Last night, during our breaking the fast supper, my daughter had an interesting discussion with me and my wife. My daughter is a senior in high school, and she's finalizing her applications for college–early decision application, early decision 2 applications, and regular admission applications. (When we first started talking about colleges last spring, I gave her a book on game theory–intro level; she never read it, unfortunately–too busy with classes.)

She had wanted to go to Wesleyan. It had everything she was after–small liberal arts school with lots of on campus activities, a strong record of graduate/work placements, small size, and a school where parties were not the rule of the day. Oh, and that it was on the other coast, away from my wife and me, only increased her interest in the school. She was also looking at Wellesley, Colby, Bowdoin, Carleton, Grinnell, and so on. Some public ivies too–U Wisconsin Madison, U Washington, and even some of the U of Californias, though the latter is her safety school.

The problem with the liberal arts colleges is that they now cost a fortune. Generally north of $45K a year and often north of $50K. The situation with the ivies isn't much different–they also cost a small fortune. The out-of-state tuitions for many universities (including the public ivies) are in the mid-20K range, and the chances of finishing in 4 years when attending them is diminishing by the semester. Needing to attend a U of Cal for 6 years to finish a major used to be a rarity. Not anymore. And there is no reason to think the status quo will improve any time soon. Here in California, the system developed by Pat Brown (the current governor's father) had the U of California system, the Cal State system, and then regional community college system. Not only are these systems struggling to find some way of increasing their capacity, but they are doing so at a time when the state government is cutting funding for education throughout the state, including these three post-secondary systems. This problem is not limited to California. In the SUNY system, all tuition goes to Albany, and the state legislature decides how much goes back to the individual campuses, rather than looking at each campus as a P&L center (as U of C campuses do).

Why bring all this up? My daughter is now contending with the question of what's the best value for getting a college education rather than what's the "perfect place" for her. So far, so good. This was what we discussed last night at dinner, and it got me thinking about the post-secondary education system here in the US. At the college level, that system has been in place for three centuries or so. At the graduate/professional level, the current system came into being during the mid-to-late 1800s. The problem is that with the current levels of tuition, the cost of a baccalaureate is rapidly becoming (if not already there) out of reach for much of the middle class population. Using loans is rapidly becoming untenable in the face of college grads unable to find jobs and one-in-twelve of the workforce unemployed. (I won't get into the loan fiasco as regards professional grads–the average medical student having debt north of $150K and for more than a third, it's in excess of $200K.) For many of the existing loans, it seems likely that someone other than the college grad will be left paying the bill. That's debt of about $1.2 trillion at risk. The bottom line is that the current system is rapidly becoming–if it is not already–unsustainable.

The question must be asked about what is the value of a bachelor's degree. I ask the question because it is becoming easy to have access online to some of the outstanding courses available at many of America's premiere universities. Will a degree really have much value when an employer is interested in what you have learned somewhere–online or in person? It used to be that the only way to obtain the knowledge was to attend a college or university in a degree program. The degree was a proxy for knowledge. But there are now other sources for obtaining that knowledge–does spending the money on a college degree make sense any longer?

The situation is even more daunting when you consider that during the mid-1970s, when I went to Johns Hopkins, tuition was about $3K a year. That was also the price of a Chevy Nova car at that time. A Chevy Spark now costs under $15K, and has a MSRP of $12K and change. Tuition at Johns Hopkins today? $50K.

All those contributions to one's alma mater are prolonging the day of reckoning for a system that will need to undergo extensive reform, and that reform will need to accommodate other forms of education rather than only in-person class attendance. Western Governor's University ( may be one example, but insofar as it is built around actual degrees, I'm not sure that it's the only type of solution.

An educated workforce is a major prerequisite for a competitive United States, yet the education system is in the middle of a crisis about which there is precious little discussion. That has to change.

Richard Owen writes: 

Education is becoming the quintessential branded luxury, taking a commodity input and stamping it with a brand.

Markets are made at the margins: the price driver has been (i) the rising share of wealth located abroad and (ii) the higher percentage of production available to the best paid domestic workers. The West is importing the GINI ratio of the Emerging Markets when it comes to high end property, education, etc.

Take British public schools: fees are now $45k/yr for the full school life, rather than just a terminal three years at college. For three children that's $135k/yr post-tax wage dollars. 7% of the UK is privately educated historically, yet the former figure is well into the 1% income range. Whats made up the marginal demand? Wealthy foreigners with untrammeled, untaxed, EM boom dollars. London is undergoing a reverse colonization. Hence in some bijou streets in the capital, residential is up 40% in two years, (having fallen not at all during the crisis, so that's not a bounce off the lows).

Carder Dimitroff adds: 

I have two daughters in their 20s. Both have Ivy-league degrees. Frankly, I'm not sure Ivy matters.

There are wonderful state and private colleges. Most decent universities offer inquiring minds incredible opportunities. If a student is looking to learn and grow, most "average" universities can dish out more than most students can handle.

A good example is my cousin's daughter. She attended a low profile public college in Florida. She went in with the attitude of learning and developing. She and several of her classmates became Fulbright Scholars. Now she is Ph.D. candidate at Duke.

If you look at Ph.D. candidates at the nation's leading research institutions, you may notice most of them never attended Harvard, Yale or Princeton. The same can be said for many business, political and military leaders.

Each school has its own culture. In my opinion, a key to a parent's success is matching the college with the student's personality. If the student love the place from day one, all is good.



 This site is devoted to the scientific method… expectations, the real world, actual decisions that people make under uncertainty. Any individual taking an economics course learns that consumer choice takes into consideration a myriad of expectations about the future subject to constraints and substitutions and alternatives. Please go back to the economics texts to see why prediction markets are much more accurate than polls. The prediction market is 75% for the incumbent. That's an all time high. Gentleman, does it have to go to 99% before you see that people actually making bets with their money is a much better predictor of outcomes than a poll? A good article assessing accuracy of expectations and margins of error for predictions versus polls is by Berg. Please. No more self supporting ideas about how close the polls are.

Stefan Jovanovich writes:

Ouch. Since all my ideas are self-supporting, I can only confess to absolute guilt. I also have to agree that money is and should be the litmus test. Intrade is not about money, however. The current "market" for Obama is 1 share offered at $7.51 and 104 shares asked at $7.46. Their comment stream, on the other hand, is unending; it dwarfs even the Huffington Post in frequency. Polls matter precisely because they are about money. They are the only device the campaigns (including the supposedly independent issue ones) can use to decide where to spend their advertising dollars and where to schedule the candidate appearances. Professor Berg's assertions about Intrade's markets are 10 years old; they also go back to the golden age when those markets themselves were so obscure that they were, indeed, pure. They are anything but that now, even if they remain shallower than the Platte River in September. I suggest that we all look at these questions the way the advertisers and producers look at audience ratings in television and radio; the overnights matter but P&G, Colgate and the car companies all want to see the internals so they can decide where to put down their next bets. What everyone knows is that trusting the raw numbers during sweeps week is not the best way to decide how to spend the hundred million dollars required to launch a new household cleaning product.

Jeff Watson writes: 

If polling offers more predictability than incentive markets, then perhaps one should look at the paper traders for guidance in the markets.

Rocky Humbert writes: 

Unless someone changed the law when I was not looking, it is unlawful for a US Citizen to bet on Intrade. When I tried to open an Intrade account several years ago, this fact was made very clear to me by the Intrade people. (And I didn't open an account.)

Hence you either have the US Election being predicted/decided by non-voters. Or you have the US Election being predicted/decided by Americans who flaunt the law.

I report. You decide.

Jason Ruspini adds: 

Liquidity used to come in during US hours and looking at just the past two days for the Obama contract, that still seems to be the case. The federal law that might be most relevant for listers is the Commodity Exchange Act. With Cantor movie futures and Nadex, the CFTC signalled jurisdiction over prediction markets, which would make Intrade an illegal commodity exchange. I guess they are busy with other things…

I have a theory that the hassle of wiring money in clips of less than $10k coupled with the margin system (you post $6 to buy a 60% contract but $4 to sell it) means that not only are the markets thin, but prices tend to be closer to 50% than they otherwise would, beyond the usual longshot issue near extremes.

EDT Hour    Volume

0                111

1                 36

2                 193

3                 60

4                 198

5                 283

6                 148

7                   22

8                  297

9                  537

10                270

11                3334

12                6621

13                1883

14                3079

15                2819

16                  262

17                8171

18                1961

19                6897

20                 101

21                 346

22                 536

23                 400



 Suppose we wanted to know the likely price of cotton in 3 months. Would it be better to look at the decisions of thousands of people like Jeff who at the margin are constantly adjusting the price to the myriad uncertainties and paths, or to take a poll of farmers about it. A terrible error in this line is the idea that we're in grave trouble from the overhanding interest rate increase from the federal deficit. Should we poll all the conservatives on this point or take account of the predictions of people like Zachar and DeRosa as embodied in the market. Which is more accurate. It is interesting that Berg suggests using a random walk model to determine uncertainty attached to such noble forecasts.

Richard Owen writes:

The voter prediction markets are probably a reasonably clean example of superiority as they relate to a specific timebound events in which nobody has an interest other than to calculate as to the most likely contract conclusion; nobody is assessed professionally on the outcome; bettors are not levered and unlevered; people do not have to recycle capital forcibly into prediction markets; etc.

Other markets probably have much more complexity and thus greater potential for becoming disjointed.

Can a PAC or similar vehicle not raise money to douse the prediction market spreads?

But to answer the primary question, money where is rapidly adjusting mouth is probably a good litmus test.



 Whatever you think of Agassi, there are several market lessons here, and Agassi must have either read the Chair's books or have been taking lessons.

"Quit going for the knockout, he says. Stop swinging for the fences. All you have to be is solid. Singles, doubles, move the chains forward. Stop thinking about yourself, and your own game, and remember that the guy on the other side of the net has weaknesses. Attack his weaknesses. You don't have to be the best in the world every time you go out there. You just have to be better than one guy. Instead of you succeeding, make him fail. Better yet, let him fail. It's all about odds and percentages. You're from Vegas, you should have an appreciation of odds and percentages. The house always wins, right? Why? Because the odds are stacked in the house's favor. So? Be the house! Get the odds in your favor."

-Agassi, from Open: An Autobiography

Victor Niederhoffer writes:

As usual Agassi has it all wrong–something that can be predicted from an ingrate from a family like his. The only one that can go for singles, that can grind is the house. The player should never grind.

Jim Sogi writes: 

Lions and hyenas use a similar strategy when they kill a buffalo or wildebeast. They group up and wound it. They don't go in for the kill. They let it bleed a while, weaken, then tear it up and eat it. Why risk injury when waiting works.

George Parkanyi writes:

What kind of a market lesson is that? "We'll let you stew on your margin call for a while– THEN we'll come and throw you out of your house." ; )



 For anyone who is interested…it seems this event involves quite a bit of he said she said, with some good old miscommunications, and selected curve fitting thrown in for good measure.

"The Inconvenient Truth Behind the Diaoyu/Senkaku Islands" :

My research of over 40 official Meiji period documents unearthed from the Japanese National Archives, Diplomatic Records Office, and National Institute for Defense Studies Library clearly demonstrates that the Meiji government acknowledged Chinese ownership of the islands back in 1885.

Anonymous adds: 

In the current drama of this event, the very ownership of the island, though seemingly at the core, is actually a very secondary issue. What is worth watching are the following.

1) In a country where there is zero tolerance for demonstrations and even public gatherings, how come  there were suddenly so many demonstrators on the streets?

2) Why is there is so much resemblance between the main slogans, banners and pictures? Who made them?

3) During some demonstrations in front of Japanese embassies, why weren't passersbys allowed to join in? Who were those allowed?

4) Of the people leading most of the violence in the streets, how come many are short-haired, tan-faced, strong-muscled, young and well-coordinated? How come they had no fear of the police when doing the violence?

5) At a time when Bo Xilai is being judged and when the Party leaders are fighting in closed doors for who will take charge in the future, is all this just a coincidence?



 The markets will be closed from Sept. 29th through Oct. 7th. It is a combined holiday of the Mid-Autumn Festival and the National Day.

Apparently a stimulus for consumption, the government issued an order that all toll roads (which include nearly all highways) in the country are toll-free during this period. Many famous tourist sites lows charges also for the period.

All this is highly cheered by people everywhere. A lot of places (cities, hotels, travel agencies, tourist sites, restaurants, shops etc.) are looking forward to the upcoming huge crowd. It is reported that some rent cars have doubled the normal prices for the feast.



 Those familiar with Sacha Baron Cohen's sacrilegious work –"Borat" (2006) and "Bruno" (2009) will wonder why this film, "The Dictator"–not directed by the comic himself–made gargantuan strides into … nothingness. Hardly a soul saw it, and reviews arced from tepid to uninterested to quasi dire-warnings.

This then is the non-epic epic of a weaselly dictator who risks his life and limber length to ensure that democracy never gets to the desert country he so happily oppressed.

Though it got hardly a ripple in the critical columns, Sacha Baron Cohen's (vulgar but incessantly ribald) THE DICTATOR goes farther than any popular film (omitting the recent, much-criticized though unseen fraught "Mohammed video" trailer that may have spawned a reactive series of riots—not) at lambasting the deficits and negatives of life in the Arab Middle East. Naughty, profane, hilarious–but also prescient, no-holds-barred, and full of delicious ironies, DICTATOR is worth a gander, or a Netflix order, if you have a strong tolerance for some not-so-subtle digs at the foibles of the UN, diplomacy, our tolerance for the insane, and a little uneven but atypical romance, with a sprightly but naive Anna Faris playing the fervid "cute little boy" health crazy the dictator starts to work for in his effort to re-achieve his proper station in life.

If this nails your quirky late-night preference, you are invited to follow the giddy current adventures of a Middle east potentate of a country called Wahdiya who becomes displaced by his body double through a series of deliberate tricks and schemes of his major domo, Uncle Tamir, played elegantly and soberly by Ben Kingsley. As he tries to work his way back into power, and destroy the new Constitution his double will be signing, we follow him into the Waldorf, the new Apple store a block away from this reviewer, Brooklyn Heights and various tony watering holes of the clouted and privileged.

There are double-over laughs in nearly every scene, a mirage of a fantastic Wahdiya palace shimmering in the desert somewhere (perhaps Spain). Scenes from the months-old film are startlingly current, and especially the scenes in the UN could well have been time-jumped back to the filming of this silly-tickle outing. And made just about the same appeal to rationality and discernment as did the real goings-on in Oyster Bay.

If laughing is your game this week, given the fumbles in NFL football, you might aim your remote at THE DICTATOR.

"Much fool may you find in you, even to the world's pleasure and the increase of laughter."

/All's Well That Ends Well 2.4. 34-35/



 A la the Hobo, while in Arusha, Tanzania and Kampala, Uganda, and Amsterdam, Netherlands and NYC on a recent trip, I counted the number of people sitting around idle vs. the number of people busy going somewhere or conducting a business. The premise is that a lot of idle people lead to low productivity and low growth and vice verse.

In Arusha, there were large numbers of idle sitting around in groups of 5-7 or more not moving. In Kampala Uganda, there were very few, maybe 3 out of 100 sitting idle. In Amsterdam there were no one not moving, consuming, working. In New York there was maybe 1 out of 1000 lying derelict in the street, but none sitting idle. All were moving fast, consuming, working.

How does the Bustle Index test out? It's interesting to note that Uganda boasts one of the fastest growing economies with almost a 10% growth rate ranking 15th in the world. Netherlands has a -3% rate of growth ranking 193. Tanzania has a 7% growth rate ranking 31st. US has a 3% growth rate. (Figures from Wolfram Alpha rounded)

So much for the Hustle and Bustle Index.



 Thus spake Taleb:

Conclude, if you are starting a career, move away from investment management and performance related lotteries as you will be competing with a swelling future spurious tail. Pick a less commoditized business or a niche where there is a small number of direct competitors. Or, if you stay in trading, become a market-maker.

Well, making markets seems to be doomed, too. It has mostly been supplanted by the 'bots, and the pockets of fleshly franchise remaining are a diminishing and endangered species.

Taleb is wrong. Investment management and advisory is, always has been, and always will be a confidence game. There will always be men who can inspire confidence, and there will always be men who lack it and are willing to pay for it. This rule trumps the ability of the confidence man to provide investment performance– as long as he can inspire confidence, his AUM will runneth over. This basic voltage imbalance among men is an immutable characteristic of the human condition, and can never be replaced by computerized automation. It will remain the driving force behind this so-called "industry".

It reminds me of this H.L Mencken quote:

Perhaps the most valuable asset that any man can have in this world is a naturally superior air, a talent for sniffishness and reserve. The generality of men are always greatly impressed by it, and accept it freely as a proof of genuine merit. One need but disdain them to gain their respect. Their congenital stupidity and timorousness make them turn to any leader who offers, and the sign of leadership that they recognize most readily is that which shows itself in external manner. This the true explanation of the survival of monarchism, which always lives through its perennial deaths.

As always,

Gibbons Burke



Lest all you smug one-percenters, clipping your muni coupons while sitting in your Nantucket, Hamptons and Tahoe homes, think the fiscal cliff is a good (or completely irrelevant) thing, then think again. Your muni bonds, and especially your Build America Bonds are rather naked as this sea goes out…and it's not just the airports, toll roads and water treatment plants that issued Build America Bonds. Some states (including California) issued GO's backed by these 35% Federal subsidy payments. From the Bond Buyer (yes, they're still in business): WASHINGTON — The threat that federal subsidy payments for Build America Bonds could be slashed under the sequestration process after administration officials assured issuers those payments were safe could permanently sour the muni market on BABs and other direct-pay bonds, market participants said Monday.In a report sent to Congress Friday, the Office of Management and Budget said that, of $4.241 billion of subsidy payments authorized for issuers of BABs and other direct-pay bonds in fiscal 2013, 7.6% or $322 million would be cut early next year. The cuts would come under the legally mandated process by which $1.2 trillion would be cut from federal programs across the board because Congress failed to reduce the federal deficit last year, and the "fiscal cliff" looms.

Full link here.



Somebody is spending, but who? This chart shows YOY customs duties and excise taxes which are a fairly good surrogate for retail spending.

However, here's a question: if the federal government buys a fleet of new Chevy Volts (the ones that burn up, LOL), do they pay excise taxes?

Mr. Krisrock writes: 

The combination of Higher Energy, Higher Dollar, Higher Commodities, and the September 15 California Tax on the internet has caused a SURGE in amazon orders to beat the increase…and of course Obama's playing with the numbers. Look at the huge drop in employment a year ago in October. Obama knows how the numbers work a year ahead, and of course, where do auto parts come from…electronic components come from Asia…for starters…and foreign car assemblies do buy foreign parts.



 The wish for a strong father figure seems to be eternal in markets. Sometimes it was The Fake Doc, other times The Scholarly Chair, or a president or chairman. Like the rookie who starts the season off with a 400 batting average, you have to hand it to Draghi. He seems to have captured the fatherly longings. Whenever the market goes down, the cry of "Where's Draghi" can almost be heard across the lands.

Stefan Jovanovich adds: 

It helps the rookie father figure if everyone agrees not to throw any curve balls:

"Despite the surge in federal borrowing in recent years, net interest outlays are projected to hold steady at 1.4 percent of GDP through 2015, primarily because interest rates are expected to remain near historic lows for the next few years. Interest rates are anticipated to rise noticeably thereafter, causing net interest outlays to increase to 2.3 percent of GDP by 2020".



 I'm a big science fiction fiend. Growing up, I went through the Asimov trilogies (and lots of his other works, some of which took on new meaning after getting drunk with him at a bar at a science fiction convention), the John Campbell stories, Niven's Ringworld series, Haldeman's Forever War series, and Dickson's Chylde series, with the latter as a particular favorite. Lots of things we now coming to reality were talked about in these novels and stories. As a group, these writers (excepting Haldeman and Heinlein) tended towards optimism about the future–the human condition would improve, albeit with changes in what was defined as work and how societies functioned in the process of that improvement. Then an interesting thing happened during the 1970s/1980s. While many of these authors continued to write, the new writers were hardly optimistic. When I was at the local Barnes and Noble this evening, I was struck by how dreary the worlds portrayed by current science fiction writers have become.

Is it that we as a society are lacking in optimism about the future–so much so that we are no longer able to imagine one with a positive image (I understand that there are those on this list who will suggest that this is merely my perception, to which I acknowledge it as so being)? Much of the talk about raising/lowering taxes represent incremental changes. I'm thinking about paradigmatic changes; those are the changes that might address some of the challenges of the moment, whether it's water, energy/natural resources, pollution, health and disease control. Perhaps it's the dreamer in me, but if we can't imagine a future in which the human condition is uplifted/bettered, how are we going to achieve it?

Ralph Vince writes: 


I've been noticing much the same thing, particularly with the 20-somethings I am routinely around. The dark, negative future they all, pervasively envision is something I have never seen in such one-sided fashion before.

I've given this a lot of though in recent years and have come to a few conclusions you may or may not agree with — regardless, I'm interested in yours and others thoughts on the matter.

I think we DO progress — I think man's progress is ever-upwards in fits and starts, but, viewed through the lens of 3 or 4 generations, has persistently been higher. I think much of this is incremental, almost unnoticeable however.

Lately, I see changes in pop-culture themes that would make me think that the dark era of the past decade or so is coming to a close. I've mentioned walking into a high-end furniture stores, and the colorful, Dr. Suess-looking furniture invoking a sensation of almost giddiness. I see it in the extreme use of bold colors in television ads of the past 12 months or so, in women's fashion and the elaborate, loud footwear now, and hear it in the driving vocals, unwavering, non-tremulo female power voices replacing the warbling songbirds of the recent past.

The mass mood is changing, it's moving in a new direction already. You won't see young men in pinstripes, though you may, by next year, see the resurgence of seersucker (I've been trying, really, really hard on this last one!)

However, just as change occurs incrementally, it also comes in BOOMs. Jonas Salk, Louis Pasteur……Air conditioning, transistors…….the magna carta.

The Santa Maria.

I've alluded to the enormous undertaking of the interstate highway system (post 1950s) and the transcontinental railroad here as things that paid off many fold.

And we've just been stuck in a period of stasis which I think is bigger than politics and politicians, era's where things are just intractable, and the stasis, like large fields of ice, just take time til things become dynamic again.. To-wit, I present Barack Obama's administration. I truly think he/they IS/ARE committed liberals. I think there truly DID intend to close Gitmo, and many of the other things that didn't get done and are being pointed to (I'm not taking a political stand here, not making excuses for the administration, just pointing to evidence to support my "over arching stasis as a natural impediment to dynamism" idea. We've had periods in history where this HAS been the case. (the natural state of politics in a democracy IS stasis. I think had Obama NOT had a supermajority in his first year, a situation where he has to have every one of his party on board and, it would have been easier for him, and odd twist in our politics)

At some point, the stasis will give and dynamism return — I would venture a guess as a consequence of some unforseen invention again that elevates our existence in a quick burst once again.

I think the more "paradigmatic changes" as you say, are very rarely, historically, the result of political structure changes, of which there have been few throughout human history. Usually, it seems, these changes are a result of increasing the geographic perimeter of our existence. These things HAVE transformed cultures. Were the Romans not transformed by their excursions into Britain and particularly the Eastern Mediterranean? Wasn't the old world transformed by Columbus and the Iberian explorers of the 16th century? At some point (I will not be here) our perimeter will expand, and political structures will amend to the new reality — new problems will be solved.

In the immediate, when I see the one-sidedness of dark expectations among the young-n-naive (who will not all be right), and I see the mass mood of culture assume a new energy, I don;t think we will see an paradigmatic change any time soon (are these things even predictable?) but I do think we'll see a more optimistic era here in the coming years, regardless of who holds political office.

Russ Sears adds: 


While I admire and agree with both your optimism and lovely essay. I believe the turn to pessimism for science fiction has a much simpler explanation. The education system and elite culture has made it a crime to be a boy and has marginalized the importance of exercise, sports and competition for the intellectual boys. The results has been a rigidity of thinking, especially amongst those scientifically inclined. This ignoring of innate emotions causes internalization and depression It has been sad to see as my daughter is attracted to these intellectual young men, but is put-off by the cloud of doom many carry around.

There is an emotional side to all thinking, What the "rational" mind thinks must subconscious join with base instincts signals of the mind to be accepted thought. Rigidity in thinking, without a recognition of the emotions, is the opposite side of the "angry" trader. It causes one to miss the short term bringing out the canes, and the long term emotional side to central planning, fed policy and brinkmanship politics. In both cases, I believe can be shown, that these time periods are not independent random variables, within statistical significant.There also appears to be a symmetry that plays out between short vs long term non independent market movements and respectively stocks vs bond markets. Which I find quite beautiful. But I will leave both these as exercises for the reader.




Directed by Paul Thomas Anderson

Joaquin Phoenix as the skanky ex-WWII sailor, Freddie, who falls under the sway of The Master played by Philip Seymour Hoffman has a broken-backed posture that is ape-like, consistent throughout the film. His arms curve down, into his unhealthily skinny, strange parenthesis of a body, like a starved gorilla's, ready to break someone's skull—if they say or do anything that runs counter to Hoffman's Lancaster Dodd, a Hemingway-cum-L. Ron Hubbard amalgam with all the animal charisma, robustness and pseudo-sagacity of those epic characters. Is his Master at peace with such overreach? Dodd waggishly calls Freddie a "naughty boy" after such explosive incidents of lethal enforcement: Here is his useful tool for control of others.

Dodd's "processing" of the Id that is Freddie is not a cost-free transactional process. Freddie's mother is institutionalized. His sexual hunger is about debasement, not lust. He is a composite of a feral wild animal.

The unhinged, barely civilized Freddie meets the happily idolized Dodd as a stowaway in the latter's boat as it rounds from San Francisco through the Panama Canal, up to NYC. It is the 50's. Hoffman cannily corners the near-savage bootlegger Freddie for his own purposes, in a dysfunctional dynamic that manages not quite to quell the furtive Freddie of his internal demons and bad parentage. Freddie does not even require direction from the force-field puppeteer, Dodd: He easily slips out and kills those who question the conman cult-meister of The Cause, a shoo-in for takeover -ologies like Scientology.

The film has ravishing setpiece after setpiece befitting the accomplished director of BOOGIE NIGHTS (1997), MAGNOLIA (1999)—which shares this film's excoriation of strata of perhaps-corrupt society, and the grim hematology of THERE WILL BE BLOOD (2007). Here, though the performances by the principles, including a primly demonic Amy Adams as Dodd's steely controlling, artificially beatific wife, Peggy, we are at a loss as to why all this energy and fury are expended for a topic that, distanced by some 60-odd years, means less to us than his prior cinematic subject matter did. Other than the news wagged by the Cruise shocker divorce initiated by a fed-up Katie Holmes, what meaning does the film convey, except to beware of Elmer Gantry-esque charlatans selling snake-oil "cures" for personality defects? In a parallel that may escape notice, Freddie has concocted a powerful alcoholic quaff that he sells to the eager unsuspecting. Like highly bruited China's exported foods adulterated with sweet melamine that go undetected until a baby or pet somewhere dies, Freddie makes his power likker using 'sweet' but toxic derivatives that pack a bigger punch, shall we say, than the average mini-umbrella cocktail.

There are anguished scenes involving de-programming effects that are treated the way Roman audiences at unfair gladiator vs. hungry lion spectacles were treated, or like the inane wealthy viewers of THE HUNGER GAMES (2012) were treated: These are just tickle your fancy entertainments, although we know, if we have an iota of decency, they are immoral and a crusty abuse of decency. There is a 'dream' sequence involving an entirely unnecessary signing Dodd, complete with naked ladies and fully clothed men. It serves no purpose other than as a fevered interlude for prurient rise in testosterone. Or whatever. I found it utterly unredeemed by anything preceding or following it. It could as easily have been excised and the film lose nothing.

The verbal and acting hijinks on screen immobilize the audience, but no good comes of it. You watch with queasy disgust, find yourself reacting with distaste and a push-pull desire to leave, while wanting a satisfactory resolution. Which never arrives.

Though MASTER is up for several European awards, chiefly for the two protagonists going at each other with such implacable force and verbal weapons, you leave your seat angry, uneasy, unsatisfied and perturbed. This is not to say that the filming itself does not capture the time it deals with. There are striking tableaux every few minutes. The jail sequence between Freddie, crashing his toilet out of rage, juxtaposed against the calm, almost professorial Dodd, standing with elbow crooked against the upper bunk of his neighboring cell, is a classic-to-be. But let Europe choose its poison: This is a masterfully filmed ugly film that does not teach us anything we did not already know, nor provide us with an elevating entertainment. It's one reason one avoids horror films—we know what there is coming, and if gore is not your chosen menu du jour, you steer clear.

Reactions range from robotic admiration for the many technical proficiencies, the cinephile's gotta see it, to the view that the protagonists are busy chewing the scenery and the movie as a whole is a visual feast but a mess.

To the extent that audiences buy in to this feast of sordid and nasty, we need worry about the direction of the population. TV is free, relatively speaking. To pay to see this, dragged into this muckish spectacle, is a judgment one must anguish over. The inkling of good the film might supply is the wakening of millions to the dangers posed by demonic and ungloved movements (and 'leaders') like Scientology, which historically stop at nothing to silence their detractors.

Is Anderson subtly signaling that we are blindly following the lemming example of a latter-day Pied Piper? Or is this just a movie?



To what extent will the expansion of the Fed's balance sheet, the QE3 and presumably more when this one doesn't work cascade around and lift other markets. Will the markets that have gone up the most so far like the grains and metals go up more than those markets that are relatively stagnant? How could this be profited from?

Rocky Humbert writes:

As one of the early believers in the market-moving potential of QE1, I suspect that my response to this inquiry may be surprising to some: I think that the idea that this qe3 and more will cascade and lift markets from here is presumptuous — and quite likely wrong. I posit with only a slight bit of quantitative evidence that we are approaching the point of diminishing marginal returns for QE. This is primarily because the move from 0 to 1Trillion was an infinite growth in the Fed's balance sheet. But the move from 3Trillion to 3.5Trillion is only a 16% increase. In other words, the Fed would need to engage in exponentially increasing amounts of QE to achieve the same effects. Additionally, the institutional memory of the market has now accepted the Chair's perception as conventional wisdom, so I think the half-life of QE effects are much shorter than previously. Lastly, I note that corn peaked on August 21st (the Fed largely telegraphed QE3 and announced it on September 13) and it has declined 11% since then. Oil peaked (so far) on 9/14 (the day after the fed announcement) and has declined about 8% since then. The Chair and I disagree on the underlying proposition. Hence, all is right with the world.



 Although I'm not at all happy with this Prez's on-going criticisms of the Supreme Court and the nature of several late-Friday-afternoon Executive Orders, I believe we're in danger of over-emphasizing the power of the presidency. He (whoever he is or might be) has little power to create jobs, damage or improve the economy, improve test scores, bring honesty into government, or bring about peace.

If any of the foregoing good things do occur, he will take credit, if some of the bad things occur, it will be Congress's fault - Bill Clinton is still taking full credit for "balancing the budget" and curbing welfare payments, few recall and none mention that Republicans controlled both houses. Mr. O doesn't believe he should be tagged with late '08's and early '09's spike in unemployment as they were Baby Bush's responsibility– both houses of congress were controlled by Democrats and any actions, good or bad, have their fingerprints all over them.

Poor old Mitt. The guy hit the nail on the head and is being crucified for it. Rather than running from the mischaracterized "gaffe", he should embrace it. We are on the verge of a "poor" majority — one which will approve almost any legislation (and legislator) that increases their monthly stipend. It's been forecast for quite some time and its just about here. I expect my 401k (and yours) to be tapped sometime early next year. Why should Mitt stick with his statement? Remember Jimmy Carter and his "malaise speech." Go back and read it - much of what he said was, and is, true. Romney could have been similarly "vindicated" if hd'd only hung in there.

Personally, I'm promoting a "Vote for the Other Guy" campaign. Anybody who is truly a loyal Democrat or a loyal Republican should hope, pray, and steal votes for the candidate of the other party. Like several other List members, i see some real hard times in the near future - and, I believe, they will last for a lengthy period. The party of the man sitting in the White House will be blamed - unjustly, of course. Hoovervilles will be replaced with Romeyvilles or Poverty Baracks and one unfortunate party will be consigned to minority status for a long time.

Before signing off I want to quote another notable politician, this one form 1957: "I can prophecy that your grandchildren in America will live under socialism…Our firm conviction is that sooner or later Capitalism will give way to Socialism. Whether you like it or not, history is on our side. We will bury you."

I have two grandchildren, one 12, the other 3. Will Nikita be proven correct?



 My family joined a new health club (it bills itself as a resort, and Taj Mahal would be a better description) this week. One of the attractions for me was the presence of a sauna. One able to hold maybe 15 or so persons comfortably. When I entered it this morning (to try it out), it was the first time I had been in a sauna since before I was married. That's a while back. My interest in saunas began when I was a resident in Minneapolis. Part of my residency included completing the Master's in Public Health program at the U of M. Kristen was one of my classmates. Shortly after Thanksgiving that first year in the Twin Cities, Kristen and her husband threw a party to which many of my classmates and I were invited. The party was at their house, sitting on one of the 10,000 lakes in Minnesota. (Fortunately, in December, there were no signs of the 10 trillion mosquitos that go along with the 10,000 lakes.) In the basement of their house, they had a sauna, and Kristen's husband, Rob, suggested I might want to try 20 minutes in it. It would be invigorating, he said.

The rule of the house was that no textiles were allowed in the sauna–no towels, no bathing suits, no nothing. The cedar wood inside was maintained in immaculate condition–I've built furniture that I'd given to friends as gifts that weren't as smooth as those cedar planks. It didn't much matter to me, though, since it was just Rob and me in the room. He wasn't much older than me, having completed his residency in anesthesiology barely 3 years before. (The house was 6,000 sq ft, with a pool house and a pool.) We were sitting in the sauna talking about something medical when in walks Kristen. Think Heidi Klum at 25 with platinum blonde hair. Suffice it to say, I left the party with a very positive image of saunas–so much so that when the renovation of our house is finished, it will have a 10 person sauna inside. But I digress.

I'm sitting in the sauna when an elderly gentleman comes in and on the bench opposite me. We exchanged pleasantries, and then after about 15 or so seconds of silence, he looked at me and asked if I had seen some article in the Union-Tribune that morning. I replied that I didn't read the Trib, just the NY Times. He grimaced and said that I must be voting for Obama. After so acknowledging, I and he had a fairly animated discussion over the next 20 or so minutes talking about the state of the country and related matters. It was a heated discussion (at least as heated as one can be in a sauna)–we both have, as it turns out, some strongly held views. But our discourse was civilized. No lost tempers, no shrieks or yells, just civilized. I guess in a sauna one doesn't have much choice–if you get too worked up about anything, your body temperature will skyrocket. In fact, it was so enjoyable a discussion that we agreed to meet again in the sauna in a few days, and exchanged contact info when we got back to our lockers.

Civilized discourse seems to be a dying art in our society. I've commented before on how we have become the iPod/iPhone society, and therefore have no interest in such discourse. Why bother, when you can hear exactly what you want to on tv or your iPod? As I noted, in a sauna is one of those place where losing one's temper can be dangerous. Even if one is inclined to be short-tempered, in the sauna, other behaviors must be present. Not only does one think and behave more rationally when one does not lose one's temper, one's ability for social intercourse is enhanced and one can avoid dangerous outcomes can be avoided.

As has been noted before, there are so many benefits to not losing one's temper, it makes me wonder why we have them in the first place. Are they simply vestigial behaviors from the neanderthal period? If not, there must be some evolutionary benefit to having one (or not, as the case may be).



Let's examine the limit order in more detail. There are essentially three scenarios that can occur when you place a limit order. One - you are brilliant. You caught the bottom, nicked the top and got in at an excellent price and can now manage a trade with great risk/reward profile. Two, you were right on the overall direction of the instrument but because you tried to be cute with price you missed your entry and now watch wistfully as prices move away from you while you remain empty handed. Three - you got your fill and now you wish you hadn't as price continues in the opposite direction of your bet.

So in summary in two out of three cases you have a negative outcome. Now if you happen to be a superb market timer that may not matter, but if you are just an average Joe (and we all are) then your chances of execution are basically 33% on each scenario which means your chance of winning is only 33%. That's why limit orders are a sucker's bet. They play to our desire for a bargain, but in the end they cost much more than we think.

Steve Ellison writes: 

"… your chance of winning is only 33%. That's why limit orders are a sucker's bet."

Here is a quick test of that proposition.

Imagine that traders A, B, and C each make at most one round trip trade in the S&P 500 futures every week. Trader C is a permabull, so every Sunday afternoon when Globex opens, he immediately buys the contract. He sells at the close on Friday.

Trader B wants to only "trade in the direction of the price flow", so he only buys the contract if it goes up 5 points from the Sunday open. Then he sells at the close on Friday.

Trader A fancies himself a tough negotiator and places a limit order 5 points below the Sunday open. He is last in line, so his order is only filled if the price drops to 5.25 points below the Sunday open. If filled, he also sells at the close on Friday.

Here is how each trader would have fared in the last 64 weeks.

Trader A, the user of limit orders, would have had 59 of 64 orders filled. He would have been "too cute" 5 times and missed out on big gains. 7 of his fills would have suffered from adverse selection as the market continued down, and trader B stayed out of the market. Trader A's net profit on his 59 trades was 223 points. 37 of the 59 trades were profitable.

Hence the 2 out of 3 things that can go wrong with limit orders occurred less than 20% of the time empirically. Trader A won far more than 33% of the time. Even after detrending the data to correct for the upward drift during the period, trader A's limit orders were profitable 34 of 59 times (58%).

Trader B would have avoided all the adverse selection weeks in which the market did nothing but go down. However, his net profit on his 57 trades would have been only 53 points.

Trader C, the always-in trader, would have traded all 64 weeks and had a net profit of 172 points.

In this test, the user of limit orders did better than the follower of price flow.

Sample data:

Week          Net profit
Ending   Trader A  Trader B Trader C
 7/8/2011    12.4     2.4      7.4
7/15/2011   -18.6      –    -23.6
7/22/2011    32.1    22.1     27.1
7/29/2011   -36.7   -46.7    -41.7
 8/5/2011  -100.4  -110.4   -105.4
8/12/2011    12.1     2.1      7.1
8/19/2011   -50.4   -60.4    -55.4
8/26/2011    59.4    49.4     54.4
 9/2/2011    -1.7   -11.7     -6.7
 9/9/2011    -2.6   -12.6     -7.6
9/16/2011    79.7    69.7     74.7
9/23/2011   -65.2   -75.2    -70.2
9/30/2011     9.2    -0.8      4.2
10/7/2011    35.9    25.9     30.9
10/14/2011     —    56.2     61.2
10/21/2011   22.0    12.0     17.0



 One finds it very dysfunctional to lose my temper on all occasions, but especially when trading or with the children. It could even lead to tilt. So forgive me if I don't mount the high horse in my disapproval of talk about Fibonacci and Elliott wave and Gann waves on the spec list as our raison d'etre is almost as antithetical to such things as it is to politics, religion, and honeys (may they never meet).

Scott Brooks writes: 

Losing one's temper is among the worst decisions you can make. Emotions supplant logic and all is lost.

I coach my oldest son's high school age baseball team. On that team we have a few hotheads. Those kids are the bane of my existence. They cause us more problems and are the source of 99.99% of the drama on the team.

Their inability to control their emotions only makes the situation worse. And even when I am able to calm them down, get them to reasonably understand that getting emotional was a bad choice, they still get emotional the next time something doesn't go their way.

They boys that have the most trouble when it comes to controlling themselves will likely, IMHO, have a very difficult life.

anonymous writes: 

This recent book by John Coates, "The Hour Between Dog and Wolf" is certainly relevant to the topic of controlling one's emotions, though I disagree with some of the author's conclusions. He documents how our biological changes under conditions of risk and uncertainty impact our processing of information, often for the worst. His conclusion that markets would be less volatile if we populate the trading world with more females and older men strikes me as simplistic…some of the greater episodes of tilt that I've noticed have come from members of the fairer sex and those long past their biological primes! 

Jeff Watson writes:

Jim Lackey writes:

A lack of emotion in sports or trading can be very dangerous due to lack of focus. If there was certainty, there wouldn't be an emotion. The most uncertain outcome and the greatest risk is quite often the best opportunity. The fight or flight emotions should not be ignored.

We will make mistakes following our emotions and that experience will teach us when to ignore the fear response. The best trades or moves on the race track are when we are fearful, yet we attack. The best saves are when we begin an attack with confidence, slip, then quickly withdraw. Learning by making mistakes in real time is the only way to gain the experience to overcome.

Deception is a funny thing as it's difficult to call someone on it, unless they are a friend. If you're wrong and call someone out, you make enemies. Which is part of the reason deceptions work on the inexperienced.

At the race track there is always someone mad as Hades. On the track he is as cool and smooth as can be. There is always some one sick, wounded or coming off an injury. On the track he is as strong as an ox. Every year a new pro says after the races, "I thought they were going to fist fight! or Wow! That was an amazing performance for a guy that was sick or coming off injury". The old pros burst out laughing, "ride your own race, kid".



 Having internalized some basic aspects of wave counts, such as alternation of corrective waves within a motive wave, coming back to the counts produced by Advanced GET is a strange experience, as the software-generated counts seem quite wrong.

Have others, as I now have, given up using software to mark the key wave points? Of course one would still use a software grid to mark Fibonacci retracements.

Anatoly Veltman writes: 

Actually, Advanced Get by Tom Joseph was very good when first introduced in late 80's-early 90's. Trick was that one should have also attended Tom's weekend workshop (mostly held near an airport in Ohio), to be tipped on the whole essence: type 1 and type 2 trades, wave 4 index and oscilator. Without figuring out when Wave 4's odds diminish to unacceptable — there is no reliable Elliott Wave trading. And Fib retracements are great — but ONLY if EW type 1 or type 2 trade has first been isolated. I taught Tom's methods for about 15 years. Not sure if any of my students succeeded in black-boxing the entire methodology.

Tim Melvin writes:

Did someone really say fibonacci on the spec list? This could get interesting if it is anything like the old days…

Anatoly Veltman writes: 

Well, that's the whole point. Loving to say Fib doesn't test well– when the wrong application was tested to begin with.

Phil McDonnell writes: 

To be sure one must test something according to the right way of doing things. However that is exactly the problem with wave counts and the like. The rules are so arcane and convoluted even so called experts disagree on them.

If you get 5 different Elliot exerts in a room you will get 5 different wave counts at the same time. It is a bit like the game of Fizzbin. The rules keep changing and are unnecessarily complex. 

Leo Jia writes: 

I think one probably should take this argument as a not-bad news for Elliot theory or any theory that gives non-consenting results. It means that it likely has some statistical truth in it that is worth one's effort in seeking. Don't we agree that a market theory delivering definitive results does not exist or, if exists, ought to be thrown out?

Steve Ellison writes: 

Trying to stay in line with our raison d'etre, I have been coding a method for retrospectively identifying highs and lows of multiple levels of significance.

My approach is to go bottom up, starting with an idea I got from one of the Senator's books. A local high is a bar whose close is higher than the closes of both the previous bar and the following bar. A local low is a bar whose close is lower than the closes of both the previous bar and the following bar (a sequence of 2 or more bars with equal closes count as one bar for this purpose).

After identifying the local highs and lows, I move up a level. A 2nd level high is one that is higher than both the preceding local high and the following local high. A 2nd level high cannot be recognized until one bar after the lower local high that follows the 2nd level high. I record the time at which the 2nd level high could have been recognized.

I follow similar rules to identify 3rd level, 4th level, etc., highs and lows and the times at which they could have been recognized in retrospect.

I haven't finished yet, but this method should give me a platform for testing hypotheses about "primary trends", etc.

Anatoly Veltman writes:

Tom Joseph's contribution to E.W. trading, in my view, was much greater than Prechter's or RN.Elliott's. Tom basically said with his excellent refined Type 1 trade: don't ever place any bid, unless:

1) you've already observed a valid impulse (with extended third wave)
2) a correction is currently in progress, approaching 38% of preceding rally
3) you're filtering this correction with oscilator return to 0, and fourth-wave index still sufficient for fifth wave
4) fifth wave projection extends to at least 2:1 profit/loss ratio, incl. all possible slippage.

I say: if all these conditions are not met (and this may not occur every day) - never place a bid at 38% retracement. If all these conditions are not met, you'll have to bid only at near-100% retracement. What does this principle have to do with popular E.W. or popular Fibonacci methods. Nothing!!

Laurence Glazier writes: 

Sure, things are complicated and one would not wish to poke a stick into a hornets nest, but … some things are complicated.

It took hundreds of years to elicit the laws of harmony from the canon of classical music (many to this day deny their existence). Put five composers in a room and have them harmonise a tune (the non-believers might refuse to!), and they will do it five different ways, but they will all have added to the map of knowledge.

Even knowing those laws, one could not reasonably predict how a piece of music would continue if Pause were pressed (unless it were minimalist) - but one might anticipate it would return to the tonic key, and that the free fantasia would not be over-long, and so on.

Those laws are difficult, unprovable, and without material substance but are the result of empirical observation.

Gibbons Burke writes: 

CTA E.W. Dreiss used, in the 1990s, a very similar way to count waves in the market using what he called the Fractal Wave Algorithm (FWA), and he traded futures breakouts from FWA-n magnitude highs and lows. Did quite well, but like all trend followers, it is a bumpy ride.

He also came up with the Choppiness Index, which sums the true ranges in the last n periods, and takes that as a ratio of the n-day range.

Jason Ruspini writes: 

This is the natural approach that I took as well. Ignoring the "correct" 1-5 definitions, I just looked for a run of higher such double-X highs and higher double-X lows identifiable with the necessary lag, with attention to what happens when you eventually get a lower major high/low, breaking the "wave" run count, which can keep going after 5. What I found wasn't very interesting, in-line with my previous comment. I'm still unclear if anyone is actually trading a tested (complicated) system or just applying versions of rules with discretion. If it is a tested system, why is it better than a simple long-term momentum system?

George Parkanyi writes:

I like to keep it simple. Many years ago, I read something written by Larry that said, when the commercials are generally substantially more net long or short than specs - that tends to stop trends and turn markets the other way. He admitted it was a rough rule of thumb - that it may take a while to turn the tanker - but I pay attention and time after time I've got to say it works. So right now two markets that fit that profile are coffee and to a little lesser extent sugar. (Oh yeah, VIX as well) I've been long both for a couple of weeks with modest starting positions, and just had a nibble at VIX. I don't know when the trends will turn and I may have to take a stop or two, but I like the chances for a good position-trade in these two markets - and VIX as a bet on a short-term post-Fed hang-over. I checked back to when coffee started this particular big decline - and it was within two weeks of when commercials were selling the crap out of it and their net-short positions had peaked. Gold and a number of other commodities did the same thing at the beginning of this rally that began in May - except that the commercials were the only buyers at the time. It may be a dumb-as-dirt perspective on my part, and will likely set off Anatoly - but its one thing that has stuck with me from reading a number of Larry's books.



"Mining it More, Burning it Less": 

We're mining more coal in the US, more efficiently than ever, but burning less of it. Domestic consumption of coal is down to its lowest point since 1988. Meanwhile US coal exports have reached their highest levels in 20 years.

Republicans accuse President Obama of waging "war on coal." Coal companies blame over-regulation from Washington. But US coal production has risen substantially over the last half century, from 560 million tons in 1950 to 1.1 billion in 2011.



 BARUG Meetup at the Googleplex

via Google Open Source Blog by Stephanie Taylor on 9/20/12

What is R? R is an open-source, statistical programming language that is increasingly becoming the lingua franca of modern data analysis. R developers have created over 4,000 packages to run in the R environment, including several dozen developed by Googlers. We continue to work with the R community through conferences, meetups like this one, Faculty Research Awards, and the annual Google Summer of Code program, which funded 16 students to work with the R Project this summer.

Last week, Google hosted the Bay Area useR Group (BARUG) at our Mountain View HQ. Over 130 R users and developers met for pizza, networking, and presentations by Googlers.

This is interesting since everyone I know at Stanford (not that far from the Googleplex) functions with SAS and Stata. I suspect that this hoopla about R is like the hoopla three decades ago about C, when Bells Labs was proclaiming it to be the next big language, the successor to pl1, fortran, algol, pascal, cobol (if that doesn't date a comment…), and a variety of other languages of the time. C has spun off a number of derivative languages, and it has emerged as the language for systems programming, especially on the net. But much like S and other such languages, it is not used–at least not directly (though SAS may have been rewritten in C by now)–it isn't used for that much statistical analysis. That's not to say one couldn't do so, just that isn't nearly as compelling a language for such purposes as it is for systems work.

SAS if the IBM of statistical software, and everyone else are the dwarves. I don't think that changes until there is some major disruption in the current models of information technology and data analysis. Of course, such disruptions are visible only in hindsight, and I'm hard pressed to see how software along could lead to such disruption. It took rashy personal computers, the TRS-80, the IMSAI 8800 and the Altair 8080 (I speak from personal experience as to how little they could do) to kick off the PC disruption, which itself took a decade to manifest. That was a hardware-led change, much as the 360/370 mainframes and the VAX mini disruptions were hardware-based. I don't see the hardware change leading to a disruption here. Perhaps it's the net itself, but I have my doubts that that's what's unfolding with R. For the net, though, if it is disruptive in software, I would expect to see it in C–and I think SAS is already there.



Afternoon esteemed (daily)specs,

I haven't done any research on the data and the numbers but even a fool like me can observe world wide stock markets, look at the release of data of economic indicators and see that something fishy is going on. I'm referring particularly to the Australian market and the release of the Chinese PMI Manufacturing numbers, and the dropping of iron ore prices.

Ready to take notes…..



 A couple of days ago, my neighbor knocked on the door to tell me he had just hired some guys to take down several trees on his property. Knowing I wanted several knocked down, too, he thought I might be interested. I said 'sure', but was on the way out, though I'd listen to their spiel and an estimate when I got back.

There were three guys, a father and son and a friend of the father's. These were 'natives' off the 'rez' about 50 miles away who were driving around town looking for dead trees, then approaching home owners about cutting them. I had no problem with that, they said they'd been doing this all their lives and showed us an insurance cert. It seems the father and son had their own company and the friend had his, but they collaborated.

Upon return, they had taken down half the neighbor's trees and he was satisfied to that point. We watched them take down the rest of neighbor's trees and found them quick and very deft at the task, scampering up and around the trees with lineman's spikes, ropes and saws. They cleaned up the property, piled the wood and brush for removal and basically did everything they said they would.

While the son and friend worked on my neighbor's property, the father popped over, took a look at my trees, described how they would take them down so as not to destroy anything else, said they'd cut the trees into nice firewood, and he gave me a quote that was 1/10th of what I would expect to pay a more high-powered company for the same work. Cash, of course. Given what I had seen, I gave him the ok and he said he would return the next day to cut my trees.

Several times as we talked, he mentioned that if his friend came over and approached me, I should not listen to him, because while they were life-long friends, the friend was the kind of guy who frequently would try to cut the father/son team out of deals. I told him not to worry, we had a deal. Later, with his friend out of earshot, he reiterated several times the complaint about his friend to both me and my neighbor.

Nonetheless, early the next morning, the guy gave me a call to let me know they were on the way and to ask if the friend had called to try to weasel the business. I said no, we had a deal. He replied that if the friend just showed up, I should not let him cut anything. I said fine.

After our phone call, I thought about this paranoia and wondered if it was a cultural thing, natives having been screwed in broken treaties, etc., and wondered why, if this guy was so worried about his friend, he would work with him. No answers, but good to think about, and in the end, not my problem.

When the father and son showed up, the first thing out of the father's mouth was 'did the other guy show up wanting to cut?' No, he hadn't. The father continued on with the stuff about under-cutting, etc., I asked where his buddy was and the father said he had told the other guy not to come because they wouldn't need him that day. In other words, while they didn't 'need' him, they could have used him, but they didn't. They then set about working and did a very nice job.

Now, part of the agreement with both my neighbor and me was they would have a third party come to remove excess wood and brush from both our properties when the work on both was complete. When the work was done, we learned they didn't really have a deal with the third party to remove brush, only the wood. My neighbor talked with the removal guy, who said he'd remove the brush for what amounted to a little extra cash. No problem, we withheld a little money from the cutters, agreed to pay a little premium for the removal, and both my neighbor and I were happy to have the work done.

A bit later, after the cutters had left, the guy shows up to do the wood and brush removal. He, too, did a very nice job and all was well. We talked with him about the job and the cutters and such. As it turned out, my neighbor had known him for some years, so he spoke frankly. He told us, without being prompted, that the 'friend' cutter was a straight-up, good guy, but he thought one ought to be careful of dealings the father and son. While they did nice work at a good price, many around wouldn't work with the father, as apparently, he was the one who had a history of doing to his friends and colleagues exactly what he had told us the friend might try to do to him and that customers occasionally wound up on the short end of the stick as well.

As I thought about this inside dope later, it occurred that we had gotten what had been promised and except for the clugey deal with brush removal, everything had gone off well and we were satisfied. But the truth of the relationship between the two collaborating cutter friends was reminiscent of something learned long ago that applies to contracts, hand-shake deals, boyfriends and girlfriends, car salesmen, politicians, and most everyone else for that matter.

That is, the biggest cheats are easy to spot. More often than not, they're those who are overly worried about someone else cheating them, even those they call friends.

And, that also reminded once again of the truth in Anais Nin's thought that 'We don't see things as they are, we see them as we are.'



 Tuesday night marks the start of Yom Kippur, the holiest of days among Jews. Hearing Kol Nidre reminds me not only of a time for introspection but also of a moment to think about family and friends with whom I've been in contact with during the prior month wishing them best wishes on the new year. Usually in talking with friends and family in Israel (thanks to Skype for facilitating free face-to-face internet calls), I hear all the news of the family and often some bemoaning of one thing or another ("that corrupt Prime Minister" or "what's so complicated about building a road?" or "The children are thriving, even though they are in kibbutz in the middle of nowhere in the Negev"). These range from adamant Peace Now backers ("why don't the Palestinians begin a non-violent movement like Gandhi") to the far right ("I knew Begin was going to betray us"). In one case, I have a cousin who framed an enlarged copy of the Dry Bones cartoon about Begin lecturing Carter about the US withdrawal from its "occupied territories") (The link shows both the original and an updated version of Netanyahu and Obama–plus ca change…).

I always hear about what's going on with the family, sometimes about a missed article in Globes or TheMarker, and sometimes a sense of the political climate. This year was a little different. I heard lots about family and friends (lots of pregnancies during the past year, and in one instance, triplets born this past weekend). I also heard some about Iran. I was surprised to hear as much as I did from across the political spectrum. One friend, a very conservative (she's the one whose quote about Begin I cited before) retired IDF colonel, commented that if Israel attacks Iran, it will be likely be suicidal but "we have to do what we need to do to defend ourselves"). Another, a fairly liberal cousin (he thinks Israel was stupid to keep the PA from developing an economy), is hopeful that an attack can be avoided, but he's also a realist ("Obama is well intended, but let's face it, Iran wants to destroy us, and given even half-a- chance, it will"). I heard a chorus of concern about Iran, and also the general view that Iran was very much of an existential threat to Israel.

The sense I got was that Israelis across the political spectrum are feeling lonely. Some are more trusting of Obama than others, but for the most part, they don't see the US going to war to deal with Iran. For a couple of folks, the recent decision by the Olympics not to have some moment of silence during the opening ceremonies merely "confirmed" their view of an isolated Israel. Developments with Egypt have been unsettling, and the recent death of the American Ambassador to Libya raised even more concern. There are now reports being published about likely responses from Egypt and Jordan if Israel attacks Iran. Many of those I spoke with indicated an expectation of such a response.

What strikes me as curious, though, is that this article is appearing now. Does anyone doubt that Israel would deal first with a perceived existential threat and then deal with the consequences afterwards? Neither Egypt nor Jordan can pulverize Tel Aviv in less than an hour. On the other hand, for whose benefit, then, is such a story being published? Not the Israelis–they seem to understand this already (and this was before the story was published). The Arabs? Much of Egypt wants to cancel the peace treaty with Israel and the rest are insistent on a renegotiation of the current treaty. The American public? I haven't observed a groundswell of support for any military action in the US by the Israelis, never mind the US. So I'm a bit challenged to figure out why this story is appearing now. Those in Israel that I've spoken with during the past month or so seem to have already factored it into their thinking. Qui bene?

Then there was another story which provides nothing no one doesn't already know. Is this is for domestic Iranian consumption? Perhaps. We know the Iranian economy has taken a hit with the sanctions. Perhaps Iran is taunting Israel and the US? That may not seem logical, but when talking about Iran, there is little that is.

In any case, the Iran watch continues. And my relatives and friends are not only worried about Iran, they are also untrusting of the US to do anything about the Iranian nuclear endeavor. At the same time, Rome isn't that much further from Tehran than is Tel Aviv (2600 miles vs 1000 miles). Is Obama naive enough to think that a nuclear Iran would not hesitate to threaten Italy in its bid to get sanctions lifted? On the other hand, is the Iran nuclear program sufficiently advanced that an attack would have no ability to stop it or slow it down significantly?

For all those celebrating Yom Kippur, have an easy fast.



 Like Michael Lewis's classic Liar's Poker, Jared Dillian's Street Freak takes readers behind the scenes of the legendary Lehman Brothers, exposing its outrageous and often hilarious corporate culture.

In this ultracompetitive Ivy League world where men would flip over each other's ties to check out the labels (also known as the "Lehman Handshake"), Dillian was an outsider as an ex-military, working-class guy in a Men's Wearhouse suit. But he was scrappy and determined; in interviews he told potential managers that, "Nobody can work harder than me. Nobody is willing to put in the hours I will put in. I am insane."

As it turned out, on Wall Street insanity is not an undesirable quality.

Dillian rose from green associate, checking IDs at the entrance to the trading floor in the paranoid days following 9/11, to become an integral part of Lehman's culture in its final years as the firm's head Exchange-Traded Fund (ETF) trader. More than $1 trillion in wealth passed through his hands, but at the cost of an untold number of smashed telephones and tape dispensers. Over time, the exhilarating and explosively stressful job took its toll on him. The extreme highs and lows of the trading floor masked and exacerbated the symptoms of Dillian's undiagnosed bipolar and obsessive compulsive disorders, leading to a downward spiral that eventually landed him in a psychiatric ward.

Dillian put his life back together, returning to work healthier than ever before, but Lehman itself had seemingly gone mad, having made outrageous bets on commercial real estate, and was quickly headed for self-destruction.

 A raucous account of the final years of Lehman Brothers, from 9/11 at its World Financial Center offices through the firm's bankruptcy, including vivid portraits of trading-floor culture, the financial meltdown, and the company's ultimate collapse, Street Freak is a raw, visceral, and wholly original memoir of life inside the belly of the beast during the most tumultuous time in financial history. In his electrifying and fresh voice, Dillian takes readers on a wild ride through madness and back, both inside Lehman Brothers and himself.

He will be speaking today at the Union Square Barnes and Nobles at 6pm

105 5th Avenue @ 18th Street
New York,NY



 i almost beat your record points in scrabble with 104 points with disquiet. i scored bingo points and triple word score and double letter score on my u. love, aubrey

Uncle Roy replies:

WHOA!! Good work! I can't wait to play with you sometime. Here are some helpful tips:

Make sure to think about having even numbers of vowels and consonants in your rack after you play your word - so on your next rack you won't have all vowels or all consonants.

Leaving double letters in your rack for next turn is usually bad, except E which is only a little bad.

Try to score at least 60 points with each blank you get.

Learn all the 2 letter words (there aren't that many") and play words parallel to each other for extra points.

On your first move, if you don't score 18-20 (including the double word), pass and draw new tiles to try to get a bingo if you think you're close.

QI and ZA are very useful… and don't forget trying to use X on a triple in two directions which scores 52 at a minimum.

Think about what you "leave" in your rack for next move. If these letters are "good" letters like ETAION SHRDLU (the most common letters in English words), you're likely to draw some more of them, and then be able to make a bingo.

Unless you have two S's,don't use an S unless it is an above average score (for you) - usually average is about 20 so try to make S really count.

Good players get an average of 1.5 bingos per game. You should be getting at least an average of 1 for now… and 1.25 when you learn some more words as you get older.

At the end of the game, think whether the other player has a Q, Z or X. If they do, don't get let them play them by making ZA or QI or QAT.

Here is a list of two and three letter words which is worth learning.

I love you! See you very soon!!!!

Love Uncle Roy

















Continued here



 With the real estate market improving, stocks up, bonds up and unemployment declining (small but better then increasing), why did the FED decide to go forward with an unprecedented unlimited QE program?

My speculation is it's related to recent animosity of the republicans toward the FED and its future existence. By driving markets higher and driving mortgage rates lower via directly buying 1/3rd of the new issue MBS each month, the FED is helping to ensure Obama stays for a second term, helping to further diminish the threat of the republican party on the FED's autonomy and power. With no fiscal stimulus coming from the democrats they will need the FED more then the republicans. So perhaps the real reason for QE unlimited is self preservation.



Hi, Victor.

I hope you're well.

I was on CNBC in Asia this morning, talking about the implications of the current anti-Japanese riots in China.

Interestingly, the anchors seemed to be under the impression that there's 'rule of law' in China. I wonder if anyone can live in the 21st Century and still believe this? Is it not generally known and accepted that China suppresses free expression and uses the 'rent-a-crowd' concept whenever it wants to put people in the streets to let off some steam against alleged 'foreign enemies'?

Anyway, I hope I made an impression.

Jay Nelson



 As precious metals continue their ascent, yesterday evening I enjoyed an award-winning movie, Empire of Silver, a historical account of Confucian banking clans in 1899 Shanxi, China, which tells the tale of silver-based economy, government-issued paper money, human frailty and greatness.

In that era, the Confucian bankers were trained from age twelve, and expected to adhere to high moral and ethical principles. All in Chinese with subtitles, this viewer found the story fascinating.

Leo Jia adds: 

Empire of Silver can be watched online here.

Shanxi used to be home to many of China's riches (not counting the royals and the officials). It is very interesting today the people there are no longer good at the game of banking. Instead, they mostly rely on mining coal, which made Shanxi not a very pleasant place to visit. Unfortunately, coal can not restore their old glories for being very rich. Today, Zhejiang (on the eastern coast just south of Shanghai), which mostly relied on making something cheap to export, is home of many China's riches (also not counting the royals and the officials).

In case others outside of China can't view that link, a search on Youtube with the Chinese title "白银帝国" results in the following 8 parts of the film:

Part 1/8

Part 2/8 

Part 3/8 

Part 4/8 

Part 5/8 

Part 6/8 

Part 7/8 

Part 8/8

Leo Jia adds: 

 There are quite a few scenes in the film showing an amazing road with tunnels running on the side of a cliff. I believe it is the famous Guoliang Tunnel Road located in Henan Province, south of Shanxi Province. That road was just featured in "10 Gorgeous Roads For The Drive Of A Lifetime", of which the Guoliang slide (Slide #10) is quoted below (with a correction of the province name).

Googling for "Guoliang Tunnel" yields more pictures of it.

Using this road in the film clearly presents a dislocation in time, because the road was actually built between 1972 and 1977. The Wiki page about it is Guoliang Tunnel Road, China.

It was built by only 13 local villagers in just five years! Located in the Henan province of China, this can be considered to be a sacrificial road of sorts. Many villagers lost their lives due to its construction, but the work went on. The tunnel itself is 1,200 meters long, 5 meters high and 4 meters wide.

It's called the most dangerous road in the world despite its scenic beauty and as a wise man once said, 'the road does not tolerate any mistakes.'



 Some thoughts about The Art of Learning by Josh Waitzkin.

1. The mother is a horse whisperer and horse trainer and the father is a world class fisherman and adventure writer. Much of his talent is genetic rather than environmental.

2. The book has a touch of Agassi's in it. He complains about everything and never lost a match that he should have won. However, it must be hard to play against the Russians when they are kicking you under the table with karate chops and talking to their trainer in Russian.

3. It is unusual to see someone very good at a mental game and also at a physical game. Usually one crowds out the other. And Tom Wiswell said he never saw a champion checker player from the old schoool that had a happy marriage as study of checkers crowds out the ability to be a good family man. I can still see him sighing when he came in every week saying, "Victor, the thing I regret the most in my life is that I never married a girl like ……, but then again if I had I wouldn't have written 30 books."

4. Josh seems to have had a very hectic romantic life. He apparently gave up his home life to follow a girl to Slovenia and then spent day after day fighting with her before going on the next tournament.

 5. There is no mention of the economics of what Josh did throughout the book, and this is one of the gravest defects. Who in the world could spend 3 years without any pay doing Martial Arts tournaments every other week around the world and training every day. He seems to have taken lessons from almost every great chess trainer also, and spent all his waking time studying variations. Who can afford to go to a 2 week tournament with 12 players of the top 1000 in some resort where you are lucky to get expenses if you don't win, which it seems he never did. He travels all over thee world to get lessons and keeps the lessons and training up for years on end with videos of his every practice session. Where does the money come from? And how could someone not completly sponsored or billionaire heir do this?

6. He seems to be a sore loser. Despite all the hoopla, training, talent, and practice he was never able to make grandmaster. He has no acknowledgment of his lack or the skill of the others that overtook him. And a very bad winner also. The book is replete with stories of his heroics in the various national championships he won and never a word for the losses and gaps. There is a video of him fighting a Garcia which shows I believe him getting totally outclassed the way a world champion never should be, but I may be wrong as I don't understand enough about push hands to be sure.

6a. There is interminable detail about how "tiger" played in various push hands "worlds" and I read every word with bated breath but think that most people would find it extremely boring and specialized.

7. I should know something about this subject because I was world class in several racket sports, and could have been a good checker player if I had put in the 10000 hours and 10 years that they say is required. I have a few wins from Tom among our games.

 8. Josh recommends an intuitive approach to learning. He believe you have to go beyond the numbers, develop intuition, play a mental game of deception and heightened awareness when crisis occurs. I had a completely opposite approach. I developed a good game, and it was good enough that I didn't have to go into mysticism. I think most would do well to improve the fundamentals and foundation of their game rather than trying to go into another zone.

9. The book is a great travelogue. He takes you to the Amazon, and to Florida and Taipei and I believe Alaska (I don't have the book in front of me) and I am impressed with his ability in fishing.

10. There is much about performance psychology in the book and he starts by saying don't worry about winning but concentrate on getting better. That part seems right but everything else seems highly specialized and not applicable to anyone but him.

11. I like the part in the book where he compares fishing in the ocean where you are always a wave away from death with his chess and martial arts career where he was always a throw or a move away from elimination. It's quite applicable to market people and I wish I had heard more about the fishing than then push hands.

12. It's amazing how much cheating he ran into. The Taipei people were always cheating the Americans and stacking the deck against them as did the Russians. I guess that's like our field and when I played, everyone wanted my opponent to win and the referees often stole matches from me when they could by calling double bounces against me. 



 Hello everyone,

Picking a good renter is akin to picking a good stock. You interview and evaluate, then hope for the best.

I use for background checks after an application is completed.

I NEVER rent to anyone without a full deposit being paid.

Also it helps to have the possible new renters go through the unit and then I slip out to inspect the interior of their vehicle. This is a tip off as to how they will keep my unit. Hopefully they are driving their own vehicle!

To me choosing a good stock has similarities to picking a good renter.

With either you may end up with a lemon.



Pitt T. Maner writes in: 

Here's an odd side effect of South Florida's foreclosure crisis: Some immense homes with pools and three-car garages in gated communities are being rented out to unlikely tenants — poor people paying with Section 8 aid. Among the properties are homes with up to 4,500 square feet of space in private communities with guardhouses and regal names such as "Monarch Lakes" and "Bellagio at Vizcaya."

Some of the owners are teetering on foreclosure and gambling they can earn enough money from the federal housing vouchers to stave off the banks. Others bought the properties cheap in foreclosure auctions and want the guaranteed rental income.

The Sun Sentinel examined federal housing subsidy data from housing authorities in Broward and Palm Beach counties and found 230 homes commanding rents of $2,000 or more, up to $3,375 a month, from Section 8 families. Typically, tenants pay about one-third of their income toward the rent and the government pays the rest.

Full article here: "Section 8 Gated Communities"



 This is a funny article about the stress of fantasy football, and baseball, for that matter… and the agonies of mean reversion and slumping players.

"Fantasy Football is Stressful for Former Ameritrade Broker ":

"Ambrosius runs a luxury tier of what is now a $1.7 billion industry with more than 34 million players, according to the Fantasy Sports Trade Association.

The fantasy here is to make believe that you are the manager of a group of actual professional players you've selected from various teams. Their success becomes yours. When they score touchdowns in real games, you get credit in a fantasy world."



 Groups make better self interested decisions.

This is confirmed by the process used to judge Olympic and NCAA diving. Judging diving is a subjective process. Actual scores are not important; consistency is very important. So if a judge consistently judges low, it doesn't matter to the diver.

To eliminate favoritism and mathematical fairness, a diver's overall score for an individual dive is calculated in the following way:

Each of the seven judges awards a score to a diver for his or her dive. (Ex: 6-5-5-5-5-5-4) The two highest and two lowest scores are eliminated. (Ex: 6 and 4 and two of the 5s are eliminated.) The remaining scores are totaled. (Ex: 5 + 5 + 5 = 15) This total (15) is then multiplied by the predetermined degree of difficulty rating associated with the particular dive performed to calculate the overall score. These degree of difficulty ratings range between 1.2 to 4.1, in one-tenth increments. (Ex: 15 × 2.0 = 30)

So groupthink generally works if outliers are eliminated.



It will be interesting to see if this 4% drop in a second comes in any other market.

Jeff Watson writes: 

You are so right, you can be sailing along smoothly then this happens… [40 second video]. Markets are the same way.  [Reuters: Theories behind Monday's shock ].



Monthly 30Y fixed mortgage rates are published by Freddie Mac, 1971-present:

This data was used to calculate mean 30Y mortgage rates by year, 1971-2011. Prof Shiller's quarterly real US house price data was also used to calculate mean yearly real house price, 1971-2011.

These data were then analyzed with regression; first regressing this year's change in real house price vs this year's change in 30Y mortgage rate:

The regression equation is
chg HP = 0.00393 + 0.0108 chg 30Y

Predictor      Coef   SE Coef       T      P
Constant    0.00393  0.009442  0.42  0.679
chg 30Y     0.01080   0.09513  0.11  0.910

S = 0.0595077   R-Sq = 0.0%   R-Sq(adj) = 0.0%

There was no correlation between this year's change in real house price vs this year's change in 30Y mortgage rate.

Is there a correlation with a lagged regression? This year's change in real house price was regressed against last year's change in 30Y mortgage rate:

Regression Analysis: chg HP L1 versus chg 30Y L1

The regression equation is
chg HP L1 = 0.00281 - 0.127 chg 30Y L1

Predictor        Coef      SE Coef       T      P
Constant       0.00281   0.00945   0.30  0.768
chg 30Y L1  -0.12724   0.09436  -1.35  0.186

S = 0.0588827   R-Sq = 4.7%   R-Sq(adj) = 2.1%

Not significant, but as one might expect if last year's mortgage rates dropped, this year's house prices increased slightly (see scatter plot).

Evidently there is a weak effect of mortgage rates on real house prices

Just for fun:

The Zombies- Time of the Season [video]

The Zombies- She's Not There[video]



 I would suggest from long experience and no contraries at all, when someone offers you a free lunch don't take it. When someone offer you a ride to the pent house, get off at the first floor. Never accept anything that's too good to be true, and that would require the firm or you to break the law or break the bank if they offered it to many other people. And above all, never do anything wrong yourself, as that's the first step to losing everything. When you are in Apache or Aborigine territory beware of an ambush. When you aren't in likely ambush territory, be double beware.

T.K Marks adds: 

The silver pit corollary: Never buy anything offered beneath the bid.

Especially a solid bid.

This took about 1 day's experience to figure out. If's it's 6 bid around the ring and some guy nonetheless starts 'energetically' offering 200 at 4, it doesn't mean he's a numbskull and those contracts are a bargain, it more than likely means he's "strategically" short and has 500 to sell at 2 stop.

An anonymous commenter writes in: 

 Such good advice. And nowhere do I find it more relevant than with people who make gifts of their trade recommendations. When portfolio managers have a view they truly believe is great, they are apt to keep it for themselves. No one wants to get other large players in the position only to have them front run one's exit. But if portfolio managers lack genuine conviction, they will try to bolster their confidence by attracting others to their side, sharing their recommendations widely. Often, these recommendations are made in a defensive tone that brooks no dissent, with scant evidence, as in, "Only a fool would be long, with money printing such as this." The purpose is not discussion–or enriching the accounts of others. Rather, it's a desperate search for confirmation–and a worthwhile tell at the market's poker table.

One bear recently provided such a perspective based upon the disastrous policies of central banks and the parlous circumstances of the Middle East. I responded by showing how stocks have behaved when more than 80% of shares within the S&P 500 Index were trading above their 5, 10, 20, 50, 100, and 200-day moving averages. Returns over the subsequent month have been quite bullish, as breadth and momentum have tended to persist. It was as if I had insulted the manager's mother: a huffy response tantamount to "this time is different" delivered in a condescending manner was the reward for my attempt at discussion. That was quite a few S&P points ago. The bear is now generously sharing a variation of his prior offering, in the form of a "bursting bubbles" thesis…more free lunches offering scant nutrition.



 I think Lacker is the most important Fed member next to Big B, not for his support, but rather for his dissent. (Aside: Can anyone name another member without checking?).

They need Lacker to the help maintain the appearance of objectivity. So the opposition can be duly noted then duly rejected. I heard Lacker interviewed recently and he is very smart, articulate and I am glad he is there for whatever reason.



 I was in Sand Valley about five years ago. It was the hottest on record in 40 years, about 135 F in the shade daily for a week. But no one keeps official records in Sand Valley. It´s 10F hotter on mean daily than Neeles and Blythe, CA that used to get the Snoopy weather reports as the hottest places in USA. 130 didn't seem that different than 120 to me and I wore 20 lbs of ankle weights and a small knapsack and walked 1.3 mi. to my nearest neighbor where the kittens and chicks were dropping like flies. We lost 20% of the Sand Valley human population that summer related to the heat. I think part of the reason I wasn't affected is I trained for eight previous summers with the windows closed and heater on full blast whenever driving, besides the walking. That was the summer the pair of 16¨ white iguanas camped under an Ironwood outside my burrow and hopped on my bare feet whenever I climbed out the burrow.

Temperature Record Is Cast Out


A team of meteorologists casts serious doubt on a world temperature record of 136.4 degrees recorded on Sept. 13, 1922 in El Azizia, Libya. They cite the antiquated instrument used, the likelihood that the observer was inexperienced and the wide disparity with subsequent temperatures recorded at the site. That means that officially, the "new" record surface temperature is 134 degrees, recorded on July 10, 1913 at Greenland Ranch in Death Valley, Calif. [Arizona State University]



 Saturday morning we were in Ridgefield, CT with friends whose property backs up on a large system of horse riding trails. It is charming somehow that the rock wall at the back of the property is also the boundary between New York and Connecticut.

As we sat enjoying a cup of coffee, we heard a tremendous baying and presently a large pack of dogs came running toward us and continued along the trail as it ran parallel to the rock wall on the far side. After a few moments a great number of horsemen appeared, posting in their saddles as they trotted along the wall looking for the dogs. There must have been thirty or forty riders, many of them just children. I wondered if they were actually hunting foxes– there are quite a few farms and clubs about that still do– and I couldn't help but peer into the woods half expecting to see Jack Aubrey come careening around the corner on his great bay gelding. It was a lovely little interlude and the kids thought it amazing. Took us back in time quite completely.



 I saw this chart on the esteemed Political Calculations web site.  I notice the graph shows Japan, U.K. and Brazil holding some of our debt. How much debt does the US hold in other nations? If that debt were added, would a net debt picture look better?



 One has always believed that the web of interrelations between markets changes enough so that what happened more than 20 years ago, does not have the same impact that it has today. Or as ecologists put it, "there's always a web, but it's always changing". Thus, I don't keep data around more than 20 or 50 years ago except in books like the investors statistical lab from 1961 (one always has to cajole the little woman into not throwing away the 1961 edition which in just 800 pages or so contained the daily hi lo and clo of every NYSE stock), or S&P security price index record or Dow Jones historical price data or the 150 big books on hourly prices on 30 markets one has been keeping since 1960. (Frank Cross had a very neat handwriting and there were only 5 or 10 markets we inputed into the book.) However, I'm happy to say, there was at least a 17 year record for worst move ever after an auction of the 30 year. It's down as one speaks a good 1 and a third big points. The previous record was 9/10 of a point decline.

As mentioned, this is not the way the game is played. The flexions and dealers that buy the long bond at the auction every 45 days are accustomed to an immediate profit in at least the same ratio as the current intrade odds on the incumbent to win of 2 to 1 ). Thus the adage "this isn't cricket" must be echoing down the marbled corridors of many a flexionic hallway today and there will not be as much merriment as usual for the fixed income crowd at their weekend summer windup revels.



 Today's base of operations brings to mind Josh Waitzkin's book The Art of Learning which espouses "the study of numbers to leave numbers". It's never happened like this before. And stocks and bonds are in moves free of the past. Needless to say, I am intensely displeased with Waitzkin's book and the moves. However, one must credit Waitzkin who is a world champion in chess and martial arts, and a world class fisheman and free diver, and apparently a lover of literature as well. With great accomplishment even if his insights rankle.

George Coyle writes:

I am reading the book now. I found the chess section to be rather interesting. Definitely elements were applicable to trading. I found it especially interesting that he spent so much time studying chess and variations. He no doubt had a natural inclination but mounds of study accompanied that innate ability. But ultimately when he ventured away from his style (at the advice of his then teachers) he didn't do so well. This reminds me of books and such that say a trading/investing style needs to suit a person's personality or it won't work…Richard Dennis said in his interviews he could publish the turtle models and people wouldn't follow it. Waitzkin's style in chess was to create so much chaos the other player would get confused and frustrated and he enjoyed the chaos, he thrived on this and used it to get to the end game (his area of focus) where most other players focused on the opening.

His discussion of deception and other tactics the Russian players used that he sometimes noticed (being kicked under the table) and other times didn't notice (tapping a piece against the table to break concentration) was also interesting.

The Tai Chi section thus far has not been as interesting. The one thing that stuck out to me is he mentioned an ability through tai chi and breathing to slow his heart rate (I assume there is more of this further in the book). I think this could be very useful in controlling emotions when trading. I was surprised there was not more quantification in the book.



 There's an interesting article in Nature about the coming winter–with a prediction for a worse than usual one. It seems to me this is a test of the climatologists' ability to do any long-term predicting–and if they are off on this one, I have to wonder what happens to the global-warming deniers (probably "I told you so").

All of which leads me to ask the commodities traders on this list: is natural gas going to put in a bottom (even if seasonal) on news like this, or is there still so much supply in the US (stored and otherwise) that even with a bad winter, natural gas will remain cheap for a long time to come?

Jeff Watson writes: 

Back in the pit days, if it looked like the contract was making a bottom, I'd sell 5,000 bushels a quarter cent below the bid (had to time it just right) to see if there was anything down there. The thing was by doing this, it was very low risk, got me a lot of information, and would cost me a max of $25, but I was usually able to scratch the trade more often than not. The grain market will tell an inside player (one who's always making a market), very clearly, when it's a bottom. Stocks and bonds, I don't know that much about.



One of the rules of the game is that any entities buying the auctions like today especially foreign governments and govt dealers and fellow travelers must make a profit on their purchases so as not to be discommoded. Thus, if there's any bad news for fixed income it must be elicited before the bids at 1100 am for the auction. But today, there's a horrible miscalculation. The Fed must have concluded that the purchase of mortgages would be good for fixed income. But now bonds are down almost 2 percentage points from the 1100 price that the fellow travelers bid at. And they actually have a loss. This is not the way the game is played, I hear them saying. Or as the English would say, "that's not cricket".



I've been thinking about the importance of deception in markets and turned to music for inspiration as well as wasps and nature. Here's a nice article on deceptive cadences. I wonder how this relates to the approach to attractors in markets, including rounds and all time highs or lows et al?



 Hello everyone.

I notice a lot more metal roofs being installed on residential home roofs of late. I asked my banker CEO how appraisers feel about metal vs. shingled roofs and he had no answer for the present.

I note most of the roofs I see being applied are metal over existing shingles. I am old school and prefer a 30 year dimensional shingle. I have a couple of my apt units that will need roofed (I tear off and never do a tack over) and will use shingles.

Any thoughts?



T.K Marks writes: 

Alan, you underestimate yourself. You transcend old school. You're paleo-school. Straight out of a Norman Rockwell painting. Never change.



 Zuck gives an interview and FB kicks up 5%. There's still no clarity on how it will triumph in the mobile space, how it will address the decline in FB use among teens and young adults in the US, or retention of employees given the stock's performance to date. I suppose one could argue that the only place for FB to go is up, but just because it doesn't decline anymore doesn't mean it will go up.

Maybe I'm missing something here?

Easan Katir writes: 

Only twenty more speeches and, at this rate, the suffering shareholders will break even. 

T.K Marks writes: 

So today's philosophical conundrum might be, would it be unethical of him…to front-run his own speeches?

Given the circumstances, that's a question more easily posed than answered.



 The machine readable crooks and their robots must have seen the German announcement and the headline must have said "limitation" and they bought a google of bonds and sold a google of stocks at the market at 4:09 AM. Then apparently the gist of the story about accepting the ESM plan in full must have been read by the robots. And they sold a google of bonds and bought a google of stocks— this before any human had the announcement. Sometimes a crook tries to steal something and gets damaged with the good they tried to steal. I guess some second level mind games are played this way. Certainly second and third intentions in fencing as discussed by Nadi in his classic book "On Fencing" and the con where a confederate tells the mark on a train that he can read the other players cards and that he'll tell him about the marked cards so they can bet big and split the winnings. And then the confederate tells him the wrong card and the mark loses everything and he has no recourse because he was cheating by hoping that he could cheat the opponent– that comes to mind also. Happens a lot in stealing signals in sports also.

To make a long story short, the robots tried to steal from those who play by the rules as they usually do, with their access to a speed of light faster than the others– and instead of stealing from a certain personage who has a very good rule never to admit to making a profit under any circumstances, they did not relieve that personage of their usual allotment of chips. Quite the contrary. The "normal" where they prosper at slow moving personages like the one mentioned will doubtless soon occur on a much magnified scale.

I should add that in the old days if something like this happened, many hours later, the price would be changed. A broker would say "I was offering them below" so that price at 14823 must be taken down." Thus, on announcements there was no way for the public to profit from a wrong way spike. But these days, they have automated price records and it is harder to claim that except in rare cases where a non-scholarly flexion is involved.



Mr. Coker points out that Draghi is Italian and very colorful and he is a real PhD like our chair (and unlike both their predecessors), and his words have great strength. I point out that the jobs of almost everyone in Brussels and the Eurotower depend on keeping the EC intact at any cost. It is not surprising in that context that with their ability to tap every country, every international aid organization, that they have won the battle.

David Lilienfeld writes:

In the absence of political unification, is there any way for the EU to survive as anything other than a trading association? The euro isn't viable in its current form, the political structure requires unanimous agreements (at least that's my understanding from the euro follies), and the folks in Brussels seem wonderfully detached from reality. BTW Brussels has already succeeded in destroying medical research in the EU with its "benign" Clinical Trial Directive.



 What are the best markets to trade? Many futures markets trade differently. Some have a lot of depth and intraday gaps are infrequent (I consider these the best to trade). Others have ample liquidity but are prone to gapping. Others still are downright scary. E-minis and 10 years seem like very "safe" trading markets. Eurodollars as well. Crude oil has a lot of liquidity but can gap. Gold seems prone to fast and erratic moves. Grains seem like they can get a bit dicey. Less trafficked softs seem rather risky. Commodities in general appear to have more erratic price risk than stock index futures or financial futures. FX is fairly liquid and seems ok. I am largely making observations based on personal experience and in some case I have none so I am curious for thoughts from seasoned specs.

Bill Rafter writes:

Ask yourself, would I rather trade an extremely efficient market in which information was digested immediately and most of the fluctuations not related to new information were due to randomness, or would I prefer a market that was less so. As you gain experience you will learn that one of these mutually exclusive choices is more profitable to trade than the other. One of these requires virtually no expertise to trade, and indeed expertise would not appear to be helpful, whereas the other requires considerable expertise. One is the frequent choice of novices, whereas the other tends to be avoided by novices. Then ask yourself, how do novices typically fare?

Jeff Watson writes: 

Grains are impossible right now. The 30 cent daily ranges make it too much of a gamble. Even trying to predict, or have a gut instinct of where the carry spreads, the corn/wheat/bean spread, the crush, are going….Oy Vey. To play the grains, to coin a surfing analogy: You better be in really good shape, you gotta see the wave (move) coming toward you, then paddle real hard, pop up and catch the wave. You better either be quick to bail or commit to the wave, make a bottom turn, then ride it until it's over. Determining when the ride(trade) is over isn't as simple as it sounds, and many dangers exist on and below the surface that can still mess you up when you bail the trade. The most important decision a grain trader can make right now is whether he wants to gamble a lot for a potentially big reward, or hunker down and reduce risk.




Some examples.

You have the insider that buys shares in their own company where there is a takeover rumor. If the stock doesn't go down it should. [If there was a real takeover under way the exec would know about it but would be legally prohibited from buying. Hence the takeover rumor is debunked by his buying].

Today I met a manager of a company who was surprised the share price didn't go up when they didn't start the buyback after the quarterly report– like they usually do. The share price didn't move up until after the orders were released to the market. [The postponement was due to an important announcement pending. The fact the company did *not* do the usual thing should have  been a clue that something was up].

What other unintentional signals are there?



 Every year on 9/11, I have the same nightmare: watching the plane going into the Pentagon. No doubt many of you were in NYC that day and remember the attacks. I was in Washington DC and was unfortunate enough to see the plane go into the Pentagon. While the attacks in NYC have become the emblem for the 9/11 attacks, it's important to remember that NYC was not the only place attacked. Those killed on 9/11 are remembered each year. We should also remember those among our military who died or were injured/maimed while serving in Afghanistan fighting those who provided the training camps for the 9/11 hijackers.

I have often wondered if the proximity of 9/11 to Rosh Hashannah, Yom Hazicharon, the Day of Remembrance, has itself some meaning, some effort at communication. As an agnostic (where did all that energy released during the Big Bang come from?), I might dismiss such a possibility. On the other hand, many hope to ease the pain associated with the attacks, the suffering of those attacked and their families (including the many 9/11 babies who had not yet been born and who never had the opportunity to meet, never mind know, their fathers), the deaths of those killed during the attacks and subsequent collapse of the towers with an appeal to a supreme being. I can't say whether those thoughts are ever responded to. I can only hope that the grief resulting from the attacks abates with time. I do not think it will ever disappear completely. For today is a day to remember, to consider all that happened on 9/11 and in its wake. For those of us with friends and family who died that day, 9/11 provokes memories of that which one hopes never to live through again. We should assure that not only should those of us alive on 9/11 do not forget the events of that day but that future generations learn about them and come to understand them, much as we did with Pearl Harbor.




 memories of that day hover nearby
looming just out of view
obscured dimly by the murk
of everyday life
vague images of aircraft
a pain so deep, so overwhelming,
that one wonders if it can possibly
be born.

only the passage of time
brings anything approaching comfort
and somehow we manage
we carry on
but there is still a wound
a hole
someone is missing
a father, a mother, a child.
not forgotten



 I think we can all agree that pursuing one's conviction in life or even a demonstrated talent is hard. Most successful people would contend that the key is through perseverance, resilience and so on. In other words, one should not give up during hard times. I think this should be true for most successful people on this list who have indeed withstood some hardship in the early career but never given up.

This is in sharp contrast with the mostly agreed approach for trading, where quickly admitting mistakes and reversing course is very key. I don't deny that someone may be doing it through perseverance (is Buffett doing this way?). Even Soros has remarked that admitting mistakes is key for his success. It is interesting here that admitting mistakes only applies to every single trade, but not really to the hardships in one's career.

There is the saying about when to hold and when to fold. For career success, the focus seems to be "hold" on, but for trading success, the focus is to "fold" quickly.

How would one reason about the two different approaches or philosophies (perseverance vs. change)? Is one of them wrong?

Craig Mee writes:

Leo, I would humbly say, one is a number game, and the other is what you do…and with that you can certainly do some fine tuning. Problems may arise from a number of things not central to what your preferred "business" is.

Russ Sears writes: 

As a marathon runner who use to be national class, it has been my experience that persistence is only part of the battle. It is very easy for a proclaimed prodigy to persist. What is hard is learning to turn a short term loss into a long term lesson for life. If you watched the Olympics here are a few things that the athletes seemed to do differently than most people.

They embraced the pain. Training and hard work was enjoyed. But they also learned from their losses, injuries and general hardships in life. Perhaps these fires are the purifying necessary part of the upbringing that the prodigy misses. Learning to believe in yourself despite what others say, turning losses into a chance to strengthen weaknesses. Things whose first order effect is negative but whose second order effect can be positive are highly favored.

2. They were optimistic about their chances, with a healthy dose of realism about their abilities, their current condition and plan. Before and after the event there were no excuses. They had a plan, believed in the plan and stuck to the plan.

There were very few people's opinion that mattered to them, their coach, their immediate family (Dad, Mom, Husband or Wife). They did not care what the critics said, they did not depend on crowd support and were not disheartened by disfavor.

4. There were many opportunities from competition. They found their niche from competing more. While the Olympics may be the showcase for their event they were not dependent solely on its outcome. Worries melted in abundance of gratitude to coaches, training partners, family, other supporter, G_d, and country

5. They were focused on the task at hand. They knew how to avoid the distractions and discount the hype. Yeah, this may be the defining moment in their lives and how they may build their fortune, but as the song says "there will be time enough for counting, when the dealings done."

6. There appeared to be admiration for their fellow competitors. This Olympics were notable in that there were fewer accusation of doping, tainted judges (with a few exceptions about some referee) and general cheating scandals. The badminton scandal being the biggest scandal, suggests to me that the athletes were into the competition more so than the best way to game the system. Perhaps this is an inverse reflection of the markets. Or perhaps simply the media has become part of the cover-up captured by the hype, rather than the watch-dog.



I remember reading somewhere that the guy who wins the first two sets and it goes to five in a tennis match usually wins.

Well, checking U.S Open stats for the first 10 five set matches in which a player won the first two sets in this year's Open, I saw it went to the guy who won the 3rd and the 4th set!

Only one open tournament, I know, but a sizeable drawdown.

Just like trading, a system is tough to follow, depending on the stake, (even if for over 10 years it proved to be true on slams) if your drawdown is extended.



 Here's a magnificent article about a 23 year old who was profoundly deaf, being able through the advances of free market technology, to hear music, to decipher music, for the first time.

What playlist of 10-20 songs, groups, orchestras, symphonies, etc would you recommend to a 25 year old who's never listened to music?

In fact, what would you recommend for the very first song a person coming out of the shroud of deafness should listen to?



A rather volatile bond futures market. At least 4 points of movements at $1000 a point a contract but ending up unchanged. With margin at 3700 a contract.



 Inspired by the market if touched order and the trapdoor spider, I have been studying spiders with a view to the lessons they can teach. The following has been helpful to me. Spiders on Wikipedia. I find that the spider has many methods of capturing prey and avoiding predators. Some use speed, some use the web. Almost all the orders that are used in the market seem to have counterparts in the spider's arsenal. The limit order to me is the normal one we see when the prey gets caught in the web and can't get out.

The spider is particularly adept at signaling other predators like birds not to mess with it by attaching pieces to its web. Many use deception. They are often captured by wasps and other insects that pretend to be prey. They have a very clever path they follow to get to their prey without destroying it.

I am interested in what you might think we can learn from spiders.

Gary Rogan writes: 

I have always found the web weaving spiders to be more fascinating. The ratio of the created object complexity to creator complexity for the web has got to be close

Pitt T. Maner III writes: 

 In the South we learn about the secretive, brown recluse spider and its reputation at an early age. Even though it does not use a web to catch prey it's a fascinating creature too. According to the second article below the spiders are developing generations more quickly this summer due to the extreme heat.


"In nature, brown recluse spiders live outdoors under rocks, logs, woodpiles and debris. The spider is also well adapted to living indoors with humans. They are resilient enough to withstand winters in unheated basements and stifling summer temperatures in attics, persisting many months without food or water. The brown recluse hunts at night seeking insect prey, either alive or dead. It does not employ a web to capture food — webs strung along walls, ceilings, outdoor vegetation, and in other exposed areas are nearly always associated with other types of spiders."


One man in Omaha has witnessed the infestation of brown recluse spiders first hand. Dylan Baumann has so far counted 40 brown recluse spiders within his home, "in the entryway, the bedroom, under the fridge." Despite living with such dangerous roommates, Baumann has yet to be bitten."They are called recluse for a reason – they can fall far back in the walls once you use poison and I'm told they can go for up to nine months without eating," Baumann said, adding he has called his landlord "about five times."

Jeff Watson writes: 

 In my part of the South and on my coast, we are constantly on guard for the Huntsman spider. They have a painful bite and are toxic but human hospitalization is rare… A recluse bite is much more damaging. Huntsman don't build a web, but catch prey using speed and ambush. The huntsman has legs resembling a crab, and is fast, extremely fast. Huntsmans also grow up to be bigger than the size of your hand, legs and body. They eat palmetto bugs, larger insects, small lizards, small frogs and toads. The mothers carry the children in an egg sack, which contain a few hundred babies. It is very disquieting to find one on the wall above your bed (and have it escape), which happens every once in awhile.



 My Dad used the rails to commute to his summer job in college (through a friend he had an "in" at the Hotel del Coronado in San Diego and he worked there first as a busboy, then as a room service waiter). It took him two, sometimes three days to get from Denver to Southern California by way of the Union and Southern Pacific. He said it wasn't anything like the movies. No "bulls" chased anyone in the rail yards when the cars were in motion; it was too dangerous for them or anyone else to be running around moving trains. He said the railroads were sensible enough to know that their security risks were not from people riding the empty cars but from people breaking into the loaded ones. That was the reason the empty box cars had their doors locked open; the railroads didn't advertise the rule but, Dad said, everyone knew it. If someone was caught touching a locked car, they would have the crap beaten out of them; if you road in an open car, the most that would happen would be a verbal roust. He also said the reason people jumped off the cars as they came into a yard was not from fear of the bulls but to catch the next train. There was no point in riding the freight all the way into the switching yard where the individual cars were uncoupled and recouped. You wanted to catch your next freight after it had been assembled and was about to head out.

Dad loved movies — all movies; and one of his favorites was The Emperor of the North. But, he loved movies for their fiction, not their reality. (He told a wonderful story about his disappointment the first time he went to the Stork Club. It was so "tiny", nothing at all like the places where Fred and Ginger had gone to dance.) Hoboes did get beaten up by cops; but the violence of that life came far more from the other hoboes than the cops. He said Jack London's On the Road was much closer to his experience than Wild Boys; the time he worried most was when he was on his way home, with his summer's savings in postal money orders. The risk was that one of the younger, angry drunks would become enraged enough to badly hurt him when they realized the "money" they had robbed from him was worthless. (For insurance he said he carried a few silver dollars in his pockets - Roosevelt had not confiscated those - and kept the money orders folded up under the inner soles of his shoes.)

T.K Marks writes: 

I used a much similar strategy during college when riding the NYC subways, a mode of transportation that was completely foreign to me.

At the time the City was in the throes of a fiscal calamity, to the point of police layoffs. The cops that managed to keep their jobs were dispirited and overwhelmed. As mayor, Abe Beame was in charge, but didn't remind anyone of John Wayne in that capacity.

Beame was a bookkeeper by trade. Bad guys of the violent variety are generally not intimidated by men who wear green eye-shades for a living. Thus, in the NYC subways of the late-70s, it was halcyon days for hooligans.

I hadn't grown up in an urban environment, no less a lawless one. As such I felt about as home in these new surroundings as Kosinski's protagonist in "The Painted Bird" did in his.

Welcome to predation, young man. Next stop, perdition. And it's a dark length of track in between.

The trick is to switch metaphorical trains, when the switching's good..

So I would routinely take the preemptive measure of keeping an illusory couple of dollars in my pocket while putting the bigger balance deep in my sock, under my sole. No tell-tale bulge. Those bills could ultimately have been fresher, but chances are at least they'd still be mine.

Luckily, was only accosted once. It was on a lonely, late-at-night #1 train, going up the West Side. They approached, and asked in no uncertain terms if I had any 'spare change'. My hayseed innocence generously complied, gave them the minor contents of my pocket, and that was that. Though I can still hear my heart from that night…Thump…Thump…Thump.

I bear no lasting ill-will towards them. They let me keep the Herodotus book that I was reading.

All of which I found only appropriate. He was a worldly historian from antiquity whom I guarantee would not be at all surprised how little the world has changed since.

The reason being, when it comes to understanding the driving forces of human nature, circumstances are made of sand; themes, of stone.

I think.

Well…actually…on second thought…I'm pretty sure of that one.

Whatever the case, in the millennia that have passed since his time, I'm not sure Herodotus has ever before been mentioned in conjunction with some kid getting rolled on an uptown #1 train, but that's how it went down so what can I say.



 It's the dry season in Tanzania. The rivers are low and the animals have to come to the river to water. The lions wait at a bend in the river where there is a steep hill near the water. The zebras approach the water. The lion waits for the zebra to get into the situation where it is boxed in by the river and the steep hill. The zebras two escape routes become boxed like in a chess box in. The river slows the zebras ability to bolt, and the hill prevents escape up the hill. The lions waits for the set up. The wait may takes hours or days. The lion only has about three days before starvation.

This strategy works for dry season and in low river water. Other strategies apply for different seasonal cycles. In the wet season the animals don't have to come to a small river, so the strategy must change.



 Now as we start thinking about a test of 1575-1600 highs in the SP being possible, we can ask ourselves is there any difference between the run up from 97-2000 and 04-2007?

Have we actually got any sound reasoning to say that the aftermath of these run ups won't play out again, or to argue that the declines to create these monster rallies were unjustified in the first place and 100% run ups over three years in both these previous periods should be looked at in that context?

Internet run/ Housing run/ QE run? What is, or is going to, hold this together?

Even if growth somehow took hold, how much re-adjustment may need to take shape?

Just to finish with a definition of Ponzi Scheme.

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going."



 Here´s my secret writing style after reading thousands of books and standing on the shoulders of my favorite masters: Steinback, L´Amour, Ayn Rand and Art Shay. This is for longer stories. The piece is shaped as the process of an individual walking down the street. There is a sequence of five events though not always in this order:

1. what the senses see, taste, hear
2. the thoughts
3. the feeling/emotion
4. action
5. interspersed with factual material about the stage

Generally, each of the five has a paragraph before moving to the next.

It´s pure formula writing, and a computer could almost do it.

If you think about it, this is what happens when walking down the street. The sequence of five varies with individuals, and a good story teller can train a person to react in a stronger sequence to events of his life.



 The fact checkers are more biased than the Elliot wave people and have more degrees of freedom to claim it wasn't true.

50 million people are on food stamps. How in the world, considering groups like this that have to vote to take money from others to pay for their stuff, and considering the number of people that work for governments in one form or another and their spouses and suppliers… how in the world can those who favor limited government ever hope to win?

It's amazing that it's only 59% for dems to win now on Intrade a six month high.

It's good to keep a pocket notebook, and people like Mark Twain and Beethoven and Franklin did so with great success.

The ocean and the lake is a very dangerous place, and life and death are only a wave or faulty piece of equipment away. The immemorial customs of the British Navy were designed to minimize loss of life in such situations and are good to apply to market business.

There is an unstoppable momentum of public bullishness when everything the public owns and is bullish about is going up and through the roof.

The people at good music schools have to be able to take a big piece and sing it in do re me form from memory front and back in order to graduate from an ear training course.

It is infinitely easier to get a job when you have a scientific or programming training than when you have a literary training.

The round numbers are attractors for the grains as well as the stocks but you probably make more money by buying the breakthroughs than reversing the breakthroughs except when the back and forth has started.

It is always bad to fight what the politicians and big banks want to happen especially before elections.

 The sports on tv are hypnotic and the worst sport to watch is tennis because watching it is like playing a video game because of the two dimensional nature of the screen and the fast pace of the serves relative to ability to return.

The book History of the World Through 100 Objects (in the British Museum) by Neil MacGregor is very good to introduce interest in art to kids especially if they like gold and baseball and chess like Aubrey.

My mother introduced the custom of reading a page from a good book at every dinner, and the kids object to it when you do it, but they remember it for the rest of their lives and come back to reading those books themselves later. I just read the chapter on Monte fighting a bear to my kids and it was so riveting they didn't complain that much or try to walk away. Anything by Jack Schaeffer is timeless and completely scientific and appropriate to the time and place he writes about and I reiterate that Monte Walsh is one of the three best novels about business ever written.



What determines how many turns in a screwdriver before the thread wears out? On a quick turn or on one with a little more pressure, it reconnects and sufficiently binds the materials. The strongest material holds good thread, but even poor material can show sufficient strength and there's enough time to feign a bond.

What a balancing act we play.



I disagree that the Fed is the major long term source of how governments are affecting the markets. This is a short term, old school way of thinking. Not that a trader can ignore this.

The major source, I believe, is benefits to seniors and the uncertainty that surrounds them. This is a global issue. The current projectories are clearly unstable, but the politicians have turned it into brinkmanship maneuvering of Euro and budgetary fiscal cliffs.

If in the 80s we conquered inflation by finally understanding wage expectations, in the 21st century will we conquer deflation and societal extreme risk aversion by benefit expectations? Is there an answer? Are we doomed to politicians promising and giving in the short term more than is possible in the long term for the vote? If so, where and when must it all come crashing down?

Gary Rogan writes:

You say in the 80s we conquered inflation by finally understanding wage expectations. I thought inflation was conquered by raising interest rates by a huge percentage. Is that not the case?

Russ Sears replies:

Yes, that was "how" it was accomplished, I am suggesting "why" it had to be done that way. It was the wage price spiral or "inflation expectations". They had to convince people they were serious in lowering inflation long term. Not flood the world with $ every time it was politically expedient to do so.

Gary Rogan adds: 

I realize there were inflation expectations and they were blamed for inflation, but fundamentally there was just too much money being created. I don't think we disagree, I just learned to think of inflation expectations as being derivative to the money supply. Whatever the details of inflation creation, you cut the money supply and inflation will be gone sooner or later. Less money = lower inflation, whatever people believe.

Rocky Humbert writes: 

If anyone can demonstrate with any degree of quantitative rigor

(1) How politics can be quantified.

(2) How politics can be predicted.

(3) How either of these things can be useful to investing in an objective way, then I will embrace political discussions wholeheartedly.

But before you folks try to go down that path, I have to point out that if you own stocks, you should pray for Obama's re-election. (hah)

David Lilienfeld writes: 

The assumption on the Dem vs Rep analysis is steady-state, i.e, the structure of the economy is steady-state. In the age of globalization, that's probably not true anymore, so the analysis, while interesting, isn't informative about what the future might hold. Further, I don't think it will much matter which party wins the Oval Office economically since both parties are going to try to spend like crazy. The alternative is to control the deficit, which may have long-term benefits but which will have short term political pain. In an age of instant gratification, I doubt that the politicians of either party are willing to take the chance that their prescription for the economy will show its benefits before the next election. Just as Wall Street analysts live and die by the next quarter's earning, so too do politicians. Call me naive, but spend and let someone else figure out how to deal with the consequences has become as American as apple pie. I see neither political party providing any basis to suggest otherwise.



If one presumes that a ZIRP is a form of command economy, without complicating the question with other similar restraints, haven't the current structure of global markets just become state sponsored speculation? That would certainly explain the increase in correlations.

I've been thinking about the line that divides investment from speculation. Prior to this administration, I considered the difference to be based on time window and interest/dividend cash flow differences.

Anyone's thoughts?

Stefan Jovanovich writes: 

To avoid real work I have been reading Sumner's History of American Currency; it is a delightful reassurance that "state sponsored speculation" began as soon as Washington left office. The present may be dreadful, but it is hardly unusual. I would argue that the present "command economy" is, in fact, far less under the thumb of the government than it was before ZIRP. Is there anyone on the List who thinks that, freed from the shackles of the Federal Reserve and the Treasury and the alphabet agencies now guaranteeing home loans, the U.S. single-family housing industry would boom and passbook savings rates would go back to 5%? Roosevelt's legalized theft of American's specie savings had terrible consequences for the American economy because it represented the complete triumph of state sponsored mercantilism. World trade literally evaporated. That is hardly the situation now. The Federal Reserve, ECB, and Banks of England, Japan and China can tinker with the maturities of their IOUs all they want and the national Treasurers can hint broadly at the need for a strong (weak) national currency; but the markets call the tune.

Gary Rogan writes:

Let's say you discover that on a particular day the stock market is likely to sell of based on historical patterns, so you short the market. In a different situation you find a promising young company that you believe will create a product that will sell in the billions several years from now so you buy the stock of that company. Wouldn't the first example be more of a speculation and the second one more of an investment? To generalize, could speculation be betting on the market participants' behavior, generally in the short term, and investment betting on the underlying fundamentals, generally longer term? 



 There is an old German phrase: Mann tracht; Gott lacht.

Roughly translated, it means Man proposes; G-d disposes.

This gritty, arresting mise en scene in the deep Carpathian woods in a wintry mid-Europe shifts from bardeau to bardeau. It starts as an actioner, shifts to a quirky comedy between the two dumbkopf hired killers, cycles to a torture spectacle, finally to an opera buffa of crescendo'ing blood and unexpected peripety (as the Greeks used to call it).

Two men, Walter and Micky–one of whom has erred in a simple rubout–are hired for what they are told will be essentially a walk in the woods kill gig deal. Plus they can, they are told, build snowmen. Hike. No real details, but their comfort with guns and silencers will be, they think, put to easy and uncomplicated use. It does not work out that way. They encounter the unaccountably out of place and sexy girlfriend, Sybelle, of tough-guy entrepreneur Berger, their employer. They are not good handling the days of waiting, enticed by alcohol, deep woods, the no-tell-hotel, and drugs, vistas of drugs. It takes days before they even learn what it is they are expected to do. Events before, and after, do not go smoothly. Sybelle is not what they had anticipated.

The gorgeous stenography of trees and snow, stark photography of pristine pines amid depths of snow, an exquisite ice-storm weighting down the branches of thousands of trees, a lonely hotel in the midst of nowhere, makes this an eerie metaphor for man against enemy nature, as well as man against man.

The protagonist we are first sickened by becomes the one we soon identify with. The goofball assassin partner, impressionable skinny Micky, we first like, we soon turn against. The implacable rich man experiences his comedown–and the hired gorilla-body man tries to out-think his boss in a fizzled-out mutiny.

It may start out a genre film, but swiftly transcends itself into a complex examination of turn and turnabout, resistance, keeping one's counsel in extremis, and the quirky results of not over-reaching, over-acting, or over-thinking one's predicament…

… But getting the hell out of the way of those even more bloodthirsty and disordered than one started out. A spare but provocative rumination for the un-faint-hearted.

Made in 2010, SNOWMAN has been on the shelf for two years. We can hear from the dialogue all the impacts US slang and culture has on German patois and issues. The music, often at amusing variance with the onscreen bloodletting, is in English sometimes, as well as in German. There is a contrapuntal lightheartedness in the early narrative voiceover. Mid-film descriptions, diagrams and explanatory freeze-frames add to the sang-froid, as it were, if not the seriousness of the proceedings.

In German, English subtitles.



 We have recently learned something with regard to trading currencies; specifically that in a strategy involving switching or rotating currencies they should also be traded with debt and gold. That is, excluding gold and debt from the universe of currencies lowers rates of return and/or increases drawdowns to less than optimal.

Background: We are equity traders who occasionally run from equities when our various quant manipulations suggest we are about to get thumped. Traditionally in such a circumstance our go-to place has been treasuries, specifically the 10-year. But there are times (like now) when fleeing to bonds doesn't seem like a good idea. So we decided to reassess our strategy vis-à-vis alternatives. And our full-court-press of research shows that the best alternative is a strategy of moving between bonds, gold and the U.S. Dollar Index. This beats ALL strategies involving only one or two of those assets. More importantly for others is that it also beats ALL similar rotations among the Dollar Index and a collection of other currencies. (N.B. we are free to choose whatever time frame seems to be best suited.)

With regard to our strategy, it trades combinations of those assets rather than one alone. However there are times when the strategy will have us in only one asset, and many would express fear at being entirely in gold or the dollar. Few would fear being entirely in treasuries, although the period of greatest decline was indeed a time when all monies were employed in debt.
No one is going to get excited about the alternative rotation strategy; it does not have an exceptional rate of return. But it does have very good risk control, which is what we want in an alternative. None of this should be surprising, as we know how interrelated they are. Currency is all debt, except gold which is the traditional debt alternative vis-à-vis inflation. But then one of the costs of holding gold is the foregone interest. Since they cannot be separated fundamentally, it is logical that they not be separated in a trading program. But it took testing to convince us of such.

If you are a trader who exclusively trades currencies, you should experiment with expanding your universe to including gold and debt.



 I have read and sent The Last Cavalier to a few friends. Regrettably, the book is marred by an unbelievable character, Hector, a count, who can do anything from chugging champagne to killing sharks, snakes, fencing tigers, and brigands. It has some great historical vignettes of the spendthrift but well-loved Josephine, and the rather generous and energetic character of Napoleon. It contains much naval maneuvering from a corsair surcout that is completely unbelievable and out of context. There is a nice section about the mystery and ability and tactics of the royalist rebel George.

The hero kills Nelson and this inexcusable act is counterbalanced by Dumas by the best part of the book, an excellent historical disquisition on the battle of Trafalgar and the rise and appeal of lady Hamilton

The book is long and discursive. The kind you keep reading hoping that it will leave you with something lasting about its time and place. But to get to those few spots you have to wade through an unending 800 pages of filler, and out of context vivid events, and martial arts. The relations with his two sisters are particularly bleak and unbelievable. A terrible thing for a young person to read.

It reminds me of a Larry McMurty novel about the west, or a James Michener novel about a country or state, which is taken from history books summed up by summer interns. Obviously the author was paid by the word, and two thirds of it including the entire story of the count was a dead weight cost to me.

To compare this book to a Patrick O'Brian Novel, except for The Road to Samarrah, which it is like in many respects, except 10 times as long and three times as boring is like comparing Cervantes to Jackie Collins.

I am sorry that I sent this book to my friends or recommended it without reading it first as the ratio of input to output here is much too high.

The best part of the book aside from the spendthrift ways of Josephine was the professor's long introduction where he describes the hard work he put in to discover this lost novel. One wishes his discovery had not been made.



 Ambergris is featured in a recent story about a young, English beachcomber, and in a new book entitled Floating Gold: A Natural (and Unnatural) History of Ambergris by Christopher Kemp.

Beachcombers along some of New Zealand's beaches are evidently quite protective of their collecting locations.

1) "Boy Finds Bonanza in Whale Vomit"

An 8-year-old boy in England could be up to $63,000 richer, thanks to a piece of solidified whale vomit he picked up on the beach. The chunk may look like a yellow-brownish rock, but it's actually a primo piece of ambergris, an expensive perfume ingredient that is, um, spewed out by whales.

2) Two quotes from Kemp :

"There is simply no stranger substance in the natural world. When it washes ashore, it is worth almost as much as gold. At various times, it has been worth double, and even triple, the value of gold. Even today, ambergris is found in farflung places like the Maldives, the Bahamas, and the Philippines, and then transported across the world, to be sold in Singapore, Dubai and the South of France."

"If you believe what you read in the media," he says, "you'd think ambergris is something that people just find by accident." The truth, he claims, is far more clandestine. "There's a whole underground network of full-time collectors and dealers trying to make their fortune in ambergris. They know the beaches and the precise weather conditions necessary for ambergris to wash up on the shore." And when whale-poop gold is on the line, he says, "it can get violent."

3) "How to Identify Ambergris"

Ambergris has an unusual odour which is difficult to explain to anyone who has never had the pleasure of its sensual aroma. Ambergris is often described as being musky and having a sweet earthy aroma unlike any other, or a mossy fragrance reminiscent of the damp forest floor. Depending on the quality of the ambergris there can be a great variation in the fragrance. Poor quality or fresh ambergris (which is black and sticky) is fairly offensive in fragrance. If you can imagine scented cow dung you will be on the right track. Many people expect ambergris to have a very strong or foul odour, but this is not the case. In general, lighter coloured pieces of ambergris have a subtle, pleasant smell. The base animal (manure) odour fades as the ambergris cures. However, the white and grey varieties, in particular, possess the subtle, sweet addictive aroma that beachcombing dreams are made of. 



 There seem to be some noticeable changes from last year. Below are data on a few 5-star hotels in the same city. All numbers include tax and service changes. US$1 = 6.3 CNY.

Kempinski Sunday brunch
: 298CNY including alcohols including some American wines and Qingdao beer (the draft Paulaner is extra). 216CNY not including any alcohol. Seems not much change from last year.

The Holiday Inns Crown Plaza
: No Sunday brunch is offered. The regular lunch buffet is 129CNY not including alcohol - a change from 99CNY of last year but not much change with the food.

: The Sunday brunch was about 240CNY last year, but they stopped offering it this year. Only regular buffet lunch is served for 159CNY including some basic domestic beer.

Sofitel Sunday brunch
: 219CNY (same as last year) including basic domestic beer. The food is largely worse than last year. The very popular seafood section with lobsters and crabs is reduced to have only some small fish. The fine roast beef is replaced with roast pork. Appetizers and desserts are much poorer. The coffee remains the best among the peers though.

The diners are generally very light (perhaps one fifth full). Although I can't conclude about the comparison with last year as I don't go to them regularly, it does appear that there are fewer people (who are most Chinese) this year.



Even though the Euro is $1.25, it appears things are cheaper in Amsterdam than New York or Hawaii. I thought things would be more expensive over her in Euroland.

                 New York  Amsterdam  Kona      LA

Beer                $4          €2                 $5        $8

Dinner for 5    $250      €80               $350    $160

Omelette         $15       €7

Coffee             $2         €2                 $2.50

Buds                            €10/g            $15/g  $20/g

Economic theory says inflation should show in currency exchange, but something else is going on with inflation and dollar and relative buying power.

People seem less stressed in Amsterdam, happier than NY and LA. There are almost no cars in Centrum area…all bikes and pedestrians and canal boats. It oozes charm.



We watched the 1993 Kenneth Branagh produced version of Much Ado About Nothing on Netflix this weekend and give it high praise. It is worthy of a view and a feast for the eye and ears. It is all the set in sunny epicurean Tuscany, with a young Kate Beckensale as fair Hero, a brilliant Kenneth Branagh as Benedick and a spicy Emma Thompson as Beatrice. More than a few lascivious moments to keep the audience interested then (circa Shakespeare) , just as now. There are skillful word plays and delicious ironies. Ultimately the women educate their seemingly honorable soldiers who, save Benedick, commit one gaff after another. As in other plays there is artful deception and false identity, clever vicars, a faked death, and much lamenting and obsessing over that inescapable condition which is young love. Fine end of summer viewing. And may all life's deceptions end so comically.



 At last Labor Day weekend is upon us once again. This weekend marks so many special things, doesn’t it? The kids are back in school and the cries of “but I am bored” no longer echo across the playrooms and backyards of North America. College football season begins as we rediscover that violence with half naked women cheering the contestants to greater fury is the true embodiment of America. The pennant races are real now as baseball gets serious. It is celebrated the same way we celebrated all our holidays with copious amounts of alcohol, the ritual burning of tasty dead animals in the back yard and road trips down crowded highways.

Most of us have some vague idea of what the holiday celebrates. It is to honor all those who work, right? The image many of us get is that of a factory worker or coal miner when we think of Labor Day at all. Indeed the holiday was started to honor them and the growing Labor Union movement at the start of the industrial revolution. It is a day to honor the contributions and sacrifices of all those whose labor built this country and continues to feed the engine of production. The men who built the skyscrapers, poured the steel, mixed the concrete and laid the block that form the foundation of this great nation. The celebration started in Oregon and spread around the country. By the time it became a federal holiday in 1894 in the aftermath of the Pullman strike, 30 states already had set aside a day to celebrate the contributions of the labor force.

We still honor, and always should, these people. Those who rise early and descend into the earth to mine coal, or head to the rigs to bring oil and gas to the surface power our nation. The factory workers assemble the products that make our daily lives better. Millions of men (and women) with calloused hands load their trucks each morning to build the homes we live in, the roads upon which we drive and the buildings where we earn our living. Labors contribution to our nation is incalculable and should be celebrated.

 When I think of Labor Day I tend to broaden my definition somewhat. I include every American who gets up and goes forward to earn their living by making a contribution to society. I think of guys like my friend Carl in Key West. He makes a nice living in Key West as a cab driver. Now driving drunken tourists around may not sound particularly laborious. I wonder how many lives Carl has saved keeping folks from driving drunk or wandering around the streets Island Drunk? I think of the Tic-Tac kid selling software that makes companies work more efficiently and on a more cost effective basis. How many jobs have been created because his products freed up resources and made a business run more efficiently? I think of my journalist friends who chase stories all over hells half acre and back to keep us all informed. What about the kid at the grocery store who stocked the shelves on the night shift last night so you had fresh produce and other products available to feed and care for your family? How about the bartender who poured your drinks, listened to your bull, put the right game on the TV and the called you a cab at the end of the night? Or the cook at the restaurant who fixed that perfect meal, the waitress who served you and the bus boys and dishwashers who cleaned up after you? They all work their ass off and make our world just a little better every day.

 The definition of labor needs to be expanded to include more of us on this holiday. You know who I think we should honor on Labor day? Working moms. Especially single ones. I don’t care if you are a factory worker, an executive, waitress or a stripper on a damn pole. Being a working mother is LABOR. Even in homes with a father present there are some jobs and duties reserved to Mom. After carrying your fair share and earning a living all day women still have to come home to the kids and be Mommy with baths to be given, homework to be checked, boo-boos to fix, stories to tell, house work to do and other tasks that are pretty much reserved to Mom. The single ones have even more as they have no one to help them fix the meals, pay the bills do the dishes or laundry or all the other tasks of making a home. Being a parent is hard work but it is even harder for a working mom. I am pretty handy around the house and work from home but no matter how much of I do my wife is still being Mommy after my day has ended and I am parked on the couch with a book and a ballgame. When you are celebrating Labor Day this year pop one of those cold frosty delicious distilled beverages in honor of every woman who works hard to earn a living and even harder to be a Mom.

 We do not usually think of business owners on Labor Day as they are generally consider capital and nor worthy of recognition. That’s just wrong. These people work their asses off, rising early to open the store, dealing with the bills, the supply ordering, the staffing, the taxes, payroll and regulatory crap before the first employee arrives. They have to greet the customers, fill in for whoever didn’t show up today, solve problems, be a marketer and cheerleader, handle employee problems, stay on top of trends and opportunities in their industry. They have to deal with salespeople, vendors, complainers and regulators. The responsibility for others families fall on their shoulders and it is a heavy burden. These entrepreneurs get up each day to open the liquor store, the gas station, the restaurant, the jewelry store, the barber shop and host of other businesses that provide the products and services that make our lives easier and better. They spend their nights with ulcers trying to eat them alive from the inside out as they sweat out the choices between payroll and mortgage, new equipment and the kid’s school bill, paying taxes or paying the bills and the other hard choices they must make each and every day as they grow their business. As they reach a level of success they are the ones sponsoring little league teams, buying ads in school programs, buying tables at special Olympics fundraisers and contributing to other community causes and concerns. They Labor to make lives better for themselves and their families and by doing so they provide millions of jobs and make our communities better places. At least one of those frosty gin and tonics in a sweat covered cold glass of lime tinged deliciousness should be downed in honor of the engine of America, the small business owner this labor day.

 You know who else labors and should be honored this labor day? Immigrants. It is controversial subject and many are here illegally but a good deal of that is the result of ignorant policy. There are some who come here just to take advantage of social benefits and I am in complete agreement with deporting these freeloading bastards. Same with those with criminal records. Bye-bye thanks for trying, go the fu home. But those who come here to work should be allowed to do so. The image of the lazy Mexican or Latino is just bull. They aren’t taking jobs from anybody, they are doing the jobs that our spoiled ass society doesn’t want to and this has been the case since the dawn of time. Immigrants have always come here to take the lower paid jobs that society needs done. They have worked hard, sometime holding two or three jobs to make a future for their family. I see the same thing today in immigrants. Those that come here to work, work hard and contribute to their new nation. We need an immigration policy that can keep out the parasites and criminals but allows those who to come here to work, contribute and write a new chapter of the American dream. I hear fears from some small minded people that letting all these Hispanic and Asian immigrants may change our precious nation. There is no doubt they will. Just like the micks, kikes, krauts, niggers, polacks, lunkheads, hunkies, hillbillies, white trash, ragheads, frogs, wops, dingo f, chinks, goat bangers, and other races and nationalities that have come here in search of a new live and new hope, they will change our nation. For the better. We are a nation of immigrants and the great melting pot of America has room for new generations of workers, builders and dreamers. I raise of glass of well chilled glass of New Zealand Sauvignon Blanc in honor of those who look to come here to labor for their dreams.

I think of those in our Armed Forces who labor to protect our freedoms. From basic training onward military service is hard work. It requires discipline, commitment honor and the bravery to rush to the guns when required. They serve often in missions they do not understand. They serve a public that is not always grateful for their service. From the highest ranking General to the newest private they serve for far less money than they could make in private life. They labor for their nation and the ideal we try to represent and I will raise a glass of cold delicious frosty beer in a salute to their labor and sacrifice.

 I even think we should raise our glasses this labor day to honor some government employees. The policeman and fire fighters who risk their lives to keep our homes and families safe. Those who rebuild and repair our roads, sewers, highways, bridges and electrical lines that makes our lives so much easier and safer. Those who keep our neighborhoods cleaner and free of unsightly trash and garbage by carting all our trash and junk off to the dump should be thanked and honored. To those teaches who labor to educate our children and push them to new heights of achievement I offer my thanks and appreciation. All of those whose toil and labor to improve our cities and towns should be considered this labor day. I raise this crisp, chilled martini in your honor.

Of course I do not offer any honor to the bureaucrats, politicians, administrators, tax creators and collectors and other parasites who live on the public dime without offering any real benefit to society. To those who make it difficult for workers to work, first responders to respond, teachers to teach and citizens to thrive I offer no honor or respect. I spit this well used cocktail onion in your general direction.

 It is Labor Day. I think the definition of the day needs to be expanded to everyone who rises each day to earn their daily bread, to provide for their family, to offer their children a better life, to achieve their dreams and earn their success. It does not matter if you wore a coat and tie, grease stained coveralls, a business suit and heels or a nurses uniform if you went to work to make your life more secure, your labor in pursuit of your own dreams has helped to make our national dream closer to a reality. This nation is built not just on the hopes and dreams of our citizens but the effort, yes, the labor, that has gone into reaching for those hopes and dreams. To the dreamers who work I celebrate you and lift my glass high in praise of your labor and your contribution to the world.

Now light the damn grill, turn on the game and someone get me a refill. Happy Labor Day to all.

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