The proper interpretation and analysis of remotely sensed images requires a great deal of expertise—and sometimes imagination.

Often ground truthing (when possible) is needed to confirm object identifications.An example of the more speculative variety of "armchair" remote sensing follows:

"Google Earth Finds More Strange Patterns in Chinese Desert"

"Today, Amelia Carolina Sparavigna at the Politecnico di Torino in Italy reveals another mysterious pattern in a remote part of China, this time the Taklamakan desert in western China.

In the last few years, Sparavigna has pioneered a form of armchair archaeology using Google Earth and open source image processing software to hunt for interesting structures in remote regions of the planet. She regularly posts her results on the arXiv and we've discussed several of them on this blog, here for example."



 I sat next to a famous 97 year old singer yesterday at a Halloween party. She had sung with Danny Kaye, Red Skelton, Frank Loesser, Lucille Ball, Frank Sinatra and many others in her illustrious career. At the age of 30 she married a gynecologist and had 60 years of a beautiful happy marriage. A year before he died he was encouraged by friends at the club to invest with a dynamic investor who was guaranteed to take their money and give them a 10 fold return within 2 years. He was a famous new jersey ponzoist a la Madoff and she lost her entire wealth of 500,000 with him. Her husband went to the dentist to have a tooth pulled and woke up with a tooth ache that night. She took him to a hospital where he was told to take or get off Cumodin. The doctor kindly told her to go home for the night and an hour later they called her to tell her the beloved husband was dead. She lives in a rent controlled apartment and can't afford the rent after 50 years. It's worth 2 million but she can't get the landlord to buy her out of her lease. She said she'll marry someone much younger unless he does, but the prospective husband wants to put her away into assisted living so it doesn't work. She had a beautiful voice, was completely upbeat, and quite a bit more up to date and mobile than I. "I remember everything" she said and she did. I touched her for good luck as I do all centenarians.



 Friday October 26th in 1861 the Pony Express made its last run as the telegraph was established

Made me think back to my Boy Scout years and i had to get a message thru and learned Morse code.


Jeff Watson writes: 

Believe it or not, we still use a lot of CW(Morse Code) on the amateur bands. For the past couple of years, I've seen an influx of real high speed operators, all with perfect form and perfectly even spacing between the dits and dahs. The thing about them is that they are fakes, just guys who use computers to crank out Morse Code. They use the same kind of program that deciphers(CW) up to 120 words per minute. No human can send that fast, only a computer. There is no personality, no individual style with the fakes either.

An average "real" CW operator on the amateur bands is about 50-85 years old. Some of those old guys can copy 60+ words per minute in their heads. They can also send 60 with a good keyer. They are all, to a person, very unique individuals. It takes a bit of craziness to still use CW, and do it well.

Old time CW operators are very humble about their skills and will admit to copying CW to 35-45 words per minute. Like golfers, old timers sandbag a lot. One is officially considered to be an old timer if they have been licensed over 25 years and active in the hobby. Everyone knows who the real old timers are.

Fakes, on the other hand are quite boastful about their abilities on CW. The average "fake" CW operator is in his 20's-30's, very computer savvy, and could care less about learning the craft of CW. I don't know why those fake CW ops play with computer generated CW when there are so many easier modes of communication. They do brag in a conversation about being a CW op, but drop the ball when questioned by a real CW op.

If I'm seeing a decline of traditional skills in the noble hobby of amateur radio, what does that say about the rest of the world? Are other important skills in other areas eroding? Does the speculation community have a similar decline of skills? Are computers making us stupid?

I wonder what percentage of today's speculators cannot do very quick, accurate math in their heads without a calculator? Quick, accurate math was a primary job requirement for both speculators and bookies in the 1900's. There have always been many tricks and shortcuts to doing quick math in your head. Have computers replaced traditional short cuts in out minds?

As an aside, I suspect that the extremely pleasant and humble Mr Milhone would make a great CW operator.




What are the popular phrases used in our business. Things like "risk on" and "challenging" and "restructuring". It always amazes me how book value of a company can decrease while its operating earnings go up.

Gary Rogan writes: 

"Risk-adjusted returns" and "risk tolerance", which seem highly presumptive.

Vince Fulco writes: 

"A rising tide lifts all boats"

"the fed/bernanke put will protect you"

"Fools dance but the greater fool is the one on the sidelines watching them dance…"

"Esp. If they are earning ZIRP"

Pitt T. Maner III writes:

There are two phrases that seem to be in more frequent use lately:

1. "jumping the shark" which has an interesting origin from the "Happy Days" TV show in 1977:

'In its initial usage, it referred to the point in a television program's history when the program had outlived its freshness and viewers had begun to feel that the show's writers were out of new ideas, often after great effort was made to revive interest in the show by the writers, producers, or network.

The usage of "jump the shark" has subsequently broadened beyond television, indicating the moment in its evolution when a brand, design, or creative effort moves beyond the essential qualities that initially defined its success, beyond relevance or recovery.'


2. "thrown under the bus" which evidently was first used by sportswriters around the 1990's.

"It's unclear where the phrase came from, but there's no doubting it's having a heyday. There are bus-throw references in the late '90s, mostly in professional sports. (Players who don't get their contracts renewed are often said to get you know what under you know where.) The phrase turns up in politics in 1999, according to a database search, with its maiden voyage courtesy of a press secretary for a candidate for mayor of Philadelphia."

Perhaps in some ways the revived usage of these (and many other) turns of phrase are indicators of overall public sentiment.

Ed writes in:

fiscal cliff, confusing alpha with beta, risk management, proprietary formula, diversify, flight to quality, short japan, market bubble, gold bug, tin foil hat theory, perma-bear, bullish, bearish, front run the fed, market master, trading guru, market cycle, ETF portfolio, bond maven, high frequency trading, flash crash, smart money, front run, market anomaly, wave theory, cash is king, cash is trash, quantitative easing, QE, money printing, wealth effect, hard money, we are bankrupt, offshoring, the 1%, responsible for 5% of NYSE/CME/CBOE volume, carried interest, deep value, momentum trade



 I became involved in the personal computer movement back in the early days. I built an 8 bit, Intel 8008 powered computer from a July 1974 magazine article in Radio Electronics. I also started one of the first "home computer" clubs at NASA/Houston in 1975, so I have been a really long-time observer of this technological development.

I have been amazed at the development of what has become the worship of Apple, even from the early days of the Apple 1. Now an anthropologist has confirmed that it has become a religion.

Today Apple Inc. has become a mammoth corporation. All very interesting.

John Bollinger writes:

I was just a few years behind you, starting with a z80 S100 system in 1978. Indeed, I developed Bollinger Bands on such a system. In those years there were a wide of microcomputer choices and many users moved around from platform to platform, but the Apple people were exclusive from the start. They used separate stores, forums, bulletin boards, user groups, ect… It seemed that with Apple you were either in or out, whereas with other platforms there was a lot of cross fertilization, debate and movement. One could work with a Commodore, Radio Shack, S100, cp/m, Atari, Sinclair, etc. user, even with some of the mini-computer users, PDP, VAX, etc., but rarely with an Apple user. The dividing line seemed to be memory mapping versus port mapping, with Apple's 6502 using memory mapping while much of the rest of field used port mapping, a distinction that faded long ago. My take is that the closed culture was deliberately fostered by Apple's founders to ensure the success of their brand.

David Lilienfeld writes:

I too remember those early days, having built the first MITS machine. Running a program meant flipping toggle switches up and down. The 8008 was followed by the 8080, which was a great chip with which to design. It was a lot easier than the 8008. There were only two competitors of note–the Motorola 6800 and the AMD 6502. That's how Motorola and Advanced Micro entered the microprocessor market (and the world introduced to Jerry Saunders, who could have taught Liberace a thing or two about flamboyance).The Z80 followed in due course. By then, the TRS-80 came on the scene, along with the first set of Apple computers. Those were heady days. Just getting a "Star Trek" program to work was considered a major accomplishment.

I'm not so amazed by Apple's development, per se, as by its rescue from the trash heaps of the PC industry. This isn't close to being the arrogant company that built the Lisa and the original Mac. I'm not sure it is a religion, though. Look at what's already happening with the early adopters and the new iPad. This situation is like the original versions of Word, and the Microsoft fans (Microsoft worship in corporations was pretty prevalent, though nothing like Apple). As with Microsoft, this support of Apple will in time pass.

Jeff Watson writes:

I remember my first Commodore and thought that being able to figure out empirical calculations(curve fitting) with major fudge factors to describe grain prices was the cat's meow. But then again I thought my old HP 35 calculator was something.




In the style of Tufte, 3D charts can incorporate higher elements such as order flow, internals, volume, volume at price, depth, ad, highs, lows, news, relations to other instruments and other internal higher order info at price point by using color or shape or numbers themselves to indicate data or information at a glance. This effectively conveys multiple order information at a glance, rather than multiple tables. Some folks are chart rather than table oriented and info and relationships are easier visually in real time.



Mr. Carling's comments ["Self Sustaining Leviathan", in reference to the welfare system] omit the most important fact. The people handling the transfers — the government employees and the private contractors — do a rake off that would make Vegas blush.

The greater part of "Welfare" spending long ago ceased to be actual direct cash given to the applicants; the budgets that create the 47% figure are largely consumed by the people who determine eligibility, etc. Some of us who delivered beer and bombs to the wide spots on the river used to joke about Lyndon Johnson had forgotten his Texas political upbringing; if he had simply offered cash bribes equal to our war spending (the most reliable statistics at the time were that it cost $1 million to kill one VC), there would not have been a communist left in the delta.

That same sick sense of humor applies to public spending on education, job training and the other efforts to bring Quaker enlightenment to the huddled masses: simply dividing up the money being spent and giving it directly to the heathen would have long ago solved the social problems. The difficulty, of course, is that it would take away all the sinecures. The barbarians certainly did their part to end the western Roman empire but its financial downfall was the inevitable result of having more and more people on the government payroll even as the Empire's income (i.e. collection of conquered peoples) declined.

P.S. The best estimate is that from the beginning of the current era (1 A.D.) to the beginning of the 3rd century the Roman Empire's armies captured and sold half a million people a year.



The All Seeing Eye mounted above could see revulsion among flexions in Germany, Spain, the IMF, the EC, the central banks, and the mid-east that the probabilities are evening, and the market is crashing. What a terrible way to lubricate the cogs of the world state. Even before the Fed must do its thing today, one predicts a helping hand from the fellow brothers in Europe.



Did you ever think about how it's hard work to have fun. We're having a Halloween party, and it's a lot of work. I love to hike and camp, but it's hard work carrying all the gear. I love to climb mountains and ski down, but it's hard work. I love to surf big waves, but it's hard work to train for it. But I find the effort as enjoyable as the results.



 The below article which talks about Australian cricket spin bowlers and gives advice from an ex world best to keep it simple, brings up certain good points in trading about focusing on what comes naturally first and foremost. Get that right and the numbers will play out, (as soon as you dilute the edge and get too fancy with new things that you haven't crunched the numbers on, your performance will suffer.)

"Warne's Back to Basics Approach": 

"The emergence of so-called mystery spinners such as Saeed Ajmal, Sunil Narine and Ajantha Mendis has ignited debate about coaching methods, after Muttiah Muralitharan said Australian spinners had the creativity beaten out of them by perfectionist coaches early in their careers. But Warne takes a different view, cautioning against teaching young spinners to push the boundaries of legal actions. He believes Lyon will be best served with his stock ball.

''Graeme Swann does OK, he bowls an off-break and a straight one. So I think Nathan Lyon has done very well, too, and if he can just concentrate on his off-break and the straight one, I'm sure he will be fine,'' the Melbourne Stars captain said. ''Don't try too much stuff, just bowl well, and over a period of time you'll have better games than not. We're traditional [in Australia]. If someone comes along who is unique you'll embrace it and encourage it but you're not going to go and teach doosras and all those sorts of things.''



 I was in San Juan Puerto Rico last weekend and happened across a chicken fighting establishment in Isla Verde. I decided to venture in to see what it was really like as I had heard a lot of stories and had seen the movies but had never personally been. I will not comment on the actual fights but they are definitely not for everyone, those who are squeamish or are animals lovers will not appreciate the place one bit.

However, what was interesting was the entire setup reminded me very much of the CME. There was a tiered system of seats (similar to the CME platforms) that descended to a central pit (where the fighting happened). In the lower tiers sat the professional bettors. They were largely a motley crew, not the kinds of people you would want to meet in an alley. They had various hand signals that allowed betting. The hand signals looked very similar to the old pit signals. All was done in Spanish which made it hard to follow so I managed to find an English speaking bouncer to give me the rundown.

Bets are on a one off basis and they are between members of the pit. No regulatory body exists to ensure fulfillment. However, there is a code of honor I was told and welching would not be tolerated (I didn't ask what that meant–the ambiance didn't leave many imaginative alternatives). Odds are not posted or discussed. Nor were the stats on the chicken, the prior W/L ratio, the bloodline, the breeder, etc. Other specifics such as weight and age were also unavailable. The owner's name was posted on a screen but there did not seem to be repetition. Not much data. It was very wide open and seemed overly biased toward the insider.

The birds were all kept in a long row of cages about 5 high by 25 wide. Ironically, the cages seemed more humane than those metal bottomed found in a pet store. The birds were fed into two glass cases where a pulley system sent them out to the top center of the arena, then lowering them down into the pit. Each bird was given a blue or white band on its leg to signify who was who. After blue won 7 straight I asked the bouncer if this happened much and who set the leg tags. He said it was the man behind the cages. I ventured out to find the man to determine what system he used to decide on blue vs white but all I got was "no habla ingles". Shortly thereafter white began to win (3 in a row). Perhaps my inquiry/noticing stirred something. Perhaps it was random. The vast majority of the crowd were 50+, male, and stupidly drunk. They would bet and lose and meander off. They did not seem like they would notice things like blue winning seven straight.

The fights began when the birds were lowered into the pit. Some betting took place then. The bell rang and the birds came out and began to fight. After a minute (if it went on a minute) a large buzzer would go off signifying the true beginning of the fight. I guess they wanted a minute to see the odds live. This is when the betting would get intense and the inner circle near the pit would erupt. It reminded me of a payrolls day. Odds would go off between individual parties at undisclosed levels depending on what the first 60 seconds displayed. There were bets before the first minute was up but less so than after (similar to pre 930 cash open in futures). After a while the fight would not hold much more mystery as the dominant fighter would be clearly in the lead. At this point some last minute bets would go off at (presumably) higher odds by the anxiety ridden losing gamblers as the announcer chanted "losing" in Spanish adding insult to injury.

The core players seemed to all be interested or disinterested at the same times. The activity on certain fights would get intense, other times it was slow and listless. On the way out I noticed the majority of the parking lot was full of lower priced cars while, closest to the door, stood 10 or 15 SL500s and such.

I found myself glad to be part of an established market with fair practices. I wondered if this is how things began in the various commodity futures markets which led to the establishment of the CFTC , NFA, etc. I was also told, in broken English, that the establishment was in the process of setting up a central betting system which would have a window where a bilingual clerk would take bets. Hard not to wonder what that will mean for the market and for the bankrolls of the drivers of the high end vehicles. And if the same thing(s) existed in the CME or the NYSE in olden days.



 I have been wondering, is there any strategy for slots? I know there is a lot of strategy for blackjack and other casino games that is applicable to trading but I've never really read about/considered slots. My quick online searches returned nothing very scientific. I assume slots have a routine (low) payout ratio. I wonder how random the results are (the conspiracy theorist in me is highly skeptical, especially of video slots).

It seems the time to play would be after a string of losses as the payouts do need to come. Sort of like counting in blackjack, you could watch other players on machines, wait for them to lose a lot and potentially assume the odds were going up. It also seems (much like old horse racers) the best recipe would be to bet a consistent amount. Watching players I see bet sizes swinging all over and a lot of loss. Usually it is bet big, lose, reduce size, win, up size, lose, repeat until broke.

Bets could vary but only as a constant function of capital (I.e. 1 with 10 in capital, 2 with 20, etc). This would be subject to casino limits but would probably beat changing size due to martingale risk. I also figure different machines would have different odds. Best to play the machines with the highest odds. The scratch lotto for example publishes the odds of their games in ny, I imagine one could find similar publications with slot odds.

Next I wonder how stop losses could be tied in. Would it be best to use a set number of losses to move to the next machine. When playing with house money should you let it ride or use a rolling stop. Rolling stop sounds better. Also if you had a big win it stands to reason that machine was not going to be paying out big soon so you should cash in and move on.

This all may be virtually impossible too unless there were teams working in shifts (people have to sleep) but casinos don't.

Welcome any thoughts or ideas. I know slots aren't sexy like table games but the anonymity and lack of fellow players makes them fun at times (but it would be more fun to walk away up money).

Will Weaver writes: 

If slots are random they don't have a 'quota' of payouts… and as in flipping a coin, every iteration holds the same probability. So there shouldn't be any advantage. But I know nothing about the machines other than they probably are not completely random, though closer than would generate an edge.

Sam Marx writes: 

If they are electronic slots, I believe they use some sort of random number generator. So I've had the theory that if there was some way to determine the formula used, then they might be beaten.

Craig Mee writes: 

Watching the payout numbers on a screen a long time ago when a technician was working on one– this was a poker slot– showed the payout to be approx 80% before double up, and after double up it went down to the low 60% if memory serves me correctly. When playing I took the strategy of banking all my small wins due to this, and doubled up on any large wins i.e 4 of a kind and the like. From there I would work a stop at flat after doubling the stake (if I won my doubles) and then a trailing 20% stop of total win one tripled my initial stake. It seems to let you have a plan, and walk away, rather than the guy next to you, tipping money into that feeder all night. If you must play, then having a plan of attack is the most important aspect, so you bank or your stop goes off …quickly…and you're out of there. 

Jeff Watson writes:

There s one great slot strategy that hasn't been touched on. The best way to win at slots is to not play at all. Even the places that offer 98% payouts. What they are really saying is that for every $100 you feed through the machine, you will get 98 dollars back. The vig is too tough for me, or any other sensible person, for that matter. One has noticed that the really easiest games of chance usually have the highest vig. Things like wheel of fortune, chuck-a-luck, slots, and keno all have outrageous vig and should be played by no one. Save your money and go to a great show.

Pitt T. Maner III writes: 

 Along the lines of the slots thread, here is some info about roulette strategy:

1) Under normal conditions, according to the researchers, the anticipated return on a random roulette bet is -2.7 percent. By applying their calculations to a casino-grade roulette wheel and using a simple clicker device, the researchers were able to achieve an average return of 18 percent, well above what would be expected from a random bet.

Read more

2) "There have been several popular reports of various groups exploiting the deterministic nature of the game of roulette for profit. Moreover, through its history the inherent determinism in the game of roulette has attracted the attention of many luminaries of chaos theory. In this paper we provide a short review of that history and then set out to determine to what extent that determinism can really be exploited for profit."

full article here.

Chris Cooper writes:

The most obvious and effective countermeasure is to disallow betting after the ball is released. The casinos allow betting after release because customers like it, but if they have any doubt it is a simple matter to change that practice.

Secondly, Thorp's original work (and mine) were based on finding wheels which were not quite level. After he hit a few casinos successfully, he found that the number of out-of-level wheels decreased. The paper cited in the original post details an approach for level wheels, but notes that more accurate timing is required.

Plus eV roulette did make it to book form, if not the front pages, by a group from Santa Cruz. More recently, a Hungarian was purportedly successful to the tune of over one million. My paper many years ago is lost to the ages, but in any case you can learn much more by reading the paper cited in Mr. Maner's post.



The Chair and the media may think Obama won the debate, but he is leaking profusely on Intrade.

And watching the (admittedly boring and annoying) debate, one saw Romney playing it safe as if he were ahead, and Obama attacking as if he were behind.

The Chair might also be interested in the unusual prominence of the Navy in the debate, but that we will leave for a separate post.



Italian Scientists Convicted of Manslaughter for failing to predict an earthquake:

"Six Italian scientists and an ex-government official have been sentenced to six years in prison over the 2009 deadly earthquake in L'Aquila. A regional court found them guilty of multiple manslaughter. Prosecutors said the defendants gave a falsely reassuring statement before the quake, while the defense maintained there was no way to predict major quakes."


"Among those convicted were some of Italy's most prominent and internationally respected seismologists and geological experts."



 I can't begin to express my disapproval of letting a son go round putting people in choke holds, and kidding them about their lives. I can't begin to think of a worse thing to do to people, and worse training for a kid. All fathers should put a violent stop to such activities at the first signs of it. I have had people put choke holds on me, and the feeling of helplessness and having death in the hands of a joker is one of the most terrible feelings that one can have. It can lead to all sorts of dire consequences and thank the good one that my friend who mentioned something about this to me is still healthy after their encounters and amusing contretemps in it.

Ralph Vince writes:

I agree that no one (of any age) should go around doing that, and a fortiori, young people must be taught to make sure not to let people come up behind them, to track them in their head, and to have a sense of the whereabouts in the plane surrounding them of all who are about. It's too easy to become preoccupied in thought (or conversation) and lose sense of where the pieces are on the chessboard.

That being said, I think having enemies expedites education. I can only speak for myself, but I live in the middle ages, and wouldn't think of leaving home without a cup and two discrete weapons. A gentle man should look like a gentleman, and above all, never, ever let anyone come up behind them for any reason. Similarly, one should be very careful when coming up behind someone else, to speak to them and them know. 

Kim Zussman writes:

Funny no one looked up the actual risks to "choking out".

However this fits with the ubiquitous meme on dailyspec, "we as parents who have lived longer (but aren't necessarily successful / self actualized / or understand fully what we are doing here) will instruct you".

Or, that you should study certain music, sports, chess, religion, etc, in order to have a better life (fit in, reproduce, instruct, etc).

This was apparent this afternoon observing various bird species. The local crows call to each other in a way they all accept. Most likely the calls are reassuring: "we are crows and we got it right!". Also there is a lot of Mexican sage growing here, which attracts legions of hummingbirds. They twit twit continuously, zipping about, arguing over this or that mate but at the same time saying "we are hummingbirds and WE got it right".

New to our neighborhood is the black-hooded parakeet - a non-native parrot released into the wild but living and reproducing happily here. They fly in a tight noisy cluster - from one neighbor's Mexican palm to another's pine. Somehow these two trees are go-to places for the parrots, as they squawk and argue about tabloidesque mating rights.

What does this have to do with Reese Witherspoon putting her Ojai house on the market ?


"Libbey Ranch provides a serene setting to be with her family, and looms large in her approach to parenting. "It reminds me of growing up in Tennessee, where we spent all day outside," she says. "I wanted my children to have that experience, to get muddy and hang out with the animals."

Indeed, Witherspoon has turned Libbey Ranch into a menagerie. A Friesian horse and a chestnut pony share the paddock. There are donkeys, goats, pigs, chickens, and four whimsically named dogs: Hope, Nashville, Coco Chanel, and Hank Williams. Neff fashioned animal silhouettes that are perched on wooden fences around the property. "

An iconic actress teaching that the fond remembrances of her childhood should be impressed on her own children for their own good. But now married to a man who is not these children's father, and expecting his. Evidently the ranch has to go.

But Ojai is not just about Hollywood. In fact other mothers duked it out there Friday on one of my mountain biking trails:

"A 50-year-old woman was walking her three dogs Friday on a road just north of the Ojai city limits and adjacent to Los Padres National Forest when she apparently surprised a California black bear and a cub. The bear, described as cinnamon brown in color, was estimated to weigh 250 pounds and was with a cub that appeared to weigh about 50 pounds, the department said.

The bears ran across the road ahead of the woman, but then the larger one came back to her and scratched her wrist, leaving a 1- to 2-inch wound that was not life-threatening, officials said. The attacking bear began to leave, and the woman turned her back it. But the animal returned and charged the woman, knocking her down an embankment. In addition to the earlier wound, the woman received at least several 6-inch abrasions that appeared to be from a claw, the department said."



Often we would remain absolutely still for several seconds even when out of distance. These were the most tiring periods for our brains were then undergoing that exhausting battle of wits which immediately preceded each phrase d'armes. The physical strain was truly severe. A fencer is irrevocably doomed the moment the lively flame in his eyes shows signs of diminishing in intensity. At times our eyes would not even blink for comparatively long periods for blinking at the wrong time, within striking distance meant giving the opponent the advantage. The slightest misjudgment in distance, or the smallest useless blade motion meant almost certain suicide for the one who erred.

I based my fencing upon the offensive defense of the counterattack and contretemps, as well as upon the third and fourth intention. Indeed the second intention was seldom successful against a champion like my brother.

from The Living Sword about his training bouts with Nado.



 The Living Sword by Aldo Nadi is an autobiography of perhaps the greatest fencer of the century. His brother was Nedo Nadi. They were sons of a famous fencing teacher of the 19th century and fenced pretty much from birth winning their first adult tournaments at 11. The fencers at the school used to like to beat the kids in matches when they were teens and induce the father to give them a bout in return for their kidding. They won many Olympic golds in 1922 and then both turned professional.

The book describes the career of Aldo Nadi who spent his first 35 years in Europe and then left for America right before the second world war. After turning professional, he engaged in a series of Galas, like our heavy weight boxing matches, with anyone who would fence against him. He was so good that eventually no one would match up against him. His style was different from others, he did all his parries from central position. In the offensive movements he deliberately avoided each of his opponents weaknesses trying to score, instead in the lines best protected against and through their favorite most effective parries. Furthermore, he insisted on launching his attacks as far from the targets as feasible. He was 6' 2'' and weighed 130 pounds and was quick as a cat and always sick.

The book starts off with a real duel that he engaged in with a writer who questioned his courage, and ends with his proposal for a duel with guns with the president of the Italian Fencing Federation who didn't accord him as much respect as possible. And it is interesting to read about the formal nature of the duels of the 19th century and how different they are from real fencing matches. "You are not at ease, particularly when you see a couple of doctors in white shirts silently laying out a hideous assortment of surgical instruments upon a little table. They may be for me in a few seconds".

 Nadis favorite activities were seduction, gambling and battles. He didn't train, drank heavily and was always sick. My father always said that such activities would inevitably lead a man to die broke and a degenerate. I was interested to see if that would hold true in Nadis case and indeed it did. He hated Los Angeles where American fencers and Hollywood did not care to put in the training and respect that fencing demanded. He went back to Monte Carlo at 60 to try to win a stake again, lost all his money, and had to come back to LA to teach again at a meager rate with the tail between his legs. His first marriage was strictly for money and his second "was a blunder". A niece wrote: "his mortal remains that I would have wished to accompany in the cemetery of Livorno beside his parents by his desire were cremated and his ashes dispersed from an airplane over the ocean. Italy, he rejected and generous America was not his country. He chose the wind for his tomb and I weep in anguish". His last sentence was "you have to know that I was a much better fencer than my brother and the only reason he tied me in our exhibition was that he begged me not to trounce him."

The book covers all of his ideas about what is good and bad in America and Europe during the major part of the 20th century. He hated doctors, railways, air conditioning, American education, and American women whom he felt were very cold compared to the hundreds of European women he seduced. He was a fan of Bertrand Russell and H.L Mencken and has many views on life that are similar to them. I found the book fascinating and well worth reading to find out how a person of tremendous natural ability and great training could mount to the summit of his field conquering the obstacles of a great activity that is not a great part of popular culture.



 An individual defines him or herself as the sum of the impact of memories as well as the person he or she is today. While others, for the most part, define him or herself as he or she appears to them today.

Often this creates an anxiety and tension between the past and the present. The kid wanting to grow up will try to prove it by doing stupid stuff to show that he old enough to handle it.

And likewise the young adult longing for the comfort of his childhood, will often do something stupid to show he's still a kid and needs the protection of adults. The young adults will often swing between these two extremes in a matter of moments, as part of him wants to grow up and part wants to stay where it is safe. The good kid with great parents and a comfortable life, often has a harder time wanting to move forward, while the "rebel" with a hard life or poor adult figures in their life will often look to distance themselves from their childhood.

 Performance anxiety can stem from this. You see yourself as the dumb awkward kid, while the audience sees you as the expert educated adult. By performance I mean anything you do where others are your audience– writing, speaking, analysis, and any artistic endeavor. Besides showing off for the girls, this I believe, is perhaps the reason we often do stupid stuff and also why we can struggle to show our full potential to others.

I have found that recognizing this struggle within yourself and acknowledging and making peace with that kid in yourself can help tremendously with these fears and self doubts. Your art will shine brighter if you let the kid in you that was blown away by ever new worlds that were opened up to them shine. And your analysis will be appear more confident if you see yourself as the adult in your presentation as others do. In other words, embrace the dichotomy, don't hide or internalize it. Acknowledging these two selves, I believe, can help young adults not do some of the stupid stuff they would otherwise find themselves doing.

I have found that acknowledging this geeky 4th and 5th grader inside me that was excited by math, science and the wonders of the world while I am presenting something, writing something or analyzing something can help, yet also seeing that 4th and 5th grader, that dressed funny, was a runt, and totally confused by socializing, especially with girls, was charming, but not who I am today. Also though I expect others to see me as an adult, I know that showing the kid in me makes me much more likable and makes it harder to discount my opinions.



 I recently read this interesting National Geographic article called "The Secrets of Sleep" : 

If we don't know why we can't sleep, it's in part because we don't really know why we need to sleep in the first place. We know we miss it if we don't have it. And we know that no matter how much we try to resist it, sleep conquers us in the end. We know that seven to nine hours after giving in to sleep, most of us are ready to get up again, and 15 to 17 hours after that we are tired once more. We have known for 50 years that we divide our slumber between periods of deep-wave sleep and what is called rapid eye movement (REM) sleep, when the brain is as active as when we're awake, but our voluntary muscles are paralyzed. We know that all mammals and birds sleep. A dolphin sleeps with half its brain awake so it can remain aware of its underwater environment. When mallard ducks sleep in a line, the two outermost birds are able to keep half of their brains alert and one eye open to guard against predators. Fish, reptiles, and insects all experience some kind of repose too.

All this downtime comes at a price. An animal must lie still for a great stretch of time, during which it is easy prey for predators. What can possibly be the payback for such risk? "If sleep doesn't serve an absolutely vital function," the renowned sleep researcher Allan Rechtschaffen once said, "it is the greatest mistake evolution ever made."

Richard Owen comments:

A favorite pastime of mine is spotting that well held societal nostrums are in fact most often false. For example, Europeans holiday excessively relative to Americans, Mexicans are lazy, that the USA is the land of Horatio Alger and opportunity, etc. I once collected a lot of these for a slide called "Is Everything You Know False?"

Unsurprisingly, the floated nostrum typically serves some form of vested interest.

Sleep and leisure time probably also fall into this category. Sleep has become a deprecated activity. Many myths surround great men and their willingness to sleep only four hours a night. In many cases it is a myth. In others, like Thatcher, it's probably true. But Thatcher also allegedly was borderline nuts by the end of her premiership.

The greatest real time experiment in this regard was the three day week introduced during the miners strike in Britain under Edward Heath. Despite 2/5ths of the working week being cancelled, GDP dropped hardly at all.

Contrast this to an industry such as M&A advisory where 100 hours weeks are mythically common (and myth then dictates reality). Most of the work completed in this regard is surplus to actual transaction requirements and of zero utility. Back when the City was staffed by Etonians, they could take a 100bps spread and simply answer that they had got their client $10/sh more than expected, so surely the fee was just. Now, instead, a senior banker must recruit a handful of young slaves to work to the bone and spread rhetoric of 100 hour weeks as a form of justification for the perceived premium.

Contrarily, those whose achievements are without question are often willing to be totally open. In this regard, Churchill slept twice a day and felt it essential to his productive output. Einstein, when pushing against difficult problems, notched up a few extra hours of z's.



 I took my aging beloved 100k plus mile truck to her certified primary care provider (dealer) recently and they identified $5000 worth necessary procedures which they printed in a very nice report. With same report I got a second opinion from a smaller family run care provider (garage) who I trust, at one fifth the cost. Since I am paying this is out of pocket I opted for the cheaper one. If another party was paying this for me I would have been indifferent.

anonymous comments:

For those going on Medicare, the death panels are not panels but cost containment measures put into place.

What has changed treatment the most in the last few year is "adverse" reaction to treatment. The Doctors have to pay for treatment out of their own pockets if after initial treatment, the patient has an adverse response within set time periods based on the condition.

The doctor not wanting to risk the lose of income and time, therefore will only accept the most physically fit for hip replacement or even cardio operations.

"He is a smoker that overweight, what does he expect if his hip goes out…we don't guarantee miracles." is a typical response felt if not said.

One wonders if this will actually cause the working poor and lower class to receive less treatment than before, at least at their most critical point in their lives, as these are often are the people with the highest probability of "adverse events".

an anonymous person comments:

Well, what are some thoughts around the notion that if individual people are more financially responsible for their own health care, they will take better care of themselves?

anonymous responds: 

This I believe is the most insidious part, most people that get medicare trust the government way too much to question that they will be getting less care not more, under a medicare plan. Handouts are seen as "free money" without consideration for their second order effects on incentives and motivations.

This is especially true amongst the working poor class in my opinion. It will be generation X and Y before the "lesson" (they need to take better care of themselves) will be accepted. By then either medicare will be cut so far back or rationed to a point where by the time you are 65, everyone, if they have half a brain, becomes a "Medicare conservative" because they have seen Government work.



 One is reading The Living Sword by Aldo Nadi, perhaps the greatest Italian fencer. His life consists of gambling, romance and seduction unlimited, and drinking without training.

After beating everyone in Europe in match games, like our boxing matches, he moves to the United States where he finds "no interest in fencing whatsoever". He loathes his brother who was the previous Europe's best, and has nothing good to say for his competitors.

I have not read the last 100 pages yet, but I am waiting to see if my father's adage that all gamblers die broke and degenerates holds true.



 To the Tune of American Pie by Don McLean.

A long long time ago
I can still remember how
The Bush expansion made me smile.
I knew the unemployment rate
Would safely stay near 4.8
And just a few were jobless for a while….

But Autumn- Oh Eight made me shiver
With each statistic they'd deliver
Bad news on the doorstep,
The Fed would ease one more step.
I can't remember if I cried
When they put in Barack and his bride,
But something touched me deep inside,.
The day the market died….


Bye, bye to the G-D-P pie
Bailed out Chevy, passed a levy,
But the plan went awry.
And good ole Ben would raise the money supply…
Thinking this won't cause the dollar to die,
This won't cause dollar to die…


Oh did you read the book of Mao,
And do you have faith in Keynes right now -
If Obama tells you so?

Now do you believe in stimulus?
Investments for some solar bus
With G-D-P expanding oh so slow….?

Mike Lewis is in love with him…
Cause he saw playing in the gym
They both took off their shirt…
The romance makes me hurt…

I was a lonely teen objectivist,
Never dreamed of operation twist,
But I knew things would go to schist….
the day… the dollar died….


Now for four years we've been on our own,
And Reid grows fat upon his throne,
But that's not how it used to be.

When the Gipper told the Red Premier
"Just tear that wall down, do ya hear?"
And his voice inspired you and me…

But while Ron Reagan's health was down,
Slick Willie stole the Bushes crown.
The right way was adjourned…
To "progress" we all turned.

While Barack read Alinsky's tome
And told us Kenya was his home…
The right won Congress all alone
Before the dollar died…


Helter skelter impeachment swelter
With "What IS IS" he tried to shelter…
Eight miles high and falling fast…

With the pepper pot he'd  made his mess,
She smoked cigars in her blue dress.
But the Newt stood on the sidelines in a cast.

Now the half-term air was filled with doom
The Starr commission left the room…
The Right got up to dance,
But they never got the chance,
When the elephants had left their cage,
They faced the Democratic rage,
But soon they'd usher Dubya's age
To rise, the dollar tried….
We were singing…

Oh, and there we sat to watch the race
It looked like Al took second place,
With no time left to vote again….
So Gore be nimble Gore be quick,
Gore poked chads with a long green stick,
Cause lawyers are the donkey's only friends…

And as Scalia took the stage,
The Times erupted in a rage,
The Bushes were not burned.
No verdict overturned.

And as the stocks climbed up to record height
And Greenspan's rates were never tight
The subprime lenders would delight….
The day the dollar died…
We were singing…


I'm from a state that voted blue,
Our debt repayment's overdue
There's just no chance that we can pay.
I went back to the sacred book
Where Dagny visits John Galt's nook…
But the Rand there said Bernanke must go away.
And in the streets the hippies screamed,
They Occupied, of Marx they dreamed.
No Austrian was spoken,
The markets all were broken.
And the three men that we can't forget,
Milt Friedman, Mises, and Fred Hayek…
They bought some Bitcoin on the net
The day the dollar died…
They were singing.

Bye bye to the G-D-P pie,
Bailed out Chevy, passed a levy but the plan went awry,
And good old Ben will raise the money supply,
But he's gonna cause the dollar to die,
Better vote for R-O-M-N-E-Y!



 "Whatever Lol–a wants, Lol–a gets" from Damn Yankees should be lyricized relative to the central banks, flexions, around the world sitting on the razor's edge watching every earnings report, every dip in the stock market ready to provide massive unlimited balance sheet buying whenever it looks like their unseen boss will not get what it wants.

George Parkanyi obliges: 

Victor, the song is already tailor-made … just needed a few minor
tweaks.  Now if you can get someone to sing it I'll be impressed. 


Whatever banker wants
Banker gets
And little printer, banker wants you
Make up your mind to have no regrets
Recline yourself, resign yourself – cause you don’t have to be through  ;)
I always get what I aim for
And your … skills … is what I came for

Whatever banker wants
Banker gets
So let the presses roll
Don’t you know you can’t lose?
You’re an exception to the rules
I'm irresistible, you fool, give in!…give in!…give in!

Hello, Ben
It’s me
We bet so high
All thanks to you
Poo poo pa doop

I always get what I aim for
And you heart'n soul is what I came for
… banker wants
… banker gets
… We’ll always win
I'm irresistible, you fool,
Give in…Give in…Give in.



That was an interesting run of 6 consecutive open to close down in the S&P. 9 of the last 11 have been down. It happened 15 times in the last 17 years. Neutral to bearish the next day. But the 6 in row happened 29 times. That is inordinately low. What consternation there must be among flexions and related world institutions. 



 Market prices for bulk power are dropping across most regional transmission organizations (RTOs or regional grids). The introduction of wind power, solar power and new demand-side technologies are three key reasons for lower prices.

Lower market-clearing prices mean lower margins for all market participants, including wind, solar, energy efficiency and nuclear power. Commercial nuclear power is particularly threatened because they lost their long-held position as the market's cost leader.

Five conclusions can be drawn from observing the power markets:

1) Because they have zero production costs, wind and solar power affect the market and lower average market prices for wholesale power.

2) Small amounts of renewable energy production can cause significant changes in market prices.

3) Trading energy efficiency products lowers average market prices even further.

4) Power markets are agnostic towards power generation; the market doesn't care how the energy is sourced.

5) Commercial nuclear power may fall out of favor, as they will likely lose significant margins and earnings.

Power markets are punishing generators of all flavors. Companies, such as Exelon (EXC), Entergy (ETR), Calpine (CPN), NRG Energy (NRG) and GenOn Energy (GEN), will see new pressures on their quarterlies. Summers should be good. Springs and falls should be terrible. Winders should be mediocre.

It appears commercial nuclear power in the United States is in for a rough ride. Existing fleets will become less profitable (see Exelon Generating's 10-Q). Except for TVA, new fleets of nuclear power plants will likely face postponement or cancellation.

The bright spot is transportation. Owning transmission lines will become vogue. Interstate transmission lines remain regulated assets and are a cost-plus business. The federal government is the economic regulator (FERC). New FERC rules favor independent and private ownership of transmission lines.Avoid distribution lines. While they also remain regulated, they are local assets. Their financial performance is subject to the [political] whim of state overseers.

David Lilienfeld writes: 

How much more efficient is centralized solar-based generation and then using the grid to deliver it vs decentralized (eg, homeowner/commercial buildings) generation? Are solar and/or wind competitive yet with coal/natural-gas based generation, and if not, what do the trends suggest in terms of parity (non-subsidized)? Are these trends acknowledged by the local regulators?

Carder Dimitroff replies:

Hi David:

I think you are asking about off-grid vs. grid connected. If I'm wrong, please let me know.

Off-grid will always be the most expensive option because more equipment is needed. Specifically, some form of energy storage device is required and two forms of energy conversion are needed. Not only does off-grid cost more to build, it costs more to operate. Every time energy is converted or stored, energy is lost in the process.

Grid connected is the most economic solution. In the utility world, there are two grid-connected options. One is a direct connection tot eh grid using utility-scaled solutions. The other is a net meter arrangement where the consumer pays only for the net amount of energy needed. Most state will not allow consumers to export more energy than they consume.

For most homeowners, net metering is the most practical option. If I were to add an energy storage device, I would not use batteries. If available, I would use water in a pump storage configuration. The benefit of water storage is it is simple, it can be efficient and it has a long operating life.

About economics. Energy analysis is always about point of view. From the point of view of the grid, wind and solar are far more competitive sources of energy than hydroelectric, nuclear, coal or natural gas. This is not a debatable point.

From the point of view of developers, incentives are still required. All forms of power production have incentives. The only incentive the federal government offers wind and solar are cashless tax credits.



 A diamond ETF appears to be in the works. Prices are down a bit at the moment. A "One Quadrillion dollar" Russian diamond story that went viral is reassessed by a specialist. A "diamond planet" makes the news. F. Scott Fitzgerald's story "The Diamond as Big as the Ritz" is mentioned.


FactorShares, the ETF issuer known for its suite of spread products, has filed plans with the Securities and Exchange Commission (SEC) to possibly introduce an ETF that tracks companies engaged in the exploration, production and sale of diamonds. The fund could debut as early as the fourth quarter.


Diamond prices are on the slide again, as macro economic gloom continues. The Rapaport Diamond Trade Index, which is derived from the average asking price for the top 25 best-quality one-carat diamonds and is seen a global benchmark, fell to $9,391 last week….

…However, the long-term trend looks positive. Worldwide demand for rough diamonds may climb more than 6pc between 2010 and 2020, according to consultants Bain & Co. This is higher that the expected growth in diamond supply.


Those in the diamond world were shocked. "Holy s—", is how Dustin Chalchinsky, a geological specialist for Eurostar Belgium, one of world's top loose gem companies, decribed his reaction. "This can't be real. This is almost science fiction.

Chalchinsky went on to write a comment on Reddit that explaining just how unlikely the asteroid scenario was. "It seems extraordinarily unlikely," Chalchinsky told Business Insider in a phone interview. "But extraordinarily unlikely things do happen.


Orbiting a star that is visible to the naked eye, astronomers have discovered a planet twice the size of our own made largely out of diamond.

The rocky planet, called '55 Cancri e', orbits a sun-like star in the constellation of Cancer and is moving so fast that a year there lasts a mere 18 hours.

5) From Wiki on Fitzgerald's story:

Washington immediately finds himself in a quandary; the value of diamonds multiplied by the sheer number available for him to mine would make him the richest man ever to live, but, based on the economic law of supply, the sheer number of diamonds, if ever discovered by outsiders, would drive their value to near zero, thus making him a pauper.

David Lillienfeld writes:

The problem with diamonds these days is that DeBeers no longer controls the market, so there's no basis for assuming any sort of price stability. The Russians can flood the market at will, and may choose to do so to raise money if oil prices decline. Whether there's more diamond to be found in Canada is any one's guess, so there is the possibility of additional supply hitting the market from up north, never mind that machine made diamonds are close to marketing, too. (Did you know that one can take the ashes from a cremated loved one and have them placed inside of a man made diamond?) And of course, there's the demand side of the equation–I don't see developing countries having the same demand for diamonds that they do for gold. So while Bain may want to think that diamonds will increase through 2020, I don't see any basis for that contention. It does make for some nice dreams, though.



Thie largest building in the world is expected to open right before Chengdu, a city in the southwestern Sichuan province of China, hosts the Fortune Global Forum in June of 2013.

This video is a virtual reality tour of the compound.

Steve Ellison writes:

It will be the largest building, not the tallest building, so it may be exempt from the Chair's theory that constructing the world's tallest building is a sign of hubris (for example, the Empire State Building was begun near the end of the 1920s boom and finished just as the Great Depression was intensifying).



 Hallucinatory realism is the writing style ascribed to this year's Nobel Prize winner in literature, Mo Yan. One of Yan's novels, Red Sorghum, was made into a 1987 movie by Zhang Yimou. (Yimou as I recall used old Kodacolor film that made for beautiful colors in many of his films).

It is interesting that Faulkner had an influence on Yan's writing.

Novelist Mo Yan, whose popular, sprawling, bawdy tales bring to life rural China, won the Nobel Prize for literature Thursday, the first time the award has been given to a Chinese who is not a critic of the authoritarian government. Official media and many Chinese cheered his selection.
Read more 

From wikipedia:

Mo Yan's works are predominantly social commentary, and he is strongly influenced by the social realism of Lu Xan and the magical realism of Gabriel García Márquez. In terms of traditional Chinese literature, he cites Journey to the West and Dream of the Red Chamber as formative influences.[3] A major theme in Mo Yan's works is the constancy of human greed and corruption, despite the influence of ideology.[1] Using dazzling, complex, and often graphically violent images, he sets many of his stories near his hometown, Northeast Gaomi Township in Shandong province. Mo Yan says he realized that he could make "his family, people I'm familiar with, the villagers…" his characters after reading William Faulkner's The Sound and the Fury.[3] Mo Yan strongly advocates that Chinese authors read foreign authors and world literature.[7]

From the New Yorker:

The People's Republic has sought a Nobel Prize in Literature so avidly and for so long that it became a national psychological fixation—China's "Nobel complex," as commentators and television shows often put it. (Julia Lovell wrote a good book about China's pursuit of the literature prize.)

Read more



 Big Wave season is again here in Hawaii with 25 footers predicted. One big lesson I've learned the hard way is NEVER take the first wave. Between sets there is often a long wait and its easy to get over eager and go for the first big one. However, when the waves are big, there are usually 3 or more waves to a set, and if you don't catch the first one, which is usually not the largest, you are going to get caught inside and worked over badly. You end up right in the impact zone and the subsequent wave land on your head violently driving you deep underwater and spinning you around like you are in the washing machine, except worse. It's better to let the early ones go by. As maligned as wave theory is in trading, I definitely see similarities with surfing.



 One wonders what that interesting personage would say about our inability to defend the Libyan compound and the amazing staged efforts of the militants to overcome 4 or 5 lines of our defense including the charted airline from Tripoli.

Chris Tucker writes:

Upon boarding the shuttle at LaGuardia bound for DCA yesterday I heard a very distinct, deep, German accent coming from the first row of seats, which could only be coming from one person. I looked down and saw Henry Kissinger chatting with his neighbor. For some reason I had forgotten that he was still living and was a bit taken aback. He looked quite old but in good spirits.

Vince Fulco writes: 

I am into the early chapters of Lone Survivor, a book written by a Seal Team member re: his early 2000s experiences in Afghanistan. I had no idea how hamstrung the boots on the ground were by rules of engagement (ROE) made thousands and thousands of miles away from the battle. He attributes these unrealistic rules to the direct loss of 3 of his squadmates. It parallels the stories of cruise missile operators with OBL in their sights. Regrettably they were unable to fire unless they received approval from then POTUS Clinton who was more worried about his own selfish pleasure with Ms. Lewinsky.



With all the sampling being done in at least two areas of recent hot debate, employment data and election polls, it brings to my mind the issue of sampling bias.

How many samples is optimal? I believe too many samples and the risk of Type 1 errors (accepting a false prediction or causation) goes up.

I use this approach towards the markets, so this is relevant to me. Is there an optimal number to avoid "water boarding" the data? 10 seems about right based on practice but statistical justification would be appreciated.



 In my family's tradition, we give star sapphire–full six-point, not a cat's eye– engagement rings, not diamond ones. At first my then-fiance was ticked off that it wasn't a diamond–and if it had been, it would have been hard as a rock, just not my style. Then we went for a ride in the Lincoln Tunnel, and as we went through, the spacing of the overhead lighting was such that the star would show and then disappear, over and over again. She was sold on the wonders of the star sapphire. No more faceted sapphire for her (which is a shame, since I've since learned how to facet).

When I had wanted to buy the sapphire in the first place, I went down to the gem district (living in NYC at the time) on 47th Street (which gave us such wonders as 47th Street Photo). I hadn't expected to find a place that felt so dead. I was surprised at first, and then went about trying to find a nice, reasonably-priced star sapphire, with the ring to be made in a month or two. After looking for several house over a month, I didn't find much. There weren't many colored gemstone dealers, and there were very few star sapphires (and what there were had quality issues and were over-priced). So we went off to Hong Kong, found the gem and had the ring made to order. My now-wife couldn't understand what was so special about a star sapphire, and besides, it wasn't a diamond. On the other hand, the platinum I had spec'd for the ring she liked a lot. This was back in 1989, pre-Tiananmen Hong Kong. The only other time I've found star sapphires that were as well priced, with translucent stars was in Bangkok, where some of the Israeli ex-pats were in the thick of the gem trade. They tried to bait and switch, but were foolish enough to brag to one another about it in Hebrew. They were shocked when I told them to shut up and bring in some better quality stones–in Hebrew. Some of the gems picked up that day made for some great gifts, but there's still quite a bit in the safe deposit box–lots of tourmaline and lapis lazuli (the prices were just too good to refuse. It wasn't quite as good as negotiating in Hong Kong for luggage (Louis Vuitton, no less; the Rollex watches, though, and the Calvin Klein jeans were beyond negotiation). In any case, colored gemstones were what I was familiar with. Diamonds I still don't know particularly well. There's the Gemological Institute of America (GIA) which will provide a certificate for a given diamond attesting to its properties, like its color. There's the Rappaport List, which lists the current prices for diamonds of various sizes and classifications. But there's nothing like that for colored gems. To make the situation even murkier, there are treatments for the gems to change their appearance–heat treatment, irradiation, etc.

With that background, I began Precious Objects by Alicia Oltuski, a German-born US-raised Jew whose family, not unusually, has been in the diamond trade for generations. Although the book is 330 pages, the pages are small, so it is not of the War and Peace variety of reading. A good book for the holidays or a few days on a secluded beach with nary a cell phone tower in sight. Don't expect to learn much about diamonds from this book. If you want to do that, take the GIA introductory course on diamonds. The on-line one is pretty good (though the intro to colored gems was more fun, but that's just me), and I'm told the F2F version even better. (The advantage to the online one is a little more control of one's time in going through the material.) She does cover some of the basics, like the 4Cs of diamonds, the role of the GIA, the history of the Rappaport List, the blood diamond issue and how the industry addressed it, things like that. But she doesn't do it with a lot of detail–hence, its lightness as reading material. What she does do, though, is describe the world of 47th Street, and she does so with much aplomb. Given that she's a writer with no interest in going into the family business (which will end with her father's death), it's not surprising that the strength of the book is its focus on the people in the diamond trade, particularly those brokers one step removed from the retail jewelers–people like her family. One gets a very clear sense of the issues they negotiate every day–the fickle whims of the public, the security issues associated with diamonds, some wonderful descriptions of some of the trade shows (particularly the Tucson show, which is to the gem trade what CES is to consumer electronics). Her portrait of Morton Rappaport, for its length, is one of the best I've seen. Having said that, finishing this book leaves with a semi-sated feeling, wanting something more.

The bottom line is that if you want to learn about diamonds, think GIA; for a history of diamonds, let me know–there are lots of good books, and this one barely goes beyond noting that Barney Barnato ever existed; but if you're into people, this brief read may be for you.



 If post traumatic stress is so common to those who have seen their comrades killed (it used to be called battle fatigue in sociology courses), then it must exist in the market, as it represents a very prevalent human condition that should manifest itself in measurable areas rather than self pitying ones related to disability insurance et al.

One is reminded of what all of us who survived the Oct 19th, 1987 crash and many others engendered by people like the inside traders among the French banks et al, and the New Jersey Governor who didn't know that they were using customer funds. All such activities led to 4 % or more daily declines and of course 25% for the Baker crash of 87.

In any case I quantified a daily PTS event as a 3 % move up from the low of a day when the low was 3% or more below yesterday's close. I find reasonable evidence of suicidal tendencies in the market the next day to the extent of about -2/3 % with a 1/3 chance of it not happening.



 I just found a tuition and fees announcement from an Ivy League website:

The Board of Trustees announced today that undergraduate tuition for the 2012–13 academic year will be $43,782, an increase of 4.9 percent (or $2,046) over the current year's tuition rate. Undergraduate tuition, room, board, and fees for the coming academic year will be $57,998, a 4.8 percent increase from the current year.

What I found more interesting is the following:

Tuition, room, board, and fees cover about half the full cost of the education, with the balance met primarily through gifts, endowment income, and other revenues.

I think we should all be grateful to those who contributed to this second half. This is about the best part of America's higher education. Because of this, many can afford to attend. Because of this, the American universities are free to teach what they believe is important (not like their counterparts in some other countries where communist propaganda are mandatory courses). And because of this, students can choose which schools best fit them. All these I believe made the America's higher education to stand out as the best in the world.

Like many others, I am doubly grateful because my first half was also paid for by scholarships.

But, people's enthusiasm about their beloved alma mater isn't about the money they paid or received. Just as I, a scholarship recipient, am proud of having attended the schools I love, others seem doubly proud as they often wear college sports shirts with "Tuition Payer" printed below their beloved college name.

What we have decided to study in college is not that critical looking back through life. I don't deny there are some fortunate ones having set their life's path on a straight line starting with their college education. But most of us have an experience of life that is unexpectedly dynamic. To rephrase Steve Jobs, one can only connect the dots looking back through life.

The real things people learn are certainly not through mindlessly attending college courses. They are through clicks in unexpected moments in life when one's mind is clearly present. It is mindlessness that makes everything worthless.

I now think that people's enthusiasm about their beloved alma mater is more about passion, perhaps not really the passion to study, but that of one's belonging, a belonging to a famous heritage, a prestige, a powerful network, a mental foundation, an incubator, a statement about life, and a perfect blossom basin.

In this sense, the $57,998 per year expense is cheap if that is what one needs, not because the other $57,998 per year is paid for by contributions, but because fulfilling one's life passion is priceless.



 I thought it would be fun to see who we can find at the top of any sport (or interest) that we have been involved in, who can teach us a lesson or 10.

Maybe this interview could be of some interest. It's Kelly Slater, talking about a few things, unfiltered. One highlight for me was his refreshing insistence on not selling out and going corporate…

Jeff Watson writes: 

When Slater was young, he took a year off the tour to star in the TV show, "Baywatch" with Pamela Anderson. The big guys on the tour at that time, Curren, Andino, Occy, Potter, et al all busted his chops for being a corporate sellout. Then when he did his album, "The Surfers" with Machado and Peter King, people called him a sellout. His big 7 figure yearly sponsorship, Kelly INC,….people call him a corporate sell out. His 30-40 movie appearances, the naysayers call him a sellout.

Personally, I like what they call "Sellouts." It shows that the individual is engaging in selfish behavior and that's a good thing.

Meanwhile, while they are calling him a sell out, 40 year old Slater has been steadily competing and holding his own. He's the reigning champion, and is competing and beating guys that weren't even born when he started on the tour.

If one weighs things on the balance of life, Slater has contributed so much.

Similarly, punk rocker Johnny Rotten of the infamous punk band The Sex Pistols, is under fire for doing TV commercials selling butter in the UK. The social media in the UK is abuzz with all of this, with most comments being highly critical and negative towards the ex-punker. To Mr Rotten, I say "Bravo." A man has to pay the bills sometime.



 Sir John Gurdon, who just won the Nobel Prize in Medicine, apparently didn't do very well in science as an undergrad. In fact, his first foray into zoology was quite disastrous. A copy of his report card where the teacher noted, his idea of becoming a scientist "quite ridiculous," can be found here.

Although I never won a Nobel Prize, and never will, I know what it's like to absolutely flunk chemistry in high school (I eventually raised the grade to a C-) then go on to major in it as an undergrad, then a grad. There are some lessons applicable to markets, to learn from Gurdon's travails, but I will leave it up to the reader to draw their own conclusions.



 I have wondered and hoped that he might be innocent from day 1 because I have seen hundreds of horse play things between kids and athletes when I was in my squash career and head of the association. I have not read the trial transcript however, but can only guess what the incentives to create damaging allegations are for the "victims".

URGENT: Sandusky Professes Innocence, Vows to Fight

2012-10-09 11:47:41.661 GMT

By MARK SCOLFORO Bellefonte, Pa. (AP)

Jerry Sandusky says he's innocent and vows to keep fighting in a recorded statement broadcast by a student-run radio station at Penn State. The statement was aired Monday, a day before the former assistant football coach was scheduled to be sentenced on 45 counts of child sexual abuse. One of his lawyers says he would stake his life on the legitimacy of the statement. In it, Sandusky says that in his heart, he knows he didn't do what he calls "these alleged disgusting acts." He says he's the victim of Penn State, investigators, civil attorneys, the media and others. Mike Fliegelman, student general manager of Penn State Com Radio, says the statement was recorded at the county jail in Bellefonte. Defense attorney Karl Rominger initially said he wasn't aware of the recording. Early Tuesday he confirmed to The Associated Press that it was authentic.

Craig Mee writes: 

Perhaps you are being "gaslighted".

Like 50s murderess, Barbara Graham whose last words ("good people are always so sure they're right") set off a firestorm of doubt in the public's mind about her guilt and inspired the film Gaslight with Ingrid Bergman, we now have our sociopath molester throwing in doubt at the last opportunity before his sentencing with all the urgency and fervor that happens when sociopaths are caught at their own game.

I recommend you read The Sociopath Next Door by Barbara Strout. There is some value in knowing the mindset of these types of people, supposedly 4% of the population. Sociopaths are people without the burden or restraint of a conscience. And the book dovetails into your other post about battle fatigue, where the conscience of the soldier is being forced into repression and then when his buddy is killed a straw breaks and either he lashes out at the enemy in a heroic or dangerous act or he points his emotion inwardly and commits suicidal types of behavior. I agree, financial markets are similar to war sometimes.



 My first job out of college was working for the World Bank in DC, the sister organization of the IMF so much in the news these days. I was a temp living with my parents who were in DC at the time. I was basically just doing Word documents, organizing supply rooms and running errands at an hourly rate for about three months. I remember though the offices being very subdued, beige, and heavily carpeted. The main activity would be the occasional meetings when dignitaries would arrive in which case things would temporarily spring to life. Without summits meetings there would be very little to do there.

One anecdote: I was helping an official who had a very thick accent. He handed my some papers and said what I thought was "..two coffees please". I brought this right up but what he actually he wanted was "two copies". I slinked out of the office, but my level of performance in this case was not at all unusual there.

My second job was working as a scheduler for a manufacturing plant that ran three productions lines 24/7. My office was the nerve center, phones never stopped, people coming and going constantly. JIT was new then and the theme of the day. I started getting line production updates calls at 6am from my apartment and it never stopped all day. Quite a contrast.



Talk about a negative feedback loop. Merkel talks today to Greece. She has to say something positive about the sacrifices the Greeks are making, which is bullish, but then has to demand more austerity to stay in power, which is bearish, but she can't demand too much austerity because all the Europe needs the incumbent as he will give the most money to Europe to stabilize the situation. It's a tri amp with the output going back to the negative input and then the positive.



 Ok, I need some help.

My friend recently sent me this video of a 7 year old conducting an orchestra with the subject title "unbelievable!"

As someone who can barely play a guitar, can't sing a lick, and has no musical talent whatsoever, what is the purpose of a conductor, and why is it such a big deal that this 7 year old can conduct a symphony? I've nothing against what the young man has done, I just don't understand it.

My take as a non-music person is as follows:

1. I believe I could stand there and wave the baton and face towards the correct instrumental group that is getting ready to play.

2. Does the conductor really do anything of value standing there. For instance, if someone were to just count of 1 - 2 - 3 -4 couldn't orchestra all start at the same time, and then play their instruments at the right time to the right beat and so forth?

As I watched the video, I really didn't see anyone looking at the conductor. It looked like they were all looking at their sheet music most of the time.

So any elaboration on this subject would be much appreciated.

David Lilienfeld writes: 

Sure. I speak as a former cellist and pianist. The role of the conductor is three-fold:

1. The conductor sets the beat so that all players are playing to the same one. Otherwise, you may have one player who is slightly faster or slower than the rest. The conductor provides the means around that problem, since s/he sets the beat and shows with with his/her baton movement. In a similar way, the conductor cues the various instruments.

2. The conductor provides an assessment to the players concerning whether they are playing too loudly, not loudly enough, or just right.

3. If any of the instruments are being played out of tune, the conductor provides the feedback to that player

4. Through movement, facial expressions, and the like, the conductor communicates emotion about the music to the players. A good conductor can use his/her facial expressions and the like to coax the best music out of the members of the orchestra. von Karajan and Bernstein (and to a degree, Ormandy and Toscanini) were masters in the use of their faces and body movements to bring out a uniform interpretation of a given piece.

I hope that helps.



 On a recent stop over in NYC, I walked the High Line, a beautiful and scenic park where the old elevated rail line on the West Side used to run to the meat packing district. It is beautifully landscaped, and provides stunning views of the city and river. The next day, doing a Kung Fu-wandering-about-the-earth-seeking-adventure-and-meeting-people, at random, we rented some bicycles in rode up along the Hudson River from the boat harbor up to the GW Bridge. When I lived there in the 70's it was waaay to dangerous to go through that area due to the gangs and the basketball courts. Now the paths are clean, tennis courts, joggers, bikes and female strollers with their babies promenade along the scenic riverside. Children play on swings in the parks. There is a little red lighthouse under the George Washington Bridge that I would see as a child on my way into the city and always wanted to visit. My childhood dream came true and when I got there by bike, a musician was playing his saxophone under the bridge and the reverberation echoed across the river and back. It's so beautiful to see NYC improve and become more beautiful. It's such a contrast from the popular but mistaken post apocalyptic scenarios. There was a funny scene after returning from Africa as I walked through Penn Station thinking to my self, "Gee, it's so clean here". I thought that was pretty funny remembering what a dump NYC used to be in the 70s.

Sorry to miss the Spec Party but I wish extend to Vic and to you all a wonderful weekend and event. I have to attend my mother's memorial service this weekend. I can't tell you all how much the Spec List, and Vic have meant to me and my family in my life, so will just extend my sincere thanks.



 Starboard at Midnight By Helen Behr Sanford.

If only heroes like Frank Merriweather, the legendary hero of Ainsle Young's novels about a superman from Yale who routinely ran onto the football field of the Harvard game and scored the winning touchdown with 5 seconds left before saving the most beautiful girl in the East from mayhem at the expense of bandits and then devoting his life to providing Ivy education for orphans, existed today. Indeed, the heroic idea is so incongruous these days that no review of this most popular book of the 20th century even exists. However, a real life Frank Merriweather in the form of Karl Behr actually existed, and Helen Behr Sanford has written what for me was one of the most fascinating books I have ever read.

Briefly, Karl was about the best tennis player in the world during the early 20th century. He has wins over Wilding, Larned, Williams, Barrret, Gore, Brookes and Clothier. He was ranked in the top 3 in the US and was good enough to give Comet McLouglin many a 5 set match. He was superb at all track and field events, routinely jumped 6 feet standing high jumps, and was a superb hockey player. His best sport was baseball, but he wasn't good enough to make the Yale team. His brother Max was the second best golfer in the country and Frank and Max played almost even. While at the obligatory Swiss finishing school La Chatalaine, before the obligatory stay at St. Lawrence, he performed risky mountain climbs and won all the tennis tournaments. He seems to have been a genius who not only aced all his classes at Yale, but was able to knock off Columbia Law school in one year. His mechanical abilities were unrivaled and he was able to work every machine in his father's abrasive plant. He was a highly successful business man, and lawyer, innovative enough to prospect all the silver and gold mines in Mexico, versatile enough to get full payment for all his clients in contract disputes, and of course able to solve all the problems of the father's abrasive business so that it yielded steady dividends for the family. He's the type of hero who if an airplane were to crash, he would save the crew and baby. And if he was on the Titanic during it's maiden voyage with a surprise ring for his fiancee Helen Newson, he would be on the Starboard side, and be one of the only men saved on the life boat. When picked up by the Carpathia, he would organize activities to save the survivors.

 All of the above happened. He proposed to Helen Newson on Titanic, and interrupted his squash game on Titanic to make sure that Helen, who he had just proposed to with his Grandmother's ring, was not discommoded. He climbed one deck above to see Captain Smith and Ismay demanding that the first class passenger Helen Newson get into Lifeboat number 7. Mrs. Newson asked routinely if she could take her whole party in with her and First Officer Pittman routinely answered "Yes". At that time, no one felt that Titanic would go down. Regrettably he suffered from Post Traumatic Shock Treatment after he was saved. And he suffered a breakdown 2 years later. His tennis career was interrupted and he gave up his position at the law firm and father's company to become a middle level broker at Dillon Read. He was the kind of hero who could never accept that he was saved by change when so many others heroically died with the musicians as they played on while the boat sank.

 The book was particularly entertaining to me because I had a reasonable familiarity with all the events. I have read all the old tennis books describing the English great like the Renshaws, Dohertys, and the Larneds, that overlapped with the greats of today through their play against Tilden and McLouglin. I played in many of the same tournaments as Behr and my career in racket ball was similar to his. I visited numerous abrasives factories in my day as a broker and walk past his ancestral home in Brooklyn Heights often when visiting my daughters, many of whom live within a block or two of their 82 Pierpont Street street address. The Behr family summered at Squam Lake in New Hampshire, and I visited Jack Barnaby there where he was tennis coach and must have passed the Behr's many times.

And yes, I suffer on occasion from having escaped from disaster relatively intact when many others did not escape at all. The Palindrome always said to me "you have to prove you can do it again. That's suicidal.". I didn't believe him then and refuse to do so now, but the anxiety and thoughts of guilt still emerge. But most of all, I knew a man like Karl Behr and Frank Merriweather who could do anything superbly, was present at each of the thousands of lessons his 3 kids took, and never spent an evening away from his loving wife Elaine. And was the perfect man that everyone loved. It's my father Arthur Niederhoffer. I would recommend Starboard at Midnight to anyone wishing to read about life as it should be. Helen Behr Sanford, the granddaughter, who found the 168 page manuscript that Karl had written when he knew he was a goner from heart disease and cancer on which the book is based has done a great job in bringing back the life of a real hero.



 On October 4th at the Junta, Gary Hoover, Entrepreneur and Explorer, Learner and Teacher, gave an excellent talk.

Let it be said at the outset that Gary is a many of great respect. Jim Lorie, the Mendeleev of our field, my thesis adviser told me on his death bed that Gary was one of the most admirable entrepreneurs and students he ever met, and that the money he made from investing with Gary was some of the happiest money he ever made, and the Santa Fe opera and University of Chicago were just two of the beneficiaries. I have always felt that I should be supportive to a friend such as this and was happy to provide a forum. Here are 10 things I learned from him.

1. He keeps Rhodia pocket notebooks with ideas for starting business. So far he has more than 200 pocket notebooks filled up and 225 new business ideas that he thinks interesting. Richard Branson has more than 2,000 such pocket notebooks filled up.

2. He has 65,000 books in his home museum, a renovated school in Texas,and he consults them all the time for ideas. His favorite business books are those by Peter Drucker and Hidden Champions by Norman Wolff. He's in 24-7 email contact with all his former students.

3. Gary lists 8 essentials for being a successful entrepreneur. Be curious. Study History. Study Geography. Be clear. Be consistent. Above all else, serve others. Be unique. Be passionate. A good guide for those in any business or pursuit of excellence.

4. He believes the greatest 3 businessmen were Albert Sloane who went door to door to make sure all his dealers were making profits, Alexander Johnston Cassatt who built Penn station when the Penn Railroad was the biggest company in the world comprising 10% of the NYSE in market value, and John D. Rockefeller who brought the price of oil down by 90% and enabled Americans to be able to afford to read.

5. The archetypical business, the start of almost all others is a person cooking for another for mutual benefit and profit. The restaurant business now has a total volume higher than home meals. He believe the food service industry is the most exemplary business and the banking business the worst.

6. When he goes to a trade show, he can tell the dynamism of the industry by looking at whether they have swim suited models pointing to a product or interactive displays.

7. You can learn something from any person you meet, and he tries to do so by engaging in conversations. He often gets business ideas by listening to what others are saying at restaurants.

8. He considers himself most fortunate in his riches in that he has started thousands on the way to entrepreneurialism.

9. He believe the greatest areas for increases in wealth and opportunities to start successful businesses are in Medelin, Columbia which is one of 42 countries he has visited to talk about entrepreneuralism and Mexico.

10. He points out that reputations lag the facts by about 10 years. People still remember the drug lords of Medelin but they have been dead for 20 years, and it's now one of safest cities in world.



It would be interesting to see what Mr. Krisrock says about the numbers. He's been predicting this for at least a year, and let us all in on what was in store for this October at the last spec party.

Tyler McClellan writes: 

"Western scholars have found many reasons to think that the measurement of Russian national income is too important a task to leave to Russian statisticians."



Tomorrow night, Thursday, October 4th, is the Junto. 

It will be held at the General Society Library,
on 20 West 44 St., between 5th and 6th Aves.

Gary Hoover will be giving a talk called Think Like An Entrepreneur.

The talk will begin promptly at 8pm but we will socialize beginning at 7pm.

All are welcome. 

From Victor and Dailyspeculations



 My submission for article of the day: "Why is the Euro so Perky? "

The article presents a medium term bearish view of the Euro. The view that the Euro is relatively strong because of the 200 days moving average seems ridiculous. Moreover, the ECB as a lender of last resort has been brought on only recently, while the Euro crisis is a long process started back in back 2009. The idea of a weaker Euro because of structural issues that cannot be solved by a divided group of leaders and nations can be shared, however, this has been a European problem (actually THE European problem) for centuries.

The Euro resiliency is a temporary phenomenon. Right, there are several outstanding reasons for the Euro to be near parity vs the USD. None of them has been sufficient, however, over the past 3/4 years to weaken significantly the Euro. If you compare prices between Europe and the US prices are at least 20% lower in the US. One example: the Ipod Touch 32 Gb cost 329 Euro vs 299$ in the US.

The Fed's "quantitative easing" program has provided underpinning for the Euro. The push of the Fed in the direction of a weak dollar is very strong and has so far outweighed the structural Euro weakness. In relative terms, it has to seen how quickly the 2 trends evolve respectively in Europe and in the US. If the US "system" is more resilient and the crisis in Europe accelerates because from the sovereign financial level it spreads heavily at the social and political level then we'll see the parity of the EURUSD. In this context, the unemployment rate in the Eurozone and especially in the southern nations is an important indicator. It is steadily increasing and it emphasizes the risk of a deterioration of the social structure should this trend continue longer.

David Lilienfeld writes:

Based on what I saw and heard in Barcelona in August, I think the matter has now gone out the ECB's domain. Granted it's a very small sample, but as I've noted before, many Barcelonians have become disillusioned with the EU and with their country in particular. That will, at some point, manifest in spending patterns and capital flight–and I doubt that that thinking will change soon. The European leaders "successfully" kicked the can down the road, but with the result of raising both the cost and the pain of the inevitable crisis resolution. Hence, the issue is no longer whether the Fed's efforts with regard to the dollar are stronger than the impact of the EU's structural problems. Those structural problems, in part because they've been unattended to for so long, will ultimately lead to the euro depreciating relative to the dollar. What the Fed is doing is at best temporary, ie, tactical. The problems with the euro, however, are strategic.

Bottom line: I agree with your concern, and at this point, I'm not sure I see how even the exit of Spain and Greece would help matters much. France is now stagnating. That doesn't bode well for crisis resolution anytime soon.

Paolo Pezzutti replies: 

David, actually this is not temporary…

John Floyd writes in: 

The key, I believe, is to recognize the Euro is a political animal. The politics are now unraveling from both the top (core countries) and bottom (peripheral countries). Bad economics have led to bad politics and the circle is becoming self-reinforcing. The U.S. dollar, rightly or wrongly, remains the world's reserve currency at the moment. There are approximately $200 trillion in derivative contracts denominated in Euros. The size of the decline in European growth, the politics, and the market product entanglement is making the Euro's ultimate price more difficult than ever to forecast as it may be 1.0 or .80, or lower. The expected returns of the thesis that the Euro goes lower in value however are increasing rapidly as the vortex of the deciding forces gather momentum and power. 

Anatoly Veltman writes: 

That was interesting reading, until you got to "forecast, may be". How to interpret what follows?

John Floyd responds:

My point was not to be interesting but to outline what I think are the key drivers of the Euro and the potential feedback mechanisms through trade and financial channels globally.

As to how to interpret what follows that is up to you. As a guide I would think outside the box and remember some combination of the following: the Tequila Crisis, the ERM crisis, why "hedged GKO's" were not really hedged, the Malaysian Ringgit fixing, how a butterfly flapping its wings in Iceland had a major global impact, etc.

Jeff Rollert writes:

I like to think of it as the behavior of the passengers in a plane, which just lost altitude suddenly.

They suddenly realize the only ones in control are in the cockpit, yet are unable to see where they're going (just where they are and a little of where they've been).

John's point is very good. History is not a (literal) guide but how investors react to the unexpected is useful.

I'm finding many pieces of evidence of avoidance behavior, including an overweight of whatever was last read.

The model may be a reversal from highly regulated markets to highly unregulated ones.

I've been going to ethnic markets for insight recently, as the calmest investors I observe are immigrants, for insight on their interaction.



 "Matt Damon's Anti-Fracking Movie Financed by Oil Rich Arab Nation ":

A new film starring Matt Damon presents American oil and natural gas producers as money-grubbing villains purportedly poisoning rural American towns. It is therefore of particular note that it is financed in part by the royal family of the oil-rich United Arab Emirates.The creators of Promised Land have gone to absurd lengths to vilify oil and gas companies… Since recent events have demonstrated the relative environmental soundness of hydraulic fracturing – a technique for extracting oil and gas from shale formations – Promised Land's script has been altered to make doom-saying environmentalists the tools of oil companies attempting to discredit legitimate "fracking" concerns.

Pitt T. Maner III writes: 

One of the major ceramic proppant companies just put in a 52-week low. The specialized fracking "sand" business might at some point be an interesting area for further research.

David Lilienfeld writes: 

Yes, I was thinking of them and also the niche international business, in general, of designing, producing and expertly injecting fracking sands and proppants into formations. CRR had a pretty good run from July 2009 to July 2011. It's interesting that they have plants in Russia and China. But the swoon, as you say, may continue. The following idea appears to be making the internet rounds (one would think fracking will play a role in these future worldwide developments): 

The relative fortunes of the United States, Russia, and China — and their ability to exert influence in the world — are tied in no small measure to global gas developments," Harvard University's Kennedy School of Government concluded in a report this summer.

Jack Tierney writes: 

Several years back we had a thread related to a coal mine cave in that resulted in numerous deaths and extensive studies to determine the cause(s). A significant portion of the blame fell to "seismicity." The conclusion was that continued use of high explosive well below ground level had a significant enough impact on the earth's composition to create tremors - some serious enough to escalate into earthquakes.

At the time I as a big fan of coal and the study and subsequent developments didn't help my positions at all. Another energy sector I liked was involved in obtaining power through an Enhanced Geothermal System. This involve injecting cold water at very high pressure down to the "hot rocks" below. Though some ""shear" was expected, the reactions received exceeded expectations. Enough so that Switzerland abandoned the idea. Continued seismic events at on-going systems are watched closely and the equities of companies involved in the process (the poster child is Orman [ORA]) have done poorly.

With those developments in mind and ever aware of the not inconsiderable power of the environmentalists opposed to this method, I have re-established those coal positions. Any adverse event substantial enough to even hint at congressional hearings could put a real damper on these current darlings and their numerous fans. And coal would once again be the most abundant and readily available power source for this country's power needs.

I took a flyer similar to this way back in the '90s. Older market types will recall Bre-X and the scandal that surrounded the "seeding" of the gold samples which indicated a huge resource. If I remember the stock went over $100 and might have surpassed $200 (things get foggier as I get older). In any event, after the responsible geologist threw himself out of an aircraft in a successful suicide attempt, the stock was closed to trading.

However, the CEO of the company screamed bloody murder, claimed it was a rush to judgment, and that the results were legitimate and all was well. And the exchanges relented and trading resumed…with stock at 2 3/8 (yes, stocks did trade in fractions). I assumed as most did that the whole thing was, in fact, a hoax. But trading had been re-instated by the responsbile overseer and for a couple of hundred bucks per round lot, the potential upside was enormous - so I made the bet, and lost. But I'd do it again. Maybe I did.



 The Fed gave a vigorous defense of their policies today. One wonders if there is anything that would ever convince them that their policies were and are wrong. For example, if the more they QE it, the worse the economy gets, and the more intractable the employment situation gets. There is something terribly wrong with certain banks laying off 30,000 operatives while at the same time receiving hundreds of billions of emollients in form of investment, loans, purchase of assets, flexionic information, favored deals, guarantees, bailouts, favored nation treatment in regulation and the Good One knows what else, and maintaining and building their 2,500 man trading rooms and CIO's. One mechanism that would cause all such transfers of resources to these favored flexionic institutions to create discommodiation in everyone else, would be the loss of incentives that creates in those not favored. But it goes much deeper than that.

Gary Rogan writes:

I call this "the Krugman Principle": when a government intervention fails it's always because it wasn't big enough, never because the idea was wrong.

To quote from a Credence Clearwater Revival song (although a little outside of its intended topic): "And when you ask them, "How much should we give?" Ooh, they only answer More! more! more!"

anonymous writes: 

When it comes to social "insurance" there is a point of diminishing returns. The argument for insurance goes, if you buy insurance, you will be able to take more risk elsewhere. And likewise with social insurance, if you don't have to worry about starving in your old age, you don't have to save as much, and can invest the savings in riskier endeavors such as starting a business and you can spend and consume more in your youth. However, if the benefits are too generous, threatening either collapse of the whole social insurance system or massive unknown changes, then the reverse is true.

Likewise the same is true for the government backstopping every corporation that is to big to fail.

It is my contention that the public has become aware that the current course is unsustainable both for the flexions and social security.

Hence the saving rate and lower consumption will continue (slower speed of money). But these are the very things that will enable the fed to say at least "we have done no harm" from a short sighted view.



 We've talked about vig on trades, but consider the vig on life events such as moving, divorce, death. Moving seems like an expensive proposition, 10% commission on house, moving, disruption, time off. Divorce probably has a 60% vig with splitting estate in half, commissions, forced sales, attorney fees, emotional loss. Death has a 110% vig, you lose everything and the transfer to the next generation has its expenses as well plus the emotional toll. Though not exceptionally successful in a career or anything else, I've been lucky not to have had to move or get divorced, get sick or die, yet. I've seen so many over the years go down in business, love, life, health: many more than have made it big. Perhaps buy and hold has some merit.

Ken Drees adds: 

There's a big vig cost on changing colleges or majors now vs. the past when the price of college was lower.



 Dad's advice about how to do well in secondary school and college in all subjects other than math and physics and chemistry (the ones where God provided the answers) was brutally simple:

"Write down everything the teacher says, study it so that you remember everything and repeat it back to him or her on every test."

In his business he took it for granted that the same rule applied. If the English teachers believed Noam Chomsky had discovered a better way to teach grammar, then you gave them watered-down Chomsky regardless of what you thought of his theories or his politics.

This would appear to be a lesson that at least some of his competitors failed to learn…

"From the Halls of Chicago Schools: Memoirs of a Textbook Salesman"

Richard Owen writes: 

Is handing back to your boss his own prejudices not a recipe for success in all fields?

Keynes' conventional failure trumping unconventional success?

e.g., Some of the smart investors you speak to who were up big in 08. They had prior caution in 07 and so got redeemed. They made their big alpha off trough assets. For "showing off" their peers disclaimed them. Some I have met question if it was worth the bother and are swapping to grind it out market neutral. You can only sell yourself close to the index, even if it's an alternatives index.



 If the average welfare recipient receives something on the order of $43,000/yr, and the average American's salary is $46,000/yr, the personal discount rate is approximately 6.52%.

There's no initial capital laid out to get on welfare, just a lot of forms and standing in line; But many welfare recipients don't really forgo income to stand in line, so I'm using $0.

Given that the Presidential term is 4 years, the total welfare benefit over those 4 years is $172,000; applying the simple NPV, is a single vote "worth" approximately $156K?

Gary Rogan writes: 

A single vote, for some specific person, is worth ANY amount of money to that person if they aren't the ones paying for it. The now violent riots in Spain and the free phone lady and the $16 trillion deficit are all consequences of that one simple fact.



We might need a newer new normal or perhaps just the old normal given year-to-date returns: equity 13%, commodity (1.4%) , dollar (1.6%), and bonds 3.1%, impressive equity premium like the old days.



 What are the common errors, the improprieties, the lack of attention to proper mores, the p's and q of trading that cause so much havoc and could be rectified with a proper formal approach? Here are a few that cost one fortunes over time.

1. Placing a limit order in and then leaving the screen and not canceling the limit when you wouldn't want it to be filled later or some news might come out and get you elected when the real prices is a fortune worse for you

2. Not getting up or being in front of screen at the time when you're supposed to trade.

3. Taking a phone call from an agitating personage, be it romantic or the service or whatever that gets you so discombobulated that you go on tilt.

4. Talking to people during the trading day when you need to watch the ticks to put your order in.

5. Not having in front of you what the market did on the corresponding day of the week or month or hour so that you're trading for a repeat of some hopeful exuberant event which never happens twice when you want it to happen.

6. Any thoughts or actual romance during the trading day. It will make you too enervated or too ready to pull the trigger depending on what the outcome was.

7. Leaving for lunch during the day or having a heavy lunch.

8. Kibbitsing from people in the office who have noticed something that should be brought to your attention.

9. Any procedures that violate the rules of the British Navy where only a 6 inch plank separated you from disaster like in our field.

10. Trying to get even when you have a loss by increasing your size and risk.

11. Not having adequate capital to meet any margin calls that mite occur during the day, thereby allowing your broker to close out your position at a stop while he takes the opposite side. What others do you come up with?

Jeff Watson writes: 

I don't know if it is an error or a character flaw, but freezing will create mayhem with your bottom line.

Alston Mabry comments:

"Do Individual Investors Learn from Their Mistakes?"

Steffen Meyer, Goethe University Frankfurt– Department of Finance Maximilian Koestner, Goethe University Frankfurt - Department of Finance Andreas Hackethal, Goethe University Frankfurt - Department of Finance

August 2, 2012


Based on recent empirical evidence which suggests that as investors gain experience, their investment performance improves, we hypothesize that the specific mechanism through which experience translates to better investment returns is closely related to learning from investment mistakes. To test our hypotheses, we use an administrative dataset which covers the trading history of 19,487 individual investors. Our results show that underdiversification and the disposition effect do not decline as investors gain experience. However, we find that experience correlates with less portfolio turnover, suggesting that investors learn from overconfidence. We conclude that compared to other investment mistakes, it is relatively easy for individuals to identify and avoid costs related to excessive trading activity. When correlating experience with portfolio returns, we find that as investors gain experience, their portfolio returns improve. A comparison of returns before and after accounting for transaction costs reveals that this effect is indeed related to learning from overconfidence.

Kim Zussman writes: 

Trading a market, vehicle, or timescale that is a poor fit for your personality, temperament, and utility, exacerbated by self-deceptive difficulties in determining this.

George Coyle writes: 

Speculation by definition requires some amount of loss otherwise the game is fixed. However, I believe loss can be broken down into avoidable loss and unavoidable loss. Unavoidable loss is, well, unavoidable. But in my personal experience (and based on pretty much all speculative loss I have seen or read about) all avoidable speculative loss is traced back to some core elements/violations: not being disciplined (many interpretations), getting emotional and all of the associated errors and mistakes that brings, sizing positions too big so that regardless of odds you eventually have to reach ruin, not being consistent in your approach (the switches), not managing your risk adequately either via position sizing or stop losses, finally you have to be patient for the right pitch whatever that may be for you. 

Jason Ruspini writes: 

A similar distraction comes from making public market calls.

Jim Sogi writes: 

The Sumo wrestlers' trainers in Japan are conscientious about avoiding mental strife in their fighters since it affects their performance. Sometimes when other life issues intrude, like getting up on the wrong side of the bed, it is better to refrain from entering a large position. You're off balance. How many times have I thought to myself, "I wished I had just stayed in bed this morning"?

William Weaver writes:

Mistakes I'm working on:

-execution error
-having too much size too early — the first entry is usually the worst
-not being able to add size when appropriate — need to add to winners; understanding when to retrade and why — why did the trade fail, was it me or the trade?
-not taking every trade
-need to adjust orders when stale
-not touching orders when not stale
-not getting excited about trades
-not holding until appropriate exits, especially winners — disposition
-not accepting the risk. Must accept the risk.

When we fear, we fail. But we cannot be courageous without risking overconfidence because it leads to recklessness (at least I cannot). So how to not fear and not be courageous at the same time? One of the best traders I know is indifferent to any trade, yet he is excited by his job. He also has (and shoots for) only 40% winners but simultaneously is profitable on a daily basis (and expects to be). These were contraditions to me 8 months ago, now they are just fuzzy in my mind and I understand them but cannot explain them.



 There are professors and then there are professors like Peter Rossi.

Here is his summary of his Metallic Laws - his observations about social programs and their effects.

"Following a 19th Century practice that has fallen into disuse in social science, these laws are named after substances of varying durability, roughly indexing each law's robustness.

The Iron Law of Evaluation: The expected value of any net impact assessment of any large scale social program is zero. The Iron Law arises from the experience that few impact assessments of large scale social programs have found that the programs in question had any net impact. The law also means that, based on the evaluation efforts of the last twenty years, the best a priori estimate of the net impact assessment of any program is zero, i.e., that the program will have no effect.

The Stainless Steel Law of Evaluation: The better designed the impact assessment of a social program, the more likely is the resulting estimate of net impact to be zero. This law means that the more technically rigorous the net impact assessment, the more likely are its results to be zero—or no effect. Specifically, this law implies that estimating net impacts through randomized controlled experiments, the avowedly best approach to estimating net impacts, is more likely to show zero effects than other less rigorous approaches.

The Brass Law of Evaluation: The more social programs are designed to change individuals, the more likely the net impact of the program will be zero. This law means that social programs designed to rehabilitate individuals by changing them in some way or another are more likely to fail. The Brass Law may appear to be redundant since all programs, including those designed to deal with individuals, are covered by the Iron Law. This redundancy is intended to emphasize the especially difficult task faced in designing and implementing effective programs that are designed to rehabilitate individuals.

The Zinc Law of Evaluation: Only those programs that are likely to fail are evaluated. Of the several metallic laws of evaluation, the zinc law has the most optimistic slant since it implies that there are effective programs but that such effective programs are never evaluated. It also implies that if a social program is effective, that characteristic is obvious enough and hence policy makers and others who sponsor and fund evaluations decide against evaluation."

My 2 favorites of his are Armed and Considered Dangerous and Just Punishments. His most famous work was Homeless in America.



 I'm not an expert in biofuels. I am on the board of a non-profit, which focuses on renewables and the Pentagon. There, we separate renewables into two tracks– biofuels and power. Most of my renewable experience is in the power area, including wind, solar and biomass.

I do see a lot in the biofuels area. Frankly, there is a lot of fascinating technology emerging and much of it is over my head (I have a weak chemistry background). One lesson I learned was that biofuel production does not necessarily depend on traditional farms.

One technology used algae as the foundation for biofuel. They combined water, carbon dioxide and a lot of sun to produce massive amounts of algae. They processed the algae to create a bio-diesel, which was later blended with regular diesel. Algae can be produced in a sunny parking lot, a brownfield site, or a cleared lot next to a power plant. The key is capturing carbon dioxide and sunlight.

The military is taking renewable energy seriously. A number of large programs started in the Bush years and most of them rolled over to the Obama years. I can attest this issue has had the full attention of the Pentagon's top leaders; for them it's all about energy security.

If the Army can use wind and solar to reduce the number of fuel convoys, they can save lives. If the Air Force can assure energy security, they can pilot drones in the Middle East with pilots sitting at controls in South Dakota.

Incredibly, if the Air Force or Navy Air can use clean fuels, they can land at more bases. I learned from a fellow member of the non-profit that the Air Force is restricted in landing and takeoffs from several military bases because their planes emit too much carbon dioxide. That member educating me on CO2 limitations was the former assistant secretary of the Air Force under the Bush Administration.

The Navy is upset their bases in Southern California are tied to an unreliable power grid. Twice, they've lost power to naval bases in San Diego, which apparently caused all sorts of unexpected challenges.

The Navy cannot afford to rely on one source for jet fuel, diesel or bunker. They have been funding development to access equivalent fuels from alternative sources, such as biofuels.

This summer, the Navy tested their "green fleet," where all military equipment was fueled by biofuel blends. These blends included jet fuel and bunker fuel.

Several believe the military will ultimately deploy small module reactors (SMRs). They will be used in theater to fuel combat operations and reduce convoys. They will also be used domestically to provide bases with secure energy. SMR technology is already under development by four separate companies and it will likely be deployed within a decade.

The private sector is leading. I'm told several ports, including some US ports, offer priority handling for clean ships.

It's easy to diss renewable energy. I was on of those who snickered at "silly power." I've changed my mind.


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