Luke Evans, Christoph Waltz, Orlando Bloom, Milla Jovovich, Matthew Macfadyen.



It is conceivable that many long forgotten mineral and metal prospects in Georgia and Alabama and other southern states are now undergoing re-evaluation given improved techniques for assessing the extent, composition, geometry and economic value of ore bodies.It would seem to be a highly speculative field not without significant risks. Not an area for persons susceptible to hyperbole.

1) "A Canadian mining company and a tiny South Carolina town are leading what could be a modern gold rush to the southeastern United States."

These technical reports give an idea how these gold and metal deposits (some abandoned during the gold rush to California in 1849) are looked at today.

3) Chris Tucker mentioned mica and I remember quite vividly as a boy seeing large areas of ground near Rockford, AL shimmering with light reflected from small pieces of muscovite while hunting mine "spoil piles" for beryl crystals with my father.

There are "potential" pockets of minerals (pg 25 of linked document) all within and along the southern end of the Appalachian Mtns. Various regulations probably impact whether some of these deposits can be mined for profit.




A point about HFT that [Fred] is not quite grasping is stock vs. futures. I'll explain it this way. Let's say the CME allowed HFT to use penny quotes and made the rest of us use 1/4 point spreads for the SNP futures. Then let the HFT quote stuff a million prices and quotes within those quarter points as you're trying to route your orders to the CME. ( You think it's just the current bid and ask prices, no, they stuff the entire book all the way up 5 points of 50 cents in a stock).

Let's say you are buying a 100 mini lot on scale 1211.25 down to 1110, it gets to your 1st 25 lot but you are not filled and you say to hell with it, I'll take the 100 down here. The price is now offered at 1112 and normally you can simply take a 1112 offer or at the market get filled 1112.25.

But if your quotes are stuffed and we rally (so you were correct in cancelling and taking them down) your order to buy is so far back in the QUEUE of traffic it doesn't show up on the CME for a few seconds, and you're not filled and if you're using a market order let's say you're now filled (on stocks) 1116 or call it about 1/3rd of a % higher.

Now you'll say, well I was wrong originally and scale should have been… to 1111.5.. or if you don't get it forget it and never use market orders.

Okay now you can see my point [concerning] my 2010 trades when my no fill column in the spread-sheet was huge, or it was obvious that using a market order for as little as 500 shares was as usual an awful thing to use.

On other hand it's just trading. When you get [filled on] your full line you don't want them and when you get a partial fill you know you should be all in.



 To the tune of The Street Where You Live from My Fair Lady :

I have often thought

that the street is caught

in a crazy dance to relate the fance of the 1920's and 1970's

to the present.

How could similarities

between the depression

and the current situation have

relevance for markets.

Cycles, things, information, are not unchanged.

Anatoly Veltman writes: 

I agree that statistical indicators should NOT be relied upon, as markets have not just changed — but rather to n's degree. Yet, this is not to be confused with charting.

Throughout the non-electronic history of markets, keen statistics would yield competitive edge - as evidenced by the Chair's trading awards over decades pre-2007. Roughly coinciding with volume takeover by the machines of current era, I believe, gone are the statistical methods of yesterday.

As to charting, which remained more art than science — the machines have yet to catch up to human brain's artistic idiosyncrasies. Somewhat akin to AI's chess challenges… But even tougher here for the machines, as humans may change/bend market rules or be more selective of contest arena.



1. The hft boys play exactly the same role that insider traders do. They get there first with better information. They take out many billions of dollars from the market. The argument exists that insider trading and hft is good because they move prices to where they should be faster. I don't buy it. The hft compete against those with short term horizons as do the insider traders. There is only a certain amount of chips to go around. The special hft and insider traders take those chips away and make it impossible for the average person to profit and for everyone else to get a fair deal. This stuff about liquidity provision is a canard. Yes, they get in and out ahead of you. They provide liquidity to other people, not the short term traders under consideration.

2. The bond stock ratio has moved about 10 percentage points back to where it should have been from the exacerbated levels it was at with bonds [futures] at 144 and stocks [S&P futures] at 1100.

3. The holidays are the worst time to trade as the markets move to create margin calls and wipeouts only to reverse as soon as the normal volume gets back.

4. The snakes have two main ways of killing. One is by constriction like the boa and the other by sharp fast thrusts from out of the blue like the viper. Which way do you generally die on your trades? A visit to the Bronx Zoo reptile house might be in order.

5. I loved when the reason given for the crony bank to receive 100% of the amount due on its trade with the insurance company was that the French banks insisted on 100% payment or else they would have violated a mandate. I am reminded of that by the Fed minutes which say that the reason that the Fed can't lower the 1/4% they pay on reserves is that it would upset the equilibrium of monetary affairs. The entire minutes seem like an exercise in euphemism and reaching out to the public to seem omniscient, judicious, equipoised, and at the same time benevolent. Much better to think of it as Nock did I think —- flagitious et al.

6. The market went from 1200 to 1000 without a break and then back again in true Lobogola fashion. When will a theory of lobogola moves be developed that is useful and predictive.

7. All the very predictive patterns of 2008 didn't work in 2009, and all the predictive patterns of 2008-2010 didn't work in 2011 until the "terrible" month of October.

8. My terminals like to go blank and disconnected so that I am rudderless whenever I have left in a big order that must be monitored on a second by second basis. How does it know ?

9. The intrade prob of a Obama win is steady at 48% and the moves above and below the magic number of 50 one predicts will correspond inversely to moves above and beyond the magic number of 1200 in sp.

10. In addition to Patrick O Brian and Frederick Forsyth, David Mamet seems to be the only writer that appreciates business as our engine for improvements in material well being and personal freedom. Along those lines, it was amazing to see that Moneyball didn't contain all the hateful, supercilious, and envious stuff about the rich that characterizes all else of his work. One must credit Billy Beane as a great manager and human being. Who else do you know that gave up a 10 million increase in salary because he wanted to be with his family. Or could it be that he objected to trend following?

and just one more:

11. The sensibilities of those buying the refunding are always hurt by even a momentary loss, and like nite precedes the day the flexions let all the bad news out before the auctions so these sensibilities will not be offended. I always think of Enoch Powell railing against a price fixing board who were similarly offended by a recipe for Bernaise sauce that they didn't feel justified an increase during the English march to agrarianism and the EC.

Rocky Humbert comments: 

Firstly, I would like to compliment The Chair on his recent 10 thoughts list, which had some genuine pearls of wisdom. However, I cannot help but note that there was an "11" as well — which, along with his comment below is seemingly written in the key of D minor. Nigel Tufnel would note, "D minor is the saddest of all keys. People weep instantly when they hear it, and I don't know why." I think I know why. Because The Chair's writing (and the key of D-minor) triggers receptors in the anterior cingulate cortex, yet it does not pass muster from a rational analysis of the facts and history.

Back in the 1970's if you wanted to buy and sell 100 or 10,000 shares of IBM, you paid (fixed) commissions and bid/ask that amounted to 1% (or more!). And a great business (for the NYSE specialists) it was.Back in the 1980's and 1990's if you had a membership on the MERC or the CME, and you stood in the pit, you earned the bid/ask spread, and front-run your customers and made a great living sucking the blood out of your customers. (Until the occasional customer blew up and bankrupted you.) And if you were willing to make a tighter bid/ask in the pit, you could take all of the business/flow that your heart desired.And now, the game has changed again, and the competition grows fiercer to earn the bid/ask spread, and it's delicious irony that a libertarian claims "foul" because someone has innovated and made his approach obsolete. Somewhere missing from this is the obvious point is that the raison d'etre for capital markets is not as a gambling casino — but rather to move capital to where it's most needed.

Hence, if I want to buy a quantity (Q) of an asset at a price of P, I will bid P for Q shares — and if there is a willing seller of enough quantity at P, I will get filled. Whether it's on the bid or the offer should be entirely irrelevant if the bid/ask is tight. What matters is buying Q at P. Remember that the HFT/market maker/specialist needs to find a home for Q — and if he's paid P.001, and I (and my breathren) stay firm at P, we will get filled. And the fact that the HFT stepped in front of me is completely and totally irrelevant UNLESS I fold, and play his game, and lift the offer.

The HFT people make money ONLY because other market participants choose to allow them to do so. If the real money in the markets go on strike and never pay the offer or hit the bid, the HFT people don't make a dime. (Duh.) Yet, I am quite content to pay that extra .005 cents if and when the offer is P and the size is Q. The same libertarian who claims foul about how technology has given an "unfair" advantage to others and left him wanting, would be advised to consider whether the game is rigged or whether he's still driving a Studebaker and was just passed by a McLaren F1. When I see tearful laments in the future, I'll spare the verbosity and just type: D-Minor. 



 The market mistress had a tough day today [2011/10/10]. The banks were closed [for the Columbus day holiday]. And volume overnight was at 1/10 the normal level. So what could she do to get the volume up to 2 million by end of day versus the standard 3 million. You saw.

Gary Rogan inquires: 

Victor, two questions:

1) Why does the market mistress care about the volume (vs. levels), is it because she feels obliged to feed the top feeder who thrive on volume? My mental image of her is that she fundamentally wants to trick as many participants as possible, and the top feeders thrive because they have better access to information and infrastructure, so it's not her "goal" to feed them per se.

2) Second, could the actions of some Europeans that matter be considered something that the market mistress did, vs. what a few government officials did?



 Are HFTs like insider traders? Insiders have an edge because they know nonpublic information about their businesses. What edge do high frequency traders have? Do their fleeting orders that are pulled within milliseconds give them unique insight into order flow?

Victor Niederhoffer comments:

No. It gives them the insight to earn the bid asked spread which specialists used to earn and prevents others from doing the same. See Niederhoffer and Osborne on this point jasa 1966.

Vince Fulco comments: 

HFT machines and their algorithms, competing fiercely amongst themselves to be the point of the cathode (bid, the electron receiver) and the anode (ask, the supply of electrons) across which a trade sparks, make it possible for a market order in size to be executed within the public bid-asked spread, which, in stocks is a penny. That means if the bid is 42.12 and the ask is 42.13, a buy order will likely be filled at 42.127566.

Compare to not too long ago when the minimum increment was a sixteenth (six and a quarter pennies) and before that an eighth (twelve and a half pennies.) As long as we aren't competing to be market makers, we the trading and investing public have benefitted from the machines duking it out in milliseconds and micropoints to sell at the ask and buy at the bid. It has narrowed the spread, speeded up executions, and facilitated ever larger trades which do not disturb the price.

This increased mechanical competition provides depth, though it is much less visible depth because the machines can flash in and yank bids and offers faster than the message can travel from your retina to your lizard brain. The supposed lack of depth is simply because the depth has gone stealth. It is there.

The franchises available to humans to make the market are gone are will be in the liquid equities markets. The machines have taken over. Our edges in humans, while they last, must span larger time scales.

anonymous writes: 

This just seems like a better adaptation, right?

At least in stocks, the order book is locked until the order executes, and so there is no way to get into the book ahead of anyone else to provide liquidity for an order as it execute. Similarly, there is no front running possible as the order book is closed.

The NYSE Specialists saw the orders first and made the quotes, and so had an 'unfair' edge. Otoh, they had to buy on zero or minus ticks unlike the HFT guys who can take stock.

As an aside, I assume that much of the price spikyness is is HFT (generation something) gunning against each other.

Phil McDonnell adds: 

 The edge they have is that their co-located servers get to see your order 30 milliseconds before it becomes marketable. This allows them to front run orders with a fast acting algorithm. Their orders are acted upon instantly but not yours. In effect they get a 30 ms option on your order.

The opportunity is very similar to the wire scam in The Sting where the results of the track races are delayed so that the scammers can appear to be picking winners.

Jim Lackey writes: 

 I bid for 5,000 shares of a nazzy stock during lunch and watched the HFT gone wild. When ESRX was pre split and over 100 a share I fooled with it at lunch one day last summer of 2010. It's exactly like us back in the day watching instinet bids and offers and we soes the market makers. Problem is or the unknowing if they can see your market order (even if limit to take the offer) 1 millisecond before it goes public the HFT can take the offer and then be the next higher offer and make a cent or as Gibbons says 1/10th of a cent. That was flash orders that are supposedly banned but who the Hades knows.

However, if you know there is nothing in the dark pool throw a market order up for as little as 500 shares and watch them take it up .125 or .25 cents and right back down. It didn't upset me much but it was funny as back in the day the spreads on those stocks were always .25 and the 1/8th for the most liquid. Order handling rules of 1997 changed the game so market makers couldn't make a living they quit became day traders the bubble hit there were no adults in the nazz and well, you saw what happened.

Opposite was the 666 lows and flash crashes. 

That isn't an edge we had that with ISLD exchange 13 years ago. First in line is no big deal, that is playing low or high tick of the day and or trying to take offers just as you know it's about to take off. We all operate on scales and if your no filled at all or enough it's because you were wrong not because your last in line for the penny or the 1/4 on the futures. Co location is the last thing I worry about. Even if you hide your orders or use limits at the offer prices or even above where your scale would be I do fear shortly the order sniffers would make my bid thru the ask the bid by the millisecond it takes my order to go from my machine in Nashville to the CME. Then see my order codes and say wow this lack is on the ball today and I go to buy 5es and they buy 50,000…

Yes that was a joke.

anonymous writes:

Hi Phil,

As I understand it, if I send an order to NYSE, my order posts to the NYSE book, and if it is marketable, the book is frozen (no new orders into the book) until my order becomes unmarketable. Are you saying that participants other than DMM's can see my order before it gets into the NYSE book? If so, I am headed to OWS.

Thanks! Jared

Tradercraft writes: 

They simply see and can react to bids and offers more quickly. If you put in a bid to buy at 15.23, they will bid 15.232. You pull yours out, and they pull theirs. You can't compete with them at the sparking tip of the arc gap. They make their money by making the market, so the competition is to be the just-highest bid, and the just-lowest ask. They pocket the spread. Outside pay the spread. That is life in the markets.

Vince Fulco comments:

Trade flow for all non-HFTs gets screwed up. Inevitably you have to bid much smaller and with wider scales lessening the chance of a full fill. HFTs exist for no other reason than to goad one to pay up.

Jim Lackey adds: 

I am not going to argue with time and sales whether or not HFT adds or takes liquidity for that second. However all day long they are simply market makers or short term scalpers, so at some point they add liquidity back.

Look at it this way, if a HFT decides to front run and buy and that next second the euro drops and the algoes whack all the bids then HFT is now a seller, which is good for us if we are looking to buy 5-50 or 5 hours later at lower prices. It's only bad when I am not long and we rise or I am long and it's a dramatic last hour decline. How you, me, and traders vs. investors scale is a function of the magnitude of ranges, day change/velocity and margin/firepower at the end of start of runs.

If you want my vote to kill off HFT or triple levered ETF's I say start with the ETF's first. What difference is it to me if its GSCO MLCO, Floorbrokers or HFT trying to rip me off? Yet the Triple nippled ETF's that are used to get around margin rules now make the stock it self a derivative of a ETF or an Index.

In a way its as wacky as that ABX intex or other mumbo that at first was a design to help and hedge a market and became a weapon. CDS ETF's all that off the book. Makes being a bookie a tough game…for what good reason? People gave up on the game as its so rigged now we have 5-10% air pockets in the entire US stock market. Kinda silly…

Anton Johnson adds: 

Will the evolutionary terminus be that the pride of once cooperative machines turn on each other once their prey is pressured to extinction, or will there be equilibrium where the apex predators maintain both population and stress levels that permit sufficient sustenance for their prey to coexist?

Gibbons Burke comments:

They are doing that now. There are algorithms that are designed to exploit the patterns of the other algorithms. There are all sorts of games being played at the millisecond level which are predatory in nature, and adaptive.



 Since Rocky made the reference, there must be other market lessons we can learn This is Spinal Tap.

In my experience trading I note there are times (perhaps a dozen a year though not widely known) when positions spontaneously combust, like the affect on drummers in certain late 70s rock bands. And in trading as Tap so eloquently expresses, “It's such a fine line between clever and stupid”

p.s. I want to see/hear a Rocky - Nigel Tufnel impression one of these days…



I ask myself, though I may be way off track, how much of a major economies fx rate is goodwill based on the size of its economy to provide security and/or a greater chance of improved economic growth on the push than its minnow peers, and at what stage should this be priced out?



 One notes that since the current Europe-is-a-disaster and the USA is-going-into-recession meme took hold, there have been several rallies — the magnitude of each has approximated a typical year's S&P gains. Each one of these rallies persisted for approximately six to eight trading days. Using the same rubric, today is day seven. Primarily because I only have ten fingers with which to count, I predict that this rally will go to 11. (Ok, I'm joking. The real reason for my prediction is the insights and inspiration that I've gleaned from This Is Spinal Tap.

Victor Niederhoffer writes: 

The sensibilities of those buying the refunding are always hurt by even a
momentary loss, and like night the day the flexions let all the bad
news out before the auctions so these sensibilities will not be
offended. I always think of Enoch Powell railing against a price fixing
board whose sensibilities were offended by a recipe for Bearnaise sauce
that they didn't feel justified an increase during the English march to
agrarianism and the EC.



 In 1969, two contrasting events occurred almost simultaneously, the Woodstock Music Festival, and the Apollo 11 flight and landing on the moon. Ayn Rand gave a magnificent lecture titled Apollo and Dionysus comparing the two events and discussing the news coverage, the politics of both. Although this is an audio lecture that is quite long, it is well worth listening to the entire 69 minutes. Ms. Rand compares the majestic intellectual triumph of Apollo 11 with the "Mindless Mud-wallowing" of the Woodstock festival, the rational Apollo 11 vs the irrational Woodstock festival. She discussed the irrational mean spirited media analysis of Apollo 11 vs their irrational elevation to the heroic of the hippies at Woodstock. Her brilliant lecture gives one pause, and puts in perspective the protests going on in Downtown Manhattan and elsewhere.



Wang Jingbo: “The world revolves around money, and it makes its own rules.”, quoted in  Patrick Chovanec's article on Chinese Trusts

Richard Bubb is shocked:

After reading the article linked, I think I smell a bubble regarding this seemingly unregulated financial house of cards. From the article:"The big concern the chain-reaction that could unfold if those developers run out of ready financing and go bust: There are signs the real estate market is already cooling . . . Hungry for cash, some developers are borrowing at 12 percent to 25 percent . . .""  “Medium-sized property developers appear to have borrowed heavily for short-term and bridge loans,” said Il Houng Lee, the IMF’s senior representative in China. “Property developers’ strains could hit trusts.” and,"Any sign of weakness in China’s real estate market could have a chilling effect on trusts and their investors, said Jason Bedford, a manager at KPMG LLP in Beijing. “Imagine that you have a real estate product and suddenly the real estate markets start to plummet,” Bedford said. “What was a liquid product suddenly becomes very illiquid as investors pull out and can’t be replaced." and,“It will cause a significant amount of wealth destruction,” [Michael Werner at Sanford C. Bernstein & Co. in Hong Kong] said. “The party goes on until someone turns on the lights and you can’t roll over these assets. There will be wealth destruction. The question is how much.” Just my 2 cents.



The stock market today [Thursday 2011/10/06] is gunning it into the close ahead of a good jobs number tomorrow?

James Lackey responds:

I dunno Mr Ken, and I don't care about such things. The number will be produced by the random news generator at best or rigged by The Man at worst… but it's not a meal for a lifetime… Please do not send such comments! Thank you.

 Anatoly Veltman writes:

Lack, this is not about the number. It's about expectation, based on market moves ahead of the number. The lesson to me is calendar-based trading - where money is made because the number is scheduled. Not because you know the number. Is there lesson in that?

Rocky Humbert issues a challenge:

You guys want a meal for a lifetime? How about this meal for the day:

Here are the most likely NFP numbers:

A) between -100k and -50k
B) between -50k and 0
C) between 0 and +50k
D) between 50k and 100k

The person who best assigns a 4pm SPX closing price to each of these 4 choices — and gets the answer right within 10 spx points — will receive a dinner voucher for 2 at my favorite restaurant. (That is, an acceptable submission would look like A=1102, B=1120, C=1160, D=1190.)

The purpose of this challenge is to demonstrate that EVEN IF you knew the NFP, you still won't be able to accurately predict the market's reaction (unless it's a complete outlier).

The judge's decision is final.

 Sushil Kedia responds:

Without any intent to contest the judges decision, my two humble cents:

A reflexivist, who often is a winner in the markets, may need to put up an answer most of the time, as E = 1155, irrespective of where the NFP numbers come.

If the judge so wishes that it may be proper for a complete illustration on the futility of information being beyond markets, may consider providing such a fifth choice. Up to the judge.

The unemployment number is released at 8:30am Eastern Time on Friday. Rocky Humbert responds:

Mr. Collins: One notes that the NFP headline number was 103k — which was above the choice D range (+50k to +100k). The judges are conferring as to whether this constitutes a scratch. They will announce their decision forthwith.

Nonetheless, and for good order, here were the entries in the contest:

Anatoly: SP will drop 90 points

Jonathan Bower: 1125 1125 1125 1125

Mr. Rogan: 1130 1140 1150 1170

Tim Collins: 1099.22 1119.66 1131.24 1149.86

Sushil Kedia: An "unlawful entry" of 1155 in all cases. (Because of his "unlawful entry," from this day forward, Sushil shall be known as Mister Meanor.).

Alex Forshaw: 1155 - 25= 1130; 1155 - 35= 1120 ; 1155 - 45 = 1110; 1155- 55 = 1100

Rocky Humbert writes further: 

I am penning this at 3:43pm — and due to the impending holiday, I need to leave early and hence will not know the final challenge result for about 30 hours. The point of this challenge was to convincingly demonstrate that EVEN IF one knows a macro data point in advance, it's frequently impossible to know Mr. Market's reaction. The signal-to-noise ratio is simply too low. Whether or not my primary point is accepted, (as of this moment) it looks like I've also convincingly demonstrated an equally important truth: "Even a blind squirrel finds a nut." (Or more accurately, it looks like Mr. Rogan has won the challenge.) But I cannot depart for my day of atonement on that note. Tomorrow (Yom Kippur) ends the Ten Days of Repentance (Aseret Y'mai Teshuvah).

 It is a requirement that during this period, one must make amends to those whom we may have hurt in the past; and to ask for and to grant forgiveness to those who ask for it. It is not sufficient to ask God for his forgiveness. One must ask for the forgiveness from one's fellow man. Mindful of the fact that I've dished out some harsh words over the past year to some of you — and I apologize for that — and I hope that you forgive me. It's especially poignant that Mr. Rogan appears to be the winner of the challenge, as he has been the target of some of my more vituperative slings — I apologize to you Mr. Rogan — and I'll try to do better in the year, 5772.

 Gary Rogan responds:

 Hey Rocky, it appears that I may not have won after all, but I appreciate your apology although no offense had been taken. You made me realize how important it is to take the Prozac regularly instead of at random intervals and varying amounts so it's all good. Happy atonement!

 Rocky Humbert responds:

I have re-emerged from atonement and post-atonement eating to find an envelope with the judge's FINAL decision. The winner is: Mr. Tim Collins who was within 6 points. The biggest loser is Sushil (aka Mister Meanor), who almost perfectly nailed the closing price, but because he was more interested in sounding smart than being right, he is guilty of a misdemeanor charge of "unlawful entry" s and walks away empty-handed. There is a meal for a lifetime here too. If Mr. Tim will mail me his US Mail address (off-site), his dinner voucher for 2 at my favorite restaurant will be posted forthwith. Thank you to all for participating and demonstrating many useful points. 



 The field is ecology and the discussion is of the negative effects that one organism has on another by controlling access to a limited resource.

The foundation is provided by work on competition at the molecular level based on the work of Morowitz  that compounds of higher energy state increase at the expense of lower energy states, while energy is flowing into the system. This idea is extended to the study of sperm competition, nest destruction by wrens, competition among plants, competition among salamanders in ponds, competition at the shoreline, competition between finches relating to bill length and shape. Models of competition are covered with detailed examination of the Lotka - Volterra model wherein two species growth is each effected simultaneously by the other species and stable coexistence and exclusion develop based on the varying effects. Tools that make competitors more effective are covered including size, efficiency in using the resources,and foraging ability.No theory of competition is developed but excellent exploration of the reasons that scientists have been unable to reach a theory in this field and others are developed.

I have long felt that competition is the major factor behind our material and emotional well being. It gives consumers what they want, and makes the producer responsive. But like others, I hate competition when the adversary has an unfair advantage over me at the start. And I agree with Milton Friedman's point that you can always be sure that one competitor will always tend to bad mouth his other competitors. I have often told my daughters that the secret to a better romantic life is to increase competition among their suitors.

I immediately applied some of the models and techniques to the competition between those who have the better equipment and size to take the limited resources available in the trading field. I found the discussion of competition of whales for krill, and owls for prey gave me great insight into the ability to get there first with better size of the hft . The access to better information that the flexions have I found illuminated by the competitive advantages that high flying and better eye-sighted birds have in seeking prey.

The entire subject calls for study and reflection and humility in the pervasiveness of competition in shaping our life. An illuminating book.

Steve Ellison asks:

At whose expense do high frequency traders take out their profits? My first guess would be slower-moving liquidity providers, who are left with fills more likely to suffer from adverse selection. Liquidity takers probably benefit from high frequency trading (at least until there is a flash crash).

Victor Niederhoffer comments:

I believe they take their profits from any short term traders because they get there faster like an insect.

Anton Johnson responds:

An assured death by a thousand cuts.

Anatoly Veltman agrees:

Very apt, Anton. I can't imagine any counter-argument, given the statistics of $50m average daily HFT profit year-round.



  For those who might not be on r-project type lists and have an interest in the R programming language. Source: Revolutions blog .

  (Contributing blogger Joseph Rickert reports from the Stanford University Statistics Seminar series - ed.)

 A Work of Art: Efron on Bayesian Inference via Revolutions by Joseph Rickert on 10/6/11

Stanford University is very gracious about letting the general public attend many university events. Yesterday, it caught my eye that Bradley Efron was going to speak on Bayesian inference and the parametric bootstrap at the weekly Statistics seminar. So, since the free shuttle that goes to the Stanford quad practically stops at Revolution's front door, I got my self down there to find a standing room only crowd of Stanford faculty and students. Rob Tibshirani, a student of Efron's, did his best to give Efron a hard time in a humorous introduction, but he didn't stand a chance against Efron's quick, dry wit.

Exploring the relationship between Frequentist and Bayesian thinking has been one of Efron's lifelong grand themes. In this talk, he used an early paper of Fisher's and an under appreciated paper from Newton and Raftery to show how importance sampling is a computationally efficient alternative to MCMC for certain classes of problems and to explore the link between Jeffrey's priors and frequentist estimates. Efron's presentation was a masterpiece. His talk was tight, meticulously prepared and delivered with an effortless grace that facilitated the illusion that even the most dense among us could follow the details. It was like having the company of a master painter on a leisurely Sunday visit to the museum: here expounding theory and there telling an anecdote about a the painter, or discussing some fine point of technique.

One goal of this talk was to demonstrate how one could go about estimating the frequentist properties of Bayesian estimates. Towards the conclusion, Efron remarked that if you have a real prior, even if its only in your head, then your analysis stands on its own, but if you are going to use an uninformative prior then you ought to check your results with frequentist methods.

For the R enthusiasts in the crowd a small surprise came on slide 22. When Efron got to the first line of this slide he paused to remark on the mixed notation, and pointed out that two of the inventors of the new notation were in attendance (Chambers and Hastie). I have been saying for some time now that the R language facilitates statistical thought. Now, I have some evidence.



In these time where heroes and inspiring figures are hard to find, I would put Jobs right at the top of the list. His vision of bringing the world to a digital age brought us not just cool devices, but more music, books, culture, and greater efficiencies so more time with our family and friends. And all these benefits were the surplus to the actual tangible wealth he created for himself, shareholders and investors. When my daughter asks me who the heroes were of my generation, I will say Jobs.



It is tempting to think the recent market top marked by the death of an agent of destruction of free will, creation, and human progress (Osama Bin Laden, D-5/2/11), will be book-ended by a bottom on the passing of an emblem of unafraid creativity, entrepreneurial spirit, and inspired human curiosity (Steve Jobs, D-10/5/11).

The memory of his life recalls the transition from Carter's malaise to Reagan's unashamed patriotism, only this time it is for capitalism.

Steve Jobs Stanford Commencement Speech 2005



T@leb, by Kim Zussman

October 5, 2011 | 1 Comment

T@leb: " We haven’t done anything constructive in three and a half years. " (Source: Bloomberg )

Especially advising everyone on the planet to short bonds a year and a half ago (plus or minus the square root of infinity)

Ken Drees comments:

Which reminds me is there a practice or routine that traders go through to look back on past sectors or trade ideas that stopped producing? So this short bonds was a bust but maybe now is the time? A case for me is the uranium stock group which was coasting along rather well but the sector got destroyed by the March Japan earthquake–now some six months later I see them still making 52 week lows as of yesterday. In the past I would get tired of waiting and the idea gets put into the cold case files dept –now I seem to check things more often–and that seems to be useful.

keep looking »


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