Graham Greene wrote in The Quiet American, "Innocence is like a dumb leper who has lost his bell, wandering the world, meaning no harm."

For me at ten years the loss of innocence was trying to look out the Idaho living room window one evening with a light on inside and snow outside and I was surprised to see my reflection. For an instant there was confusion to who I was: the reflection or what it saw. I moved slightly to feel my body and determined thereon to be the person inside it.

A second mindful decision occurred twenty years later in a Michigan kitchen alone reading and a sentence from Carl Jung´s Memories, Dreams and Reflections. I looked up abruptly from archetypes as universal thoughts, symbols, or images having a large amount of unconscious power, and are shared… and it popped into my head from that point on to control my own thoughts. With willful effort I practiced the multiplication tables for ten minutes until the answer to 2 x 2 did not arrive until I caused it.

The third grave verdict that has shaped my life took place in a Michigan basement while reading Lewis Carroll's Through the Looking Glass where the page turned to the hideous monster poem ´Jabberwocky´. It´s written in mirror text, and it doesn't matter that I was reading in a coffin lined with electric blankets against the icy wind whooshing through the wall cracks, or that I was reading with an Edmond Scientific top grade mirror to reverse the text so the Jabberwocky came alive from left to right. Suddenly it dawned on me that I could turn the book upside down to cause the print to flow right to left and dispense with the mirror and monster. That´s how I´ve read hundreds of book to date, and the reason is to balance the body, eyes and brain to a more perfect symmetry to think better critically.

The fourth waypoint on the road to objective thinking was learning the chessmen and their moves that is as much a model as computers for the thought process.

The fifth rest stop is quotations that has become a lifelong study, and one of the best on critical thinking (that is attributed to no one) is "Critical thinking is thinking about your thinking while you're thinking in order to make your thinking better."

So in a long march to discovery of self along the best road I know how, in the first step I determined the body manufactures the thoughts; in the second that I could control the thoughts, on the third that the body must remain healthy and symmetrical to think better; on the fourth to use models to understand how the mind functions, and at the fifth to stand on other´s shoulders and pass along their advice.

Howard Zinn said, "History can come in handy. If you were born yesterday, with no knowledge of the past, you might easily accept whatever the government tells you. But knowing a bit of history- while it would not absolutely prove the government was lying in a given instance- might make you skeptical, lead you to ask questions, make it more likely that you would find out the truth." I might add this is not only true of government but of medicine, business, sports and anything else worth thinking about. The trick is to balance being skeptical and open. If you are only skeptical then no new ideas filter through to you and nothing new is learned. On the other hand, if you are open to the stretch of gullibility without an ounce of skepticism, then you won´t be able to distinguish the useful from the worthless.

The one skill everyone on the planet needs is the ability to think with objectivity. If we are prepared to think for ourselves, and learn how to do it well, there is little danger of becoming slaves to the ideas and values of others that is taking the earth and limiting self-potential. The list of core critical thinking skills includes observation, interpretation, analysis, comparison, evaluation and explanation

There are some training workouts: math, read Sherlock Holmes, logic riddles, and conversing with other critical thinkers. The number and direction of steps up from fuzzy thinking to a height of acute awareness varies from person to person. The ultimate step a quantum leap because no problem can be solved from the same level of consciousness that created it.

The adventure of critical thinking is the finding of self. You develop insights into what is and can be. I´ve found as much as possible, and the chase goes on.



 I've lived in southeast FL for 13 years and have gone through Category 2 & 1 hurricanes and a borderline Category 2/3 hurricane.

Category 2 can cause severe damage, Categories 3 & 4 can be disastrous.

With some preparation, Category 1 can be slept through.

Tropical storms can cause inconveniences such as road flooding but not much damage. Isaac has been a tropical storm and a Category 1 . As such it has been overhyped.

I suspect there was a political reason for this.

Jeff Watson writes: 

At the beach, on the Gulf side, even a direct hit from a Cat 1 is frightening, and that's why we have to evacuate even from a 1. Storm surge at high tide is a sight to behold.

Sam Marx comments: 

People who live at the water's edge should be prepared for hurricanes or shouldn't live there at all.

Outside of the water's edge, a Cat 1 hurricane does not do much damage , except, inland, for road flooding and damaging some houses built under the very old building codes.

Isaac became a Cat 1 over water and quickly dropped to a tropical storm over land. It should not have received the excessive media coverage it got.

Tradercraft adds: 

Tell that to the half a million people in New Orleans who are sweltering without air conditioning right now, and their frozen foods spoiling (can be several hundred dollars worth of food), and unlikely to get power back for a week, Entergy announced. Not something one can easily sleep through.

Sam Marx writes: 

I believe there never has been so much media coverage over a Cat 1 hurricane or tropical storm in the past as given to hurricane Isaac.

Gibbons Burke writes:

The fact that it followed a path very similar to that of Katrina, and actually hit New Orleans on the seventh anniversary of that storm had something to do with the attention it received. But the fact that it was early on slated to hit Tampa during the RNC convention certainly got the media's interest in the storm going, and once they get started on something, they often like to beat it to death.

Victor Niederhoffer writes: 

The wisdom of Gann in predicting confusion and uncertainty and volatility during the anniversaries of vivid events is underlined.

Anton Johnson adds: 

Tips for live coverage of minimal hurricanes.

1. Wear loose-fitting rain gear, preferably with an open hood to better accentuate wind gusts.
2. Stand with feet sholder width apart and knees bent. Lean torso and head into the direction of the wind for effect.
3. Use minimal wind-screen on microphone, speak loudly as if straining.
4. Position shot to include a fluttering small diameter palm, and a dilapidated structure with flapping corrugated metal.
5. Adjust light filter for gloomy effect.
6. Cut to animated overly-enhanced color radar during lulls.
7. Pan to blowing fronds, leaves and trash if possible.



The increase in leaked govt news releases coincides with the rise in curated "machine readable" dedicated news feeds hawked by the various data mongers. Everyone in that product chain has an incentive to front-run. And it would make sense that the robot news traders would have the same moral compass as the quote-stuffing HFT crowd.



Last year I visited Spain, visiting a friend who came to the states for education and then went back. He has a job in the Ag Dept. What he said was that family and tradition run deep. He said it was rare for young people to even think of doing what he did, graduate studies abroad outside Europe.

My impression was that family was the safety net beyond the government. Besides the Gypsies and hostel tourists, there were few homeless people. Few drug addicts or winos on the streets. I asked and he said the families take care of them for the most part.

I suspect that those not in denial may think the government cannot be counted on but surely their families will hold together.



 This is near to my heart, approaches 100% correct, and is the right way to approach any environmental issue.

"Surfonomics Quantifies the Worth of Waves"



One has noticed anecdotally that the % of leaked announcements tends to be increasing. Many of the announcements are relayed to the media about 1/2 hour before the release, like the beige book and the employment numbers. The reason is that these media write a story about the number almost simultaneously with the announcement. Many of the stories are 500 to 1000 words and contain interviews with several people talking about the bullishness or bearishness, related to the numbers.

It's sort of like when the government calls up Upside Down, or Sage, or the Greek 4 trillion investment office for guidance on what they're thinking and what should be done. I've always said that the acquisitions get leaked because all that's necessary is a shrug of a shoulders at a squash game between an acquisitions team member and the Chinese wall separated speculator or arbitrageur.

The documented number of cases where sophisticated signaling and front running went on for years emanating from the legal offices of the targets or acquirers shows how rampant it is. One wonders if we've become more jaded, more skeptical, more attuned to this as we see the attitude towards the importance of a level playing field constantly being batter away as we become a society of equality of outcomes rather than a society based on the equality of opportunity,or as Gaynor used to say a society based on the rule of law rather than men.

How could this be quantified? And is the social trend I allude to a necessary consequence of egalitarianism and class warfare rampant today?

Rocky Humbert writes:

DOL among other data providers have allowed reporters early access to the numbers for years (to write their stories). The data & stories were embargoed until the official release time. It used to be that they (literally) had the phones in the press room turned off. That approach doesn't work too well in the age of 3G.

I'm always amused when the Chair bemoans the "unfairness" of it all, simultaneously arguing for the abolishing all sanctions for insider trading. Assuming that there is more leaking (which I have no factual basis to believe or disbelieve), it should make the markets more efficient….

Victor Niederhoffer writes: 

Rocky has a good point. But ever since I wrote my article Insider Trading with Lorie in Jrl of Law and Economics, 50 years ago [Ed.: actually 44 years ago], I have never agreed with professor Manne that insider trading is harmless. It takes money away from one group and gives to another. It's a dead weight cost. As for the reporting thing, I think that the leaks are a lot more prevalent now and perhaps it's because of better ability to send info over the channels before the release. The reporters shouldn't get the stories in advance in my view because they're leaking them much better. That's my hypothesis. It's nice to have rocky back to disagree with me on all my hypotheses.



 Economic high times in Peru during three short years since my last visit in 1999 has put 100 times as many keyboards under the fingers of the citizens who have blossomed a fresh consciousness about town. The changes are sharp in the minds of 500,000 of this largest city in the Peruvian Rainforest. In with the computers, out with the old jungle charm that has defaulted to a new middle class efficiency.

Cheerfulness has always been endemic in Iquitos and it is the most relaxing place in the world to take a walk. The children grin and gawk- they used to gawk and grin- and the dogs run out to play. I have never been bitten and there is virtually no violence in the town history. If you smile at a person the he´ll say buenos dais every morning after.

The difference now compared to three years ago is in people´s faces registering what they see followed by a flicker of calculation. There used to be no past or future tense in the minds of the natives, and they remembered only the last thought until jolted into the next. Now it´s smooth mental sailing.

The dominos of awareness on the streets, in shops, homes, on waterways and in the people's minds are amazing. Whether they access computers or not, by speech, newspapers and non-verbal cues, critical thinking is sweeping the town. This enables inspiration in an individual by a great purpose, some extraordinary project, and all of his thoughts break their bounds. He is able to hold not one but two or three thoughts at once, and others see it. I think a new, great and wonderful world has opened in Iquitos. Dominant forces, faculties and currents have come alive in the discovery of self.

What´s more curious is that instead of adults teaching children the art of consciousness in the traditional style throughout world history, in this computer revolution the machines are teaching the kids first and they then their parents. The kids flock to fifty internet cafes- nearly all new- before and after school, at lunch, and just before bedtime. Thousands swarm the internets that in the first month I was here in June slow them from a usable USA 2010 pace to a near standstill at prime hours. One expat here was accustomed to winning six simultaneous games of computer chess at a USCF 1850 rating until last year when he started losing one in six when his clock flag falls as the computer is slow, and his rating fell so drastically that he quit. I pay a daily advance for ten hours at $.60 per hour to hold the highly prized chair through the busy times including a 7- 9pm night session for ´computer romance´ that has replaced strolling the town plaza for amour.

What do the kids do? They don't care if the systems are up or down; they´re addicted to the noise and game hunger. When the computers are up they cruise Facebook and play online games. When down they switch to canned hard drive games. It´s a musical chairs of gleefully shouting children, and often I give mine up to go hike, eat, read or nap in a private booth with a nonworking computer.

As the kids jam the cyber cafes the adjacent soccer fields that used to be busy with anaerobic games lie barren for the first time in history. In parallel the children are growing little hunchbacks with enormous hands and delicate fingers to resemble Edward Scissorhands. Romances bloom in the cafes and especially in private booths that rent for an extra dime an hour. The teens hold hands and visit their friends on Facebook or Skype double date.

The daily ratio of computer use across the city is: Facebook 45%, Games 45%, and 10% schoolwork, surfing or other. Yet it doesn't matter where their fingers walk because one way or the other computers teach users to think like them in raising their consciousnesses. Children computer schools are popping up everywhere, and a chain called CompuKids offers twelve station rooms for primary and grade school children at $.30 per hour for group lessons three times a week from an itinerant professor. In turn, the kids run the family cyber businesses outside of school and commonly a ten-year-old installs programs, fixes glitches and takes money, while the parents sweep and mop.

The children are the vanguard of a wave of critical thinking obviously due to the computers as the only strong variable, aside from boom money, introduced to Iquitos in the last three years. For every computer then there are about one hundred today, children learn them in primary school, and the more affluent university students use laptops. Many businesses have installed systems to record books, and along Putumayo Street where the established line of one dozen self-appointed notaries for decades have for set up sidewalk typewriter tables to hunt-and-peck at $.50 a page for letters or legal forms to the partially illiterate society, now two use laptops and printers.

Critical thinking has been described as reasonable reflection focused on deciding what to believe or do. It is the predecessor of self-regulatory judgment. It is the ability to chew up and spit out what you don´t believe in this story, and swallow the rest.

What of innocence in a computer revolution? Here was a place, a time, like a dream a rule of subconscious in the most remote thickly populated region on earth. Nevermore. For me this means the citizens look me directly in the eye rather than from a haze of unconsciousness and fear of the persistent Pela Cara, or face peeler. Every child for a century used to be told that one night a gringo called a Pela Cara was going to snatch him from a river bank and peel the skin off his face and body, squeeze out the oil, and… then this variation of the legend… send it back to the USA to be used as missile fuel for rockets with nuclear bombs. Many adults also feared the Pela Cara. Once I was introduced to a group of mechanics as a visiting Pela Cara who instantly vacated the shop. A few years ago a father-in-law of an expat was sent to prison for two years for aiding a gringo who was doing this to an aunt.

It is believable that computers may alter individual and world consciousness from a stronghold of centuries, but for it to happen in one place in three short years is incredible.



 Heraclitus said, "everything changes except the law of change" and "you cannot step in the same river twice."

The river changes every second and so does the man who stepped in it. Life is ceaseless change. The only certainty is today. Why mar the beauty of living today by trying to solve the problems of a future that is shrouded in ceaseless change and uncertainty–a future that no one can possibly foretell?

-Dale Carnegie

Leo Jia writes: 

I have also been studying the topic of change lately.

Just as Heraclitus said about the river, the ancient Indian Veda teaches that even the human body does not have the same flesh and bones as those a moment ago — it is constantly changing. This constant change has made the concept of death (as we know it) less dramatic. Because death happens at every moment as the change of the body goes, the final physical death becomes no more a distinguishing event.

The very nature of change has led Gautama Buddha, who started as a Hindu monk, to believe that there is no self, contrary to the Hindu belief that there is the eternal soul which is the self.

I believe this ancient concept of change has very good reflections in modern sciences of molecular biology and quantum theories. At the atomic and molecular levels, the body is constantly reshuffling and exchanging, at a very fast rate, the atoms and molecules with the surroundings. This has not only made one body not containing the same atoms and molecules from moment to moment, but also made one body to share the same basic components of life with others in the surrounding. At the subatomic level, the change is even more profound, as quantum theory teaches us. The particles become waves or energy and the waves or energy become particles at all times. With this, the body is no more that physical as we see and feel it. It becomes more of a congregate of energy. And the energy is not in closed form - it is open and exchanging with all in the universe. In this sense, the separation of the bodies amongst us becomes less meaningful.

Isn't there the new concept that information is the change of energy? With that, we no longer need to search or absorb information, the information becomes us and we becomes the information.

Why is it hard to believe? Because we confine ourselves to only rely on our physical perceptions. The physical perception is just that — physical. How do we perceive otherwise? That is what I need to learn, and I look forward to someone enlightened sharing the wisdom.



 This is a very interesting article on "What Happens to Stolen Bicycles":

It seems as if stealing bikes shouldn't be a lucrative form of criminal activity. Used bikes aren't particularly liquid or in demand compared to other things one could steal (phones, electronics, drugs). And yet, bikes continue to get stolen so they must be generating sufficient income for thieves. What happens to these stolen bikes and how do they get turned into criminal income? 

In 1968, Chicago economist Gary Becker introduced the notion that criminal behavior could be modeled using conventional economic theories. Criminals were just rational actors engaged in a careful cost-benefit analysis of whether to commit a crime. Is the potential revenue from the crime greater than the probability adjusted weight of getting caught? Or, as the antagonist in the movie The Girl Next Door puts it, "Is the juice worth the squeeze?"

Criminal activity (especially crime with a clear economic incentive like theft) could therefore be modeled like any financial decision on a risk reward curve. If you are going to take big criminal risk, you need to expect a large financial reward. Crimes that generate more reward than the probability weighted cost of getting caught create expected value for the criminal. Criminals try to find "free lunches" where they can generate revenue with little risk. The government should respond by increasing the penalty for that activity so that the market equilibrates and there is an "optimal" amount of crime.



 Now that Shark Week on the Discovery Channel is fading from memory, it seems appropriately bad timing to revive the question that drives many DailySpecs to reach for their academic harpoons.

For those of you unfamiliar with the history of this argument, a brief summary:

The authors of the United States Constitution and the people who voted for its approval thought that money's special purpose was to serve as a final unit of account - i.e. the stuff that people use for pricing their own and other people's assets and liabilities - under the "law"- i.e. the courts and the government would recognize the unit of account as legal tender. The authors of the Constitution and those who ratified it were also wise enough to know that the greatest risk to their new Republic was to allow anyone - private or public - the privilege of debasing the country's legal tender unit of account. If Congress or the State legislatures had the power to debase the currency, they would most certainly do just that. The war veterans who were the majority at the Constitutional Convention had seen the Revolutionary War come close to being lost because Congress and the states had literally written more checks (actually, printed more notes) than their credit could support. That would not be allowed to happen again.

The Founders' solution was wonderfully direct and subtle. The states would retain the power to charter banks but they would surrender the authority to legislate what would be the legal tender unit of account. Only Congress would have the power to "coin Money". Congress, on the other hand, would have its authority over the country's legal tender unit of account limited to regulating the weight and measure of domestic and foreign gold and silver coin. It would not have the authority to make its own IOUs into money. In the periods when the Constitutional gold standard was observed by Congress (1789-1862;1869-1914), the Federal government was required to pay all its bills, including redemption of its debt, in specie at the weight and measure that defined the dollar as a legal tender unit of account. Even now, a century after the Congress, the President and the Supreme Court all decided that the Constitution could be safely ignored in the name of the War to End All Wars, our laws still observe the restriction on the states' ability to define money. The U.S. dollar is now paper, not gold; but only Congress can authorize its printing. The Coinage Act of 1965, specifically Section 31 U.S.C. 5103 ("Legal tender") limits the country's unit of account to "United States coins and currency" and affirms that they are "legal tender for all debts, public charges, taxes, and dues."

What seems to confuse nearly everyone is the fact that, from its very beginning, the country did not do business in money but in credit. That part of our national legacy remains unchanged; and it is so elemental a part of the American political economy that even the Federal Reserve finds it hard to explain that we are all - sharks and prey both - swimming in a credit sea. When asked why the Federal and state governments often refuse to accept cash but will take payment by checks, money orders, and credit cards - none of which are, under our law, "United States coins and currency", the Fed could only answer the question by referring to the very language of the Coinage Act that raises the question in the first place.

Americans have always dealt in credit, not cash. Even the opponents of the authorization of a national bank accepted, as obvious, the right of banks to issue notes that would be broadly accepted as a means of payment. The First and Second banks of the United States and the State chartered banks were all authorized to issue notes, and state laws even allowed state bank notes to be considered legally sufficient payment for state taxes. But, no one believed that bank notes themselves were to be considered actual money. That truth was reflected in the pricing for goods and services. As Sumner notes in his History of American Currency, while pricing would use a consistent unit of account, the prices themselves were determined by what exactly was being paid. So, in Connecticut, under the example Sumner took from Felt's study of colonial currency, a sixpenny knife cost in 12 pence in pay but only 6 pence in money. ''Pay " was the state issued currency price (Connecticut, Massachusetts, Pennsylvania and other colonies all tried at various times to issue paper currency to "save" (sic) their precious metals); "money" was Spanish or New England coin, (with) only wampum, no paper, accepted for any change (fractions of a penny). To deal with the complications of government price fixing (colonial governors were always trying to deal with shortages by establishing official prices), people even dealt in "pay as money"; the official price would be acknowledged but the government's paper money would be discounted by 1/3rd from the nominal government exchange rate.

By dealing in credit Americans had precisely what the Federal Reserve Act promised to provide - a flexible and adaptable means of payment. What they also had was the assurance that the government itself could never risk its own credit because it would always pay up in cash. A state legislature might - foolishly - adopt laws that recognized the state's own bank notes (but not those issued by out-of-state banks or local private banks) as sufficient payment; but Federal customs and excise taxes were only payable in gold. It was precisely the desire of South Carolina to avoid this restriction that led to the first of the many nullification crises. Everyone applauded sound money; but no one liked using it to pay their out-of-town debts. Sumner explains it beautifully: "The colonists began, soon after the settlement of Massachusetts Bay, to use a barter currency, ostensibly because they had not money enough: really because they wanted to spare the world's currency to purchase real capital, which was their true need. The currency history of this country has been nothing but a repetition of this down to the present hour. It has always been claimed that a new country must be drained of the precious metals, or that it could not afford so expensive a medium. The new country really needs capital in all forms. The only question is whether, being poor and unable to get all that it wants, it can better afford to do without foreign commodities or without Specie currency. No sound economist can hesitate how to decide this question. The losses occasioned by a bad currency far exceed the gains from imported commodities….. Credit, in its legitimate forms, is priceless to a new community, but when used in illegitimate forms, as in a pure credit currency, or in a currency into which credit enters in an indefinable element, it makes true credit impossible."

What is remarkable about American history is that, thanks to the leadership of Sumner and Sherman (John, not Cump) and - most of all - President Grant, the United States chose, after the Civil War, to restore its Specie currency and to honor its greenback IOUs in gold. What is equally remarkable is that entire history - and its remarkable successes - are not entirely forgotten. Resumption forced Congress, the Treasury and the banks to all have notes constantly discounted against "money" prices by the market. The result was something that no modern economist understands; neither the government nor Wall Street ran the country. Wall Street could "panic" and repeatedly did; but enterprise did not suffer. The bank crises of the 19th century were severe, but they lasted for months, not years; and there had no lasting effects on the country's growth and accumulation of wealth. The investors and depositors in untrustworthy banks lost their funds; but the trustworthy banks were able to expand. In the absence of a central bank, failures were not socialized; in the absence of fiat currency, the money "supply" (sic) was not an issue. The gold did not evaporate, and entrepreneurs and laborers were free to take their savings and invest them in new, credit-worthy ventures. J.P. Morgan became so powerful, even though he was, as Rockefeller observed, a man whose personal fortune was comparatively small, precisely because Morgan's bank notes always sold at par. In times when other banks were caught short, Morgan's deposits would swell. That was - and is - the beauty of the Constitutional gold standard; it allowed the market to set the relative prices of money and credit by never confusing the two.



I found this excellent Stanford course recently and wanted to share it with the site.

Probabilistic Graphical Models

Daphne Koller, Professor

"In this class, you will learn the basics of the PGM representation and how to construct them, using both human knowledge and machine learning techniques."


-respected teacher
-no money cost for course
-textbook is $85 at Amazon (or $100 less discount through MIT Press)
-time cost (8-10 hr/wk for 11 wks)
-prereqs: one programming language, access to Matlab or Octave, and the ability to do some abstract thinking



The effects of the mountains are sanguine. The vast open spaces and the scale that the West provides will give our policy makers the temper to make grandiose and bold statements. Freed from the confines of offices and committee rooms, let the liquidity flow like the big Snake river itself. Why would they want to spoil the mood in such an inspired setting. It must be the one of the reason these meetings take place in the mountains rather than seaside resorts.



 Dear Mr Niederhoffer,

I really like your website dailyspeculations. There are a lot of fascinating and interesting articles that lead to new ideas and inspiration.

I read in the "About V.N & L.K" section that you trained some very successful traders and hedge fund managers. I am a student of business administration in Germany and want to work as a trader in the future.

It would be interesting to know how the training of your traders was structured and what were the most important things you focused on during the training? If you were now in my age (25 to 30 years), how would you start and where would you try to get the sufficient education for this business?

I hope that you can help me with your insights.

I wish you all the best and hope you will continue to share your insights on the markets.

Kindest regards,

Lars Gutt

Victor Niederhoffer writes: 

This is a good question. Does anyone have a good answer besides reading a good statistics book like [the old] Snedecor, Horse Trading by Ben Green, Bacon's Professional Turf Betting, and starting a hypothetical trading account, and doing some hypotheses testing from a field they know something about?

Jeff Watson writes: 

A big question is why you would want to trade. Trading is a pretty thankless job, very tough, and maybe you only see the media presentation, or you want to tell people at a cocktail party, "I'm a trader," but I'd like to see a why.

Having a good mentor, someone that you can apprentice to, is the most important thing in learning how to trade. A good instructor is much more important than Ivy League Degrees, how to manuals, internet chat rooms, books, systems, gurus, the financial media, and all the other mind numbing stuff out there.

My mentor when I first started was an 85 year old guy who was first trained by Art Cutten. He learned well from old man Cutten, and taught me how to keep out of trouble. The main lesson to learn in trading, more than anything else, is how to keep out of trouble. Manage to keep out of trouble, keep your own counsel, and the mistress might give you a second or third date.

George Coyle writes:

Series 3 study guide is a great (relatively brief) overview of the commodity futures industry. It touches on styles of trading as well as goes through lots of the unexciting but important details (order types, etc.). (Outline of material covered in exam [pdf]). (Online version of Study Guide by Investopedia).

From there the Market Wizard books are good to look at the different styles to see which sounds the best to you.

If quant focused I would say read something on how casino games work (odds and such–Richard Epstein's Theory of Gambling and Statistical Logic book is good) and think of how that might be applied to markets with the trader acting as the casino. Focus on keeping it simple, think of what is practical and possible when working with data.

Read your books of course. Read interviews with William Eckhardt. Larry Williams' recent book (LT Secrets for ST Trading) does a good job of outlining how quant works specifically, as does Charles Wright's Trading as a Business. Livermore's How to Trade in Stocks is a good one too (less popular than Reminiscences but more of a "how to" manual).

Deitel and Deitel C++ How to Program is the best C++ manual out there in my opinion. I dodged it for years but it is crucial and so useful. is a great website to watch youtube vids on various languages to get your feet wet (but Deitel is necessary if you really want to learn the specifics).

And just start trading. The best teacher is experience. Even if equipped with all the great logic from above it seems real experience is necessary to actually follow the rules.

Craig Mee writes:

Understand valuation. Get a handle on all things that move a market price. Maybe have an 8 week internship of your own making with 8 different dealers. Corn farmer, art dealer, financial dealer, car dealer, importer, etc, and understand that whatever you're trading, you potentially should be able to move in theory from one to the other seamlessly. You are a valuer first and foremost, and if you value it wrong, you will also see how most of these choose to cut their positions. This might help to keep in the forefront of your mind what your mission actually is.

George Parkanyi writes:

Well if you can get past the fact that he finally went bust and blew his brains out, I found Reminiscences of a Stock Operator, about Jesse Livermore, to be quite useful. The most notable things I remember are (1) "making the most money when he was sitting, not trading" – meaning a position needs time to make really big money, and (2) to Jeff's point about staying out of trouble – averaging UP a position once its already showing a profit, and never averaging down a losing position. (The latter is especially important when trading with leverage.)

Ultimately, it still comes down to a style you are comfortable with – keeping the staying out of trouble part in mind; however you do that. And this may or may not involve the things mentioned above.

David Lilienfeld writes: 

Go through some psychology texts–learn to understand human behavior and get to know one's own temperament. Understanding on an intellectual level doesn't help much if one's temperament is suited to trading. I have an old friend from high school who was on the Solomon trading in the mid-to-late 1980s. He hated it, often spent the weekends sweating his positions, etc. He moved on to be a buy side analyst, became the portfolio manager for a number of funds that succeeded pretty well under his direction and prospered. He had no trouble sleeping as a portfolio manager, and as I said, his funds did very well. A college roommate became a sell side analyst and was bored as could be doing his job. He did OK with it, but not great. He changed employers (at one point he thought about leaving the industry if he wasn't hired by someone to do something other be an analyst), started in its training program and found himself on the trading floor. He enjoyed it immensely and retired last year (I'm still not sure if he "retired" or was retired by his employer; looking at his homes, it's not as though he's wanting for much, so maybe he really did retire–but it's also not been a topic open to discussion, at least not with me). My guess is that just about everyone on this list has friends with similar stories. The bottom line: You have to know your temperament. You can learn the math, but if you don't have the fortitude, the math doesn't much matter.

The psychology part is understanding what people are about. Understanding gambling is about the mathematics of risk. Important stuff to be sure. But people matter too, and understanding what they are all about is also important.

Those are my recommendations. Lucking into a good mentor helps, but observing for a while is also one of the best teachers.



 Went to Botafumeiro tonight, and in a word, it's outstanding. Heartily recommended.

Went through the Call today. It's the old Jewish Quarter (Jewish niche would be a better description, though).There's not much left of it, though.

There are some things I'd like to see in Barcelona, but for the money and the time, I enjoyed being in Bordeaux (besides the wineries) much more. Then again, I'm not enamored with Paris and think London's a ton of fun to be had (and Amsterdam's great for more than some of the finest Indonesian cooking to be found outside Indonesia–and some great art, too), so you might want to take those views into account when thinking about my thoughts on Barcelona for a get away sometime.



 The news of Neil Armstrong's death hit me hard. He played an important part of my life and it was like losing a close friend, although I wasn't a close friend but rather an associate.

As a teenager I read about Neil's Korean War flying mishap in Popular Mechanics. Somehow I remembered his name probably because I was a fan of the radio serial, Jack Armstrong, the All American Boy.

I was an engineer at NASA in Houston when the second group of astronauts was announced and I learned that Neil was selected. I was selected to teach the group about flight mechanics with emphasis on launching into orbit. Neil had a great grasp of the subject. All the astronauts were active duty military and Neil was the sole exception. He was a civilian NACA/NASA test pilot who was famous, within aeronautical circles, for piloting the X-15 rocket powered research vehicle.

Neil and I crossed paths at various times within the context of mission planning for the Gemini and Apollo programs. I was pleased that he was selected to fly on the first lunar landing mission. I believe he was the best choice out of the very talented and capable group. My faith in his ability was validated with his successful mission performance.

Looking back, I see how the manned space program changed the trajectory of my life in a good and wonderful way. Goodbye Neil Armstrong, you are someone I admired and respected.

Victor Niederhoffer comments:

Inspired by Mr. Cassetti's post, I have a Neil Armstrong letter I wold like to share.

Dear David,                                                      Sep 12, 1986

"I am saddened to hear of your illness. Your father told me you are interested in the mission of Apollo 11. Apollo 2 was of course the high point of my life. When the rocket lifted off the launch pad I must confess that I was not sure I'd have the distinction of being the first man to step foot upon the moon. In every flight there's the possibility of risking one's life. As you may have studied, I had a close call aboard Gemini 1 when the craft started to roll violently. It could have ended in disaster. But Dave Scott and I lived to tell about it. The good Lord had something to do… being on the moon was somewhat like standing on the high desert of new Mexico on the night of the full moon, only it was much brighter. Looking back on the video tapes of it, earthlings didn't quite get the breathtaking spectacular of it, on their tv sets. The moon's surface was very powdery with fine granules that made beautiful footprints. And since there's no wind on the moon, my footprint will last much longer that I will. Maneuvering around on the moon was tricky at first. While the gravitational pull is only a sixth of the earth's, it was a bit of a trick keeping balance. It was a skill we mastered quickly. David, you asked me if there was any funny moment on the moon. The one thing that stands out is the fact that with all the engineering and calculations that the lem would sink more than it did into the moon's surface. The last rung of the ladder was about three feet off the ground. I remember wondering if this first historic step was going to be a big flop before the whole world. Later, I recall how ironic now that big first step was then accompanied by, "that's one small step for men, one giant leap for mankind. It's been over 17 years since Apollo 2 and while the details of it are vivid in my mind, it's still quite hard for this Ohio boy to believe he actually made the trip. Through a telescope, I can pick out the spot on mars transquilliitatis where the eagle landed. I'm still very awestruck in retrospect. The excitement of actually being there was overshadowed to a great degree by the the overwhelming tasks that were required of Buzz and I. I wish you well, David. You are a very brave little boy. I will keep your well being in my thoughts and prayers, keep up your studies and I'm sure you'll get to visit the moon someday.

Sincerely yours,

Neil Armstrong

Easan Katir adds:

Neil Armstrong should rightfully be remembered as a world hero, along with—far beyond actually— Christopher Columbus and Ferdinand Magellan.

Leo Jia replies:

Wasn't the greatness of Columbus due to the fact that he had a vision and then acted upon it which led him to realize that vision? The land he discovered is a treasure to mankind which later nurtured a great country and wonderful people. I am not sure if he would still have obtained the prestige if the land were a totally uninhabitable piece of waste, or if the land were still unreachable by people by a long shot.



 I just finished Stiles' The First Tycoon. It's a bio on Cornelius Vanderbilt. The book is well written–it's not short, but it reads short. Not like a Robert Caro-style book. (I enjoy reading Caro a lot–if you haven't plowed through The Power Broker, you're missing out on one of the most cynical descriptions of political corruption in NYC circa 1920-1970. Of course, with that corruption came Jones Beach, the LIE, The Triboro Bridge, the 1964 World's Fair and more. Also the creation of the South Bronx as an exemplar of urban decay.) Caro is a compelling writer, and so is Stiles. The difference, though, is that Caro stays on target. Stiles does, too, but the target is the economic and political climate of the industrializing America, not Vanderbilt. And that's the only real weakness of the book. Nonetheless, it's a fascinating read, and I'd encourage anyone interested in US economic/business history to read it.



Perfectionists have a compulsion to do things perfectly. When things do get done, they are done well, but there is a dark side. They can't get things done because they are never perfect. They seem afraid to take risks because they are afraid of not being perfect. They have many requirements, so many that needed projects do not even get started.

Trading is one of those non perfect endeavors which when done well has a high, say, 40%, failure rate. This is tough on perfectionists.

A friend is a great singer, but as a perfectionist refuses to sing because it's not perfect. Singing is like trading, you never hit the exact note. In fact that is the beauty of the human voice, it's not perfect. It's the wavering and straining that makes it emotional and beautiful. But that is another topic, similar to the penumbral idea.



 Considering the astonishingly large number of experts and hobbyists we have on astronomy here, may I appeal to you to educate me and possibly some others… One of my favorite proverbs, one that I made up is "the round number is never a penumbra". It always gets broken like today (albeit many other numbras one could say the same thing about)… but … but assuming it is true with appropriate sliding, is the astronomical reference correct? Or if not, how should it be modified? Thank you.

Anatoly Veltman questions: 

Why astronomy, and only astronomy?



 A common mistake that stock people do I think is to pay attention to the increase in sales numbers. What does this have to do with future profits? I would think there is zero correlation given the earnings change since sales are so easy to manipulate by such things as discounts, pre-orders, and incentives for early buying, and reducing inventory et al. How did this ridiculous emphasis on the sales increase become as or more important than earnings relative to expectations in affecting stocks after the earnings report? I recently met with a pairs trading outfit and gave them 100 reasons I don't think it works, but it was from the seat of my pants. The main reason was of course that it goes against the drift. It hedges against the 10,000 fold return.

Gary Rogan writes: 

If sales increase while profits are decreasing, that's a bad sign. However when profits increase while sales are decreasing, this may be very good, but it can't go on too long. Sales trends gained influence as a counterbalance to profit growth being fudged. When you have profits, sales, and cash flows all increasing in unison and indebtedness not increasing, that's as good as it gets. 

Jeff Watson comments: 

Profits increasing while sales are decreasing are usually a sign of increased productivity, better inventory management, better management of labor, and better management of capital. Although Gary says this scenario can't go on too long, it really can go on forever. 

Gary Rogan replies: 

Well clearly it's mathematically possible to decrease sales by .1% per year and increase profits by .1% per year close to forever so "too long" was perhaps a bit harsh, but at some point in the real world gross margins become so high as to make further advances impossible due to competition or substitution. My statement was prompted by not being able to recall a real scenario of sustained profit growth and sales decline resulting in a good outcome having looked at hundreds of income statements, but I've never made a study out of it nor have I looked at multi-year trends. When customers are buying less of your stuff year in and year out that usually means they are not excited about your stuff, because they don't like it but perhaps in this case because the price is too high for them to use more of it. When customers get into the habit of using less of your stuff, that's hard to fight. 

Jeff Watson adds:

The Chair is 100% correct. Going back to Sears as an example…their aggressive pricing will only squeeze their retail operation out of business(if continued long enough), as prices this low are unsustainable in the long run. If a store has a 30 percent increase in sales after implementing a big sale, but it's gross profit goes from 22% to 6% or less, is that a good business plan? Even though Sears is not increasing labor to handle the increase in sales, the model is still badly flawed. I understand that one of the most important things in retail is buying right, but I suspect that most of the things Sears is selling is a loss leader. Maybe they are subscribing to the old cliche, "We might be losing a little money on each sale, so we'll make up for that with the increase in volume."

Russ Sears writes:

Coming from the world of insurance, when things sell unexpectedly well the actuaries double check their pricing. The agents and the market will quickly spot when you are selling $1 or risk coverage for 99 cents. When I started, before rate books were online, a printing error cut-off the $1 handle of 70 year old women term life insurance rate per $1,000 (this was highest age we sold term to). The month after the book went out we had more 70 yr. old women apply for insurance than we had in the past several years combined.

In other words sales increases often indicate increase in claims volatility. Sales increases make me wonder if management really knows what they are doing. One wonders if this rule holds for the retail and stocks in general. 

Carder Dimitroff adds: 

I may be naive, but in some sectors I believe the top line could be critical for long term investments. I'm thinking of regulated and capital intensive companies like electric utilities, gas utilities, water utilities, pipeline companies, transmission line companies and MLPs. In a different way, I'm also thinking of non-regulated utilities, such as independent power producers, refineries and REITs.

In all these cases, if the top line falls, the bottom line is plagued by fixed costs, such as interest, ad volerem taxes, depreciation and amortization.

The second derivative of revenues in such cases is capacity factor. Low revenues suggest low capacity factors. Low capacity factors suggest troubled assets and long-term challenges. The assets could be partially stranded by market conditions.

An example is marginally efficient coal plants. With low market prices for natural gas, many coal plants find themselves out of merit and not dispatched (zero earnings for producing energy). When natural gas prices return, marginal coal plants are again deep in the merit order and they are dispatched frequently or continuously.

Julian Rowberry writes: 

An internet marketing equivalent of over valuing sales figures is over valuing social media subscribers. Twitter followers, facebook likes, page views, ad clicks etc are all very easily manipulated.

Leo Jia adds: 

Here is my two cents regarding growth vs non-growth.

The present value of a business without growth is much lower than that of a similar sized growing business. So one obvious question to any business owner is whether he would like to receive more money or not if the business is to be sold today. The answer is obvious. But one may counter: since he is making good profits on the business, why would he sell it today? Well, isn't that the beauty of modern finance produced through Wall Street? To sell it today, the entrepreneur can collect today all his future earnings projected based on the best periods of his business performance, and with that reward, he can move on with his life, rather than be tied up by the business which may turn sourer later and cause him to suffer.

Why would Wall Street care more about growing businesses? Those people who bought out the entrepreneur have an even higher reward outlook than his and would seek higher profit on the investment.

Art Cooper writes: 

An example of this currently in the news is Hormel Foods, described in the article "Spam Sales Boost Hormel's Profit" on p B4 of today's WSJ.

The article notes that Hormel's Q3 earnings rose 13%, led by strong growth in products such as Spam and Mexican salsas, continuing a trend of higher YoY earnings. "Even so, rising commodity costs and shoppers' resistance to higher prices are pressuring its profit margins, which could affect its results in future quarters."

HRL's price has been roughly flat for a year.



I have found great value in the website, I signed up with them and get a short but very thought provoking excerpt from a book every morning in my inbox.

Since I signed up with them I've ended up reading over 10 books I wouldn't have normally read, just because of the excerpts.The website describes themselves by saying: "Delanceyplace is very simply a brief daily email with an excerpt or quote we view as interesting or noteworthy, offered with commentary to provide context. There is no theme, except that most excerpts will come from a non-fiction work, primarily historical in focus, and will occasionally be controversial. Finally, we hope that the selections will resonate beyond the subject of the book from which they were excerpted."

I recommend this site and find the 45 seconds it takes to read the excerpt to be a very pleasant treat.



 My second day in Barcelona was spent in the neighborhoods. It was hot, so taking frequent breaks at cafes provided lots of opportunities to speak with the locals. (It's amazing what a heat index of 95+ will do to one's thirst.)

Some observations:

The German Foreign Ministry and the German Ambassador to Spain have lots of work to do with the Spanish. I heard many times about how the Germans are "meddling" in Spanish affairs, that the Germans lack compassion, that the Germans needed to be bailed out recently and no one behaved towards them the way that the Germans are now treating Spain. Their words.

2. Roger Arnold asked me to inquire about the state of real estate in Barcelona. I was told by lots of people that now is a great time to buy an apartment or a house if one can get a mortgage. And there's the rub–that seems to be a challenging activity to successfully complete. After hearing about how hard it is to sell residential properties, I started counting "For rent" signs (it's the only Spanish I've learned so far this trip). In two blocks I counted eight signs. Many for for condos, as I didn't see any free-standing houses (I'm sure they are out there, just not easy to get to from the tourist perspective). My take from this is that real estate is hurting. How badly is it hurting? I don't think my stay here is going to help much, though a few folks suggested that the spiral down in prices isn't showing any signs of stopping. And then there were the comments that the Germans are making things hard in Spain so that housing prices fall and the Germans can buy it all on the cheap. Their words. Maybe it's the beer or wine talking.

There seem to be a lot of people unemployed, especially among those under 30 years. That's just an impression, though. Two early twenty-somethings told me about their friends; one suggested that a quarter of his friends are out of work, the other was more like one in five. Not good numbers. Of course, these are hardly scientific samples.

4. Commercial real estate: As I walked closer to downtown, the number of shuttered businesses increased. I don't know though that this observation means anything, insofar as there may simply be an increase in the density of such businesses as one gets closer to downtown.

Consumer discretionary income: I don't know what's happened in the way of consumer discretionary income in Spain. What I observe from conversations with some of the folks in the restaurants and tapas bars in the Born section of town is that whereas a few years ago, the restaurants in this section (which usually cater to the locals rather than tourists) were full to overflowing during the week. Now, there's always at least one empty table, and for many of the restaurants, more than that–presumably suggestive of softness in their business. "People don't have money to spend on these things" I was told by two maitre d's. On the upside, the restaurants are still full on Friday and Saturday nights.

All in all, thus far, Barcelona seems to be having its challenges economically. No one provided much sense of any impending change in its fortunes. It's hard not to wonder if Spain is now in the summer, 2008 phase of the US financial implosion.



 As an island resident we have to worry about hurricanes this time of year. Lots of interesting things about hurricanes but one of the biggest is they are pretty unpredictable looking out a few days/weeks. A look at any "spaghetti" chart will show that the current storm, Isaac, might end up in New Orleans or it might end up in Boston. A pretty wide range. Generally it is best to have some supplies on hand when living in danger zones but to avoid closing the shutters and making amends with the almighty until the storm is right on top of you.

That said, all models seem to predict fairly well in the short term. Has anyone looked into spaghetti models in predicting market movements? Thus far my simple google searches haven't turned up much in the way of the math behind the models. I know some weather predictions involve the Lorenz indicator and elements of chaos theory so perhaps that is a good starting point.

Gibbons Burke comments: 

Interesting fact: Isaac in Hebrew means "he laughs" or "he will laugh". Sarah, his mother, laughed when she overheard the prophesy of the three visitors telling Abraham she would bear a child within the year, past the age of childbearing.

Russ Sears writes: 

I believe you are looking for Lorenz Equations.

While not my expertise, I think this is best visualized as two circular motions pushing against each other, the pressures, speeds and dynamics of eventual interaction makes the path "chosen" impossible to predict exactly. Often they will "spin" in one direction or the other because a very small tipping point gets rolling and will be opportunistically reinforced.

Others like to illustrate it with the "Lorenzo Water Wheel".

Here is a video illustrating it.

Perhaps the water wheel is a better analogy to the markets, The bulls are pouring money in, the bears are leaking it out and the financial/economy weighs the inertia and gravity to the spin.



"When you look at the distribution of annula S&P returns, 2008 is not an outlier, in fact it is not even the worst but the second worst return". Harry Markowitz

I watched this [interview with Harry Markowitz (caution: 74MB file)], and thought, you gotta be kidding!

It's the perfect manifestation of really smart guys who are just totally oblivious to the trenches, even though he (Markowitz) has been in the trenches for many years. When he speaks of the fact in this little 3 minute video that 2008 was only 2 1/2 standard deviations outlying, that we really haven't seen an annual outlier of 3 standard deviations in US market history, I'm left stupified.

I remember being on the phone in November of 2008, late at night with Mikey, who was consoling me, urging me to go meet the monster margin call I had to meet in about 9 hours time. In those days (since I was long equities out both a** and piehole) I was living with an airline barfbag by my cellphone.

"We've never seen 3 standard deviations in annual returns…."

Right……"Can I have till next year to meet that margin call? After all…."

Yeah, well, long story made short(er than Ted K's manifesto) I did manage to scrounge up the money, run around bittercoldBostonInABaseBallJacketInNovember, meet the call, and eventually get out of everything at a profit (thanks Mikey!). But annualized returns? What are we here, in the private placement world??? Weekly data is as far out as we can usually afford to go down here on the shop floor, usually, it's daily and hourly and minute-by-minute, though I try to look away as much as I can.

But that annualized returns thing just cracked me up, and I had to share, especially in the anecdote that 2008 has now faded off into.



Considering that the 8/1 open market meeting issued a very disappointing statement about the prospects for easing, and the market went down about 2 % from the announcement to other next day, you would think that there could have been a more balanced release that stated how many members were waiting in the wings to be accommodative at the sign of the first easing. Let us hope that the sensibilities of any flexions were not discommoded by this decoy as much as the public.

Steve Ellison writes:

It seems most of the investing public was driven out by the 2000-2002 dot com crash, and the survivors were decimated in 2008. In this respect, the upside down man's pronouncements seem like piling on. I know he wants people to buy bonds instead of stocks, but he has already triumphed completely in this regard. How could anybody reviewing the past 12 years not conclude that "gentlemen prefer bonds"?



 Once in a while someone asks me how it is that I accomplish so much. (I'm not convinced that I accomplish more than most people, but perhaps my accomplishments are more public.) In large measure I think it's not because of what I do, but because of what I don't do.

Here are some of the things I don't do much of: watch television, closely follow the latest news, hang out on Facebook and other social networking sites, randomly surf the Internet, engage in chitchat with my co-workers, eat out for lunch or dinner, or go shopping. Don't get me wrong, some of these activities are enjoyable and distracting, but I work to avoid them as much as possible.

What I've found is that eliminating these less productive activities frees up a great deal of time for the more productive activities in my life. By avoiding social networking sites and not watching television and not going out to dinner in the evenings, I have time to work on my music, read real literature, do some stretches, and write (I aim to do each of those things daily). By not going out to lunch or chatting with my colleagues or checking the news throughout the day, I have time to complete more high-value tasks at the office. And so on.

Recently on a finance discussion list I frequent, a participant raised a similar point about investing: don't spend a lot of time trying to find a portfolio of perfect companies, but instead formulate a list of strong possibilities and then eliminate the losers (or at least the companies that are less likely to succeed over the long term).

We all have a "portfolio" of activities we could engage in, but, just as in investing, time and money are preciously limited. The approach most people seem to take is to add more and more items to their to-do list. By contrast, I'm thinking that it's more effective to add things to my to-don't list; as a natural byproduct, I will focus more on what really matters and less on what's nonessential.



 Any opinions on Sears Stock SHLD?

Barrons had a positive article on it last week but the shorts keep shorting it.

Down 2 Yesterday.

Somehow I find it difficult not to be in Ed Lampert's corner.

Anatoly Veltman writes: 

Maybe this is off-topic re: stock purchase, but I'll throw in an Alan-esque: in advance of seasonal clothing change-overs this year, they marked down 85-90%, even off fashionable labels.

Jeff Watson opines: 

A common mistake retailers do is to mark things down, give up gross profit, all in the order of increasing the sales numbers. Giving up gross is a bad, bad thing. In retail, if something is not sold at full price, it is considered to be shrink. Shrink is very bad in the retail game. I went to Sears this week and bought 3 pairs of Levis, for $16 each and 3 pairs of nice Dockers for $19 each. I saw Sears selling name brand surf trunks that I know cost them $16 wholesale, selling for $4.99. Sears is giving clothes away. I wish their sales would extend to the Craftsman line, their electronics, or their appliance line, which was only 25% off the big ticket items.

An anonymous contributor adds:

A common mistake is to think that Eddie is about retail, Eddie is about cashflow liquidation and control stock. Is Berkshire about Textiles? He has now also filed on the Gap and Avon. Sears was always about the owned commercial real estate and durable goods, but the internet and housing bust crimped it. He also has filed on Autozone and Autonation (Sears automotive?).

his MO has been to buy 50% of the float of a stock that he could LBO completely, but then to drive cashflow into stock repurchases while cutting CapEx. My personal opinion is he is planning to eventually put all these pieces together.

The technical issue then becomes the expiration of his 5 year lock-up for investors that Goldman raised the money for, therefore I would not be surprised by a large 4th quarter in the stock.

His stocks trade more like a corner or pool operated stock. The reality is they are no longer public stocks they just happen to trade on an exchange–stocks like this used to be called footballs and to understand the trading one must understand the personality.



T here are millions in California looking for jobs, but few want the type of work available.

A couple of years ago NPR's Terry Gross interviewed an apple farmer from Washington facing this problem. Most "Anglos" didn't even want to attempt the work — those who did rarely lasted more than several days. Last year Alabama was in the same position after its Republican governor managed to get through legislation requiring all field laborers to be citizens or holders of green cards. For the past three years Tennessee has not been able to find enough workers to keep its many nurseries thriving.

In every case there are (were) many job seekers. In most cases, though, the Anglo component of that cohort didn't even apply. Much of this may be well known but what is new (at least to me) is that for the first time ever the number of unemployed over 25 with some college or a college degree outnumber those with a high school diploma or less.

If this is an anomaly I suppose it's no big deal. However, if it signals a paradigm shift, then the high cost of education really does deserve some serious study. Two weeks ago the Senate released an 1100 page report outlining the depredations of the for-profit colleges. Despite appeals that the study also incorporate our many non-profits, the Senate majority said "no."

Should this development prove to be a new trend then the current secondary school curricula must also be re-examined. And I would hope that emphasis would go into examining the position and credentialing of the "guidance counselor". Currently the big push is to get as many high school graduates as possible enrolled in college — any college. The secondary school system measures its success by this number…and it is widely circulated. However, I've never been able to get a number of how many of these college bound grads also received a college degree.

If secondary schools and their guidance counselors are aware of a shift then it would behoove them to adjust their curricula and guidance to remain true to John Dewey's Creed:

"Every teacher should realize he is a social servant set apart for the maintenance of the proper social order and the securing of the right social growth. In this way the teacher is always the prophet of the true God and the usherer in of the true kingdom of heaven."



 The SPU futures have gone exactly 26 trading days since 7/12/2012, the last time that they registered a 1 % decline over the preceding 2 days. Such events have occurred relatively infrequently over the last 13 years, indeed just 5 times, with neither bearish nor bullish overtones.

Of course, during that time period the 30 year bonds have gone down about 7 full points, while the SPU futures have gone up 35 points. Multiplying the bonds by 10, that's a 8 percentage point increase in the ratio of stocks to bonds. That reminds the old times of 1987 where the divergence must have hit 50 percentage points. One notes however that of the 35 most similar divergences during the past 12 years, the expectation 10 days out for SPUs was zero. Similarly, zero expectations exist based on this for the bonds with standard deviations of approximately 2 % for both entities over the next 10 days.



 Come to think of it, Mr. Owen's analogy of the killer whales coordinating a great wave to wash a seal to its death was exactly like the desperate bond action of Friday and so many other markets in their final throes in one direction.

Russ Sears writes:

Much ink (or bytes) have been spilled on the checkered past of Bill Gross's market timing on stocks. But one wonders how much these timed stock market jabs are a pilot fish/diversion for the perceived shark attack on bonds. I have not seen a good counting effort on either. 



 Some may remember from 1969 until the early 1980s, the Orioles were the dominant team in the American League (As fans may disagree, but I think the numbers speak for themselves.) The bullpen was solid, the pitching staff top notch. In 1971, the Os pulled the rare feat of having 4 20-game winners. Only the White Sox in 1920 had equaled that feat (and that was with a dead ball). (And with today's coddled arms, I doubt we see anyone ever pitch 300 innings again, never win 30 games again, nor ever have so many 20 game winners on a team again. Coddled arms indeed.)

Earl Weaver was in his prime, the teams were built around pitching and defense (not surprising considering you had Brooks Robinson, Mark Belanger, Paul Blair, Jim Palmer, and Rick Dempsey on the field at different times during that period.). There was the some great clutch hitting, some base stealing (the Os have never been much of a base-stealing team), and some an inspired use of a deep bench. Then Peter Angelos bought the team, and what can you say. It's the anti-Midas touch. The last few years (decades?) have seen the Os inhabit the cellar in the AL East, though it's not for lack of opportunities, perhaps the best example of which was hiring Davey Johnson as manager. Why Angelos fired the man will remain one of those angelic mysteries of Orioles history.

Now it seems Camden Yards is getting more and more crowded, the Oriole bullpen has pulled its weight and then some, and there are some signs of late that the hitting may make a showing this year yet. The Os are solidly over 0.500 for the first time in too many seasons. They're in the race for the wild card spot, and perhaps more significant, they may yet catch the Yanks for the Division lead. In any case, the Birds are on the Wing, and all is right with the world. To quote the immortal Chuck Thompson, "Ain't the beer cold Miss Agnes!" Come to think of it, I'll have some National Boh and some crab cakes for dinner. Watching the game against Detroit, of course.

"Buzz at Camden Yards is for the Orioles Again"



 I'm headed to Barcelona on Tuesday for a week of business meetings. I decided to start using my old US Air FF miles for the trip (with more than a 1.2 million miles and given that I've stopped using USAir back in 2008, this seemed like a good use of them). Imagine my surprise to open my email this morning and find US Air's wonderful missive offering me citrus-marinated chicken skewers or vegetarian Portobello mushroom tortellini for the lovely price of $20. (I assume since this will happen somewhere over the Atlantic, there's no tax.)

And the airlines wonder why people complain about air travel?

It would be good if someone took a look at how much the airlines are actually making off of their baggage fees, too. Yes, it's revenue, but the consequence is that everyone who can brings their luggage as walk-ons. While it took maybe 15 minutes to board a plane in the 1990s, these days it's at least 30 minutes and often longer. That's time lost from being in the air, which is after all what the airlines are in business for in the first place. I don't know anymore which I dislike more–air travel or airline stocks.



 FB premiered in Value Line recently, and here are the round numbers, as I understand them:

Market cap: $40 billion

"Working Capital": $12 billion

I think the "working capital" is mostly cash, but I'm not sure. It went from $3 billion last year to $12 billion this year, so it sounds like cash from the IPO.

Enterprise value around $30 billion.

They had revenues of $5 billion and "operating margins" of about 30%, so it sounds like they would have earned $1.5 billion pre-tax, but instead they earned roughly zero because they had >$1 billion in "variable compensation costs" for their 3,000 employees. I.e. it sounds like employees got bonuses of >$300K, on average. I'm not sure why "variable compensation costs" are not consider a cost of "operating" when calculating "operating margin".

Value Line says their revenues will be about $13 billion by 2015-2017, and the operating margin will be 50%. That sounds like there will be $6 billion of profits pre-tax on this enterprise value of $30 billion, but again, will the "variable compensation costs" chew that up?



 This must be one of the most bizarre revenue schemes linking a tax to a beneficiary group. Not only does the passage of the tax demonstrate that skillful politicians know sin-taxes are the path of least resistance to raise revenue, they also know how to capitalise on the scientific illiteracy of their colleagues and constituency.

Quinn Signs Strip Club Tax:

"Strip clubs in Illinois will have to hand over a share of their revenues, starting in 2013, to help fund programs to prevent sexual assault and counsel victims under a law signed by Gov. Pat Quinn on Saturday."



All students of the market should study this chart. Of today's movements in bonds. A classic. After two previous terrible declines to minimorums. Hats off. Very well done, Ms. Market.

Craig Mee adds:

I see the attempted rebound, and quite fast subsequent clean out of these early longs… should I be also considering something else?

Vic replies:

Much ground covered. Many attempts to create consternation and capitulation. 

An anonymous commenter adds: 

If you scroll down to "wildlife in action" and watch this video, is this the same phenomenon?



 The Perseid Meteor Shower occurred this past Saturday. The Earth passed through the tail of a comet. The meteors were slated to shoot from the constellation Perseus which appeared on the low northeast horizon in the evening. Lying in my cot wrapped in a -30 down sleeping bag in subfreezing temperatures at the 12000 foot level of Mauna Kea in Hawaii, the iPad Stargazer app pointed the constellations. It's always fun to learn new constellations. Cygnus is above Cassiopaea in the Milky Way which in turn is above Perseus and rise in order as the evening passes. We saw a fair number of meteors, but honestly it was so cold, I couldn't even stick my face out far enough to see much of the sky.

The constellations are patterns the mind makes out of random patterns of stars in the sky, yet for centuries they have been used to help navigate and orient lost travelers, tell time, seasons. It's an effective method.

Since charts of random sequences display patterns, I wonder if charts of markets, some of which are not random, properly analyzed and quantified, could be used for navigation and orientation purposes in the market. For so many the visual chart is more meaningful, more easy to understand and digest than tables, number series or verbal input.

Kim Zussman comments: 

Allow me to share some of my thoughts on star gazing.

A telescope is not useful for observing a meteor shower. You need dark skies (mountains or deserts away from city lights), a lawn chair or sleeping bag, a meteor shower, and your eyes.

The radiant constellation (Perseus, Leo, etc) isn't important as it is just the general center from which meteor streaks radiate.

Meteor "showers" are often disappointing as the frequency at peak is usually less than one per minute.

If you go to the trouble of traveling to a dark site on a clear night, in between meteors it is great fun to explore the milky way (our galaxy) with binoculars. 7 X 50 is good for this (7 power / 50mm aperture) because it has enough light gathering power to resolve thousands of individual stars with low enough magnification for hand-held mounting (larger binoculars need tripods).

The fun part is realizing how old the light from these stars is, and the likelihood of planets with life out there.



"The set piece" is an elaborate and memorable interlude in a film or book, e.g. a duel, an escape, a death which is visually striking and somewhat apart from the main story. I like the set piece in Post Captain where Aubrey is dressed up as a bear to evade the French or the train scene in Atlas Shrugged where the workers come to make the ride safe or best of all the scene in Reverse of the Medal where Aubrey is sentenced to the stocks and all his shipmates line the street to prevent him from getting pelted. I understand there is a nice set piece in The Dark Knight where the plane is hijacked at the opening but I missed it amidst the 3 hours of heroism and villainy. What are your favorite set pieces? The set pieces in Count of Monte Cristo are frequently used as great ones.

It's somewhat similar to the Pitching in the Pinch of Christy Mathewson where the crowd is on its feet and the pitcher bears down and it's sudden death at a count of 3 and 2 with the bases loaded. Okay, the market has set pieces. It's a conflict between bear and bulls often with wide gyrations that yes, stand out on a chart, and perhaps have great volatility and volume. Perhaps a change from limit up to limit down like used to happen in silver in a second or the announcement that catches everyone the wrong way and leads to the running of stops, even both sides.

It could be the battle royale that leads to a turning point. What is your favorite set piece in the market and how can it be quantified. And yes, are there any predictive aspects to it?

T.K Marks writes: 

"Perhaps a change from limit up to limit down like used to happen in silver in a second"

Once upon a time I was a fledgling silver clerk during just such an occurrence. Was buried 'neath an avalanche of order tickets, limit up bids in the same pile as limit down offers. They met in the middle and both buyers and sellers thought it was Christmas. They soon made me a trader because I somehow kept my cool that day.

I think that fortune oftentimes smiles on those that find calm in chaos.



 Until this week's news vacuum for the Olympics and Euro Vacations, in the last two months SNP 500 cash market has had a wave like behavior. Of course, the SNP futures trade all night in low liquidity and are influenced by overseas currencies and markets. Futures prices are more volatile and spotty than the cash daily, open hi low close levels.

If I was a conspiracy nut, I would think insiders know the news and influence the news hopper timing. It's easy to see how the HFT crowd with quick news reading machines jump to bid or offer the markets for an hour. At first I thought how easy it would be to have a buddy writing the news headlines, or drop a fed/ecb easy money story at my time and trade the futures by front running HFT, that is front running the shorts covering.

After looking at the cash charts, Oh my gauche, talk about making some real money. The billions that could be put to work in the cash markets on the big down for 4 days in a row, a small day in between, then rip it back up over a few days. It rallied just enough over the last rally highs, say 7-11 points or a whole percent this time to unload a massive inventory. (Especially easy as everyone remembers what happened last year at this time. We had the declines, but this time we get the fed/ecb news hopper rallies.)

It's not so much the Surfer Sogi's waves never happened before in markets past. It's more about the number of days and the way we rally, or magnitudes/time. The 4-5 downs in a row and the 2-3 fast ups, then straight back down, notice the magnitude! In SNP futures, I didn't catch on. Yet the cash markets look like some electronic or electromagnetic type wave. Could that be a computer model? Humans do not seem to be so passive and so aggressive so many times in a row. After all we seem to learn from our mistakes, right?

Okay, I have no idea what I am talking about in electromagnetic radiation waves or computer models for trading. Yet I see 'near field' with hft and news. Then, no action news black outs is the far fields, the wave patterns this week.

Not only were the magnitudes of the declines and rallies similar, the durations were similar to this wave pattern . vs 2 month SNP cash charts.

Give me 20 minutes and I'll come up with anything more fun than "markets rally on Fed Easing hopes", "markets decline because there might be a problem with the Euro banks", over, and over again.



 A friend recently sent me this interesting article by Steven Pressfield on the most important writing lesson he ever learned .

I agree with the three answers Pressfield supplies to get your copy read. However, I disagree with much of the rest. First, "Advertising lies…it's evil, it's phony…" Fact is you can trust advertising copy a lot further than the Editorial content that may run immediately adjacent to it.

Misrepresentation in an ad can actually wind up getting you prosecuted. fined or sentenced to public service (rarely is anyone tossed in the clink). In any event, the result is usually a career killer. Editorial writers (columnists and editorial page contributors), on the other hand, under cover of the "opinion piece" label, can play with facts a lot more loosely. If they are very adept at it, they'll find themselves syndicated; if they're geniuses at it, they'll make it to the electronic circuit as guest contributors (with modest to healthy stipends). If they're really, really good, they can become press secretary to the President.

Pressfield is not totally correct that "nobody" wants to read your sh*t. A great majority read sh*t because they HAVE to. It might be just to find who has the cheapest can of coffee, who has the best deal on a new mattress, a used car, or who is featuring the cheapest movies. The great myth (at least in the newspaper business) was the editorialist's contention that the paper was chosen for the singular purpose of reading their collective thoughts.

The greatest presentation I ever attended featured our computer geeks demonstrating for the editorial staff what the product would look like when transferred to an electronic format. One amongst them, and by means a rookie, asked why advertising was included in the electronic version much as it would be in the paper itself. Couldn't it just be pushed to the back, grouped together, and left for the unwashed to search out much as they did with our Classified ads?

The lead presenter was a very young new employee who had been brought on for his computer expertise. Unaware of the deference that editorial was used to receiving, he proceeded to reveal some research on the primary reason (what feature did they turn to first) our subscribers bought the paper. First bomb: on any given day, anywhere from 25-45% of our readers bought the paper for the ads (Thursday, food advertising day, had the highest percentage). Bomb two, 8-10% of our very tony readership turned first to Ann Landers, another 8% to the comics, 7% for the crossword puzzle, 5% to the horoscope, another 5% to the bridge column. Among editorial's heavyweights only Mike Royko and Siskel/Ebert made a measurable impression.

After reading Pressfield's biography, I'm a little surprised at his perspective. He and I are the same age and entered the business about the same time. We were fortunate in having what may well wind up being the last generations of engaged readers responding to or rejecting our selling messages. Selling to today's "Tweet Generation" though, must be a real challenge and I'm glad I'm out.



 You may have heard of Phantom Limb syndrome before. This passage from an article started me thinking about what things are present in the market that
we feel but don't in fact see, adding to the chance of our ache and
ruin. Or alternately, what is present in markets that helps to guide us,
no matter our deficiencies?

"The woman was born with only three fingers on her right hand and had the hand amputated after a car accident when she was aged 18. She later began to feel that her missing limb was still present and developed a "phantom" hand.

"But here's the interesting thing," Paul McGeoch at the University of California, San Diego, told New Scientist. "Her phantom hand didn't have three digits, it had five."

However RN's phantom thumb and index finger were less than half the usual length and were painful.

Dr McGeoch and Professor V.S Ramachandran used a mirror box which reflected the woman's left hand to make it look like she had a pair of limbs.

After two weeks of training RN was able to extend the short fingers on her phantom limb, which relieved her pain.

McGeoch said the study indicates that there is a hardwired representation in the brain of what the body should look like, regardless of how it actually appears in real life. It showed more about the balance between the external and innate representations of a limb, he said."



 9. Cold Freight

Mountains loom to the icy left, snowy foothills to the right, and dead ahead an appointment with cold doom. If the conductor doesn´t let me board the caboose this may be my ´last southbound´.

´It ain't the cushions!´ he shouts thrusting a fist off the caboose back porch that instantly covers with snowflakes. ´Ye should have thought twice before boarding.´ He shakes it, yanks a timepiece from his heart watch fob, and adds more kindly, ´Get back on your car or you´ll miss the train.´

I did think three times back in Denver before boarding, you fool. My sleeping bag was stolen from under a pile of ties. I scavenged a black garbage bag, hunkered under a RR bridge, and looked two directions. The downtown lights beckoned, while the rails sliding out and up the Rockies forbade. When the first snow flies each year I inch south with the other hobo snowbirds, but unless the first storm hits Colorado tonight it should be safe enough to catch to Pueblo, warm in the morning sunshine, closer mile by mile to the sun, and pull a chair up in Dallas to Thanksgiving supper with my folks.

Yonder comes a freight, pausing in mid-train at my feet for a switchman to throw a switch frog, and I’m stuck on the spot to make a decision. "Frisking a drag", or choosing a car by walking through the train before it pulls away has a pitch of excitement as it may jump at any moment. This one does. I pat the garbage bag lovingly in my Pendleton pocket and grab iron. Three locomotives huff and the rung jerks one speculating hobo sixty cars back clinging the ladder and then ducking under the belly of a semi-van on a flatcar to the rubber tires for a wind shield.

Denver´s a memory, and an airstream whistles around the fat tires per Bernoulli´s principal. It´s a fast freeze in a 40mph rail gale on the Beaufort scale that strikes the nervous system with shivering and fuzzy thoughts. I was born in Buffalo, grew up in Idaho and northern Michigan, and know the cold. The firm upper lip icicles will melt if I exercise. So I stoop walk under the four-foot belly of the piggyback van to the rear and slap jumping jacks and run in place until the marrows warm, and then sit and lean against the tires unbuttoning the Pendleton pocket. Slit arm and neck holes in the garbage bag make a poor man´s windbreaker, but it is weather weakened, rips into tatters and blows overboard.

If the first snowstorm of the season hits the mountains tonight, I´ll deal with it. Called to bluff, the air thickens with cold and in two hours the initial big flakes float in and swirl around the tires. Small patches of snow begin to quilt the right-of-way and a blizzard engulfs the mechanical snake winding through Colorado.

I grow drowsy but to sleep is to die. The train stops perhaps to turn on the locomotive sanders to add friction to the track. I think of the caboose, rise stiffly, work down the ladder with popsicle fingers, and stagger the line of cars back to the caboose for a devil of a conversation, am refused entry, and lurch back to the flatcar just before the train pulls away.

In an indeterminate time the freight goes ´in the hole´ siding for an Amtrak of passengers with pleasantly warm brains whooshing by and rocking the stationary flatcar. I elbow crawl to the lip of the flatcar as the Amtrak clears and with nonworking hands and legs roll and drop five feet onto the ballast like a sack of potatoes. The freight jerks forward with three-foot steel wheels rolling inches from my neck, the lighted square of the conductor´s window, and the red taillight wobbles and becomes a pinpoint in the night. ´You devil! ´ I whisper into a mouthful of cinders, and the trundle reflects about the valley for five minutes.

Now there is total silence. I look up and about at a pastoral scene like the glass snow spheres shaken upside down and turned upright. A six-inch white carpet undulates along the ground onto pine boughs and up mountainsides to the stars. I kick the rail, feel nothing, and scrape with forearms along the cinders for ten yards, pause, another twenty yards, rest, and fifty more until blood surges the frozen limbs. Then a hands and knees crawl for ten minutes to bring circulation to the fingers, toes and nose. I snort fresh air, use a RR switch to stand upright, and teeter from the right-of-way toward a mountain pass.

Hours later a white manger of hay crystallizes on a snowy meadow. I´m a little surprised to awaken the next morning with straw in the mouth and sunshine on my face, and walk out the Rockies laughing at the conductor.



"US Agencies Help Afghanistan Exploit Mineral Wealth":

We have identified somewhere between 10 and 12 world-class copper, gold, iron ore and rare earth deposits that no one knew were there," Jack Medlin, regional specialist for the Asia-Pacific region in the USGS international programs office, told the audience. "In our 2007 publication, we gave an estimate of undiscovered mineral resources for the country, and … you can add up the tonnages of copper, lead, gold, iron, silver and so forth. … But this country has many more world-class mineral deposits than most countries in the world, if not more than any country," he said. That doesn't mean it will be easy to turn these resources into national income, Medlin told American Forces Press Service.



What of the threat stringing out past the point of threat into a sleep? Market fatigue waiting for the euro mess to resolve, Iran to be bombed, Syria to fall, nat gas to get a pulse, gold to restart, Japan to rise again, GE to come, etc.

Steve Ellison writes: 

Natural gas, 6/15/2012: 2.467 (July contract)

2.196 (adjusted for rolls to August and September)

Natural gas now: 2.752 (September contract)

That's a 23% increase.



An unusual consilience of 6 consecutive 20 days maxs in S&P futures has occurred in the last days.

It is interesting to put some stats on table for frequencies of how often such events have occurred in last 17 years.

Number of consecutive 20 day extremes                                          

           min                          max                                          

1         204                     313                                          

2          95                     165                                          

3          37                      88                                          

4          17                       50                                         

5           9                      17                                          

6           5                         9                                        

7          0                         4                                          

8          0                         2                                           

9                                    1                                          

10                                   1                                         

11                                   0                                         

In case my formatting didn't come across on your screens, the number of consecutive 20 day minima starting from 1 and going to 8 was 203, 95, 37, 17, 9, 5, 0 , 0

The number of consecutive 20 day maxima starting from 1 and going to 11 was 313,165, 88, 50, 17, 9, 4, 2, 1, 1, 0.

It is interesting to note the falloffs in consecutive maxs from 4 to 5 and the fall offs in consecutive minima from 2 to 3.

Steve Ellison writes: 

If markets were efficient, one would expect a 50% probability that a run of n consecutive highs/lows would become a run of n+1. In this dataset, of 1017 runs of n, 500 (49.2%) became runs of n+1. That doesn't seem far off 50%, but p=.31 by the binomial distribution.

There was an upward bias to the S&P 500 in the past 17 years, so not surprisingly the results are more extreme when split into highs and lows. Only 163 of 367 runs of n consecutive lows became runs of n+1, an apparent p of .02, if one neglects to detrend the data. 337 of 650 runs of n consecutive highs became runs of n+1.



 Many innovations changed the world and sometimes the person who first had the new technology garnered great power and wealth. In ancient Japan, a man with a sharp and strong sword ruled all those around him and was for the most part invincible. The first group with the stirrup who could shoot an arrow or wield a sword while riding surely began on the road to world conquest. Imagine the first man to invent a tool, fire, or a weapon. Those innovators surely reaped immense wealth and power. In each case those at a disadvantage soon found the weakness in the strategies used by the innovator, or weakness in the technology. Chair's algo's were innovative, and even now new ones seem to keep appearing by the quick footed. Bill Gates' and Paul Allen's programs were innovative and powerful for their day and timing with new computer chips made their strategy a huge success. Google's algo's still seem to rule and their cache of information is scary. As in the old days, the weaknesses are exploited discovered and the advantage weakens over time, or in cycles but not before resulting in great success, wealth and power.

Craig Mee writes: 

James, great insight. I suppose the question then may be are the inflammations of the current system greater than ability of the system to overcome and adapt? Are the internal inflammations getting so large that they may soon take absolute control and lead to death, no matter what the ability of the system to adapt?



 Some recent advances in technology:

"Avatars to Assist Passengers at New York City Airports" :

"They're the best kind of worker. Sarah, Libby and Marie don't take time off. They don't get sick. They always smile at the passengers.Just don't ask them any questions. They can't answer them. Because they're not humans — they're virtual Customer Care Representatives, or, as they're more commonly known, avatars."

And the 3D advertising is becoming quite eye-catching too. Check out this Star Trekish dematerialization.

And finally, who will need to fly cross country to meetings? Just send your avatar over the net at a fraction of the cost:

"Billionaires: Russian Mogul Wants to Upload Your Brains Into Immortality":

"Earlier this year, a Russian media mogul named Dmitry Itskov formally announced his intention to disembody our conscious minds and upload them to a hologram–an avatar–by 2045. In other words he outlined a plan to achieve immortality, removing the human mind from the physical constraints presented by the biological human body. He was serious. And now, in a letter to the members of the Forbes World’s Billionaire’s List, he’s offering up that immortality to the world’s 1,266 richest people."

And lastly, here is indeed a technological leap beyond Duane Hanson's "lifelike" figures.



 Scientists find that success breeds success in sports:

"In the 1980s, psychologists showed that the hot hand idea in basketball was based on the misperception of random sequences. Now a statistical study of cricket scores suggests that it may have been premature to abandon the idea that success breeds success in sport"

"The 'hot hand' idea in sport is the belief that players who have had success in the past are more likely to be successful in the future. The most famous example is in basketball where many fans believe that a player is more likely to make a shot if he or she has successfully made the last 2 or 3 shots. In other words, the player has a 'hot hand'.

Back in the 1980s, three cognitive psychologists decided to take a closer look at this idea. Their studies showed that basketball fans indeed believed in the hot hand idea in shot sequences. They then examined the actual shot success rate of specific players to see if there was any truth in the idea.

The results were a surprise, at least for basketball fans. While some players are certainly better shooters than other players, the psychologists found no evidence of a hot hand phenomenon. The chances of success on the next shot are not correlated with the success of the last shot. In other words the hot hand idea is a fallacy.

The psychologists attributed the effect to a general misunderstanding of random sequences: long sequences of successful (and unsuccessful) shots naturally occur at random. They just look as if the player has a hot hand.

(A similar effect occurs in coin tossing experiments when people think a tail is more likely to occur after a long sequence of heads. This is known as the gambler's fallacy.)

In 1985, they published their results in a paper called "The Hot Hand in Basketball: On the Misperception of Random Sequences" and since then hot hand effect has been generally considered a fallacy.

But as a sports fan, it's hard to let go of the idea that success breeds success. Indeed, there has been huge debate since then over whether hot hand effects exist or not.

Today, researchers reveal that the hot hand effect is alive and well in the game of cricket.

The evidence comes from the work of Haroldo Ribeiro at the Universidade Estadual de Maringa in that well known cricket-loving country, Brazil, and a couple of pals.

These guys have examined the rate of scoring in three types of international cricket match played between 2002 and 2011. The three types are T20, which lasts for about 3 hours, one day games which last for about 8 hours and Test cricket, which lasts for five days.

The hot hand phenomenon is a type of memory effect since future performance is determined by events in the past. Because of this, there are well-established statistical techniques for revealing its presence.

Ribeiro and co duly put the data through its paces, examining not only the evolution of the scores over time but their variance too. They say they can clearly see long range memory effects at work. "This result shows that there is long-range memory in the score evolution… positive values are followed by positive values and negative values are followed by negative values much more frequently than by chance," they say.

So if a cricket team starts off scoring well it is more likely to score strongly later in its innings. Conversely, if a team starts badly, it is more likely to continue this poor run.

Interestingly, this effect is just as clear in Test cricket over 5 days as it is in T20 cricket over three hours. So the memory effect works over extremely long timescales, compared for example to basketball shooting sequences.

"The long-range persistent behavior in the score evolution not only indicates the existence of this phenomenon in cricket, but also suggests that this phenomenon can act over a very long temporal scale," say Ribeiro and co.

That's an interesting result. Cricket is a hugely psychological game in which confidence plays a major role. If confidence is contagious, it makes sense that early success can lead to success in the future.

Ribeiro and co say their methods can be applied to other sports as well so it should be possible to see the statistical fingerprint of a hot hand effect in other areas too.

The next question is whether this will effect sports strategy in future and in what way. Suggestions in the comments section below.



 I have found a worthy complement to the O'Brien series: Dumas' The Last Cavalier

In 1997 someone had gone through an old French newspaper and found a serialization of Dumas's last work, which had never been published as a book because it was unfinished. Finally it was published in 2005. I happened to buy a copy then, but have only just gotten around to reading it.

I have found it absolutely fantastic. For those who like historical novels, it provides great coverage of the Napoleonic era, the period after the revolution. If you are (as many on the list) a fan of the Patrick O'Brien series about Jack Aubrey, you will find this book gives you the French side of many of the events. One of Aubrey's counterparts would have been Robert Surcouf, so-called King of the [French] Corsairs. Of course Aubrey was fictional and Surcouf real. Dumas' tales of Surcouf are just as good as O'Brien's tales of Aubrey. The protagonist in Cavalier is mentored by Surcouf. Additionally there is an excellent play-by-play account of the Battle of Trafalgar and Nelson's death.

Dumas has written so much, that there are bound to be repeated scenes. An obvious one is that in which an engaged couple signs the marriage contract. That scene in Count is repeated in Cavalier including where the groom disappears immediately before signing, although the respective grooms depart for different reasons. The Tuileries Palace discussions of Louis XVIII and his staff in Count are repeated with Napoleon and his staff in Cavalier, although chronologically Cavalier precedes Count by at least a decade.

Dumas seems to want to please everyone, and refrains from taking sides, which probably accounts for his publishing success, as both Republicans and Royalists could find something to cheer about. He also provides entertainment for his female audience - lots of social gatherings.

This is a long book. My copy was 700+ pages; the action spanning six years with additional prior history.

The first 300+ pages deal with politics and troubles of a police state, somewhat on edge because of an uprising in Brittany. The parallels to the current political scene are startling. Supporters of Napoleon attributed everything good to him, while the Royalists blamed everything bad on him. One hopes we do not undergo a similar war of extermination. Finally our protagonist gets his freedom and goes on one swashbuckling episode after another, much like the Musketeers.

Dumas meant for it to cover perhaps another eight years if you consider the 14 years from the signing of the marriage contract mentioned by the soothsayer. And I truly wished it had. It's one of those books you hate to have end.

Further editing to put it into a book by Dumas would have made it even better. Still, some of ways he conveys information are extremely well done. He spoke of Surcouf (Jack Aubrey's counterpart) as a man whose one good fairy not invited to his baptism was Patience. And he chastises young men for leaving their health in brothels and their purses in taverns. Another: "While Nature may have given him a lot of excellent qualities, it had refused him like qualities of the mind."

As the Chair has said, some of the best reading is over a hundred years old.



 Cold reading has much in common with market charlatans:

"There seem to be three common factors in these kinds of readings. One factor involves fishing for details. The psychic says something at once vague and suggestive, e.g., "I'm getting a strong feeling about January here." If the subject responds, positively or negatively, the psychic's next move is to play off the response. E.g., if the subject says, "I was born in January" or my mother died in January" then the psychic says something like "Yes, I can see that," anything to reinforce the idea that the psychic was more precise that he or she really was. If the subject responds negatively, e.g., "I can't think of anything particularly special about January," the psychic might reply, "Yes, I see that you've suppressed a memory about it. You don't want to be reminded of it. Something painful in January. Yes, I feel it. It's in the lower back [fishing]…oh, now it's in the heart [fishing]…umm, there seems to be a sharp pain in the head [fishing]…or the neck [fishing]." If the subject gives no response, the psychic can leave the area, having firmly implanted in everybody's mind that the psychic really did 'see' something but the subject's suppression of the event hinders both the psychic and the subject from realizing the specifics of it. If the subject gives a positive response to any of the fishing expeditions, the psychic follows up with more of "I see that very clearly, now. Yes, the feeling in the heart is getting stronger."

Jeff Watson writes:

Here's a great how-to" book on cold reading.

Bill Egan writes:

A complementary resource I recommend is "The Definitive Book of Body Language" by Allan and Barbara Pease. Always watch peoples' body language and compare it to their words, and watch how both change over time. For example, when the fraud thinks he has you, there is often a split second where he will shift his body position and display a chilling facial expression like a fox looking at a chicken. That half-a-second is real important to you.

Jim Sogi writes:

Trial lawyers look for cues in the jury's race, clothes, hair styles, books or magazines, shoes, apparent class, education, prior experiences who they speak with, their background information on their questionnaires to get a read on how they might decide a case. Trial consultants use broader data on how similar groups might react to similar situation. During Voir Dire, a short question and answer period, the lawyer can ask the prospective juror some questions that might shed light on the juror's prejudices that would justify being removed from the panel or dispose the juror against the lawyer's client. Again, all forms of cold reading.

A fun game I like to play while people watching in restaurants, or on the street is to look at people and try to figure out without anything more than watching from a distance, where they are from, what they do, what the relationships are between members of the group, what they might be like. Family groups on vacation are a pretty easy read as well as their internal family dynamic. Old couples are straight forward. Groups of young people tend to send strong signals. Groups of business men, groups of tourists, newlyweds all have characteristic mannerisms. The next level to try discern their relationship, what they are like and get an idea about them from only external signals.



 11. Hand from a Boxcar

Labored puffing outside the boxcar’s open door, the rasp of long, rapid footsteps on ballast. A hobo hangs from the door’s latch and can’t pull himself in, can’t let loose or will be minced by the rolling wheels. I reach down my hand and he grasps it firmly.
Washington is apple country and in season a northbound hobo is likely an apple knocker- picker. I'm on a southbound boxcar and there's a crunch, crunch, outside the moving door. It doesn't make sense and maybe I've gone soft in the head. I just chased and hopped aboard two minutes ago. Listen. A bo sleeps with his boots on and his ear near the track, can roll his bed in a minute, trot alongside his ride, toss in the roll and then raise himself. My rule of thumb after having tripped and fallen dangerously close to 3-foot cookie cutter wheels is to catch a freight on the fly only if I can run as fast as it.

Crunch!!…crunch…crunch!! The steps are further spaced as the train accelerates. A burlap sack sails through the door and bangs the far wall. Suddenly there is a scrape on the wooden floor next to me and a foot disappears out the door. Again a shoed foot enters the door, scuffs the deck and exits. A hobo is trying to catch at 20 mph.

I peek out the door and there hangs a bo on the latch. He's graying, strong and in tattered clothes, no doubt an apple knocker in trouble. The metal latch of a boxcar hangs like a 2-foot stem and bo's in days of old would grab it on steam trains and swing aboard. It required sharp timing and I've never seen the technique utilized on modern faster moving diesels freights.

A pace is reached at which it becomes perilous to let go the latch and face the ballast, and that's the fate of my peer. His strides are fifty feet long, his lungs heaving and his foot thrusts into the door shortening. In seconds he could grease the rail. He doesn't realize my presence and to pop my mug out the door might frighten him, so I make a decision.

From his perspective, a hand descends from the sky. The skin is tanned, fingers willowy and it beckons. I feel a meaty grasp as his takes mine in a death-lock. The train picks up speed.

I've traveled most the gridiron west of the Mississippi, camped the jungles. Been around the world in a boxcar, I tell folks, since that's the estimated rail mileage in some 300 rides. Though I'm just a boxcar tourist out for summer scenery and adventure, it's ironed the body.

Now a man is dangling like a scarecrow from the side of a fast freight, attached only by my hand. He's my size and I pull hard, but it's a tug-of-war as the rail joints click by. Seated, I skid along the floor toward the edge and waiting space. Then my trouser seat meets an oil spot and suddenly I slide at once.

BAM. My foot hits the door frame and braces for the final pull. Tenaciously I lift. He has blue eyes, like mine. With a heave he's in the boxcar and safe.

There are a number of unwritten rules of the steel road. First, don't steal anyone's boots. Second, look after yourself first. Third, if you're okay then give a hand to peers. Fourth, no need to speak of the obvious. Fifth, partings come easily.

The fellow crawls panting to a far corner, dragging the burlap, then sits on it in silence. We jiggle along for miles without a word. The sun sinks and still nothing, as the train passes from Washington to Oregon. Somewhere in California the freight stops and he slides out the door, shaking my hand.

I've never picked an apple, but I've picked a hobo.

12. Out of the Blue

At high noon on a clear summer day a mile above the Arizona desert a single engine Cesena drones, suddenly stalls and goes into a nose dive.
To my left my racquetball partner pilot operates the pedals and levers like a mad drummer as the G-force turns his face into a squirrel. The destination is the gamblers capital Las Vegas for a professional stop but in my heart I don’t think we´ll make the service line.

For the first time in my colorblind life I see external red, a splotch on the white desert floor. Engine out in silence except the rustle of wind over wings, and we plummet. Racquetballs, paper cups, pencils and papers fly in our faces and I am so trained that by sheer force of will the balls could fly into the cups and the pens write our fate.

My buddy´s hands and feet shake on the controls and in the flash of a tremendous exertion the flesh and steel bodies act as one. The plane flips on its back and free falls upside down toward the earth. Now the debris rains from the floor as I duck in the seatbelt to keep from hitting my head on the ceiling.

I recheck the pilot, a dentist, physician and anesthesiologist who appears unconsciousness with eyes popping out the sockets like goggles from the same G´s that pop mine. The plane free falls for twenty seconds, and then suddenly the cough of the engine, it catches, and the controls shift and the plane turns right-side up.

We fly directly forward as if nothing happened except at 1000´ lower.

The pilot glances over at me and utters, ´Everyone should face his death before it happens.´

A few years after the won tournament, the pilot in the same Cesena crashes head first at terminal velocity with propeller churning into the San Francisco bay and the cause remains a mystery to this day.

13. Bone Dry

Given last year´s last record summer daily highs of 120F or greater in the shade that dropped chickens, dogs, the great-great blind grandson of Secretariat, and killed 20% of the humans in Sand Valley, Ca., I made two little moves. Neighbor Fred had fallen out of bed with heatstroke and died of a heart attack in what California paramedics call a ´trailer wedge´ between the bed and close wall, Big Jon evaporated one day into the desert and is rumored to have buried his head unsuccessfully in the sand, and the good Reverend two months after passing to his hereafter frankly drew our noses at four miles distant. So first, I dug a cool ten-foot burrow lined with blankets and a solar panel atop to communicate with the outside world. And second, the following hot August since experiments must be conducted under the most realistic conditions I explore a pedestrian route out of Sand Valley to the nearest whistle stop Palo Verde.
I take off in reverse from Palo Verde one bright morn at 80F with a gallon jug of water in each hand, loaf of raisin bread, compass and penlight. The 30 miles overland route as the vulture flies covers animal trails, sand tracks, arroyos, and bushwhacking the Sonora. A bird mile is 1.5 walking miles in the desert. The water is rationed to the last drop on the ring of hills beneath a pink sunset where I cannot spot the trailer. I take an educated bearing toward the ring center and start downhill. Stars twinkle one-by-one into being and creatures emerge from hole homes to scamper the boulevard arroyos. My rule is that under a full moon you may see western diamondbacks and sidewinders, under a half-moon you miss the sidewinders, and under tonight´s new moon they see you first.

The night grows fascinating. A sidewinder rattles ´Hello´ on raised ‘black pavement’ above the washes where I shine the penlight only. Up and down the washes I climb for hours wishing to urinate to wet a dry tongue that threatens to clog my airway and suffocate. A stone sucked for an hour depletes the last saliva and the mouth dries like a mouse curled up and died. I collapse in oxygen debt with a wrist pulse race to 100 and little twitches take the limbs, before it occurs to me to distill water in the mouth from the air. The ambient air of about 110F is higher with more moisture than the oral cavity at 98.6F, so via a temperature gradient of fitted breathing, every fifteen minutes or so a dollop of thick saliva grows to swallow once, get up and walk for fifteen minutes, and repeat the routine. I don’t want to sleep for fear of a desert crib death.

The moon arcs and drops below the horizon, and it´s starlight reckoning until the North Star falls behind a mountain, and then the penlight batteries fail. The fear of rattlesnakes overcomes a death sleep, so I recline in a wash under an Ironwood and after distilling a swallow of saliva let myself doze. A kit fox sniffs my boot and alerts me, won´t leave for five minutes. Later a four-point buck snorts and stares down into my surprised eyes, pawing the sand. Inspired, I rise on hind legs and wander the dark in a cramped, heated shuffle for water before sunrise or I may die.

One hope centers in a rock cistern of a Louis L´Amour short story ´The Strong Shall Live´. Following an hour march up a rocky slope kit fox, deer, coyote and bird tracks circle a pothole of water from last week´s storm. I slurp a pint on all fours, pollywogs and all, and in thirty minutes feel stronger. I fill a gallon jug and descend drinking a pint every fifteen minutes until the jug empties at sunrise that reveals a familiar outcrop to point the way home. The best adventures often come from bad decisions, and the quicker we can laugh off our own folly the better we will be to face the next.

14. Whiteout

One early March I set the left boot on the Pacific Crest Trail at the Mexican border. This path runs the Sierra Nevadas for 2600 miles through California, Oregon and Washington to touch the Canadian border. The aim to hike border-to-border in one season requires starting in spring and risking snow in the Sierras. Mountain trail miles translate to bird miles at a 6:1 ratio and mid-June finds me tramping the first snowflakes outside Tahoe.

The trail has been fantastic for three months. There was a western diamondback the size of a Louisville Slugger every other day, lightning storm on a peak with a pot for a pillow, lost cowboy aboard a snow mired horse to dig out, many waterless and foodless days, and run-in with a green sheriff with an itchy trigger finger in a crossroad town who was called by a TV citizen who identified me from America´s Most Wanted as a serial killer. He saw me buy and eat Puss ´N Boots Liver and Chicken because I needed a stake, and the Sheriff ran me off with a tip to watch out for big cats, although there were only bears on trail.

I meet one hiker every other day on the PCT staggering under towering backpacks who refuse to believe I´m a through hiker lightly carrying a fanny pack. The custom waist pack is wreathed by four one-quart water bottles with a down sleeping bag slung beneath, tube tent, maps torn from an early guidebook and can opener. The gross weight sans supplies of eight pounds enables me to outdistance the classic mountain strategy of toting a 50lb pack eight mountain miles a day instead of my flying along the trail at 30 miles a day to connect extended supply and water points. My gear and the weather hold out until a June climb up Tahoe into a freak snowstorm blocks the sunset. A pine at ten paces disappears and the trail vanishes under a snow carpet. The horizon dissolves and without reference points for the compass and I am lost.

I know how To Build a Fire from Jack London´s short story, and the lost cowboy advised me of a snowstorm where he curled up like a C note with a hot cup of coffee in a blanket and waited it out. So on stumbling over a fallen tree I roll with it and make a pine bough bed and overhang. However, popsicle fingers fumble matches into the wet kindling, and as the blizzards rages the weight of snow collapses the boughs and awakens me sputtering white. The sole recourse is a prayer position in the snowstorm with sleet melting off the body and freezes into an exclamation point.

At first light I unfold into a world of white and drape the ice crisped sleeping bag over a shoulder, and aim along an easterly flank to face the sun and thread the mountains. For hours no signs protrude the fresh foot of snow, but in late afternoon a distant hum of cars draws me to a road where I hitchhike out to that hot cup of coffee.

A decade later I return to Tahoe to continue the Pacific Crest Trail and now ultra-light packing that I independently invented is the rage with trailside lodge caretakers shunning me as a weekend warrior under a 20lb knapsack, until I tell them through a crooked grin of the whiteout.

15. Mexico Scrap

A lifelong passion for hard times and scrap led me to a sunrise hunt in San Felipe Baja. A Mexican partner and I slalom a banged-up pickup past a hundred scrappers puffing behind wheelbarrows and shopping carts half-empty with knickknacks. A three-mile thick dump ring around San Felipe is picked clean by the penniless men and women except for sifted nails and bolts n fire cinders dug out on warm knees. They look up with ashen faces and would injure or steal to get what we will find.
The jalopy brims with a sunset load of two refrigerators, stove, washer, two auto gas tanks, brass fixtures, lawn chair frames, four 12v batteries, engine parts, nuts, nails and bolts, and a pail of copper wire. It waddles low on the springs through the night sifters fallen on hard times in the big dump ring, and back into town to my partner´s house. He advises me to defend the booty against thieves, waves goodnight, and goes drinking.

The spare trailer sits on an arroyo near the old cemetery where a 1972 cloudburst filled this very arroyo and floated several corpses down Main Street past the window into the ocean. I tumble into an exhausted sleep from the day´s work until… In the window, nose pressed flat, eyes ranging over my modest pad, a black face opens and shuts its mouth. I spring from bed to window, bang the glass and shout, ´Get out of here!´ The lockless trailer door creaks opens and the intruder, showing teeth, barges in rasping ´Hsst!´

I shoulder him, at once wondering at a boldness that would permit a Mexican into an alien American trailer. He either has a knife, or a cohort waiting outside. I grab his wrists to prevent reaching for the pocket, and slam him against a 2×3-foot mirror that swings open on hinges projecting dingy streetlight on his eye-popped face. He looks 25, 5'8", crew cut with black moustache, and muscled.

We struggle until he glances down at my nude body, and smiles at my lack of … shoes! I shove him out the door, and jump into Bermuda shorts. After one shoe, a thump outside and I know he is nabbing the Mag spare tire. Before the second shoe is on he vanishes into the night.

I trail the deep footsteps by penlight along the arroyo road until miraculously a police car pulls aside. ´Americano,´ I yell, ´And a moment ago a thief battled me and stole a wheel.´ ´Where is?´ asks the officer, and I point along the footprints. ´Too dark,´ asserts the officer, and leaves me to sit all night on guard the truckload with a scavenged pitchfork.

The next morning the 1200lb scrap brings a whopping $160, and my little one a few bruises.

16. King Cobra

On a deserted Sira Lanka beach a flute charmer slowly plays his 12´black king cobra out a wicker basket, its tongue flicking until it reaches my sternum. I am fatigued from the long walk in soft sand, and stroke its brow to which it nudges me affectionately like a puppy that I pet repeatedly. So, I was the first to strike and lived to walk the day.

17. Deadly Mickey

There isn´t much to this story, actually. I am slipped a Mickey or food laced with poison in a skid row room at the Los Angeles Rainbow Hotel and minutes after the person leaves descend into an abyss. It proves nothing to detail the pain and awareness. However, I am found by a housekeeper and rushed to an emergency room where a persistent fibrillator jump starts my heart 42 times before it catches and beats on its own. The doctor claims I have been brain dead for four minutes. The recovery alone makes the story warming to bystanders. There is absolute amnesia for one day, unable to remember my parents´ last name. On day two I walk into a room and cannot remember where the door is. For one month I can remember one read sentence only and gaze longingly at a book shelf. I am physically capable, and walk miles daily for three months until adding columns of numbers comes naturally. One year after the Mickey over a self-prescribed course of exercise, healthy food and good water, the recovery is complete and I adventure out again and again.
18. Six Miles of Smoke

´Railroad bulls drag hobos like you out long past lookin´ blue!’ a Grand Junction, Co. brakeman cautions gesturing grandly along the transcontinental rail toward the 6.2 mile Moffat tunnel that pierces the west flank of the Rockies. But I´m green and eager to chew up and spit out challenges, if need be, and climb aboard the only available flatcar ten stock behind six locomotives that rumble like beasts at the bit of a mile long freight.

The jiggling platform I hold down is a piggyback van mounted on a flatcar, leaning against the fat wheel, 330-degree view of life, sunshine smack in the face, thinkin´ how far, how long, and the number of ways to skin a road cat. Suddenly a mountain opens a dark mouth and swallows the piggyback at 25mph. The bore engulfs the tail of a smoke whip and reflects sparks everywhere. I yank a bandana to mask the face, choking.

Mile one into the tunnel: Smoke and noise ricochet along the shaft. Air burns. Dizzy. Mile
two: Flashbacks!- A road partner Iron Horse and I ride a boxcar into St. Louis as a white Bronco with a CB antenna keeps pace with a pistol pointing at my heart and a bull behind it yelling, ´If you have a weapon I will shoot you!´ Mile two: I slip to the rolling platform for cooler breaths but inhale only rank gas, and another memory takes hold- On a Christmas Southern Pacific from California to Texas I reach to catch a moving ladder in a rainstorm outside Yuma. The rung slips and I crash against the grain car, ricochet to the cinders and watch the cookie cutter wheels roll by my nose. Mile four: Beside myself with suffocation, I must remember or pass out. A bull tangle leads to a court date in Salt Lake City. Gizmo Kid, the founder of Linux-Care, and Colorado Casey, a gold speculator, face time in the cross-bar hotel for breaking into an automobile carrier that we didn’t enter. Gizmo, having once caught the Encyclopedia Britannica in his head, eyes the judge with his gray pate, leftover smile and a Freemason ring with a raised gavel. He flashes his honor the secret fraternal sign, and the judge pounds the gavel, ´Dismissed with Prejudice!´. Five miles: I'm a poisoned bug on a mechanical worm. Smoke balls the stomach and limbs twitch until, with the Sixth mile to go, I pass out.

The light at the end of the tunnel hold´s a sharp blast of sweet air in sunlight. I made it!

19. Lions in Camp

The Kenya Serengeti hosts the largest terrestrial mammal migration in the world that is a smorgasbord for the king of beasts. Tonight I am on the menu. The high diversity of animals relates to the diverse habitats that our 8-person safari truck has bumped about for a week ranging from grassy plains where we see hundreds of migrating zebras, thousands of antelope and tens of thousands wildebeests. Dozens of 12´ crocodiles and hulking Cape buffalo battle in shrinking puddles until the last drops. An aardvark parades as big as a Volkswagen and elephant tusks jut two-stories over the truck. Herds of wide-eyed ostriches bob heads as the English ladies break upper brows to the crush and scream of ´I got you bast…!´ in opening the meat cleaver wings of Tsetse flies on their fair skins before the clouds put them to sleep. We run into a crash of four rhinoceros who are as blind as Magoos but with strong noses for French perfume chase the girls and me to musical trees where I gallantly am the last one pushing them up on the hinnies to the lowest limb to hang like fruit. One midnight the Dutch lasses shriek ´Bo!´ on hearing Chomp at the foot of their tent, and I fling open my door to the 5´ wide smile of a grazing hippopotamus. We follow a pride of lions taking down wildebeest in a bloody lunch, and none of the others have the intellect and curiosity of the king of beasts to study our truck windows trying to figure out how to get in. This evening the unfed lions tail the fat tired, high sprung Mercedes Fire truck converted to safari vehicle up a stony hill to an open camp above the Serengeti.
It seems crazy to camp in Wild Kingdom without a shotgun, and yet we clients dutifully set the little pup tents in a neat row, mine a single as the only male. Baboons strut about as if owning the place and I open the outhouse in a malaria fit to vomit and bats flit out as a 160lb spotted Hyena laughs, ´Excuse me!´ before stepping out.

The night creatures are a worry and the malaria more so as I stagger to the tent, half zip the door and fall recumbent on the blanket. Catalepsy sets in with a muscular rigidity, fixity of posture and paralysis while remaining alert. In vet school a pharmacology instructor gave a mouse a cataleptic drug, stood him on hind legs, stuck a cigarette in his mouth and it smoked without moving as I cried.

I hear them padding and sniffing at the tent flat. Lions in Camp! A male likely longer than the 7´ pup tent rubs the canvas and roars like a freight train. Paralyzed, it is the first time in my life to faint.

If parallel universes exist, I fall into one and awaken the next morning when the guide tugs my toe and yells to rise and shine or miss the truck. Then he eyes the waxen hands, feels the fevered brow and shouts, ´Malaria!´ ordering the gaggle to dismantle the tent and heap me on the safari truck floor. It rocks a half-day to a Red Cross on a white house on a green riverbank and the women deposit me in the sole hospital bed before leaving down the track.

The graying nurse declares cerebral malaria, and adds that though out of quinine tomorrow a boat connects to a road with Nairobi bound vehicles. Overnight a leaden headache and dry heaves break blood vessels in my eyes until the following midday I squint into the sun and am piled on the boat deck. A few hours later on docking the near corpse in my clothes is loaded onto the floor of a taxi and rushed to the Nairobi General Hospital where I vaguely recall a Caucasian tropical medicine specialist diagnoses cerebral malaria and holds out a tiny white tablet saying, ´You may take this and probably live, or not and surely die.´ I nod, and after several attempts a nurse forces the pill past vomit and rubs it down my throat.

One of the greatest instant reliefs in medicine is quinine, so the next morning I feel stable, swallow another pill, and in the afternoon feel good, and by evening just want to flee the attendants´ hourly pulse probes, blood pressure cuffs, and pricks in my veins. The nurses and assistants think this is necessary for recovery but the doctors and administration know it is to cover the hospital liabilities.

In the wee hours, unable to rest, I rise and tiptoe past the other patients to the clothes chest, dress, out the room and slither a darkened hall to the cashier at the front door. I don a bright face, introduce myself as a visiting medical philanthropist and hand the sleepy clerk a $100 bill. Turning on a question mark, I escape into a quiet street to a hostel to self-treat with quinine, and after the eight count get up for the next round.

20. Hit and Run

The motorcycle is scarcely warm between my legs approaching the signal, rolls through green, into the intersection and out of the San Diego night an old Caddy accelerates along University Drive trying to make the light. It broadsides the sidecar hack and the attached Honda 450 tumbles over twice while I hover above it having jumped on the toe pegs to avoid the brunt of the 30mph blow. I bounce once on the street in the middle of circulation, see oncoming lights and leap just in time to take a glancing blow from another car that doesn´t stop either.
In a two second window I am the victim of two hit and runs!!

Minutes early I had downed a hot chocolate at 7-11 to brace for the cold night, nodded to two policemen on the way out, heard a dog bark, hopped on the bike and pulled into the intersection.

On hearing brakes squeal the cops rush out and one helps me to my elbows while the other sprints for the patrol car. ´I´m fine,´ I assure him, though I´m not but don’t want the trauma and bill of the Paramedics. He jumps in the police car that lays a patch. ´Justice will be done.´ quips a bearded homeless man and trundles a shopping cart by watching the high speed chase.

Unable to get to my feet on the road shoulder, I roll to a speed limit sign and scratch up the post to stand and think through a daze. The dispatcher has been radioed for about a five minutes response to leave the premise or face a third assault by big hearted bureaucrats. Unable to walk ahead because of the crush of the left leg between cycle and hack, I begin a backward shuffle for one minute to flush the adrenalin along the system, and to appraise myself medically. Possible internal abdominal injury, lungs okay, mild shock with a shallow rapid pulse, and a few abrasions. Now I can walk forward with a gimp and respiratory pain against the right ribs from the glancing blow.

The bike and sidecar have miraculously somersaulted upright, and except for broken windshields, a bent fork and flooded engine that won´t turn over, I can push it. Shaking in pain, I shove the crippled bike to my Hillcrest basement home and feel the better for having walked off murderous cramps. Doubtless the Paramedics and sheriff are surveying the broken glass and blood wondering what became of the ghost biker.

I shudder into unconsciousness on the cellar bed, and unable to get up on the second day the upstairs tenant comes knocking with food. On the third day I walk with the help of a 2×4 crutch to a corner payphone, and skid through an insurance claim despite California no-fault if I obtain a police report. I hang up, dial, and the SDPD voice on the other end intones there is no police report which makes sense because the victim escaped after the drivers. Recalling the helpful policeman’s chest nametag ended in ´…ski´, the voice replies, ´That could be any number of our officers.´ I describe him to no avail, and since there is no record of anything the sympathetic Sergeant loses patience and mumbles hoax warning of a trace on the line. Then I recall a peculiar muffled dog bark and guess it might be a Canine Unit. ´Bingo!´ the detective shouts. ´That´s officer ´Z…ski´ and hold on… he just verified and is writing a tardy police report, and despite not being to apprehend the two hit and runners, Officer Z wishes you well.´ An hour later I pick up the report, receive an insurance check, and no I didn’t get post-traumatic stress on this or any of the other survivals.

I refuse to capitalize it. It is an empty coin by psychologists to keep themselves in work. You walk in the path of death daily, doesn’t matter if you´re a jet pilot or an Avon lady, and if you crash, miscarriage, get robbed, chased by a bull, or hit by a car a couple times, just deal with it and get back on your feet, shake hands and come out fighting.



 The announcement of Paul Ryan's candidacy took place in Norfolk where the U.S.S. Wisconsin is now berthed. The Wisconsin is an Iowa-class– the last and largest type of gunned surface ship.

It is interesting to compare statistics of the Iowa class battleships with the ones for the last two classes of WW II submarines — the Tench and Balao.

The submarines had crews 2.5-3% of the size of the battleships. Their displacements were 4-5% of the battleships.

Overall, the submarine force was 1.6% of the total number of personnel in the U.S. Navy engaged in the Pacific theater. Submarine attacks accounted for the sinking of over 5 million tons of Japanese military and merchant shipping - 54% of the total. This is remarkable given the fact that U.S. torpedoes were close to useless for the first 18 months of the war.



 As Chaos Manor finishes reassembling itself here in North Carolina (2 months after packing up and driving cross country from California with the cat), I find myself thinking about "capitalism". It seems to me the perfect term for what a committee would come up if it were attempting to define political economic liberty. Enterprise used to be defined quite simply by people taking money and hiring people to do things. That still seems the only true definition of an entrepreneur: can he/she write a check and hire/fire people without getting anyone else's approval.

What is remarkable about Sloan's General Motors, Rockefeller's Standard Oil and Morgan's Bank is that the enterprise was stuffed full of entrepreneurs — "lowly" parts managers/depot heads/clerks all had the ability to spend money and to hire and fire people without having to check with the home office. What is even more remarkable is that there is often no one left inside modern organizations who, as an individual, has such political economic liberty. No wonder the most that can expected is a defense of "capitalism"; defending absolute liberty would be an insult to everyone with assigned parking privileges.

David Lilienfeld comments: 

I think you're confusing managers who were empowered to manage (Rockefeller was a master at this) and in so doing, manages risk in the course of producing, as opposed to entrepreneurs, who identify an opportunity and use risk to address that opportunity, and in the process creating something new. If that something new creates wealth, it's a for-profit enterprise (non-profit means untaxed, nothing more), and if it doesn't, it's a charity. In high performing organizations, the two will overlap, the higher performing, the more the overlap.

In Sloan's GM, Rockefeller's SONJ, and Morgan's bank, there was sufficient distance from HQ that if managers were empowered to manage, then the enterprise would come to a halt as orders from HQ were awaited and then received through the mail. With the rise of communication technologies, first the telephone, now cellphones, and the net, HQ thinks nothing of maintaining control. That's true in the corporate world, it's true in the military world as well. It used to be that the individual service chiefs were accountable to their respective secretaries (SecNav, SecArm, etc). After the 1979 aborted hostage rescue, the Congress changed that system to one in which all operational command was vested in the Chairman of the Joint Chiefs and the individual service chiefs ran their respective staffs and were consulted but they did not have an operational role. At least that's my understanding of the changes that were put in place. There have been few CJC who haven't exerted direct control over operations, and if't not infrequent that POSTUS hasn't taken control from the CJC. Not surprisingly, military commanders don't like to be second guessed any more than corporate ones, and after a few years, those commanders stop trying to manage risk.

One of my observations having lived in Silicon Valley is that the thing that differentiates it from other places is that it accepts risk and thrives on it. At least it did. And that was why failure in an enterprise wasn't something that destroyed your career–if you learned from the experience and understood how to avoid a repetition. Unfortunately, since the late 1990s, with the dot-com boom and bust, the VCs in the Valley decided to minimize risk. VCs focus on finding an enterprise that can produce a product within 18 months, 24 months at the latest, and allow them to IPO the company so they can earn their fees. And it's become rare that they've tried doing things that are really innovative, as the internet browser was with Netscape or the development of tPA at Genentech. By the way, this is a big reason why the last major American pharmaceutical companies were founded in the mid-1990s. Since then, the goal has been to sell the company as quickly as possible to some big pharma so the VCs can get their fees. After all, if you get out in 18-24 months, at least in pharmaceuticals, there isn't much risk. The risk is in Phase 3, and there are few start-ups that get that far these days. For more than decade, there isn't a pharmaceutical company I can think of which has revenues north of $500 million a year which didn't exist prior to 2000. You might argue that that's because of the FDA, but the FDA hasn't really changed that much. (The issue isn't just with the VCs being unwilling to embrace risk–entrepreneurial style–as those running the R&D groups at most of the major pharmas are similarly risk averse.)

I don't think it's a function of what capitalism is as much as the increasing tendency of HQ to micromanage. Unfortunately, that mentality is creeping at an alarming rate into Silicon Valley. A decade plus ago, it was very different than it is now.



 Flames lick the window of a skid road room in San Francisco as I try to save the date in a bucket brigade from the shower and relate as rapidly as the hands fly how the curtain rose over my sex life in veterinary school so long ago, chasing a female intern to and from the anatomy lab with a dog´s penis. She is impressed enough to ask me to the Michigan State cow barn having a newsworthy cow with a glass side, for a roll in the hay. I spoon out the plastic sleeves in anticipation of cold feet only to palpate the cow to gauge her estrus and then watch the fodder roll around through the glass. She leaves me in the barn but there are two girls left in the 50-man vet class.

Thinking rapport is the key to romance. I memorize the days of every date in the upcoming decade with a simple mnemonic, and prove it to the woman throwing water on the wall that on a Friday thirty years ago I spewed logic riddles to entice the next-to-last girl in vet school, spending a small sum on a watch that reflects on her forehead each hour, ´Time to Copulate´ so I´d know when to stop the jokes. She flees to an equine pathology text. I take the last girl in class to the Tin Lizzy bar in Lansing, Michigan with a little magic up my sleeve and as the band cranks Inagadadavida, I pull fire out of my fist that backfires up into the lovely face of the second smartest girl I've ever known and burns off her eyebrows and lashes. She screams past the bouncer, I beg the date in the burning room, at once realizing in the smoke of my past romances that they must escalate into a burning ring of fire.

I travel for two years on hard times with a small flask with a tapered neck that functions as a Genie´s lamp with a recipe of 1:4 alcohol to water that covers the bottom two-inches. On sloshing three times the surface emits a vapor that can throw a lighted match into a mini Northern Lights as the ignited vapor burns and evaporates at an equal rate rising and falling in a 3¨ thick ring up and down the inside of the flask. If the pre-shake is less than three not enough vapor generates for a show, and if too many times…

I don´t dare until I finally find the girl of my dreams and math major in her nail-biting final exams at San Francisco College and take her out for a couple extra shakes. On throwing in a match, the fire ring magically rises up and down much thicker and more rapidly than normal, until it begins thumping and jumping out the neck and above the flask. The glass bowl shatters and a ring of fire leaps out and crawls up a curtain setting it in bright flames. The old walls are flame retardant and only blacken to stop the romance as we hurry the bucket brigade of trash baskets from the shower, telling her, ´The lesson is in the heat of the moment is don´t lose your head to dangerous romance´, and after the fire´s out she loves me for it.



 "The explosion is almost here."

Reminds me of the villains talking in Batman The Dark Knight Rises. OK I didn't mind the movie.

Gold had ten inside weeks closes.

GPUSD had ten inside week closes (I see this however had approx 32 weeks of range back in May2009-Jan 2010 before it finally kicked out and moved approx 3-4 times range size.)

In the early 2006 we had 10 inside weeks before a market move 6 x range. Though we have had plenty of other crappy yours mine.

What could be the interest around this movement to decide if this one will kick? Are we in a significant area for concern? What did the move preceding this consolidation signify if anything?

Always be on standby under such conditions and at the controls… and be looking to learn.



Back in the 1970s, the number of new cases of TB in the US had declined to the point that it seemed that TB would be eliminated from the US within a decade. Accordingly, since TB was no longer an "epidemic," Congress and the President decided to cut spending on TB control programs. After all, they reasoned, the disease is going to disappear on its own anyway, why waste the money. Then came AIDS, and TB resurged. It seems we may be at the same point with gonorrhea, except instead of HIV, it's a drug resistant bug.



I recently watched 56 Up. It is a fascinating British documentary series I first saw at college over 30 years ago.

This is an interesting article about the series:

"The film is about the heroism in everyday life, which isn’t the stuff of Hollywood movies but is the stuff everybody has to go through. And if there’s one thing I do know, it’s that everybody has a story."

The Wiki



In Swahili, mzungu (wazungu-pl) is the name for white people and literally translated is one who wanders around aimlessly. It is a good description of the the today's market — wandering around aimlessly. It is at a border crossing, 1400, so there may be some rhyme to the reason.



 There are 2 obvious derivatives on mobile payments and NFC. The rumor is that iPhone 5 will contain a NFC chip that will help popularize the technology. And so quickly looking into it would lead you to PAY which is the leader in payment terminals that needs to be upgraded would NFC based payments become popular.

The other one is the semiconductor leader in the field, NXPI. The long term problem with NXPI seems to be that prices likely will move from $5 to 50 cents in short order and from standalone chip to integrated solutions where NXPI doesnt play. Both stocks are seemingly cheap at PEGs around 0.5. One has been following Square and what the founder of Twitter is tying to do (payment without tapping phone or credit card). Here is an excellent article.

So this morning when one was about to pull the trigger on PAY, Square announces the partnership with Starbucks and instantly wipes away 10% of PAY's market market cap. Could the reason for Apple not introducing NFC yet be Square? I guess we will see on September 12th.



It would be interesting to opine on the extent of amateurism in other markets. We have quite a few experts on particular markets here.

Gary Rogan writes: 

It would also be interesting to hear opinions on the strengths/weaknesses associated with professionals vs. amateurs. There are two well-known supposed professional (that is, institutional professionals) weaknesses, which are, 1, professionals get graded every quarter, so it's dangerous for them to execute strategies that have high drawdown probabilities, and 2, professionals get graded against their peers, so it's better to lose with everybody else than to take a chance on a generally winning strategy that once in a while loses when all the peers are winning. 



The Sapo green tree frog offers predator snakes, crocs and birds the most poisonous secretion in the world used by the Matses to poison darts, US special forces in Peru to enhance bullet tips, and burned into the biceps of Iquitos tourists as a death rehearsal. However tonight´s batch goes to scientists worldwide to analyze the ingredients of the most biochemically active substance known to man whose medical benefits are hardly imaginable. Last night I helped hunt and tend the 'waiting room' of thirteen Sapo frogs in a jungle operation in the Loreto state of Peruvian.

Picture captions tell the story of the Frog Hunt.

1. The Sapo Frog is plucked like green fruit from trees at night. (pic1 )

2. The frog is splayed between four sticks. (pic2 )

3. Toes are pinched all around to aggravate a flow of mucus secretion. (pic3 )

4. Venom is scraped off the back and legs. (pic4 )

5. And transferred to a stick where it crystallizes overnight. (pic5 )

6. The frog is released back into the trees. (pic6 )

Full story of the Frog Hunt is coming.



The Gini  ratio is a commonly used measure of income inequality. Historical GINI data by year is available here.

Higher GINI ratio is greater inequality, and has been widely discussed GINI has risen 1948-2010. This data was used to calculate year-to-year change in GINI, and yearly rate of change was partitioned by presidential party: Democrat (1) and Republican (2). Mean GINI yearly rate of change for the two presidential political parties was compared:

Two-Sample T-Test and CI: yr change GINI, D(1) VS R(2)

Two-sample T for yr change GINI

R(2)  N    Mean   StDev  SE Mean
1     27  0.0012  0.0206   0.0040   T=-0.58
2     36  0.0038  0.0135   0.0023

The mean yearly rate of change in GINI for both parties was positive (income inequality increasing). Though during Republican administrations the rate increased about three times faster than during Democrats, the difference was not significant (there is no statistical difference in the rate of increase in GINI).

The attached plots yearly change in GINI vs year. One notes the dispersion in yearly GINI change was much higher pre-1980. A possible explanation for this would be changes in the US central bank's approach to the business cycle ("the great moderation")


David Lilienfeld writes: 

I have a different take. Prior to 1980, it looks like there is a pretty clear positive slope, whereas after that the line is pretty flat. That strikes me as counter-intuitive.

Ron Schoenberg writes: 

I would like to see an analysis based on wealth rather than income which I believe would show a significantly greater inequality. Also, the data referred to below apparently doesn't include capital gains. I believe the results are understating true inequality. 

Rocky Humbert wonders:

And how does Ron propose to apportion the so-called wealthy people's share of Federal, State and Local debt? Of the trillions of unfunded liabilities through out the public sector?) Does he propose to allocate it based on "wealth" or per capita? And if he apportions it per capita, how does it deal with the fact that per household debt cannot possibly be serviced by per household income.

It's all reminiscent to the way that a couple going through a contentious divorce to do it: The wife says: "I'll keep the house." Husband: "Ok."Wife: "And I'll keep the dog." Husband: "Ok." Wife: "But you take the debt." Husband: "But, but…."



It is interesting to see that before the 10 year auction results are announced at 1300 EDT, there is hardly any volume whatsoever on the bid or asked in 30 year bonds. I saw bids of a total of 30 bonds and offers of a total of30 bonds before the results announced 3 ticks on either side. Normally the bonds trade 350000 futures contracts a day and there are bids and offers of 1000 each within the 3 point range. What this means is that the market at least for fixed income is almost entirely professional. There are no amateurs who leave their bids and offers in to be taken when the market makes a move of an average of 16 ticks on the auction. Hats off.



 Article of the Day: "Billionaire Democrat Jeff Greene Fears Revolt of the Poor"

The man who made his fortune hedging against the real estate market– and since 2009 accumulating mortgage-backed securities– still wants to represent the poor, improve their lot, convince his rich friends they should pay more taxes…

Pressler draws a picture of Greene, 57, worth an estimated $2.1 billion, as a man who lives in fear of a populist revolt, a plundering uprising of America's "poor people." As a member of the country's richest 1 
percent, Greene claims the nation's wealthiest people, people like 
himself, should pay more in taxes willingly– "buy a little democracy 
insurance"– because one day, "if you have 50,000 angry people coming 
across the river, you think you're safe?"

Pitt T. Maner III writes: 

The revolutionary route into Palm Beach would be across the Southern Blvd. bridge which spans the intracoastal waterway (not exactly a river, but close enough). Fortunately for Mr. Greene, Donald Trump's Mar-a-Lago would be the first mansion encountered by the envisioned, angry hordes.

The only invasion activity seen at present are the wondrous sea turtles that are laying eggs in good numbers on the Atlantic Ocean beach side. The turtle hatchlings begin their life cycle in Florida and follow a general circle around the Azores to Florida and back. They are the endangered species and the "farmers" who are important to the ocean ecosystems.



 Talk about putting statistics on the table. New York once had 25% of the Fortune 500 headquarters in the city. Now it has 3. They've lost countless jobs and become totally dependent on the financial industry, a total risky bet bound to lose because they chased all the big corporations out with their high service rates and union rates. Steve Kagan, the chief economist for the Pataki administration authored those studies, and has followed it up. What a tragedy. Please …. check your premises.

Anatoly Veltman writes: 

I've noticed even trading firms moving to FL. One of new factors: trading is performed by servers co-located at the exchanges; there is no longer any need to keep traders and researchers near the exchanges.

Leo Jia writes: 

Since the mid 90s, people have been imagining the impacts of high-speed networks on business and people's lives. It was argued that some day it wouldn't matter if one was located in New York or the remote Vermont (or the remote China in my own case). That day seemed to have mostly come to pass. For trading, particularly. People may argue that for high speed trading, one (or at least his servers) has to be located at the exchange. But even that is no longer a good choice. As the following article explains, "the most advantageous position to be in, if you're trying to wring a profit from tiny discrepancies in price between two distant trading centers, is at an intermediate point between them" - not at the exchanges.



"Recycled Cardboard Bicycles for $ 9?" : 

They are made of recycled cardboard, can withstand water and humidity, cost nearly nothing – and might change the concept of green vehicle.

Izhar Gafni is a Kibbutz resident, who decided to prove to his fellow engineers that he could make a bicycle at nearly no cost. "They said it was impossible".

One wonders what other engineering and construction applications this folded, modified, recycled cardboard (or enhanced version of similar, ubiquitous materials ) might have.



 Much ink has been spilled about the inter-generational wealth transfer required by the looming Social Security/Medicare implosion, as well as the massive under-funding of many public pension funds. But as the Ginsu Knife commercial hawker says, "Wait, there's more!"

I recently stumbled upon a Pennsylvania Court case, "Health Care & Retirement Corporation of America v. John Pittas." In essence, the Pennsylvania Supreme Court found that children are financially responsible for their parent's care (i.e. nursing home bills).

Evidently, there are 29 states which have statutes which could require adult children to provide financial support for their parents, and giving the financial condition of Medicaid, this is a precedent worthy of study. Interestingly, this so-called Filial Responsibility Law could be simultaneously hailed by Social Conservatives and assailed by Fiscal Conservatives.

This could also be the first step towards multi-generational "means testing" for social benefits… and which could close the loophole that encourages wealthy elderly to distribute their assets to heirs and then receive public support. This May, 2012 link from Forbes discusses the ruling: (If you Google the court case, you can find much deeper analysis too.) One posits that Grandma may soon be leaving the nursing home and moving back to the attic… sitting in her rocking chair…proving once again that Alfred Hitchcock was ahead of his time!



 My earliest fond memory of being trapped in our Idaho basement and constructing a ladder of chairs to escape through the clothes hamper was a rebirth to adventure. I read Bomba the Jungle Boy, Tarzan and graduated to the non-fiction Kon-Tiki and Endurance before taking a Doctorate of Veterinary Medicine. This education of an adventurer and self-treatment for wounds in the jungles, mountains, deserts, skid roads and oceans of 100+ countries beneath a backpack full of dreams with a few nightmares led to multiple survivals.

The nearer to death is not always the better story, yet the survival techniques offer broadening principles for everyday life. Here are my Top 10 adventures with a death element and how I lived to tell them.

1. Lost in the Amazon

The jungle is the most inhospitable region on earth with the Amazon rainforest the largest and most remote. I had thought to make the jungle my friend by first interviewing at Aires Burger in Iquitos, Peru veteran guide Juan Maldenado who instructed not to eat before a rainstorm or you´ll get hypothermia, and if lost to follow the small tributaries to larger rivers that will flow to civilization. Then I hired Carlos Grande, a pot-bellied guide who on the eleventh day of a 21-day expedition from the headwaters of the Amazon abandoned me in the chlorophyll.

Everything is green when you´re lost in the Amazon. Carlos Grande left me in a Mayoruna Indian hut on stilts over the Rio Javari because of rumored cocaine narcoterrorist flanks on our overland trek. The Mayoruna, called Cat People for whisker tattoos sprouting from beneath the noses to ears, are a scattered population of about 2000 in the most inaccessible areas. The farther from civilization the quicker the tribesmen appear to drink blood, the naked children touch never having seen white skin, bare breasted women grin shyly, and pink dolphins with reputed ESP jump in the rivers.

As if in silent alarm the village suddenly empties to the river bank, and a fierce faced chief thrusts a paddle out one hand, an outstretched palm the other, and because of a dialect barrier nods at a 6´ child´s canoe down the muddy shore. The rest of the thirty adult villagers bob up and down behind him holding machetes overhead. Thrown into confusion I try the magic of biting off my thumb and swallowing it that draws giggles from children but the chief wiggles his whiskers shaking the oar in my face. So, I dance a jig in a circle like Richard Chamberlain in Shogan to convince him I am too silly to cast off, but he looks sternly past my ears.

Not crazy, I dig in a pocket and hand over the equivalent of $6 for the broken oar and canoe, step in and shove off… in a child´s canoe on an unknown river with no destination other than the courage of early explorer Percy Fawcett and Maldenado´s advice to follow the small rivers to larger ones to civilization.

Day one: No food, sunburnt, plate sized colorful butterflies, water sipped from the river induces fever, a green snake off the bow, more pink dolphins, mosquitoes at dusk, howler monkeys in the trees, and drifting under starlight. Day two: The canoe centerline is one foot and with the least teeter water pours over the lip. I must urinate where I sit, but defecation is out of the question from an empty bowel. Day three: Lost on an oxbow, I rudder into a stick dock and fall overboard into the helping arms of an old gent with fading tattoo whiskers who shares his yucca. Day four: A motorized pecapeca canoe sides mine and takes the child´s in trade for a half-day´s passage to the Brazil border. At the border two barefoot teen soldiers in tattered fatigues wade out bearing down with AK-47s and raised sights on my three-week beard, ripped clothes, sunburned skin hanging with leeches, and enormously swollen feet.

I don´t have the Spanish to tell them, ´My philosophy is when you think things can't get any worse, it will, so stop griping and deal with it.´ ´Venga!´ they order, ushering me up the bank to the commandant saying that only narcoterrorists look like Indiana Jones on a bad day.

´Welcome to Colonia Angamos on the Yavari River,´ greets the Colonel pumping my raw paddle palm. We hunker on wood crates in his thatch roof, dirt floor office and are joined by the non-military town chief. They politely ask me to prove that I am not hustling cocaine from Peru to Brazil, and satisfied after a ten minute explanation of the abandonment order me carted on the two barefoot soldier´s shoulders to the town hospital where a nurse injects tetracycline and morphine. I fall onto a clean sheet in a provided bed of a thatched hut with chickens and hogs rooting beneath, rats skittering the walls, cats on deck, and parrots flitting in the air. For two, three, I don't remember how many days I drift in and out this surrealism until jolted upright by a powerful thwak-thwak over the roof. A youth helps me stagger across a swinging bridge onto a grassy military airfield where a General is stepping out a chopper.

´Sir, I address him in Spanish. Do you speak English?.´
The kindly man who looks like Walter Cronkite replies, ´Yes, but Spanish is better.´
´I am sick.´
´I can see that.´
´Can you medevac me to Iquitos?´
´We shall see,´
In three hours after meetings with the commandant and officers, the General returns and helps me by the elbow into the copter. It rises into a checkerboard of sunshine and clouds and two hours later drops me at the Iquitos military airport.
´What do I owe, General?´ I ask hopping out and feeling better.
 ´Your good health!´ he laughs, and the chopper takes off into the sun.

2. Bear Attack!

 My little encounter occurs five years ago at a New Mexico mountain streamside. Hiking along the river, suddenly a black blur bursts out the bushes and I know in an instant it can make two moves for every one of mine, that one throws everything out he has read unless he has mentally or physically rehearsed it, and that I had better hurry up and react. The 350lb black bear looks up at me as it has been tracking, sands on it hind legs eight feet away and peers into my eyes. The afternoon sun glistens beautifully on its fur like a lover. She is a foot shorter than me, so I raise my hands to the height of my earlobes. The bear raises its paws to the same. Then I raise my hands six inches higher with the elbows crooked, and the bear stretches its paws overhead as high as it can to equal mine. I shoot my hands straight up in the air to make myself appear taller or in surrender- let her decide- and the bear drops to the ground, dashes to a nearby pine, and leaps up scratching marks in the bark that I would have to stand on tiptoes to reach. Then she drops, gives me a bear grin, and scampers into the bush. A peak experience at 3500´.

3. Cowcatcher

The first freight I caught was in a VW van on the cowcatcher of a 25mph locomotive that scooped and carried me 300 yards down the track on the cowcatcher. The brakes scream and my life including these survivals passes before my eyes glued out the tilted window at the advancing rail. My hands grasp the bent steering wheel as the VW crushed in a V slides slowly down the catcher toward the sparking wheels as the locomotive decelerates to a stop. I escape out the window with sprained thumbs, and the vow to live life full tilt. 

4. Tin Leg

´Raise em!´

I gaze down the long barrel of a .45 leveled at my chest.´You have the wrong man.´
´You may not be the guy I'm lookin' for, but you're close enough.´
The old codger on the Los Angeles sidewalk takes a step up and spews cheap wine breath, ´I was a bank robber. Red and me was the best east of the Mississippi.´.
The pistol sight hangs a yard from my heart, just out of reach. I follow it to the hand, and into the deep sorrowful eyes of the beholder. ´Did I tell you I was a bank robber? Me and red was the best west of the Mississippi.´
Passersby weave about like current around stumps, and it´s the first time I´ve been the center of attention of bystander apathy.
´Tell me more,´ urging him to get it out.
´Well?´ he demands, expecting an answer.
´I still say you have the wrong man.´
´Son, my gun is still a-pointin' at you.´
My mind races for words. The right ones can save me; the wrong ones end in a puff of smoke.

He doesn't appear drunk. We've never met. This is real. I was just a regular citizen strolling a sidewalk a minute ago. More passersby flow around us. He is too alert to sidestep.

´You handle that gun like you know how to use it, I'll make no bones about it. Nothing to fear from me, Mister. Say where did you get your gun skill? ´
´You're damn right. Where? I was squeezin´ trigger in Shy Town (Chicago) before you were at mamma's nipple. Red and me knocked 'em down from Memphis to San Francisco and a lot of spots between."
´Peterman…safe blower!"
´Better believe it, sweet Jesus! It was a fine life until one caper on the getaway I didn't outrun a bullet."
´Damn them.´
´That's right, son. Slowed me down and put an end to my career. Life ain't been so good since.´
His eyes lower and mine water. Now he drops the end of the pistol, lets it fall to his side and suddenly raps smartly the barrel on his right leg. A metallic THWANG sends the foot traffic in a wide arc. As quickly the big .45 swings up to my breast.
´Tin, young man.´
´Don't doze off on me, fella. You say you ain't the one that shot me and I say you are. Why'd you come back for more?´
´You are a patient man, Mister. Anyone can tell you that. So tell me about the old days when the gun was necessary.´
´I'm ancient but I ain't no fool. Why I oughta …´
A gravel voice booms behind me. I fear to turn that it will be my last because when a man with a tin leg and long barrel orders me stay still, I listen.
´Nick! old friend. The voice roars. Put that pea-shooter away. ´You know how thick the heat is around here. Put the gun in your pocket,´ he commands. Could this be Red? Suddenly there is no chance to find out because I´m shoved between the shoulder blades past the gunman and down the sidewalk.
´Aw, all right, just for you,´ sniffs the old man behind me. ´I'm just old. Did I ever tell you about when Red and me were the best bank robbers between Mexico and Canada?"
´A dozen times if you told me once, but tell me again.´
THWANG I lose the rest of their conversation in a metallic ring that reverberates in my ears to this day.

5. Florida Trail

 The Florida Trail stretches 500 miles the length of the state from the Everglades to Georgia border. It begins near Alligator Alley that traverses the everglades east-west where motorists currently pay a $3.00 toll for game wardens to remove or sheriffs to shoot up to 13´ gators from State Road 84. I crawl via a gator path under a tremendous 10´ chain link fence built to contain the reptiles, look up and down the road at a couple five-footers sunning on the asphalt, and climb the fence on the other side.My romance with the Alley began years earlier with the mysterious arrival of a package addressed to Philmore Hare, my 7´stuffed rabbit who rode shotgun next to me in a ´74 Chevy van waving down via an invisible fish line attached to its hand passersby in a search for intellectuality. The return address was Linda Smith in Orlando, and the package opened to a sprig of hand-sewn stuffed carrots and a note, ´I read about your owner in Sports Illustrated ( Nov. 19, 1979), and as the Sea World seal handler would like to train him to bark. If interested, meet me at midnight at mile marker #99 of Alligator Alley on New Year´s eve.´ I met and fell in lust with Linda and then her Everglades, and long after an owl came into her camp I returned to near the marker in a sort of memorial hike to her.

The trail proves more dangerous as the days progress to weeks and then after a month´s march north along an unmarked footpath with a sketchy guidebook on the day before reaching the George line I step into a bog that oozes like dark mashed potatoes with no plate. The conventional method to extract from a soft spot is to fall forward into a crawl and swim out, however my boots are entwined below in vines or roots and the pull of the pack straps prevents it. Next the manuals advise scream ´HEEEELP!´ but I haven´t seen anyone ever on trail, and instead while sinking to my navel scan about and think it queer to be missing the lower body half. The vicissitudes of the past month flash before my tearing eyes…

Sleeping with tarantulas in trees above snapping turtles, stepping over 5´ Cottonmouths, monkeying over log bridges, getting shot at by deer hunters, hiking a 20´ wide two-mile levee of a gauntlet of hundreds of alligators 30´away and up to 13 feet long that can sprint faster than a racehorse, hungry and lost dozens of times, and a water experiment designed after John Muir who fell ill with ´swamp fever´ in Florida on a walk down from Ohio…

Unable to afford a water filter, I tested each source with a series of pint plastic bottles from rivers to saw grass marshes by sipping mouthfuls, rolling each around my tongue, drinking a pint from any savory source, and thirty minutes later taking my body temperature with an oral thermometer and recording them in a Francis Galtonian chart. Normal temp is 98.6F, and over the course of a month the generalities proved that flowing streams and saw grass swamps were clean and without a fever; large lakes brought about a degree increase to 99.5F that I easily continue hiking; stagnant ponds or standing water raised to 101F for which I had to stop to let a gutache or headache pass, and only once at 102F did I pass out for a few hours. Fever isn't a disease but a fighting style, so by the time I sink in the bog on the last day there is probably immunity to everything in it but death.

It is inglorious that after enduring a hundred water tests that I would drown in this bayou. I kick the bottomless mire, give up, shake hands with the phantom of Philmore, sink to the chest, kiss the spirit of Linda goodbye, and open wide for the last gag.
The descent stops, and I look about. Empty water bottles strapped to the outside of the pack are acting as ballast to keep me afloat. With them I´m able to breaststroke to shore and crawl out caked with muck and Spanish moss. A swamp monster appears lost and shambling along a fence line for some hours until the crack of a whip like Rawhide and ´He Haa!´ breaks the air, with the sound of advancing hoof beats. A burly cowboy in a white hat on a black stallion waving a whip above his head gallops along the fence and hard reins the horse that rears pawing the sky like Silver missing my chin by scant inches.
´Mister, I just walked 500 miles and crawled out of a bog or I´d give you a hug.´

´Bud, grouses the cowboy, I smelt you comin´ through the heifers a half-mile back. Follow the horse´s tail to my ranch and we´ll fix you up.´ After a warm meal and bed, the next morning I leave with springs in my feet for the Georgia line thinking anything else will be anticlimactic.

The drone of autos sounds along State Road 301 that parallels Alligator Alley 500 walking miles over my shoulder. A battered Ford sways onto the shoulder and a white gloved thumb jerks me into the back seat, I slam the door, and the driver turns around to show a white beard and red stocking cap. ´Merry Christmas!´ yells the driver swinging the wheeled sleigh onto the road and I Ho Ho Ho into the next county.

6. Dollar an Inch of Skin

I draw an assignment to seed capitalism around the globe. One of the early stops is Caracas, Venezuela where an applecart salesman who is writing an English teaching manual is to be handed $2000. My capitalist benefactor will take a receipt for 15% off the annual gross, and then it´s on to the next stop like the 1950´s TV series ´The Millionaire´ appearing on peoples´ doorsteps in surprise. I pause first in Caracas for a meal."May I change twenty American dollars if I eat?" I ask in Spanish.


The dish steams in my face in three minutes. The café is elongated like a French fry with a dozen tables and a tiny bar; just a place to get a meal before the next stop. There are two occupied tables, a husband-wife pair at dessert and two males drinking tall beers with their meals. I study the drinking men with their backs to me. Clean ebony skin, cropped hair, pressed shirts, and grace in bearing the bottles to their mouth. Inexplicably, one built like a cheetah raises the beer in salute. I nod, and at first bite see his dark face blush. Francis Galton observed in Africa that this betrays shame rather than embarrassment. The waiter clears the table, I order another plate and pay with an American Jackson, and in five minutes she returns with Venezuelan Bolivars change and the piping hot plate. The waitress leaves, the two drinkers exit, the cashier disappears, the cook is unseen, the floor sweep locks herself in the bathroom, and the married couple rises for the door.

The cheetah and his partner brush in past them with raised machetes. The split to stand to either side of the chair, the table's in front, and my back to the wall.

"Tranquillo," orders the cheetah jabbing me in the ribs with the machete point just hard enough to hurt. He holds the knife low and expertly. The blade is fourteen inches long, plus another six in the wood handle. The other knifeman hold his lower and stabs my thigh.

´Su dinero!!´ (Give us your money!)
´I spent it all.´ Everything in Spanish.

Jab. Jab. They double team me with the knives, one below the left floating rib and the other on the right thigh, bruising but not breaking the skin. If I move I´ll impale myself.

I try to stay way ahead of these bad guys. The first step is to secret stashes around the body with the idea of sequentially losing only one or two. The most obvious spot to a thug is a money pouch around the waist or neck, where I now carry a thick wad of small bills to raise the saliva of a hooligan. I struggle to pull my neck pouch but a sharp blow by the knife point in the ribs knocks the wind out of me. There´s another wad in my back pocket, I beg them to let me pull it and throw over their heads to greedily claw the green shower allowing an escape, but a sharp stab below the pocket prevents it. The cheetah slashes the neck pouch, and the other slices the pocket and the monies fall into their hands. Now all that´s left is the big store, the seed capital for all of South America, sewn inside my right pant calf. Inadvertently one of the jabs hits the thick pouch of hundreds. The knife slices out the secret pocket, they take the three purses, and flee.

 ´Silencio!´ the cheetah barks at the front door, and then they're gone. On cue, the sweep girl emerges from the bathroom and shakes her head sympathetically, the cook starts banging pots, and the waitress asks if I want another dish on the house. I'm cleaned out but alive with a full stomach and this is no place to linger. Today I bucked odds without spilling blood, learned about myself and, at the price of a dollar a square inch of skin, walk out on lighter feet.

7. Silverback Gorilla

 The 500-pound mountain Silverback Gorilla stands five paces away drumming his chest. The arms can bench press 1000lb. and bend the 2¨ tempered steel bar. Yet the thin Rwandan guide behind me whispers, ´He will charge only if you are afraid.´

The male at 5´ 11¨ is big for the largest gorillas in the world. A harem of four females half his weight gather leaves behind him for the nest. He gazes at the four European girls behind me, and then locks my eyes. It´s taboo for wild animals to stare down but he must defend his honor. There is no need as I would trade my group for his for the education. You don't have to call them. You don't have to send them flowers…

He displaces, grabbing limbs and breaking them, racing up a 15-meter palm in two seconds and raining coconuts down on everyone, and then returns to the ground and stands chin to chin with me at the same distance.

´Bo, he likes you!' giggles a French girl behind me. The gorilla´s face twists in amusement. His shaggy neck is a stump and erect penis shorter than mine.

He beat his chest, and I open my shirt and do the same lightly. The girls and guide back off in my peripheral vision. It´s a respectful stare down of one man and one beast, and today there is no winner because the gorilla glances away bored.
The brute edges forward; It´s a bluff. He climbs a tree like a ballerina and roosts in a crotch twenty meters high in the last stronghold of the remaining 1800 Silverback gorillas on earth.

8.  White Mountain Crash

Clomp, clomp across the Golden Gate bridge in a Bay Area 10k race that began one week ago with a crash on White Mountain. I am bicycling 1500 miles from Canada to Mexico along highways #101 and #1 on a Peugeot PX-10. ´Bikeman!´ is relayed for two weeks up and down the Pacific coast to ward off logger trucks on narrow mountain highways. Bikeman is my CB handle, a grasshopper on wheels in bug Walkman earphones with a 5´ Radio Shack antenna stretched ahead off the handlebar.
In the shank of a golden California evening churning the cranks through the Redwoods along bike pathless Highway 101 the road climbs, zeniths in a roadside splash of wildflowers, and I coast down the other side with the wind whistling in my ears and feeler. The grips tighten, and as the speedometer dials to 35mph a rabbit in the meadow catches my eye so the fraction arch of the brow starts a wobble that on trying to correct intensifies into a violent frame shudder that the brakes amplify. The front tire catches the soft dirt shoulder, stops, and I shoot over the handlebars as if shot out a cannon. A tumble skid back and forth across the asphalt and earth leaves a bloody ten yard exclamation!

At the dot I find my feet but it is difficult to walk. Blood streams everywhere on bare skin except the tennis shoes, shorts and curly hair. The bike front wheel is bent at 30-degrees like a flapjack that made only three-quarters the flip, and the remainder is in standard post-wreck condition of gimped stem, twisted seat, luggage strewn in a line, and paint chips everywhere. I sit by the bicycle along the roadside like a faithful dog. I don't know what to do. There is little money. I am far from anyone I know. My body hurts all over. The sun is setting. A siren sounds in the distance…

A fire engine, patrol car, ambulance and sheriff arrive in a fifteen minute window from a 911 call by a good Samaritan passerby and suddenly I´m surrounded by multi-color flashing lights and concerned uniformed men. The cool sheriff takes charge and on learning that I have no wherewithal for the hospital or hotel, advises all to leave except the fire truck to which the bike is strapped to the bumper, and he allows me on a blanket into the front seat of his patrol car. We cruise down White Mountain to the nearest little burg where he pays for a room for which I´m grateful to this day.

The room offers a wall mirror in which I play doctor – patient. You feel fine, just look bad. I shine a light in the right eye of the mirror and determine there is no concussion. The pulse is stringy with shock but evens to 60. Blood covers 80% of the skin with dirt and grime stuck like flies on good flypaper. I release the patient to the shower and it must be cold to wash off the blood and seal the bleeders. On emerging there is a clearer picture. Scrapes and scratches cover 30% of the skin, so I take the first aid kit consisting of a one-ounce bottle of Methiolate and dab all the raw spots I can reach, lay a towel on the bed, and collapse.
The next morning I pick up a couple bottles of Methiolate and one large of pink Calamine lotion for poison ivy from the roadside tumble. The bike won´t be fixed for another day, however the sports page announces a marathon at the Golden Gate Bridge, so I board a bus to watch. Yet on arriving on the north side a number is pinned on my chest and the race director ushers me to the frontrunners saying it will be good publicity to have a Pink Runner in the lead for a few seconds.

We´re off and in the first minute a hundred runners breeze by shouting ´Go Bikeman!´ I am 70% pink in black tennis shoes, a running advertisement for Methiolate and Calamine in a 10k race. I lose ground on downhills where the skin is stretched and jars with each step, and gain on uphills where the bubblegum scabs don't bounce. Bikeman!´ chant hundreds of spectators four-deep along the south ramp of the Bridge as runners sprint and slap my back until the blood flows to the tape.

After the finish there is another, as I hitch a ride back to the repaired Peugeot, and another on the bike to Mexico, and then another… wherever the last one lands me.

10. My Old Man and the Sea

The Indian Ocean surf on the white sand beach of Bali is cold between my south of the equator toes after a sunrise jog, and the unpeopled shore slopes sharply to the breakers. I backward walk through the rollers, dive through higher ones, and the first blow of a powerful offshore current carries me a quarter mile out to sea. With a patience breaststroke I fight the current for a minute without making headway. I shift to a strategy of floating and am carried another 200 yards out to sea.

Swells glide over the withdrawing layer of water, springing high and cresting with foam when the lip becomes too thin. An underwater tug-of-war for my body takes place with the waves beating me beachward and the undertoad pulling me outward until I grow dazed and thrust out the water like a porpoise for a view over the rollers of swell and break, swell and break on the island Bali.

What does it mean to fight for one's life? There is a position, a goal, a plan, struggle, and the outcome. I try a modest front crawl, make headway to the beach, then stop, rest and drift back out to sea. Then it´s an all-out swim kicking hard and extending my toes in hope, stop to survey, and am swept to sea. The difficulty of rest there is that I am an Ironwood human with a body fat of 7.8% compared to the floating average of 17%. Following another adrenalin pumped leaden legged battle with the current I reckon that for lack of body fat I´ll fall to Neptune and this afternoon´s tourist attraction washed up on the shore of Kuta beach may be a bloated man with a half-smile on wrinkled lips.

The breakdown of the emotions when caught in a rip tide is: Panic with hope; hope disappears and willpower takes hold; truth replaces will, and in horror I believe I will drown. But it is countered by a flashback of water memories of my old man and the sea. At five years he took me by the hand into the Santa Cruz Pacific, and let go saying, ´Look out for the under toad´ that I thought was a rare water frog and spent several gleeful hours chasing. Red Cross swim lessons followed at the Idaho Falls YMCA pool. He built a submarine in a basement. Body surfing on vacation off Coco Beach I swam headfirst into a Portuguese Man of War narrowly escaping the 6´ dreadful tentacles, and he pacified it. One day Pa showed up like Jacques Cousteau on our front yard dock over Browns Lake, Michigan lugging a bell helmet to which an umbilicus ran to an air compressor like a fish bowl to a bike pump. He yelled at me to stop riding off the dock on my bicycle to make way for my first diving lesson. It was extraordinary looking from inside an aquarium glass at the fish and snapping turtles, and opened a life to scuba diving. A peak underwater moment was having a mouthpiece torn from my lips and breaking bubbles with my teeth to take in oxygen mixed with water, separate it in the oral cavity with a chewing motion, spit out the water and breathe the air for three minutes. The snowdrifts piled to the windows of our Charlevoix, Mi. home and father walked out the front door every Saturday in a black wet suit, the neighbors chattered, ´There goes Galloping Gil´, and he jumped off the ice into half-frozen Lake Michigan to scuba for an hour. One Spring we pulled a 19th century anchor from the bottom using a 55-gallon drum sunk, tied, water displaced by tank air from the mouthpiece, and raised the 5´ anchor and leaned it against out front yard Maple tree.The flash of incidents was like holding a dance partner for his strength and caring. Then the watery history moved swiftly full circle to a mouthful of saltwater in the Indian Ocean. I flip onto my back. Many fish take or rejects air from its swimbladder, a carrot shaped sac off the gut in the upper body, by swallowing or burping air. The amount of air inside the bladder controls buoyancy and an average fish must be occupied with about five percent air by volume to float. With a body density that approximates the specific gravity of water, I use my lungs as a swimbladder, taking in half a lungful when I desire to hoover just beneath the surface, or a full lungful when I want to float, or exhale to sink like a tombstone. I take a big gulp, rest on my back and think. Buddhists believe their dying thoughts influence their next life but that presupposes the next life which i do not believe in. I refuse to go out kicking like a berserk fish.

I remember I learned to make water my friend. In this recovery a textbook solution comes to mind to swim parallel to the shore to escape the grasp of the rip, and I turn on my right side and begin the transverse. After five minutes onto the left side for five minutes more. In twenty minutes I pivot with an energy saving breast stroke toward Bali. The distance closes until my feet touch the bottom only to bob away. Finally I stand upright in waist deep and gratefully feel the push of rollers. I stagger heaving lungs through the breakers, crawl up the beach and flop in my earlier footprints. Our home should not be called Earth but Ocean for it is seven-tenths water. One body, dynamic under the sun's heat, over the planet's rotation, beneath the lunar tides and countless breezes and currents that shape our lives. I would have met Neptune today but was buoyed by a flash of memories owed to my father. It will be nice to see him again on what others say is his deathbed, tell the story, and thank him.

The lessonfrom these ten survivals is don't believe anyone who tells you, ´You're gonna DIE!´. But I had to put myself in the coffin after the Cold Freight trip. That winter I returned to my alma matter MSU seeking two things: warmth and money. I spent my last $50 on a simple pine coffin constructed by the woodwork instructor, who introduced me to the sociology dean at Lansing Community College who hired me to teach a sociology course ´Hobo Life in America´ You bet I took the first check and lined the coffin with electric blankets to sleep like a baby through the Michigan winter in a Lansing basement. The first night in the coffin was risky because I shut the door tight in the unheated basement and mentally calculated its cubic volume, my tidal respiration, and using a factor of 80% exhaled oxygen per breath determined there was enough to last eight hours, but set an alarm clock for seven hours as a failsafe.

The coffin from which I popped the next morning like a Jack-in-Box illustrates the formula for survivals: You venture beyond where most go, there´s a jam, you calculate the risk factors, and use a store of knowledge and experience to escape. I obviously have no death wish, but purely a strong will to calculate survival.

So it was with surprise last November I read of my recent death in Mexico hopping freight trains in dozens of Emails and Facebook posts. My family on not hearing from me for three months had filed a missing person report with the El Centro, Ca. police department, and assumed the worst on not hearing back from them. They appealed online. The death spiral was finally clipped by an a post-obituary in Chicagoist ´From the Vault of Art Shay: The Legend of Bo Keeley Grows´ (12-14-11) which explained simply that I had retreated to my Sand Valley home to feed the animals and write.

The mind is the best all-purpose survival tool, and it is honed by experiences. The first test venture is the only difficult one, so head out as I am in the Amazon encountering fer de lance, tarantulas and Sapo frogs, and live to tell the stories.



I think the VIX is greatly over-rated. Here is my synthetic vix (7page PDF ). It follows the actual vix closely and the actual vix is just the market upside down.



 How many market maker jobs do you figure were lost in the past five years since HFT market making came in heavy? Could it be 2,250 jobs? What is that at 200k a year per man? 450mm?

The wealth was merely transferred. Even if all was lost to the industry, which it wasn't, the industry would still be a couple billion ahead. It is absolutely amazing how technology has reduced labor costs.

On that note, I see that production plants for cars remain open this summer (an excuse for good labor reports) when every GM car lot has cars and light trucks parked in the fields next to the dealer. I assume some economist at GM decided labor or housing would pick up so they built too many pick up trucks. Yet GM is not selling.

I understand why the GM econ team had issues, with their pent up demand market call. They sold 600-700k pick ups– wait, no, that is 850k a year on average from 2000-07, as we must add Chevy + GMC as its same chassis so their sales dropped 35-40% from mean to this year. They were down over 50% at the nadir. FYI ford F-150 looks to be down 27% off the 2000-07 average of 850k per year to a low of 413,625 in 2009.

Pick up trucks are the best selling vehicle in USA and very easy to classify. Also the gist is, people use trucks to work and play. We have such a long way to go before we come back to full strength. All this talk of feds and bond spreads and government reports, we need a big pick up… truck.

** take my comments as optimistic as to how far we need to grow and improve simply to regain what has been lost, since the crash of 2008, not to mention all the improvements we shall see over the next decade.

(One can argue MPG and fuel costs for 2nd vehicle pick up's 20MPG average vs 30 for a small car. Ford is testing a F-150 with all aluminum body! F is attempting to shave 700 pounds off their trucks. That should get them 24MPG's Yet it's not to sell more trucks. It's to meet EPA Cafe standards for fleet MPG that is at some astronomical number by 2017. It's a costly bad joke.)


1    Ford F-Series    +16.9%    February 2012    47,273    +25.9
85,766    February 2011    37,549

2    Chevrolet Silverado    -1.3%    February 2012    32,297    +1.8
59,147    February 2011    31,728

3    Ram Trucks    +31.3%    February 2012    22,595    +21.2
40,504    February 2011    18,644

4    GMC Sierra    -6.7%    February 2012    11,306    -3.3
20,823    February 2011    11,696

5    Toyota Tacoma
+30.2%    February 2012    10,662    +35.3
19,560    February 2011    7,879

6    Toyota Tundra    -9.6%    February 2012    6,328    -9.7


Rank    YTD Sales    YTD vs. 2011
Year-Over-Year    Monthly Sales    vs. July 2011

1    Ford F-Series    +11.9%    July 2012    49,314    +0.4%
350,455    July 2011    49,104

2    Chevrolet Silverado    +3.5%    July 2012    28,972    -12.5%
223,480    July 2011    33,121

3    Ram Trucks    +22.8%    July 2012    23,824    +17.3%
162,405    July 2011    20,311

   GMC Sierra    +4.8%    July 2012    11,105    -11.8%
84,050    July 2011    12,596

5    Toyota Tacoma
+27.0%    July 2012    11,350    +27.1%
78,503    July 2011    8,929

6    Toyota Tundra    +14.0%    July 2012    9,176



 As a hedge fund manager you have nine assistants employed solely to give you advice. Each of the assistants has a different perspective on the markets. They are all good advisers, as any one of them improves your trading immeasurably. For example, the market has a 2 percent annual return, but with your skills you can generate a 10 percent return. If you also add the advice of any one of your assistants you can bump that return up to between 12 and 18 percent.

Over the last 12 representative years there have been times when the nine were universally bullish. But despite their unanimity the market did not always rise. Conversely, even in the protracted down moves of 2008, their bearishness was not unanimous. Put another way, there was always one or two that wanted to go long at the worst times. Yet each and every one over time provided great advice.

You would like to find a way to combine their advice to get even better results than by using any one alone. But that's not easy. Sometimes, adviser A is early, and late at other times on a move. Likewise with the other assistants. One simple solution would be to have them vote, but the performance result of the vote underperforms some of the individuals, although still better than not having any adviser.

*Note here that we are only considering return and not the risk taken to achieve that return. Risk should always be considered, but for the sake of moving along, let us assume that taking the advice of your advisors never increases risk and that their respective upside contribution to profits is directly proportional to their downside exposure to risk. That is, much of their positive return contributions come from reducing risk, which is what we have observed generally.

Now, let's suppose that these advisers are not people, but algorithms. That's actually better because as algorithms they can be combined in ways that individuals cannot. They can be viewed logically (on/off) as in the voting experiment, or they can be ranked by their actual values. If they have scalar values they should be normalized (given the same order of magnitude or scale). For example, you cannot compare the slope of the Dow Industrials with that of the S&P 500, as the former is an order of magnitude larger. But if you put them on the same scale (e.g. divided by price), you can easily compare them.

Normalization is exactly what you would do to your inputs if you were using a neural net, and you might be tempted to go the NN route. But NNs have problems; among them would be your inability to discover the actual combination of what worked best. You might say "who cares" as long as it works, but that philosophy does not have a good history. However there is a very good use for a NN, and that is as a trial. That is, if you are good at NNs (and most people fail), then you should by all means try. If the NN gives you good results, then proceed on your own to find a good combination without the NN. But if using a NN does not improve results for the experienced practitioner, then it is going to be very difficult to find a better combination.

 But how do you combine them to your best advantage? Well, there's an app for that. It's called linear algebra. It is somewhat vertigo-inducing for most traders, because most of them are comfortable with things they can chart. For your average trader that means two dimensions; options traders tend to be comfortable in three dimensions. But with our illustration we are likely progressing to higher dimensions, and they are not chartable, although the problem's solution is indeed a chart, albeit a virtual one.

Subsequent "chapters" (if the topic flies): Operations, Testing.

Jim Sogi writes: 

"But with our illustration we are likely progressing to higher dimensions, and they are not chartable, > although the problem's solution is indeed a chart, albeit a virtual one."

One of my first posts ever to the SL was Flatland, and the idea that multiple dimensionality is lost in two dimension charts which are typically used.

Easan Katir writes: 

Flatland, one of my all-time favorite books since I read it 40 years ago, offers insights in many arenas. Perhaps some enterprising ex-game coder would turn his attention to finance and provide charts where the point of view can be changed with a click. Will traders of the future be trading on an X-box-like device?



I don't recall being as excited as I am today for science and our
endeavors in space. Must be some of what the mood was like in 1969.
Funny how the geo-political B.S. fades away for a few days when one can
watch this and the Olympics and enjoy all the greatness that humanity is
capable of…

(BTW, speaking of 1969,  a friend astutely observed that the moon landing coincides with the day that good old Teddy drove off the bridge…luckily for him attention was overwhelmingly skyward…).



 Digital music uses different algorithms that reduces the spectrum of pure sound to a small sampling. As a result the sound is always "hollow" and lacks the fidelity of live or even analog vinyl. Turning up the volume or boosting the bass doesn't cure the problem. I remember when we would spin the vinyl in the old days, everyone would get up and dance. There was more feeling. Some of the algos boost the prominent parts of the track and hide the back tracks. Things are lost.

In a similar way, IB uses some sort of algo to reduce the bandwidth of the order flow in order to keep prices current for execution. Investigation to determine if it is a proportionate reduction of the bid/ask order flow, showed it is not. Use of the IB data flow will screw up order flow calculations. Russ wrote about this some years ago. A lot is lost, but even in fast markets IB's price seem to keep pace pretty well. Its hard to tell when your broker quotes lag behind your data feed what is going and results in fills outside the apparent inside market.

Jeff Sasmor writes: 

A lot of what you hear has less to do with the digital process that's used to compress the audio but with preprocessing to make things sound better on ipods and such. Hard to believe? In the past I worked at a major NYC recording studio and we used to have tiny speakers so people could see what a recording would sound like on a junky transistor radio or an AM radio.

It's the compression and other processing that makes most of what you're complaining about. It's also dynamic range. On a standard CD you have 16-bit audio which isn't mpeg encoded or anything like that. But 16 bits is only 96 dB dynamic range which isn't enough for you to hear quiet sounds adequately without having loud sounds be distorted. So sound was routinely "compressed"; not in the sense of mpeg and aac (which are perceptual encoders) but rather dynamic range compressed to make quiet sounds louder and loud ones quieter. That's most of what people found objectionable when CDs were first introduced (and even now since the tech is more or less the same).

Perceptual encoders are not worth explaining in detail, but they throw out sounds you probably wouldn't hear as part of the process. It's actually sort of obnoxious…

Modern uncompressed audio at 24-bits, if encoded that way originally and not messed up by mpeg or aac or other processing is much better than vinyl with no clicks and pops.

But with all the emphasis on downloads and the fact that most people are listening on systems that can't reproduce much, and the other fact that most people don't care, 24-bit just isn't viable as a product.



 The upside down man's objection: "If wealth or real GDP was only being created at an annual rate of 3.5% over the same period of time, then somehow stockholders must be skimming 3% off the top each and every year" is easily rebutted by Philip Carret's observation that common stock is like a leveraged investment. Bondholders are first in line to be paid, but their claims are fixed, so all upside of earnings beyond a fixed percentage belongs to stockholders (as does all downside if the company fails to perform). If the typical capital structure is 50% debt and 50% equity, the typical common stock is a 2:1 leveraged investment, so an expected return approaching 2x GDP growth would not be unreasonable.

Stefan Jovanovich writes: 

There is a complimentary explanation. GDP figures are a sub-set derived from the monetary Marxist notion that nominal expenditure by the government is just the same as voluntary private spending. (This is the same notion that the CIA and all the Galbraithians depended on to decide in the 1970s and 1980s that the Soviet Union had matched or even surpassed the US in economic output.) Er, no. Sherman Tanks may be useful and necessary but their "cost" is not the same measure as the spending to buy a combine harvester. The same applies to civil service pay versus private payrolls; the one measures a Keynesian cost, the other measures an expenditure in search of profit. It should hardly be surprising that, in order to support the dead weight of wars and "public" investments that no private market demands, the equity residual has to grow at twice the rate of the overall "economy" measured in nominal Marxist terms.

Ralph Vince writes: 


Yes, this was the case I made on this or a related list about 4-8 weeks ago and had my economic naivete was assailed. In fact, I would posit that not only should government expenditures NOT be included in the positive column of GDP, but rather might best be place in the negative column. A good portion of government spending is in the form of capital outflows, interest payments to foreign entities, outright gifts to foreign entities (when we give the UN a billion dollars, is that really a billion dollars added to out GDP? 10 billion to Israel, does not increase our GDP by 10 billion), nation building (building schools in Afghanistan does not increase GDP). Outflows such as exports, count on the negative side of the GDP ledger — so too should government spending, or at best, it should be a wash.

If GDP growth is anemic now, remove the YoY increase in government spending from GDP and it's a pretty bleak picture in recent years (and no, I'm not being political about the Oreo presidency of the past 11 1/2 years. Same guy, same party, same people, different faces and names).



A math approach to cycles in human history:

"the researchers found that two trends dominate the data on political instability. The first, which they call the secular cycle, extends over two to three centuries. It starts with a relatively egalitarian society, in which supply and demand for labour roughly balance out. In time, the population grows, labour supply outstrips demand, elites form and the living standards of the poorest fall. At a certain point, the society becomes top-heavy with elites, who start fighting for power. Political instability ensues and leads to collapse, and the cycle begins again.

Superimposed on that secular trend, the researchers observe a shorter cycle that spans 50 years — roughly two generations. Turchin calls this the fathers-and-sons cycle: the father responds violently to a perceived social injustice; the son lives with the miserable legacy of the resulting conflict and abstains; the third generation begins again. Turchin likens this cycle to a forest fire that ignites and burns out, until a sufficient amount of underbrush accumulates and the cycle recommences."



 This is a very interesting comment from El-Erian…

My thoughts:

So while markets have been conditioned to expect ever greater central bank intervention whenever the data weakens or sovereign spreads spike in Europe, the cost-benefit equation within the Fed has gotten considerably trickier. There is now much greater appreciation that the policy response, no matter how imaginative, can do little on its own to address decisively America's challenges of too little growth and employment, too much long-term debt and too great a political polarisation.

So, this time around,the Fed decided to talk the talk but not walk the walk. It is unwilling to do anything now, also reflecting a desire to keep dry whatever policy ammunition remains in the event that Washington is unable to deal with the fiscal cliff and Europe takes another turn for the worse. And while it signaled a willingness to do more should conditions deteriorates, I suspect that it wishes this to be in support of other policy measures rather than substituting for them.

The Fed's attempt to overcome its policy dilemmahas little chance of succeeding given the degree of political dysfunction in Washington. It is only a matter of weeks until, once again, Fed officials will feel compelled to act, and despite full knowledge that their measures will have limited effectiveness in delivering desired outcomes.

Most fundamentally, what is being illustrated again in all this is that what the US faces today is as much a political problem as it is an economic one.Until the political system steps up to its strategic leadership challenge, America will risk the trap of policy purgatory.



 Even granting the the Elliott stuff is garbage, the opposing linear forces of buyers against sellers subject to a vig forms wave like patterns. All other waves can be modeled. Why not market waves?

Leo Jia writes: 

I'd love to hear others' comments on this. My take is as follows.

The market waves are actually constantly measured and modeled by market participants. These people then use their models to conduct trades on the market. This very action, as performed by many, then causes the underlying market wave to change its attributes, which then fades the models in use and causes the people using the models to lose money. This gives many the impression that market waves can not be modeled.

Perhaps akin to Heisenberg's uncertainty principle, which was initially mistaken as the observer effect, the above view of the market might be misconstrued. The uncertainty principle was later understood to actually state the matter-wave dual nature of quantum objects, regardless of the observation.

Aren't market participants very similar to quantum objects in this sense? What is the dual nature of people? Can't we say greed-fear?

Jeff Rollert writes: 

I would argue the periodicity, or perhaps wavelengths, vary as do ocean wave patterns reflect long distance, off shore storms.

Long ago, I read somewhere that polynesian males hung over the side of boats naked, so their "sack" could sense current vs waves for navigation.

Perhaps the model should include waves and divergent currents.

keep looking »


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