In line with the HBR study exhorting egalitarianism, there is egalitarianism in the ratio of europe to us at 5.00 a consilient number. We all have the idea that has the world in its grip in our markets. 

[Ed.: the chart shows GX/ES, the ratio of Dax futures prices to S&P futures prices].



In 2013, stock market return for January - April is about 12% (SPY: Dec 31 - end of april). Going back to 1994, regressed subsequent May- October returns against return of prior Jan-Aprils shows a positive correlation:

Regression Analysis: May-Oct versus Jan-Apr

The regression equation is
May-Oct = - 0.0107 + 0.753 Jan-Apr

Predictor      Coef  SE Coef      T      P
Constant   -0.01071  0.03092  -0.35  0.733
Jan-Apr      0.7530   0.4125   1.83  0.086

S = 0.115422   R-Sq = 16.4%   R-Sq(adj) = 11.5%

Though not quite significant, in the absence of a miraculous recovery in economic activity (and unlikely FED tightening), the regression equation suggests another +7% through October. 



 "Those well-known experts who had pulled off a big windfall by going against the tide and winning were, over the long term, the worst at forecasting."

That sounds understandable to me, and there is a research to prove it.

The original article on Harvard Business Review requires registration.

Victor Niederhoffer writes:

This article provides confirmation of the idea that has the world in its grip. Egalitarianism prevails. Especially at Harvard. I will have to read the article to see all its biases. But it was guaranteed to be published in the HBR.

Rudolf Hauser writes: 

Not having read the HBR article, I cannot comment on that particular study. But I would note that the nature of the forecast and time frame are important considerations. The news article did note that the study only looked at three years of data. If the forecast related to only quarterly trends the conclusion that it might have just been a fluke forecast could be valid. But say someone had predicted the financial collapse we saw in 2008 with valid reasoning but was off in timing. In that case his or her forecast would be wrong for part of the time but someone who acted on it might have had some years of underperformance but avoided the debacle that was to come. That forecaster might be someone to listen to in the future. But even being right once for the right reasons does not mean that the person will be correct all the time on such major calls or even that they will ever be right again. In the end, one should listen to the reasoning but make one's own decisions.



 More Phys.org stuff, but this is pretty interesting. They are reconsidering the elastic rebound model of earthquakes. They call it "Plastic" deformation:

"Their work has not only defined the size of the area's average rupture, but also has shown that widely used earthquake modeling may not account for when the crust sometimes deforms permanently, rather than snapping back to its original position."


"The Cornell researchers have concluded that up to 10 percent of the surface of South America that overlies the subduction zone, which is responsible for the great earthquakes and runs along the western coast of the continent through much of Chile, has actually deformed permanently due to earthquakes. If that's the case in other places too, elastic rebound theory-based earthquake modeling might be too simple, Allmendinger said."

Here is the abstract for the paper with accompanying figures.

And here is a good picture.



 1. Never try to make money the same way twice in a row.

2. Don't trade inactive markets.

3. Don't assume that the relation between your two favorite markets will stay the same from year to year.

4. Be alert to big minimums on Monday as they tend to reverse.

5. Try not to sell markets that have big drifts upwards like stocks.

6. Try to go with with the central banks.

7. Be one with the idea that has the world in its grip and be on the side of the market that will further that grip.

8. Never go for small profits as the vig is too great relative to your gain as a %.

9. Don't trade when a loved one is very sick.

10. Round numbers will be broken.

11. Play the yen to break 100 and the S&P to break 16000 and Apple to swing from below 400, e.g.

12. Gold has been a store of value for a long time. When it gets hit hard, think of all the people in the world and the institutions that use it for insurance.

13. Don't sell premium in the grains as they move explosively.

14. Never trade so that you exceed your margin. (You will have to get out at the close unless it moves in your favor and that makes you weak).

15. Don't listen to tips or try to follow fast moving operators as you won't know when they are going to change positions and how strong and on what basis their views are made.

16. Let your profits run after you have a big loss and get back to even sell to the sleeping point.

17. Don't take positions that you plan to extricate from in inactive trading hours.

18. After or just before a major announcement don't use limits.

19. Only buy the worst markets or stocks at the end of a quarter or year.

20. Never trade when you're out of the office or on vacation or on a whim.

21. Beware of trading when the market is going to be closed and you will not be able to extricate from your position like European markets when they close for a month around Christmas.

22. Don't short big up opens.

Okay, that's a start. Hopefully, I am more adept at this kind of thing a trader should know than I am at the things a man should know.



 BUT WAIT! Get a Second One FREE, just pay…

We've all heard the late-night spiels for some lightweight crinkle hose, or a new miracle chopper, carpet-tack holder or cat feeder floor- shield. Or domestic mail ricin detector.*

The ad engagingly shows you how fabulously easy it is to use the doohickey, how much time or energy or weight it saves you ("Why should you expect a cane to support you, if it can't support itself?!" Sophistry aside). Then comes the money shot, as it were. You can buy this life-changing device or product or varmint destroyer for just $whatever. Whatever or so. O, oh joy. Then the kicker: Wait! We'll "give you" another one, totally free! "Just pay postage and handling, extra."

So if P&H are, say, $9.99 for the first item, and it can easily accommodate a second item neatly spooned in a slightly larger cardboard box shipped to your front porch, why do you have to pay a whole extra $9.99 for the "free" second item you don't really need?

Because the manufacturer/retailer makes all their profit on that near-subliminal catchphrase: "Just pay extra postage and handling." Wow, what a deal. If you weren't so logy from sleep deprivation when you hear these infomercials, you'd pick up on the dicey proposition to separate you from your wallet with a feint to the word FREE! and the sub-audible addendum about the P&H extra cost.

Who knows? Maybe these incontrovertible must-haves are foreign, and they fall into the "overseas contingency operations" beloved of a certain gunmetal-haired appointee of the current Administration that do merit extra postage, taxes, handling, to get through Taiwan border sentries…? Last giggle: If you try to purchase the device or product without the add-on, they won't sell it to you. Discretionary purchases that wend their way into mandatory.

What brings this to mind is the bait and switch we experience with the late-night chief executive, who feeds us one message about "saving babies" in the Newtown, CT, massacre of kindergartners, a tragedy, versus his "celebration" of the long-lived, mostly government- underwritten abortion palace of Planned Parenthood, whose sole purpose is to crown our efforts with yet another aborted fetus or seventeen million.

The issue is laden with land-mines, yes, we know. For a period of time, most advocates of limiting abortion were, for perhaps one or two decades, advocates of "women's right to choose." A neat runaround for the notion that, au fond , we are speaking of the slaughter of little humans.

The worshipers of the faux notion of climate change, a theory that is maximally disputed by many, especially scientists without a Democrat agenda or debts, don't apparently believe the indisputable fact that it is human life developing from the time of the dividing zygote. They'll swallow climate change on the falsified info of dubious charlatans and wannabe's, but won't accept fertilization: Call them Cirque du the sun-addled.

Because we are never to be inconvenienced, we women must be permitted our hard-fought right to erase our 'mistake' (the current president's locution when once asked about the possibility of one of his daughters' becoming pregnant—she should not be "punished" with the results of her "mistake"). We are busy. We are important. We have other things on our minds. A baby would interfere.

Mind, we are not addressing the issue of pregnancy from rape or incest, or a threat to the health or life of the mother-to-be, all of which have legal, moral, ethical perspectives and dimensions apart from female or marital convenience. But in view of the ongoing but strangely muted coverage of the Kermit Gosnell trial for his decades-long grisly handling of babies born live after his maladroit abortive efforts, and his consummate population reduction of gestational mothers who pass his way, it is mystifying the larger public is not gummed to their recliners at the gory spectacle of "snipped" infant spines and shelved, bottled baby parts ( no pimiento included, sorry, folks )–scenes that have kept the tabloids in chocolates and Crystal for eons. Why the reticence?

It has all the ingredients of a bloody disaster ("tragedy" being the White House resident's fave locution, after not tragedies but deliberate acts of heinous sabotage and slaughter) so beloved of the famed "Never let a disaster go to waste," or waste disposal, crowd.

Hey, Janet Incompetano: Here's a REAL "man-caused disaster. " Yet Ms. Janet is…mum…on this issue that upholds and justifies her tortured and otherwise bizarre linguistic pretzels.

Doesn't Dr. Kermit warrant a wee wrist-slap by the nannygrams of the regulation-happy Ubama Reich? Don't hundreds of killed infants near to term, a Dr. Caligari-level chamber of umbilical fetal "preserves," and a handful of regrettably slain moms-to-be, rise to the level of public outcry and revulsion by the ever-outraged #1 Peevish POTUS and his ever-feckless companion Incompetano? Et al? (Actually, no one in the past fervid five years under BHU has stooped that far. No one et Al. Yet.)

But wait! You get two monsters in one—kills live-born babies and their 'inadvertently' murdered moms—just handling & postage, extra. Ye Presidential nostrils do not descend to the aroma of this particular olfactory stimulus.

Is there a way to package the Gosnell's gossamer tale of grue with the darned inconvenient Tsarnaevs of Boston Bombing infame–which colorful duo (and screeching family) "have no known connection to any known terrorist sect or group," right, Ms. Janet? And did this all wholly unaided by foreign monies or assistance; correct, again?—so that we get them both, FREE, just adding correct postage & handling, so we can drop-ship them anywhere out of the orisons of the lovely folk who brought you UbamaCare, otherwise dubbed the Affordable Care Act, whose very vocal proponents are now scrambling to exempt themselves from its regulation-barnacled, writhing, exorbitantly unmanageable and debt-ivied tentacles?

Call it Don't ask; won't sell.

*restrictions & conditions apply

Jeff Watson writes:

That get one free for additional S&H is exactly the same thing they busted McDonalds for when they offered super-sizing. I've often wondered that when one is at the airport and the bar at the airport offers a drink for one price, then offers a double for a little more, how much their profit margin goes up? Hey, with a short pour, a little at the top for taste, their profit margin might double. I know about up-selling, as that retail 101, and will make a mediocre business a profitable business. I wonder how many times a day the Mistress of the Market tries to up-sell the players? Probably on every trade…



 I really enjoyed this article "The History of Creating Value". It has a great timeline showing how people made money through the ages.

Stefan Jovanovich writes: 

Warrior — "We can plunder grower's food for the King". Actually, not. Food is grown and taxed under the King's authority so that the King can afford a standing army that picks fights with other standing armies.

Craftsman — "If we make things and found cities, warriors won't get us." Kings need palaces and priests need temples and they are sure as hell not going to be stuck out in the boonies.

Skipping forward…

Oil Driller — "since industrialists need to feed cars, oil" . Oil was used first for illumination, then for furnaces (both for direct heat and for steam), and only then for gasoline, which begins its history because the Russian oil production has created a kerosene glut.

Corporate Executive — "cars made large factories into corporations" - So this is why the East India Company and the Pennsylvania Railroad are really outliers.

Ms. Vital is the new winner of the Historicity Prize and is entitled to a full case of scuppernog.

Gibbons Burke writes: 

The underlying thrust of this timeline is to argue that being a startup founder is the route to wealth and value creation today. Which is a great idea, and in line with Distributist economic organization, which holds that the main problem with capitalism is not when you have too many capitalists, but too few. The more owners there are in the society, the better.

But while the idea is a good one, the reality is that the road to wealth proposed by these startup evangelists is not to found and create a company which will provide a way to generate value for the owner over his lifetime, but to come up with a novel idea, develop it to the point where it has a proprietary advantage, and sell it to some corporate behemoth who has decided it it easier and much less risky to outsource its research and development to masses of proles living the startup dream. When one emerges with a good idea, simply snap it up and bring it into the corporate umbrella, and either monetize it and develop it further, or kill it because of the disruptive threat it poses to the existing herd of corporate cash cows.



 I heard someone the other day say the "wrong route be easy" whereas the "right path will be hard." I challenged them to defend this principle!!! This is an annoying empty platitude. Both in markets and in life.

If you want to be a poet, please recite the rhyme of the ancient mariner instead. If you want to be an ascetic, please get your philosophy correct. If you want to be a trader, recognize that pain means you were WRONG.

On what basis do you argue that "on the wrong road, you find success and happiness initially but in the end you lose; whereas on the right path, you suffer but eventually win."

By this standard, if you allow me to hold your head underwater for the next 2 hours, it's a winning "position".


Perhaps I should go back into my brain hibernation — from which you awakened me 50 hours ago!!!

Leo Jia writes:

Thanks for the wonderful argument, Rocky.

On a single trade, I am totally with you in that one should quickly recognize and correct mistakes. But on an entire trading career, this is generally not the case. I don't know how you learned to trade, but along my experience, which I believe is also quite similar for many successful traders, there have been a lot of difficulties. Should I or those many others have better quit early along the way? One simple example that perhaps best reflects this in life is on choosing careers. The easy (and likely the wrong) route is to get employed. The hard (and likely the right) route is to start one's own venture.

Stefan Jovanovich adds: 

I am the 3rd generation of Jovanovich to subscribe to the belief that "good business happens quickly". Depending on how you would include joint ventures/partnerships in the count, Eddy's Mom and I have started between 8 and 12 businesses and run them until they were either sold, shut down or the Peter principle applied to our management skills. In every one the test was the same: you made money within a matter of a few months or you never made it at all. These rules do not apply to venture capital or any other start-up where the loss of the money invested would make no difference to the lives of the investors. They apply absolutely to the opening of noodle stands ("broth runs deep in our veins, son") and other enterprises that start from scratch without any scratch.

The other rule is that sick businesses cannot be cured or "turned around"; they can be liquidated, as Secretary Mellon advised; but they cannot be saved as enterprises once the rot has set in.



 My sons Quincy and Ryan are 11 & 8, respectively. They spend a massive amount of time together and are best friends.

They love to make up games, challenges and bets. I strongly encourage this.

Tonight at dinner we had a smorgasbord of leftovers from the weekend. Ryan got a devilish grin and held up two closed fists. Here is a summary of the conversation:

R: Quincy, I bet you can't tell me how many apple slices I have left

Q: What do I win?

R: The winner gets to shower last (Who goes first and last in the shower has become a big deal)

Q: Ok. I see one apple slice on your plate. I think you hid one in your noodles. And I bet you only have one in your hands. You want me to think you have one in each hand and there are 4. I bet there you only have 3 left.

R: I only have one! (Opens two empty hands and beams with pride). I wanted to see if I could fool you and give you the answer but make you guess wrong.

The whole scene reminded me of the iocane scene from The Princess Bride .

A strangely proud dad,




 The annual CTA Expo took place at the CME Group in NY. It was a day full of presentations. The industry's line, of course, is that the stock market has become a joke. At best, stock trading and investing have been commoditized. There was a lot of outright self-promotion by the energy and metal interests, and much less so by the bond and currency funds.

It sounded quite symbolic to my ear, as this is what I am thinking going into next trading week. The earlier April's riot in precious metals was just the opening salvo. Similar to oil market, metals alternate strong down and up weeks of late. But I see the overall bias decidedly contractionary. And this is just the financial industry's prelude to going all into the US Dollar. The Euro-currency is the largest, most liquid market - and it will be the last to go. The metal market is much narrower, and it had to be vacated first. The energy markets are wider, and will submit only grudgingly. Finally, the Euro-currency is a Titanic that appears un-sinkable - until it hits the iceberg, and only so many life boats will be available.

It was very refreshing to hear how many funds (even pension funds) have become tactical players in European Periphery sovereign debt. Heck, if you manage to only hold (that kind of long-maturity paper) overnight — then you benefit from its relatively high yield, on day-to-day basis! In fact, so many money funds have devoted themselves to this tactical idea, that current yields and coupons no longer objectively reflect the high default risk. On day-to-day basis, risk premiums have became partially arbitraged away. The longer term (a lot of them institutional, but less agile) investors are thus subjected to complacency reflection. They do not receive adequate premium for risk, which, if anything, has only become greater in distorted market.

There was another interesting thought that came forth: world's strongest Central Banks have one by one announced that they will never raise rates again! So you can't be short any core bond in the foreseeable future. The lifetime's easiest trade has been announced, which is the only trade that one will ever need to perform: you continue to stay Long bonds until the very day that you instantly reverse to Short. That's it, lights out.



It is interesting to contemplate the distribution of waiting times to the next 10 day max's and 10 day min's in S&P futures since 1 1 1999.

[Ed.: an n day max is defined by {for 1 = 1 to n, c[t] > c[t-i] } i.e. the close is higher than the previous n closes]

Col A: days since last 10 day minimum
Col B: Number of occurrences
Col C: Waiting time to next one
Col D: days since last 10 day maximum
Col E: Number of occurrences
Col F: Waiting time to next one


Col A  Col B     Col C            Col D     Col E       Col F

0        524                          0         789
1        297        10.5              1         373        8
2        219        13                2         276        9
3        188        14                3         226        10
4        165        15                4         185        11
5        146        15                5         161        11
6        140        15                6         148        11
7        130        15                7         131        11
8        124        15                8         119       11.5
9        119        14                9         115        11
10       110        14                10        108        11
11-15      426        15              11-15      375        11
16-20      289        15              16-20      226        12
21-30      339        16             21-30       257        11
31-50      288        13             31-50       257        11
51-100     54         06             51-100       11         05

There were 3575 trading days during this period with no drift per day, i.e. the adjusted  futures started and ended at the same level.      

Many assymmetries are evident.

The maxima occur with much greater frequency. The average waiting time to the next 10 day min or 10 day max is constant until 51 days has elapsed. The waiting time to the next 10 day minima is greater than the wait to the next day maxima  after more than 10 days have elapsed.                                                                      

I studied this because I am brushing up on my knowledge of stochastic models, reading many good books on the subject. I find the subject very refreshing and useful and it is good to keep the paper and pencil less feeble at counting.

One would point out that Mr. Tom Downing did very good work on writing this statistics program while he was employed by my firm.   Vic, chair.



 The Chair asked how can one trade the news.

"Big Data Gets Bigger: Now Google Trends Can Predict The Market":

Yesterday three economists, (Tobias Preis of Warwick Business School in the U.K., Helen Susannah Moat of University College London, and H. Eugene Stanley of Boston University) published an eye-opening paper that said Google Trends data was useful in predicting daily price moves in the Dow Jones industrial average, which consists of 30 stocks. Their research result:

An uptick in Google searches on finance terms reliably predicted a fall in stock prices.

"Debt" was the most reliable term for predicting market ups and downs, the researchers found. By going long when "debt" searches dropped and shorting the market when "debt" searches rose, the researchers were able to increase their hypothetical portfolio by 326 percent. (In comparison, a constant buy-and-hold strategy yielded just a 16 percent return.)

This was a 180-degree turnaround from earlier research, by Prof. Preiss published back in 2010.

Back in 2010, he used Google Trends data and found the opposite conclusion:

"The Google data *could not predict the weekly fluctuations in stock prices*. However, the team found a strong correlation between Internet searches for a company's name and its trade volume, the total number of times the stock changed hands over a given week. So, for example, if lots of people were searching for computer manufacturer IBM one week, there would be a lot of trading of IBM stock the following week. But the Google data couldn't predict its price, which is determined by the ratio of shares that are bought and sold."

What happened? Are people revealing more of their investment intentions in their searches?

The clue may be in looking at changes in the nature of what's reported on Google Trends. In a nutshell, the data is getting bigger, by getting finer, and faster.

Also, this is an interesting graph with current downtick in search and uptick in stocks.

Pitt T. Maner III writes: 

More research via Nature which references possibly useful search term analysis:

1) "Quantifying Trading Behavior in Financial Markets Using Google Trends":

'Crises in financial markets affect humans worldwide. Detailed market data on trading decisions reflect some of the complex human behavior that has led to these crises. We suggest that massive new data sources resulting from human interaction with the Internet may offer a new perspective on the behavior of market participants in periods of large market movements. By analyzing changes in Google query volumes for search terms related to finance, we find patterns that may be interpreted as "early warning signs" of stock market moves. Our results illustrate the potential that combining extensive behavioral data sets offers for a better understanding of collective human behavior.'

And a graph using a "Google Trends" Strategy claims to show this:

'Profit and loss for an investment strategy based on the volume of the search term debt, the best performing keyword in our analysis, with Δt = 3 weeks, plotted as a function of time (blue line). This is compared to the "buy and hold" strategy (red line) and the standard deviation of 10,000 simulations using a purely random investment strategy (dashed lines). The Google Trends strategy using the search volume of the term debt would have yielded a profit of 326%.'

2) A reference to Goodhart's Law:

'Furthermore, economists acknowledge that any transparently profitable strategy for playing the markets will quickly lead to a change in trader behaviour that cancels it out — a principle called Goodhart's law, after the British economist Charles Goodhart. "Social systems have the complication that the system may directly react to predictions being made about its behaviour," agrees Susannah Moat, a computational social scientist at University College London and a co-author on the study.'



 "Bringing People Back From the Dead" :

"While 45 minutes is absolutely remarkable and a lot of people would have written her off, we now know there are people who have been brought back, three, four, five hours after they've died and have led remarkably good quality lives,"

"after the brain stops receiving a regular supply of oxygen through the circulation of blood it does not instantly perish but goes into a sort of hibernation, a way of fending off its own process of decay."

It would be very interesting to know how long the brain can stay in this hibernation state. 



"How Knowledge Can Make You Stupid" :

Being unable to assess somebody else's beliefs with 100% accuracy is a problem, and if it's your own knowledge that get in the way, that means it's even more important to ensure the beliefs you hold are the correct ones.

This research is very interesting. How can we know better where the market will go? Does it pay for one to know more than what the market does? Or is it worth it for a trader to spend all his effort to absorb all the information? The research seems to say no. Knowing more doesn't make one more correctly predict what others would do.

Another situation to which this may apply is financial bubbles. We believe that bubbles are caused by people's irrationality. But perhaps that understanding is not enough. A bubble may just be caused by people's inability to judge others' thoughts. Since mostly everyone knows something that others don't, that information gets magnified in the bubble when people who know it assume that others would also use it to value the situation when in actuality those others don't really have that information.



There has been a run of exactly 5 up opens (i.e. a rise from yesterday's close to today open) in the S&P [see price sheet below]. This has been bestowed upon us 15 times in the last 4 years. Strangely this is not unduly bearish at all for subsequent periods (exactly 6 up opens in a row occurred 9 times). The number of runs is consistent with randomness. Does this have anything to do with the news that central banks all over the world are increasing their stock to bond ratios on their balance sheets (i.e. they're buying stocks as well as bonds with the money they print?). What is the long term outlook for such a shift?

John de Regt writes: 

Hard to say, but the bond and stock purchases might one day be unwound, which would cause markets to fall. That said, the Fed might very well hold their debt securities to maturity, and never sell off.



 It is true Enron's management was engaged in a series of bad decisions. It is also true Enron offered major contributions to the energy industry. Their biggest contribution was to introduce power markets to the electric utility industry.

Because of Enron, control of the nation's transmission lines was wrestled away from utility engineers and put into the hands of traders and bankers. Physical transactions were replaced with financial transactions. Free options to use assets were monetized and priced in open markets.

One example is firm transmission rights (FTRs). Before Enron, owners gave away rights to use transmission lines to a trusted few. Now, FTRs are auctioned in open markets, where users bid for the right to use utility assets.

Because of Enron, Regional Transmission Organizations (RTO's) gained significance. RTOs are what many believe is the "nation's grid." The truth is North America has many unconnected grids, ten of which are open markets in the form of RTOs (most of the nation's population centers are located in one of those RTOs). Every day, RTOs conduct a series of open auctions for energy. They also conduct other auctions for capacity, FTRs and related products and services.

Enron helped transform a highly regulated government-controlled industry into a loosely regulated market-based industry. Enron went bankrupt before the transformation was complete. Initially, only the Northeastern states and California jumped into market-based power. Later Midwestern states, Texas and some Southwestern states joined in. But to this day, many Southern states shun power markets, preferring instead a government-controlled regulatory scheme.

It is true that Enron tried to corner the very market they created. It is also true that the financial techniques they introduced were new in the energy industry, they were borrowed from Wall Street, they were transformative, they were sometimes unfair and most were legal at the time.

Today, RTO's operate under Federal Energy Regulatory Commission rules. Those rules include valuable lessons learned from Enron and other actors. They continue to evolve.

On balance, Enron was a positive force for free markets. They were also a negative force for fair markets.

Russ Sears writes: 

 Enron is a good example of what can happen when a company/species goes from a survival of the first strategy into a survival of the fittest as their niche draws competition and does not survive the process. Normally, growth and high profit margins are a sign of strength, but the temptation as the niche gets crowded is to eat the young to support the current generation of leaders so they can grow and have the high profits they were brought up to believe was their birthright. A similar thing happened in the mortgage backed markets.

These are the times that test collaboration and integrity. It is easy to be honest in passing out the pot when it keeps growing fast and furious. I believe Apple may be a case where it survives through a good collaborative environment within. Time will tell. Given Jobs' reputation of being a dictator and his temper, would this have been the case if he was still running things once continued growth became limited? 

David Lillienfeld comments: 

The issue with Jobs isn't what he would have done. It's whether the management team he left leads the company to continued prosperity. It isn't yet clear that they are so doing, but I'll give them another year to show one way or another.

Managements have two responsibilities–place the right people in their jobs and to provide for an orderly succession that allows the company to continue and hopefully better its lot. (Bettering its lot means ultimately bettering the lot of its shareholders.)

The book on Jobs as CEO isn't yet concluded. Many suggest that he was the greatest CEO of all time. I'm not ready to subscribe to that notion–not until his successors provide some demonstration that the company is not adversely impacted by his departure–no man being indispensable (that great Churchill comment about the cemeteries of Europe being filled with supposedly indispensable men). From my limited perspective, I think the title of the greatest CEO remains a tie between Alfred P. Sloan and John D. Rockefeller. One can argue about what they did, but its hard to argue with the results–both during their tenure and afterwards. J. P. Morgan, too. I suppose one could put George Washington in that league too, but I'll defer to others on this list who can speak to that idea–pro or con–better than I can.

Jobs was an SOB, but the man performed. So was Bob "get rid of the olives" Crandall. And Henry Frick. They all performed, they were all considered magnificent CEOs. The latter two hardly qualify as among the greatest CEOs, and the book is still out on the former.



 This is some good reporting about yesterday's interesting mini crash:

"Fake Post Erasing $136 Billion Shows Markets Need Humans "

Like aligators lurking just below the surface, gazelles and wildebeast are pulled under by deception. From a micro mechanic point of view, such a fat finger drop might weaken the support structure of the depth by eating away supporting bids despite the subsequent rise. Testing needed.

Laurel Kenner writes: 

When the crocs have eaten they get sleepy, and the other members of the herd can then cross the river.



I found the paper, Stochastic Hydrology, lecture 24 to be the best discussion of extreme values very useful in finance I've found. It uses the time between successive maximum events as a base to calculate the probability that a maximum will be exceeded by simple and relatively understandable and useful things that a person can calculate and count with pencil and paper. It ends a rather time consuming search for such a method.



 Old racers and traders agree on quite a few things:

1. Do not look to get out even after a big loss of position. This is in regards to time. A runner, dirt bike rider, or race car driver would never consider an attempt to go back to the lead after a bad crash in the main event. Most realize it might take a couple weeks to regain strength before attacking for the victory.

2. Hold your place. The market or a race isn't about you. The gist is the ability to win a national event is the work you put in the prior 6-8 weeks to the event. Racers are either 'on top' or 'not feeling it' which is code for strength vs. the others or skill on that track.

If 'on top', you make a huge mistake and almost blow up. After such a near disaster we look to the front of the pack and we are still right there? Now most engineers or spectators will say, hold your place regroup. Go get them after you calm down. A racer is never, ever going to do that. The gist is if I almost crashed and my heart rate is pegged at 199, look up and we are close to the lead. We are going for it full throttle. The gist is you made a huge mistake and should have lost it. You're right there! This means everyone almost blew up and too many will, coast for a bit. You can go strait to the lead if you do not hesitate.

"Not feeling it'– That line is easy after a big mistake. We look back over the shoulder and see how much we must push to hold the position.

3. Take your loss. From the drop of the gate everything is wrong. Matter of fact the last laps of the past race everything was wrong. There are two codes in race results that team owners and managers always get upset about, DNS did not start/qualify DNF "did not finish". There is always a push to regroup and gain at least a point on the week. I am cringing as I write. It's so painful. Racers call it, do not get killed. Let's not make a bad weekend worse and ruin, destroy the season. Get back out there! You can do this! Ah, okay, but…..

It has always been easy for me to DNF, load up the trailer and spectate. I remember dad arguing with his best friend. We were at the track and we could not figure out why the engine was down on power then there was a leak in the transmission. Dad said "On the trailer" No, no! No, everyone else agreed we can fix it.. "On the trailer now!" and dad walked away. Later that week we were working on the race car and found 5 more problems. His buddy said, "good thing we put it on the trailer, let's make that a rule"

To be clear, I am talking about what everyone always talks about –"them or "I". The markets are either weak or strong. The position you have vs. the field or the market has nothing to do with how the rest of the field will perform that day. Unless you crash and take the leaders out.

If you're weak and they are strong and you make a huge mistake, take a step back for a lap. If you're weak yet they are weak, you might try standing on the gas. This does not come natural. We are trained from little ones to take a seat and rest after a fall.

There is the old athlete problem. Fighting them for the sake of respect and competitiveness, we all do it… Basically the trade is all risk for little to no reward. That happens to traders all of the time. We spot a window of weakness and go for a pass. We find ourselves boxed out and lose a few points on positions. We add, for no good reason! We didn't have the skill, power or traction to make the pass the first time. That was, with a good pattern window to make such a move. Now our only pattern is competitiveness, the will to win. We are weak, yet feeling it, or best we feel nothing at all because we are mad as Hades. We lay off for a moment build all kinds of speed and go at them with everything we have.

That is how that 30 minute window and a 2 point loss turns into 10 handles against us, all in. How in the world do we get our selves into such bad positions? OH I dunno the last 50 times we made the pass the first time and 4/5 we came back after a regroup and passed everyone back in a lap. We have do this so many times we never think, until it's too late. Then the boss comes on the radio… other than hope, why are you still out there? The pit window is open. Bring it in now! Please….. Good men act silly when they trade or race angry. The gist is we are weak and too upset or stupid to realize it.

There is old dailyspec line on losses. In a big move, in a panic, if they let you out for even, it goes much much more in your favor. Of course, that is big market moves or a huge crash on the track… stay out there and gain all the spots you can. In general that does not work in day trades. It's all your fault, you caused the pile up for self and or others. Perhaps that is where the bias is from, a baseball player pops up a perfect fastball to hit. A football player fumbles. A driver loses focus and hurts the car. Next time out we find the hole we stand on the gas and get boxed in and the will to win, never ever give up attitude takes over.

Which is where the old coach line must have come from "Come on lack use your head" and "are you okay– you have a concussion or something, that was not like you" or " usually you're much better than that".



"More jobs for graduates than the unqualified in UK - study"

A very sad development, restrictive of freedom and upward mobility. The educational oligarchy must be broken. Did the Left ever imagine egalitarian policies would burden their constituents with a choice between permanent career Apartheid or back breaking debt?



 Years ago, Dr BO, the hobo, our kind of crazy genius, posted a report on the realization, he could live of a few $ a day by eating some 1,000 calories per serving at McDonald's, with that 2k a day calories plus a bit of walking he'd lose a few pounds per month. A couple memes destroyed and on the meme generators, He would never read newspapers again.

P.S. last night at BMX track a few asked about eating the AAPL. My comment was when the price of a good lap top is under the cost of the telephone/computer pad… got that?

Yesterday was a frustrating day. I took out all my frustrations on the starting gate. I have a few kids that can't get the hole shot, or 1st out of the first turn. To remedy this I announced let's see how many starts we can do in one hour. I managed 32, about double the kids. Which is silly, as interval training probably slows you down in the short term. Yet the proper form and muscle memory is needed for certain tasks. This comment is in regards to school or requirements of jobs to have a degree when nothing about the job or degree will help perform the task. "We had to do it so, you do to" the gist is the Chief of hiring requires the degree in X because we had to do it. That reminds me of running up the Indiana beach Sand dunes because Walter Peyton was doing it. Or, the silly habit we had as kids to run or walk around with ankle weights.

My cousin, same age, is like my brother and my best friend. He ran MX at Red Bud the famous track we raced as kids. He reported that his results of 15th of 18th last Sunday. He never quit riding but hasn't raced in forever. We had planned on racing the event June 8th. He reports that there is no way in hades we can run the vintage class (same bikes we had as kids 30 years ago) as the track is too difficult. Yet, if I really wanted to race, (he talked me into it in the first place) I can ride on of the practice bikes or 5 years or older bike in another class.

On race results that had import to excel. I then figured out why he was so concerned about me being run over. He had no clue how well he did vs. the current 30 and over Vet pros that ride for money cash awards. The top 5 in his moto or race won the 30 over and beat one of our old friends that run 40 over Vet pro. Plus my cousin is riding a 10 year old 125CC 2 stroke in the 250 4 stroke class. Yet he wasn't even in that class with the kids…as he didn't want to get run over. He exclaimed BUT the class was called Vet sport C class or 122CC and over bikes for riders just coming back.

Bobby I don't care what they called the class… that day it was 30 over open class and you were in there with the Pros X pros on 450's brand new technology bikes… Those guys ran two classes and a few of them finished better in the money race then in our open for trophy of the day. OH!

Which reminds me of yesterday and the flash crash. Guys had stops in 10, 15 and 20 under or trailing on their advanced computers. The problem was hours later they were getting fills and now ofcurse they were now caught short from waaay below.

The electronics and software of the markets remind me of the TPI or fuel injection that was coming on productions cars in the mid or late 80s. They didn't work right and were basically junk. Yet by the early 90s it was good and now it's awesome. My dad, frustrated, pulled the TPI off his vette and threw an old school carb, fuel pump on his mid 80's vette… For years he exclaimed how the computers and all was junk. For years I argued.

Today it's now about Turbo charging small CID engines or running direct injection into a V-6 that makes some 300 HP. For example my first good job and check I bought a 91 vette that had only 325HP.. By my second in 95 it was up to 350 HP with electronics and head designs alone.. Now a much smaller engine, a V-6 with 12-1 compression and variable valve timing makes 300+ HP and the little 4 banger engines are making 300 HP with turbo chargers. All of this was available 20-30 years ago but was junk. Now it works with computers.

So, if walstreet computers follow the time line of race carz to production car it will be 20 years since electronics were first introduced into market making about 97. In 4 years it will all run right and we will not even notice.



 I have been considering whether there is any evidence that socially responsible businesses are better investments than profit maximizing ones. Most of the research points out that it is hard to define profit maximization because short term and long term maximum paths might differ. The concept of risk and return is also relevant with higher return often decreasing the chances of surviving. The duty of a company and its directors to its shareholders, and their incentive to do better for themselves and their shareholders by increasing earnings also plays a part. The concept of dead weight cost is also relevant which is minimized when marginal cost equals marginal revenue and the pricing is such that the demand curve intersects the supply curve at the profit maximizing price. I found this article on going for fourth downs refreshing and provocative in this area.

Rocky Humbert writes: 

I think this is an important subject to consider and the current academic literature does a comparatively poor job. For starters, there is no satisfactory definition nor rubrics of "socially responsible businesses." The monikers of "sustainability" and "green" and "sensitive to communities" are difficult to quantify to say the least. And frustrating to understand in many cases. A chemical plant that dumps its toxic waste into the backyard (while poisoning its workers and neighbors) is?? clearly maximizing short term profits at the expense of long term profits. And it's clearly socially irresponsible. And it will eventually fail. In contrast, my office landlord just installed infrared soap and hand towel dispensers in the bathrooms (presumably to be green), but will they have a good ROE on this? I have no idea. Will they attract new tenants because this is a "green" building? If the rent is the same, I suspect yes because some # of customers get incremental utility from transacting with socially responsible businesses. In contrast, no one (reasonably) gets incremental utility from transacting with socially irresponsible businesses.

The "duty of a company and its directors to its shareholders" is a decidedly American concept. The reality is that torts and taxes and regulation mean that the actual implementation of this duty may in fact include social responsibility. Things have changed over the past 100 years (for better or for worse). So — the answer to the chair's question must be: if the cost of being socially responsible is small, then socially responsible businesses MUST BE better investments. If the cost of being socially responsible is large, then it's less clear — and there is the free-rider problem.

Rishi Singh writes: 

I had the benefit of hearing the current owners of the Empire State building give a talk on going green and increasing revenue a few years back. Their synopsis was that going green for the sake of going green was too expensive for the marginal benefit (e.g. solar panels). Instead, by gutting office space, adding insulation, different windows, and light sensors to turn off lights, they improved the quality of the offices and significantly reduced utility costs at a reasonable cost. By adding these features they could charge higher rent while also improving their green footprint and returning to profitability. An example of market forces awarding the cheapest implementation of reduced energy usage.

Susan Niederhoffer writes:

Some thoughts:

1. His point about short term vs. long term is very important … because long term you see/pay for your short term decisions. Conscious Capitalism companies are long term focused. We have used as proxy for good companies, 100 best companies to work for, or some other third party list.

2. Your heading reveals a trade-off mentality, that it's either or. That's not what we've found. It's possible to keep looking for solutions that make ALL stakeholders better off (and most CC companies include the earth as a stakeholder to avoid those nasty externalities). Even if it costs in the short run, doing the right thing will pay off over time. Patagonia is a good example.

3. CSR is often the crony capitalist trying to tack on a beneficial marketing strategy to get on the green bandwagon (his landlord). You have to dig deeper to sort out which companies really mean it.

4. Transparency is getting harder to avoid. Companies that delay finding out about the negative impact they have in their supply chains and fixing them will pay when their customers discover and put it on twitter. Brand loyalty is hard to buy.

5. You will have fun debating these with John at Junto. Keep up the research…but better read the book too.

Russ Sears comments: 

The problem also is there are many "socially responsible" businesses that are not to be believed. The customer wants to do business with a business that is on the loyal side of the prisoners dilemma. It signals that they value repeat business, and this one transaction will not be be maximized at the customer's expense. In other words, a properly designed social response shows that the business considers itself to be in an infinite set of transactions. It will take less now so that the great great grand kids can make up for the small cut they give back to society. Like Zacheus the tax collector, if they miscalculated and took more than their share, they will return it 4 X what they took.

The problem however, is that often a social responsible business is really doing a slay of hands. Like Capone gifts to the Opera, or LiveStrong gift to healthy living.

Also sincerity is terrible difficult to measure, but it's something many individuals think they are better at than they are. Like ants, they are to be trusted because they give off the scent that they are from the same "tribe".



 I feel like Pitt looking through the current issue of Nature which has a million ideological articles about biology, including a purchase for 60 million of a 2 million Mendeley company, a start up that involves 2 million users sharing and using research papers, an article about Gosling who used paper clips to take the photo of DNA that Watson and Crick used without mentioning to discover DNA. A non-ideological thing from Nature of relevance: "Discoveries take ego, genius, conflict, inspiration, and fierce ambition. But they also need, the hard graft of PhD students who beaver away late into the night and improvise with what they find in the stationery cupboard." Of course articles on how trawling is depleting our fishing stocks, how Greek science is being depleted because we don't give it enough money, and paeans to Obama for funding based science and his budgeted increases in research spending, (but a slight slap for not funding more basic science), and a strident denunciation of those who would wish for deficit decreases, the new secretary of the interior who will "oversee" 200 million hectares of public land and 700 million of land offshore, Sally Jewell (a personage good to know), an article on how we shouldn't use synthetic science to destroy the rain forests, an article on an unsung pioneer of classification who showed that structure and uniqueness is more important than DNA in classification, 2.3 million paid for Nobel prize medal of Francis Crick, and how coelacanths' genes can tell us how we got from the water to the land. Much going on in biology, and much has the idea that consumes our world to make man small in it. 



 One of the most beautiful things I've ever read is the biography of Marie Curie by Eve Curie, Madam Curie. It shows true scientists at work. It's the portrait of one of finest marriages ever. It is a model of what a good biography should be. It provides a great depiction of emigre life in Paris in the 19th century. It shows the force of an indomitable will to discover. It makes you cry when Pierre Curie is killed by onrushing horses on a crowded Paris street. It shows how chemists had to work when they needed to weigh, and touch and bottle and see everything in order to make discoveries. It shows how two new elements plutonium and radium were discovered. It shows the ossification of science in France. It amazes one as everyone connected with the Curies won Nobel Prizes or became Presidents of Poland even though they were the most self effacing scientists that ever lived, refusing all awards (she got two Nobels, and she deserved it, not like Linus Pauling.) I keep going back to it to see what a loving scientific family should be like. The father read literature to them every Saturday and spoke 11 languages.



 My squash coach at school, the great Jack Barnaby liked to tell stories about how he beat this and that player in the semis of this or that tournament in the 1920s. We liked to characterize it as "the older we get, the better we were" and had some tee shirts made on that vein. The current market brings back those days. (the worse we are, the higher we go). One can't resist shorting it on occasion to one's cost. One is also reminded of the historical fact I've seen which is that french stocks went up during the French Revolution.

Kevin Elian writes: 

Great point. And the French market being up was probably the result of inflation:

On March 17, 1790, the revolutionary National Assembly voted to issue a new paper currency called the assignat, and in April, 400 million were put into circulation. Short of funds, the government issued another 800 million at the end of the summer. By late 1791, 1.5 billion assignats were circulating and purchasing power had decreased 14 percent. In August 1793 the number of assignats had increased to almost 4.1 billion, its value having depreciated 60 percent. In November 1795 the assignats numbered 19.7 billion, and by then its purchasing power had decreased 99 percent since first issued. In five years the money of revolutionary France had become worth less than the paper it was printed on.



There is always something new to someone with many gaps in knowledge like mine. And the minimum spanning tree which I saw in an astronomy article "bootstrap, data permuting and extreme value distributions" by Suketo Bhavsar (which I couldn't understand but sent to Dr. Z  as he could and Mr. Grain who could also understand it and it seems like a very good thing for technical analysis. But I will have to study it when not losing in market (all too rare). 

Kim Zussman adds: 

The article is unfortunately significantly beyond my boundaries. Observationally I would worry also about what we can see vs what is obscured by interstellar dust, but presumably they adjust by using infared (which penetrates dust better).

But I see your point vis traded price path:

"The Minimal Spanning Tree or MST (Zahn 1971) is a remarkably successful filament tracing algorithm that identifies filaments in galaxy maps (BBS; Ung 1987; BL I). The technique, derived from graph theory, constructs N - 1 straight lines (edges) to connect the N points of a distribution so as to minimize the sum total length of the edges. This network of edges uniquely connects all (spans) N data paints, in a minimal way, without forming any closed circuits (a tree). In order to distil the dominant features of the MST from the noise, the operation of "pruning" is performed. A tree is pruned to level p when all branches with k galaxies, where k < p, have been removed. Pruning effectively removes noise and keeps prominent features."

Victor Niederhoffer writes: 

But it's descriptive right? I don't see anything about how to use it as predictive?

Kim Zussman replies: 

They seem to be trying to lift signal (filaments) from background noise. Do you think some market moves are signal and others noise?

Victor Niederhoffer responds: 

Yes. Like when bonds and stocks are both up on the day. The green on our chart or a break of a round number. Like an orgasm. But I can't understand the astronomy of the Indian paper so can't unravel it. 



Over the weekend I did a bit of research into that perennial question: inflation or deflation? That let me to look more closely at velocity of money. Depending on how you measure it (M1, M2, MZM), it seems that velocity of money has been declining pretty steadily since ~2008 (M1), ~1996 (M2), or ~1981 (MZM):

Velocity of M1 Money Stock (M1V)

Velocity of M2 Money Stock (M2V)

Velocity of MZM Money Stock (MZMV)

If (and I do say if) those trends continue, one could argue that deflation is in our future. (The third graph there looks an awful lot like the Japanese experience since ~1991…)

Has anyone here done more detailed research on velocity of money?



We achieved a 20 day minimum on 4 18 2013 at 1534 in spu. It is interesting to see the expected duration of time in market days until the next 20 day mimimum:

number of days______expected duration
since last 20_______until next 20 day min
day minimum
1                  24
2                  30
3                  33
4                  36
5                  37
6                  40
7                  41
8                  42
9                  46
10                 48
11-15              45
16-20              43
21-30              41
31-50              50
51-100             39
101 and above      20

Thus, we can see that 20 day minimum are rare, and they don't exert a gravitational effect until 100 trading days have elapsed. As the observations are not independent, the standard life expectancy distributions don't fit it. However, if we were dealing with 20 day maxima in daily changes, then the standard distributions would apply and the duration to the next 20 day maximum in daily change would be approximately 40 days.



 This is a very interesting documentary about gold: "The Secret World of Gold". It just aired on CBC. The premise is that central banks have leased out gold, bullion banks have sold it multiple times over, and there is a big gap in physical gold that is supposed to be in vaults vs the claims that counterparties/customers have on it. But before that there is some really interesting historical stuff about gold at the front end. This was a really good watch.

So if the bullion banks and western central banks have this big shortfall of gold and it is starting to come to light, my theory is that what is going on right now in the gold market is a bear raid to get the prices of gold and silver down as far as possible so the mega-short bullion guys can buy in as much physical that they can (at lower prices) to avoid getting caught in the short-squeeze that has to be the outcome of this.

A couple of points that seem to be adding up.

1. Germany asked for its gold back and was told - 7 years. They were not allowed to see the gold that was supposedly there, supposedly for security reasons.

2. Texas wants its gold back from New York! They don't trust fed government sanctioned counter-parties in their own country!

3. J.P. Morgan was successfully sued (settled) for storage charges on physical gold that was supposed to be in their vaults, but was not.

4. ABN-Amro recently settled gold claims in cash at prevailing market prices. Investors came to get their gold - turns out there was none.

5. China and Russia probably smell what's coming and have been buying large quantities of gold, and encouraging their citizens to do so - setting up the short squeeze?

6. Forcing Cyprus to sell its gold? So who's buying it?

7. What's behind Utah, Arizona and other states legislating gold as legal tender?

If this is what is happening, best way to play it is in physical bullion, certificates in bullion trusts that actually hold the physical gold like Sprott, and gold/silver miners I would think (even if its in the ground, they still have gold). Not sure about futures and options, ETFs that use futures as underlying, nor precious metal ETFs that don't publish the serial numbers of their inventory.

Even if banks settle in cash, it will validate/underscore the shortage of the physical product. And if a manipulation comes to light, people will realize there was nothing wrong with gold as such, and will scramble to buy it back themselves for the reason they had it in the first place - insurance. There may also have to be more government assistance if the squeeze turns out really badly for the bullion banks, exacerbating the money-printing.

Anyway its an interesting scenario. Could be a good trading opportunity, I think the move could be explosive depending on how the news comes out - days of limit-up stuff in the futures markets (unless the banks and government call "uncle"). For disclosure purposes - I'm in a battered long precious metals trade right now, holding what I still have (I took partial stops) and starting to slowly rebuild the position.

Anatoly Veltman writes:

Outside Canada, the documentary can be watched here.

I think it's been known for a while that:

1. There is no upside limit for the price of gold in fiat currencies

2. That government confiscation is unavoidable, to limit item 1

Thus, the balance of the two is likely to be found within the historical $255-$1921 range…

Remember the logic for $250-500 oil calls, as $147 was being approached? All scenarios are always based on unrealistic "all else staying the same". Well, it never does. So it was on approach of $150/barrel, that Vitol got the news that it was "not a hedger" and thus is deemed in violation of NYMEX position limits, i.e. must liquidate…So what news will be new on gold's new wave up? That private ownership of it, outside jewelery and numesmatics is prohibited. First to liquidate will be funds, then individuals desiring to stay out of jail. In George's words, the move could be explosive depending on how the news comes out – days of limit-down stuff in the futures markets…

Stefan Jovanovich writes:

When gold was "confiscated" in 1932 holders were paid for their specie in F.R. bank notes at the Constitutional "price" - $20.67. People had to turn in bullion, coin and the outstanding gold certificates - the U. S. Treasury notes that had remained outstanding after 1912. When 2 years later the value for international exchanges was raised to $35 an ounce, the "profits" went to the U.S. Treasury which also took title to all gold and gold certificates held by the Fed. It is hard to see what the Fed/Treasury would gain from a repeat performance. They are no longer obligated to settle foreign exchanges in anything but the currency of their own digital creation.

Let me try to understand what is being suggested about the current state of the world regarding gold, prices and credit: (1) the amount of physical bullion actually available in the world is far, far less than advertised, (2) to preserve their legal tender oligopolies the central banks are not only lying about how much gold they have on hand but actively short-selling against their reserves, and (3) when interest rates rise in the U.S., social chaos will result and the government will impose Martial Law.

The premise seems to be that the U.S. and Europe have unsustainable government debts, and an inflation is inevitable. To avoid this, the Fed/Treasury/IMF/ECB and other institutional villains are doing everything they can to destroy speculators betting that the currency prices of gold will go up.

I don't get it. All of the past examples of government default that the Roganistas point to occurred during periods when foreign exchange markets cleared in gold. No country, not Britain, not the United States even in their days of greatest authority, could settle its foreign debts in its own fiat currency. When Roosevelt issued his Executive Order making the ownership of gold (and govenment promises to pay gold) treasonous, the worry was that the U.S. would literally run out of gold because our European trading partners' currencies were no longer fixed by a specie weight and measure. When, 2 years later, the U.S. devalued by 40%, it was to create a "stabilization reserve" that would keep the country from running out of gold. Even after WW II, with the rest of the world in ruins, the U.S. still had an explicit obligation to redeem its foreign exchange deficits in specie valued at $35 an ounce.

Our present world only began when President Nixon and Treasury Secretary Connolly adopted the Henry Ford approach to currencies - the U.S. trade partners would have their accounts settled in any colors they wanted as long as they were green and black ink on rag paper. Since that time, prices for the same scarce objects - fine art and Bel Air real estate, for example - have literally soared. But what has driven them is not an explosion of legal tender - what was quaintly described by Friedman as "the money supply" - but an explosion of private and public borrowing. When credit has become "tight", prices have fallen; once banks and other lenders, including the government itself, have been able to write checks once again, prices have resumed their increases. It is hardly surprising that gold - itself a scarce object - that has shared that increase in price. What is surprising is that we are somehow supposed to learn the "lessons" of those times in history when foreign exchange was measured in gold ounces and apply them to a period when current annual borrowings, including rollovers of existing debt exceed the sum of all borrowing by the species from its origin until gold's full legalization in the U.S. in 1975.



 It may pay to keep an eye on the Aussie dollar in the near/medium term as it appears things have been coming to a head. A recent article in the Sydney paper mentions 42 dollar fish and chips, and 10 dollar bottles of water being sold. Add this to project investment diminishing, commodity prices on the back burner, banking services employment in some sectors struggling, a government political landscape that possibly has been the worst ever, and further rate cuts on the agenda. The market has been in a yearly range of 1.02-1.06 and it looks like the lower end is about to be tested. The Titan may be now be tested.



 I have noticed that some of the strongest, most successful, and most original personalities make relatively little effort to incorporate others' point of view into their persuasion techniques. Do you think Steve Jobs really tried to understand how others saw the situation when he was screaming at them to get things right? I've dealt with multiple "screamers" and I hated their guts, but they had achieved more than me.

You certainly have to make yourself understood. If whoever you are talking to has no idea what you really want there is no point talking. Without doubt great leaders and great achievers of all stripes have to have enough situational awareness to understand whether they are getting their point of view across. But more often than not they simply get rid of people who can't understand them.

Think of some great leaders you know. Some of them have claimed to feel everybody's pain, but did they really? Was there enough detail in their description to indicate that they really knew the nuances of the pain that the multitudes of people they were addressing felt? Think of some of them with quirky personalities. Do their communications on complicated subjects often even make sense? They make sense to them, but sometimes their thinking is so far away from the pack that going down to the level of everyone they are talking to simply is not something they are willing or often capable of accomplishing. Think of some other great leaders who get others to follow them simply by displaying their leadership qualities on the most basic level but not the real goal of where they are going.

So in summary, yes there is some obvious truth to using situational awareness to convince people. But trying to get down to the level of every single person one has to deal with isn't something everyone who is successful does, nor is it strictly necessary to achieve many goals of persuasion.



One of Tom's favorite proverbs was "it's good to have a system even if it's a bad system". I made some very rare profits the last two days with the theory that the Boston situation was a cover up of Mideast activity and was able to profit from a few news announcements and reactions thereto with that theory but the theory was wrong and I was wrong and (one is seeing the Mikado tonight). At least having a system prevents you from being oscillated out by stops or excessive vig or ephemeral things unrelated to the theory which are wrong too, I think. 



 It strikes one as wrong that governor Deval Patrick said "there will be no vengeance but accountability." I had the displeasure of hearing him speak at a Milton commencement of my daughter when he was a mere student out a few years with a hateful message that at least saved me from ever contributing to Milton again.

Anonymous writes:

The reason they picked the wrong place to terrorize is that there will be tremenous amount of vengence.

Because, marathoning, is only for those in great shape. And Boston, with its qualifying standards, is only for the elite of the elite.

The best and only true vengence is success. They have just unleashed an enormous amount of motivation in every runner's strong and true heart.



 New and old technology can coexist well together. For example, I had a ground water monitor installed recently which has a wireless feature that seamlessly deactivates a related irrigation system. Sounds complex, but the key element in the system is cork. When the cork in the device expands due to rain it triggers the cutoff. Cork is very useful in other areas too. The modern fishing reels use exotic metals and arbor designs to get the best performance. But cork is still used for the drags. This sets the tension on the line when fighting a fish which is the main purpose of a reel. In wine cork is preferred sealer especially for the purpose of aging. In trading the older methods of going against the panics and the crowds can coexist and profit in the post HFT world.



David MacKay says:

"Principal Component Analysis" is a dimensionally invalid method that gives people a delusion that they are doing something useful with their data. If you change the units that one of the variables is measured in, it will change all the "principal components"! It's for that reason that I made no mention of PCA in my book. I am not a slavish conformist, regurgitating whatever other people think should be taught. I think before I teach.

Bill Egan responds:

Well, Prof. MacKay is wrong. In fact, I have made predictive models that have worked for years in real-world corporate environments that were based on PCA. Worse yet for the good Prof., all work done in the predictive modeling of optical spectra for the last 40 years or so has involved PCA or a related method.

PCA transforms your data into a set of uncorrelated, unit length vectors. The first of these new vectors contains the most variation in the original data. The next vector explains as much of the remaining variation in the original data as possible, and so on. Each new vector is a linear combination of the original data into the new vector. The method is reproducible and quite numerically stable if you use singular value decomposition as the algorithm.

PCA is a very useful way to reduce the dimensionality of a data set, say one that has many variables, to a smaller set of uncorrelated variables you can work with. To be fair, the new variables do not necessarily have physical meaning, but they often do, and it always pays to look at the weights applied to the original variables (called loadings in some of the literature).

Well, Prof. MacKay is wrong. In fact, I have made predictive models that have worked for years in real-world corporate environments that were based on PCA. Worse yet for the good Prof., all work done in the predictive modeling of optical spectra for the last 40 years or so has involved PCA or a related method.

PCA transforms your data into a set of uncorrelated, unit length vectors. The first of these new vectors contains the most variation in the original data. The next vector explains as much of the remaining variation in the original data as possible, and so on. Each new vector is a linear combination of the original data into the new vector. The method is reproducible and quite numerically stable if you use singular value decomposition as the algorithm.

PCA is a very useful way to reduce the dimensionality of a data set, say one that has many variables, to a smaller set of uncorrelated variables you can work with. To be fair, the new variables do not necessarily have physical meaning, but they often do, and it always pays to look at the weights applied to the original variables (called loadings in some of the literature).



It is good to know from the Blodget interview that 142 people including bank and public relations people get Fed releases 1 day in advance on an "embargoed basis". As Willie Sutton said when the Dodgers lost to the Giants, "makes you want to turn yourself in to headquarters". No wonder the market tends to go up the day before favorable employment releases et al.

Craig Mee writes: 

"Embargoed basis"… looks like the medicos do it too. So much room for shenanigans:

"In the case of a trial that I already know I probably want to cover, I will often ask the PR person if I can get access to the slides beforehand, and I assure them that I fully intend to respect the embargo. In most cases my request is turned down, for any number of good reasons: the company doesn't have the slides, the investigator is terrified of an embargo break, etc. But often enough the request works and I'm able to save a lot of time and effort during a busy meeting by preparing some of the work beforehand."

And from the tech stock crowd (from June 2011):

"And there's one more big problem with embargoes: newsmakers haven't been holding up their half of the bargain. Part of the gentlemen's agreement is that if a reporter or a news organization deliberately breaks an embargo, there will retribution. The company or PR firm whose embargo got flouted is supposed to exclude the offending reporter or organization from future embargo offers and pre-briefings. But I don't see that happening any more. TechCrunch, in particular, breaks embargoes with total impunity. Like codependent spouses, companies and their PR reps always seem to rationalize away the breach and go back to Arrington's crew with the next confidential story.

You can't fix the embargo system with more embargoes. It's time—for me, at least—to walk away from the whole bankrupt system."



 There are some traders who make money based on news events. Please tell me how an analysis of the recent news could have been beneficial to traders who analyze news. The first reaction was a drop of 1 % in the last hour in S&P and a rise of a corresponding amount in gold. The reaction overnight was the opposite. Why was this news so bullish overnight? Is all news just an opportunity to do the opposite of the initial reaction? What do you think? Is there a systematic way to profit from news announcements? The 9-11 was not a temporary thing. Was that the clue?

Steve Ellison writes: 

I would hypothesize that any market reaction to a news event that triggers strong emotions should be faded because of the availability heuristic (people tend to give too much weight to dramatic but rare events).

I would also hypothesize that any market reaction to government statistics should be faded, since they have margins of error and are often significantly revised later. However, when I tested this proposition using the government report that routinely provokes strong market reactions, the monthly US unemployment report, it was not clear there was any edge to trading in the opposite direction of the S&P 500's move on the report day.

Jeff Watson writes: 

I generally don't fade USDA crop reports after they come out and grains are offered limit down. However, I've been known to buy wheat right at the top just before the report and have it go limit down on me. I hate that feeling as the noose tightens when the trapdoor opens. In fact that just happened to me on the last go-around.

Alston Mabry writes:

How do you test news events? First, you have to immediately and accurately evaluate what effect the event "should" have, ex ante. And then at some future point in time, compare the predicted to the actual effect the event "did" have, ex post. As there is no objective measure to use for the first step, you wind up simply testing whether or not you're any good at predicting the effects ex ante.

Steve Ellison writes: 

I tested using the following logic. If the absolute value of the change from Thursday's close to Friday's close on an unemployment reporting day was greater than the median of the absolute value of the daily change in the previous month, I assumed the market was reacting to the unemployment report and selected that day. For all the selected days, I backtested a one day trade entering at Friday's close and exiting at the next trading day's close, positioned in the opposite direction as Friday's net change. That is, if the net change on Friday was positive, the hypothetical trade was a short. The results were consistent with randomness.

Sushil Kedia writes: 

News is a rare commodity in today's world. We are inundated with broadcasts today. Any media missives that bring by a communication of fact and those amongst the fact-set that are beyond the expected may still have some market moving value. The durability of that fact or how out of line of anticipations it was may perhaps have some effect on how much and for how long the prevailing state of prices will be affected. Those broadcasts that provoke emotion are likely that are worth inspecting a fading trade. Whether news of war, crop-failures or any such genre' of information flows that produce an instant or moment of endocrinal rush.

The fine art of speculations rests on anticipations. Broadcasting media would never report what is coming to happen tomorrow, but only what may have (no guarantee that the broadcast is totally factual, since we have more "viewspapers" today than newspapers) already happened. Those who rely more on figuring out what they ought to anticipate on such resources are often the food for those who would rely on these broadcasts to figure out where the likely dead bodies will be buried. Price may not have all the information of what keeps happening every moment, but does have more information than any other resources of what is expected to happen.

Event Study Method may be a decent tool to evaluate the statistical behaviour of specific kind of events that occur repetitively with varying outcomes and of studying the repetitive actions of specific mouth-pieces than of studying erratic and randomly occurring news.

In a highly inter-connected markets' world and where the risk-free rate itself has a volatility the comforts of isolating non-random abnormal returns' evidence too is fraught with risks of playing on a frail advantage that keeps fluctuating in its expected value with ever-changing cycles if not fading away. Thus, it seems fair to me rather than an over-simplification that the most important factor for the next price is the price at this instant or any distant instant is the price at this moment and in the prior moments.

Rocky Humbert writes: 

I have one secret on this subject that I will share. Well, actually it was explained by Soros and Druck as the "Busted Thesis Rule." I think I've written about this previously on the Dailyspec.

If there is a news event that SHOULD BE unequivocal in it's meaning (i.e. bullish or bearish), and the market after a bit of time starts going in the opposite direction to the consensus meaning, then it's a wonderful opportunity to throw your beliefs out the window and go with the short-term direction. Many important big moves start this way. For example, XYZ is bullish news, yet the market after a little pop starts going down, down, down, …. don't fight it. Rather, "Sell Mortimer Sell!" P.S. I learned this lesson the hard way when Bell Atlantic made its ultimately ill-fated bid for TCOMA and Bell Atlantic's stock when straight up instead of what it "should" have done … which was go straight down. I won't describe the censure I received by my legendary boss at the time. Amusingly, neither of these companies still exist. Bell Atlantic became Nynex which became Verizon. And if memory serves me, TCOMA was bought by AT&T when they got into the cable tv business…

Gary Rogan writes: 

In a similar type of episode, when 3Com spun off 5% of Palm thus giving it a market valuation, and the resultant value of Palm significantly exceeded the value of 3Com that still owned 95% of Palm, this marked the end of the dotcom era.



 Okay, the 142 bank pres and public relations people have the minutes already to be released to public in 10 minutes. Bonds are up and stocks are down. Germany is getting killed. Which way will the release to the non-flexions affect bonds stocks and gold. I've been buying gold whenever it drops as I believe that the bank deposit confiscation has to be bullish for gold as are the trend followers short.

Anatoly Veltman writes: 

Rocky is patient at $1390, getting ready to pull trigger on test of $1320.

Victor Niederhoffer writes: 

Rocky a lot more astute than me perhaps because he has a bit of the idea that has the world in its grip in him from his days at the 'Bank' and his love of trend following. One passed their headquarters near the scene of the crime yesterday evening and it was replete with canine k9 4 footed operatives.

anonymous writes: 

One can imagine the scene:

Fed: Honey, I would love to be with you but we have to lay low a few days after the press got pictures of us together.

Banker responds: If that is the case, you and the D. C. boys have fun by yourselves. Give me the checkbook and I will go home to L.A. to shop. Call me when you decide you need the markets to go up again.

Rocky Humbert writes: 

For the record: I am flat gold. If Cyprus (or any other country) could cure their ills simply by selling gold, there would be no ills. My recollection is that the Korean housewives were selling their gold wedding bands to support the Won … during the 1997 financial crisis over there. Korean bonds were yielding 15% at the time. And I bought a few as an investment. That worked out ok. I am not buying the bonds of Cyprus, Greece or those other places. The wealth of a nation is in its land, its laws, and its work ethic. Everything else is a speculation.

Gary Rogan writes: 

"The wealth of a nation is in its land, its laws, and its work ethic."

Brilliant! I would add "respect for its just laws" to the list. May those who want to reward millions of those who broke the laws of this country by giving them the very object of their law-breaking and by making them a part of this nation give this some thought.

George Parkanyi writes: 

This is not scientific, but my feeling on gold is that given government interventions (manipulation is such a strong word) in markets these days, they can't exactly let that turn into a complete rout either. Fear is fear. Gold was supposed to be the haven of last resort. If people see that collapsing then there is the sense that there's nowhere to hide. The panic could transfer to other markets. It's not behaving as it "should" under the circumstances, which further calls into question in people's minds what the hell IS going on? And what is this action discounting - massive deflation? Governments sure want that idea to spread. This is one of the reasons I'm still holding fast to the core position - though I've taken stop-outs on portions. Not large enough portions to avoid a big hit. But it is what it is. The gold stocks are really getting creamed as well. Solid producers trading like penny stocks. Unless deflation IS ultimately our lot, I'm smelling blood in the streets (some of which is mine) and screaming bargains.

I think the odds are good for a sharp reversal rally. If things go really bad in other markets, that's where they'll be looking to cash out rather really pounded down precious metals. And gold is an international commodity - still highly valued in many cultures. This crowded-trade unwinding behaviour I think could reverse very quickly, very soon.

A commenter adds: 

Was the fall in Gold the result of some bigger thing that I am unaware of, and did someone smell a canary that has been dead for a few months and was the first to find out triggering the selling?

David Lilienfeld writes: 

Let's take a look at what's known:

1. Europe was weak going into 2013, but the dimensions of that weakness are becoming evident. The collapse of auto sales in the EU, the episode with the Cypriot banks (which I still don't understand why the Cypriot government didn't say, "Fine, Germany, we're leaving the euro, we have all these euros in our banks, our new exchange rate is X, and now you have a big mess on your hands, much as we do on ours; don't like that? Fund us!), the coming episode with Slovenia, followed by Spain, Italy (if it can figure out who is the government) and France. Then there's the farce previously known as DC. There's the leader of North Korea trying to demonstrate that there is testosterone flowing throughout his veins. The dimensions of many of these has become evident recently. The degree to which China is slowing down and the degree to which the US housing "recovery" might slow down have also started to clarify recently. I won't get into the potential for a repeat of a SARS-like outbreak in East Asia.

I don't think the canary's been dead for a few months as much as it had a massive stroke, followed by resuscitation from cardiac arrest a few times (OK, OK, it was many times), and it's now brain dead and being maintained by artificial life support, ie, it's dead but it doesn't know it. Or the canary's been dead for much longer than a few months.

There's a lot of bad stuff that's gone on the last few months, and the extent to which the market in the US is near its all-time highs is a wonderful gauge of nothing so much as the power of denial. How there could be as much complacency as there's been (a topic of recent interest on this list) is something I don't understand.

Craig Mee writes:

If you haven't noticed, the first stop for gold was the width of the consolidation. I bring you information on laying of track to take into account expansion and contraction. We must work out what size volatility or influences allows for temperature rises and falls.


1611. In laying track, provision must be made for expansion and contraction of the rails, due to changes of temperature. As the temperature rises the rail lengthens, and unless sufficient space is left between the ends of the rails to allow for the expansion, the ends of the rails abut one against another with such force as to cause the rails to kink or buckle, marring the appearance of the track and rendering it unsafe for trains, especially those running at high speeds. If, on the other hand, too much space is left between the rails, the contraction or shortening of the rails due to severe cold may do equally great harm by shearing off the bolts from the splice bars, leaving the joints loose and unprotected. The coefficient of expansion, i.e., the amount of the change in the length of an iron bar due to an increase or decrease of 1 degree F. is taken at .00000686 per degree per unit of length. 



 Vis a vis the impossibility of threading the needle. There is a great short story by Sholem Alechem called "The Competitors". The gist is that two fruit sellers enter the bus always at the same time. She in the front, he in the back. They fight like cats and dogs. They curse at each other. "He has the rotten fruit. All the highest prices, the unhealthy ones" "She is a crook and beats her children. She takes all the money and runs around with it. Her stuff has molds and she doesn't keep it refrigerated. She was ordered to stop by the commisar and that's why she's here". Eventually he trips her and kicks her down the stairs and all her fruit goes tumbling. A good Russian helps her pick it up. "Why do you always do it on the same bus. Why do you have to fight with him?" "Who, my husband?".



 I should add that many people mistakenly come to me to ask for advice on trading. At the junta, where I turned over the moderation to Gene Epstein, he likes to refer to me as a philanthropist. So at the end of each junta, about 20 people crowd around me asking me for philanthropy to them. Another 20 request a meeting with me to get my advice. But I don't have good advice. And I don't have a minute in the week where I'm not trading or parenting with my 7 kids. If one had a minute, it would be nice to say hello to the significant other, especially when one doesn't have a losing position. However, that's so rare that it's not worth talking about.

Many mistakenly see that on occasion I luckily beat the odds and make a small profit and come to me for a little guidance as to how to take out a little profit from the market. It seems so easy and the hourly wage is so great relative to what they make. I note that my average swing from day to day is often greater than my father's total earnings in his life time. That's a terrible lure to many people. But you can't make a profit nor have I ever seen one who could unless you buy and hold, unless you have a tremendous quantified and updated date taking account of all sorts of statistics and randomness and ever changing cycles. Then you have to be there 24/7 to implement it because the swings that are good only last for seconds and if you have job or like to have lunch or dinner, that's incompatible.

Of course other than buy and hold you can always invest with a hedge fund. But… but… but… . By the time, an operator pays his sales force, and his administration, he has to charge 20- and 2. Okay, suppose he can overcome 1- % a year vig, and make 2 % more than the market's 10%. That gives you 12 % before fees and 10% before vig. What's left for you the investor? I reiterate, one feels like telling those who wish to join the fray, come with me to Rockaway or the Hamptons to the ocean. And I'll hold up my hands like King Canute and say, "I am as incapable of helping you, and you are as incapable of making a profit other than buy and hold as I am to stop the waves".

Jeff Watson writes: 

I tell people they are better off going to Vegas then trying to trade. At least if you blow a couple hundred grand, the pit boss will give you some comped meals, a couple of shows, a room, hooker etc. The market mistress doesn't even give you a kiss before or after she "takes advantage of you", and you certainly don't get comped. 

David Hillman writes:

When people ask me how I make a good living out of my business and appear to work so little at it, I say "If you have 35 years to listen, I will tell you every detail of my career and if you can figure out how to make that work for you, maybe you can do the same." Thankfully, I get no takers.

When people used to ask for investment advice during the salad days when a monkey with a computer could make 30%+ with 'buy and forget', I would say "Oh, here's what I'm doing." I stopped with that and started saying, "Sorry, I don't give anyone investment advice anymore." Now, I say exactly what Blodget says in this piece [forget Task, he's the straight man]. It is nothing really new or different from what many advise, but it cuts to the chase, lays it out and makes the case in a very impactful way. If you have 5 minutes, it's worth a look….I wish every investor could see this.

Peter St. Andre writes: 

I don't see that Blodget's conclusion follows from his premises. Yes, the short-term trading game is rigged, but that doesn't necessarily mean that index funds are the right approach for individual investors — maybe long-term / dividend investing is best, maybe permanent portfolio, maybe other things (depending on the investor's mindset, patience, discipline, intelligence, etc.).

David Hillman writes: 

I won't debate this, because I'm not here to try to convince anyone of my correctness nor of Blodget's, nor do I care what anyone else thinks, but I will comment.

I don't think it's BS at all. While I can't put the stats on the table, I'd bet something close to the 80/20 rule applies to whom he's speaking when he talks about the "average individual investor" and those who could be investors.

The suggested alternatives, stock picking, dividend investing, etc. require, if not a lot, at least some knowledge and sophistication. Most have little to none of either.

Unlike the astute types here on the list, there's Billy Joe Tireiron, who has an 8th grade education, works second shift at the plant and picks up a few shifts a week at the 7-11 in order to sock a little away. He's not a dummy and may know a little about saving, but knows a nothing about investing.

And, there's the systems engineer who is highly educated, brilliant at his job and spends 80 hours a week at it, but knows nothing about investing and has no time to learn.

There are plenty of individuals like those out there who are smart and good at what they do for a living, they may know about wine, sports, history, art, whatever, but are clueless about investing. I'm sure we all know a ton of them personally, I do.

So, when do these guys have the time to learn about stock picking and/or dividends, and where're they to go to get good advice that is in their best interest? What the heck do they know about investment strategy, short or long term?

When the chair and I first met 11 years ago, I told him the story of a family member, a well-educated person with a master's degree and whose well-educated engineer husband handles their investments, who said to me "We made $1,000 in the market today." I told her they only 'made' $1000 if they sold and took their money off the table. These are very bright people and somewhat market knowledgeable, but still didn't realize there is an important difference between paper money and cash.

Or take a guy who knows very little. He hears dividends are the way to go. So, he buys 100 shares of a commercial REIT at $10/share that's been consistently throwing off a dividend of $1.20 for years. He thinks "well, this is a consistent 12% return, it looks safe, and it's better than the index fund that averages 9%. When the share price falls to $8.00 and the dividend remains $1.20, his yield rises to 15% and he thinks "wow, my dividend is up 25%", but then fails to consider his depreciation of 20% which gives him a net negative total return.

What are the alternatives available to the average guy, one of the 80-percenters, who wants to invest? They can buy into the marketing hype of online brokerages that tell them 'we'll give you all the tools you need', but still have no time to learn and understands half or less of what they're reading. They dive in nonetheless and lose.

Or, they buy some hot stocks or funds because some personality screams a recommendation at them on TV or they read about them in a financial rag a few months after the fact when they're no longer hot. Or, they're sold an annuity by a bank which benefits more than the client from that option, or a whole life insurance policy by an insurer as an 'investment', which we know it is not.

Or perhaps they go to a commission-based financial planner who takes their 6% off the top and they're upside down from the get-go on every dollar they invest. That may be better than the others or not being in the market at all, but why start out upside down? Instead, they can, as Blodget advises, invest in a low-cost index fund, paying 1/30 the 6% entry fee and taking advantage of the long term drift.

Blodget may be generalizing, which is all one can do in a 5 minute webcast, but he does quite clearly make the distinction between the disadvantages of short term trading and the advantages of long term investing for a pretty broad audience. He's making the same case the chair was and has been has made for years.

If one doesn't buy into the drift, fine. But, it's not 'big bad wolfing' nor bad advice to say "hey, average guy……don't swim in a shark tank, don't buy into the hype, instead, play it safer, minimize your costs and go with the drift." Besides, there are some morons out there who should be scared into caution rather than gamble their family's future.

If we want to nitpick, Blodget may fail in saying "the ONLY way for the average guy to make money in the market long term is low cost index funds" rather than to say "there are other reasonable long term strategies that may work for some, but if you have no idea what you're doing and have no time nor inclination to learn, going with low-cost index funds is the best bet to maximize your return over the long term."

And, he probably also should have said "this advice does not apply to the Spec-List where everyone is brilliant and knows what they're doing and many will think this is BS." ;-)



 Many of the markets that one trades have an unerring capacity to avoid giving one a profit. If you hold a position over night, they move so much that you can't hold them without staying up the whole night, for two days in a row, which for most people is impossible.

Other markets only let you get out of a position when it's going to go in your original direction by a fast 1 or 2% like the S&P over night today. If they won't let you out then they are ready to go down 150 bucks like gold yesterday.

When you try to trade them in normal hours they go back and forth so that your vig on a small sized position taking account of the back and forth is inordinately large to be unprofitable.

When I trade gold, I find that it likes to move a fast 10 bucks in 2 minutes every now and then so you can't leave limit orders profitably to catch the reversal. If your position is too large, it will move so far against you that you will be margined out, especially over night when you don't have data to provide a buffer as to which way it's going. If you happen to have a position in the right direction and it moves a fast 10 bucks in your favor, why then it's impossible to get out. Within 1 1/2 bucks because only 1 or two contracts is bid or offered within 30 cents, and by giving up that much of an edge to trade a reasonable number of contracts, you lose your expectancy. If you trade with a small size, then the hourly wage from doing all the work is less than a construction worker.

Worst of all are the markets where just a few hardened members on the rules committee make the markets. Many of the options markets are like this. They will maneuver the prices and the rules against you so that it's impossible to make a profit at the settlement or hold the position through it because of marks and margins against you.

If you trade for small gains and losses, that's worst of all because the high frequency people are ahead of you on each tick, so by the time you pay the bid asked and take account of the fact that you never get your limits until it's way against you like in the old pit days, you're giving up infinitely more vig than at Vegas.

The book on baseball betting says that you only pay 2 1/2 % vig on baseball betting, much less than any other market or our market. However, you have to live in Vegas to speculate there, and they treat you like a persona non-grata there and the chances for being comped or otherwise ennobled are close to zero.

Gary Rogan writes:

This just tells me one more time that being a long-term investor, specifically in stocks is the thing to do for all but the very best. Yesterday was a bad today, today is a pretty good day, but do I care? Not really, other than it's more pleasant to see a lot of green than a lot of read. I do care that there is nothing good to buy, but can I do anything about it? No. Like in fishing, I just hope that sooner or later the situation changes, in the mean time watching the drift with noise superimposed on it is like watching paint dry, but a special kind of paint that doesn't dry in a monotonic fashion. So the "mistress" to me is nothing but paint that dries in an unusual fashion.



It is interesting to speculate whether there is a seasonal tendency to go down on the due date for the service and whether there is a corresponding seasonal for the subsequent days. One noted a revulsion in the air on those days in the past. One notes 3 April 15 and 4 April 16 literally that were down and a not insubstantial move the next day with 7 of 7 up a not insubstantial amount. 



 We may be through with the first generation of social media start-ups. The issues go a bit beyond just Facebook, though it too has problems. Twitter's doing OK, but I'd hardly call it en fuego, and unless one thinks of teens as being lagging indicators of social media developments, I think we may be in for a lull of a year or two as the second generation gets going. Come 2015, we should be able to sort things out. But as for this round, unless someone develops some new business models that include more transparency on monitization, this round may be done. If Twitter does come public, it may be the 2013 version of StrataCom. I have it on pretty good authority from within Cisco that while many in the company don't see it as quite at the level of the TW acquisition of AOL, they would like to forget about it as it ranks up there as on the list of horrible 10 figure purchases. Did Cisco even integrate the technology into its product line? I don't think so.

We've had some discussion about FB in the past on this list, but I don't think we've talked much about this round of new social media companies.



 In the top drawer of my dresser there is a baseball. I have no idea where this particular baseball came from and there is nothing really special about it. It has the look of a stadium or fast food giveaway ball as it has both the Orioles Logo and Bank of America stamped on it. I’m pretty sure my stepdaughter gave it to me but I could be mistaken. It is just a baseball. It is a regulation ball made by Rawlings. It has a cowhide cover over a cork center weighing about 5 ounces. It is 9 inches in circumference and has 108 red double stitches holding it all together. The baseball has never been winged around the diamond or smacked off the outfield fence by an enthusiastic bat. There are no scars or scuffs on my baseball. It is just a baseball that lives in my dresser drawer.

Sometimes, like now, I take my baseball out. I grip it like a pitcher and try recreating the grip for a fastball or the curveball I could never throw. I even grip it like a knuckleball and toss the ball up for a bit to see if I can get the motion correct. I flip the ball into the air and catch it and just generally goof around with my baseball. I have always loved the fell and the look of a new baseball. Sometimes I take that baseball out and just toss it up and down while I am working and that baseball and I go drifting back.

We drift back to a dusty filed in the Eastport section of Annapolis. It is nine in the morning on a summer day and already groups of boys are gathering in that field. It’s a grubby collection of boys ranging from 8 to maybe 12 years of age. They are wearing whatever jeans were on sale on Britts Department store, JC Penney or Sears. There are no cleats or fancy shoe wear and PF flyers and Ked’s rule the day on our little field of dreams. I am there with my dirty old glove and trusty bat. I am enthusiastic about the game and love playing it. I am not very good at this game but I do love it so. I can’t hit for shit although since I am ambidextrous I am equally awful from both sides of the plate. If I get a pitch right in the sweet spot of my swing when batting left handed I can drive a ball a little ways so no one ever throws it there. On the rare occasion I pitch the game turns into home run derby time. I can play the field without embarrassing myself and I’m pretty fast for a little guy so I am not a total liability. We will be in that field until dark if our parents let us.

On days when there were not enough kids to get up a game a few of us would grab the Wiffle Ball gear and head for the back of the Harbor House Apartments. Off the wall was a home run and only one kid could hit it. He hit it every time he came up to bat. Needless to say that kid was not me. None the less we played until the folks down the third base line had to be sick of the sound of a plastic ball whapping off the sliding glass doors and little boys arguing strikes and foul balls. When there was no bigger game in the filed we were behind the projects playing a version of baseball with rules and quirks know only to us.

 The feel of that ball in my hands with fingers properly aligned for my lightning fast 25 mile an hour fastball and I can recall as if it was yesterday being in the back yard with a pitch back net. The net was stretched on an aluminum frame with springs and had a strike zone stitched in the middle. When no one else was around, or far more likely I was grounded for some nefarious crime against parenthood, I would spend hour upon hours pitching to that machine and chasing down the returns. I was Palmer, Ford, Gibson or McNally on the release and Brooks, Belanger and Mantle on the return. I have no idea what my mother spent on that damn thing but it was the best deal she ever got on a toy.

Tossing my pristine baseball gently into the air watching the spin of the seams through the air and I am carried back to my basement room in the house on Boucher Avenue. I can almost feel those little white plastic earplugs on my highly prized hand held transistor radio. I would lay on the bed and listen to Chuck Thompson call the game aided by legendary stadium announcer Rex Barney. Those earplugs drowned out the sounds of a marriage that never should have happened coming to its harsh ending over a period of a couple of years. The sounds of the Orioles whipping the snot shit out of the Tigers, the Yankees, and the hated Boston Red Sox frowned out the yelling, the tight voiced arguments and occasional breaking of dishes or whatever else Mom chose to wing at her husband that night. Listening to the White Sox, The Indians, The Angels and The A’s go down in ignoble defeat could help you forget your sister was in the hospital with yet another asthma attack. You could escape it all as Buford , Blair, Robinson F, Boog, Robinson B, Johnson, Etchebarren/Hendricks, and Belanger used superior fielding skills and fierce bats to smote the evil opposition. Palmer, McNally and Cuellar befuddled and dispatched the opposing batters and Eddie Watt would close it out of they got tired from tossing all those strikeouts. I wasn’t supposed to stay up listening to those games but my mother let me have my little escape from it all and at some point during the night she would take those plugs out of my sleeping ears and place that little radio on the dresser. That radio had the most amazing batteries too. I had it for years and the batteries always worked and never needed changing. One suspects Mom had something to do with that as well.

As I recreate the motion of throwing across the diamond to nip the runner at first with my baseball I can remember the first time I went to a game. My friend Billy’s dad took us and no supplicant ever approached the altar of St Peters in Rome with the reverence and awe which I entered Memorial Stadium for the first time. The grass was breathtakingly green and the stark white of the baselines is etched in my mind still. Right there on the field in front of us were the Gods, legends and heroes of my youth. Andy Etchebarren hit a home run and Palmer outdueled Louis Tiant for the win against the Indians and I do not think my feet touched the ground for a month.

 My baseball and I can fast forward too. We can go all the way up to 1983 to the one and only baseball game my father and I ever went to together. We were estranged for many years and not reunited until I was in my late teens. My own travels and misadventure kept us apart for several years as well but I was back from my travels and misadventures and living in Baltimore. Dad was pretty sick by then and didn’t get around so good but he scored tickets to a game that season of Orioles Magic. We sat in the first row of the upper deck and watched the Orioles come from behind in the bottom of the ninth with six straight singles to win the game. It was the only baseball game I ever went to with my dad and I still remember it well.

A few months later as Cal Ripken caught the last out to vanquish the Phillies and win the World Series I reached for the phone to celebrate with my Dad. He didn’t answer and my joy of the victory was tempered by the fact that he never would again. He had died just a few weeks earlier and we would never go to another game or talk baseball while catching a game on the television. But I have that one game and I will treasure it forever.

My baseball and I like to visit 1984 as well. My daughter was born of May of 1984 and a more unprepared scared shitless,”what the f to do I do with this thing” father you have never seen. Fortunately there was a bus that stopped right outside my east Baltimore row house that dropped me right at the stadium. I packed that stroller up many times and just took her to the game, diaper bag in tow, to watch the Orioles. It was on such an adventure that I learned that no matter how exciting the game you cannot just give the baby more bottles in the heat and sun when she cries. Bad things happen when you do that and then pick the baby up after the game. The upside is that when you are covered in baby puke in the heat finding a seat on the bus is not much of a problem.

 We can fast forward some more to the little league fields of Arnold Maryland watching my son play ball. He was so much better than I ever was and I loved watching him play. He was all legs and elbows but had the range and glove to play shortstop like a little Belanger. He could pitch a little too when called upon. He was a tad erratic. When he was on he was a strikeout machine. When he was off he hit every batter he faced. On the upside he rarely walked anyone. Tommy wasn’t a great hitter but he was far better than his father ever was at the plate. Eventually girls, video games and other distraction of the teenage years took him away from the game but my god I did love watching my son play baseball. In my mind’s eye I can still see his bony lanky form drifting over to snag a grounder at short and start the double play.

I made my daughter play softball one summer as well. She had a skill set a tad below her brothers. She couldn’t hit, was afraid to catch the ball and ran like a very slow turtle. But Lisa tried and even made a few plays and accidentally got a base hit once. The other girls on the team were incredibly supportive and I can still see her with her multicolored braces and early teen awkwardness in her Arnold Orioles uniform giving the game a try for dad’s sake. She declined the opportunity to play the next year. My baseball sparks more recent memories as well. I think about taking my wife and stepdaughter to a game right before we got married. Maeve still wasn’t too sure about this whole stepfather thing but she had a ball at the game and just maybe figured out that the whole thing wouldn’t be so bad after all. Anyway she stills has the bright orange oversized foam finger around here somewhere so it was not an entirely horrible experience. She and my wife have learned to tolerate my addiction to the worst baseball team in the American League East and try not to laugh too hard at me when I am watching the games during the summer. I am pretty sure Maeve even gave me this baseball I sit spinning randomly in the air while sitting at my desk and she made me the Baltimore Orioles Build a Bear that sits on the bookshelf. Perhaps I am not the most evil stepfather in the history of the world after all.

Tommy and I catch a game or two together every season these days as well when time allows. He is busy climbing the ladder of success out there in the world it is nice to slow things down for a bit on a sunny summer’s eve and head to Camden yards. It is a chance to knock back a couple of years and enjoy the bonds that baseball has built between fathers and sons over the decades. Lisa comes along once in a while but she I suspect she doesn’t have the love of the game her brother and I do and is merely indulging us for the price of free beer. Erin and I have caught a game or two over the past two years, although again she is mostly indulging her strange little husband’s love of the silly damn game.

 It is just baseball I keep in my dresser. Sometimes I take that baseball out and toss it around and grip it like the major league ballplayer I never was except in the backyard with my pitch back net. I think of the lessons of the game that have translated to my life. Practice often. Run out grounders. Don’t spit in the dugout. Always hit the cutoff man except when you a play at the plate. Watch for the signs. Sometimes a bunt is better than a home. Sometimes it’s not. Keep the ball in front of you. Know the pitch count, how many outs there are and what base the runners are on. Back up first.

As I grip that baseball I think of that little boy in torn dungarees and the amazing journey his life has turned out to be. I think of the people I love and the moments we have shared along the way. I recall the joys of being at a game with friends, enjoying a few beers and the greatest game in the history of the world (in my opinion anyway). I think of my kids and my wife who indulge my baseball addiction and all we still have to experience together as a family (including the Orioles World Series games we will be attending together very soon) and how blessed and lucky I am to have them in my life. As I watch my little baseball roll across the desk after my latest error I think of all the magic of life and the pure joy that being alive can bring.

It just a baseball I keep in my dresser drawer. There is nothing special about it at all.

I think I’ll keep it.



I believe the stock market sell-off was in anticipation of the "Sell in May and Go Away" syndrome.

Further, because of low interest rates, the investor has nowhere to go, so the market will stabilize and be choppy until November.

After November 2013, the bull returns and finally ends in 2014.



 I have just finished reading Joseph Conrad's "Typhoon", which was first published in Pall Mall Magazine in 1902. The story is about Captain Macwhirr, who sails the steamer Nan-Shan into a typhoon in the northwestern part of the Pacific Ocean.

The personality of the Captain is interesting. He is a dull, ordinary, methodic, decent professional, who lives an emotionally uninvolved life.

"Captain MacWhirr had sailed over the surface of the oceans as some men go skimming over the years of existence to sink gently into a placid grave, ignorant of life to the last, without ever having been made to see all it may contain of perfidy, of violence, and of terror. There are on sea and land such men thus fortunate–or thus disdained by destiny or by the sea".

He was confronted with a decision that might endanger the life of his men. When the barometer and other clues began to hint at trouble ahead, he decided not to lose time on an alternate course. However, he made up his mind without being fully aware of the risks and consequences. The conversations between the Captain and Jukes, the first mate, are enlightening: ….."How can you tell what a gale is made of till you get it?"…..

….."If the weather delays me–very well. There's your log-book to talk straight about the weather. But suppose I went swinging off my course and came in two days late, and they asked me: 'Where have you been all that time, Captain? ' What could I say to that? 'Went around to dodge the bad weather,' I would say. 'It must've been dam' bad,' they would say. 'Don't know,' I would have to say; 'I've dodged clear of it.' "

…"A gale is a gale, Mr. Jukes," resumed the Captain, "and a full-powered steam-ship has got to face it. There's just so much dirty weather knocking about the world, and the proper thing is to go through it with none of what old Captain Wilson of the Melita calls 'storm strategy.'

 This is a story about destiny. The decision of the Captain started the ball rolling putting inexorably in motion a predetermined set of events. Nothing could stop them. There are immense forces that cannot be escaped once engaged. Why should a Captain of a fully efficient brand new ship change course? "Keep her facing it. They may say what they like, but the heaviest seas run with the wind. Facing it–always facing it–that's the way to get through. You are a young sailor. Face it. That's enough for any man. Keep a cool head."

99,999 out of 100,000 times, changing course would be a waste of time. But that ONE time you enter the perfect storm, you can only suffer the violence of the sea and hope in the benevolence of destiny. What is a calm and flat surface can suddenly erupt into a storm capable of destroying anything in its way. This reminds me of the inherent unpredictability of oceans and of complex systems.

There are many similarities with life and trading. You can either run away from risks and dangers. Hiding. Or you can face your choices rationally, based on facts, on models that, somehow inflexibly, frame and contextualize events. The limited experience one has of events and ever-changing cycles does not include all possible variables. Black swans happen and can have devastating effects. The fat tail of distributions cannot be simply ignored because sooner or later you may run into it. And in that situation, there is no "storm strategy". You can only trust the ability of your helmsman to face the wind and keep going. You can only trust the structure of your ship.

This is fascinating and applies to life and trading. It is this balance between fear and rationality, between the trust in our own capacities to build the future and the awareness that destiny can be stronger than us. It is the dignity of the human being, which faces bravely the unknown. With the awareness of these limits one has to navigate both calm and turbulent waters.

Far as the mariner on highest mast Can see all around upon the calmed vast, So wide was Neptune's hall … — Keats



 I became curious on the issue of usury sometime back and found an article (which I cannot re-discover) which made the following case:

Once upon a time in Europe, most people lived in widely separated agrarian communities under the power and protection of a "lord." These were essentially closed communities with closed economies. As a result, the lord of the village did his best to make sure his community possessed all the trades and skills necessary to get by year-to-year. Surpluses were rare, trade even rarer.

So it wasn't unusual for a village economy to have roughly the same amount of capital circulating from year to year to year. Any significant or ongoing loss of capital could cripple an already fragile economy. An overwhelming amount of the capital (and labor) was controlled by the lord with the church coming in a distant second. It was apparent to most that the viability of the community depended almost totally on the fiscal wisdom of the lord.

Lords had significant holdings in land, crops, and rents; many were also very ambitious, others merely spendthrifts. It was not unheard of for a lord to borrow against any one or several of his many assets. If these "loans" were at no interest, repayments could be made out of the regular expected flow of funds - and the village's capital would remain static. However, a loan at interest meant that each payment meant a small loss to the capital base.

The larger the loans, the longer the prepayment, the more the capital base dwindled. If, and when, a loan was completely repaid (with interest), the community would be that much poorer. Obviously, it would be the peasants, tradesman, and artisans who would suffer first and most; the lord and the church later. So the church banned usury as a measure to short-stop "executive mismanagement."

As far as I can determine there was no scriptural issue here. In fact, in the parable of the talents, one man buried his coin lest it be lost, incurring the wrath of the master. He incurred that wrath anyway for not putting the coin to productive use and, at the least, he should "have deposited my money with the bankers, and at my coming I should have received back my own with interest."

I'm not familiar with the Hebrew of Islamic positions on this issue, so I can't say whether or not theirs are similar or more nuanced.



 To the extent that the central bank is driven to accumulate government securities at artificially inflated prices(and repressed yields), either such purchases must be i) held to maturity (implies that the central bank will not have the freedom to contract its balance sheet in a timely manner in order to tighten quantitative monetary policy) or ii) the government must be prepared to underwrite the capital losses realized from the sales of such securities in a normalized yield environment.

from "The Complete Chartpack Of The Top Global Themes For The Next Five Years"

One wonders when the U.S. has had a "normalized yield environment" and if that phrase means "one without the Treasury/Fed's collective thumbs on the scale". Sometimes they push down and sometimes they push up; but that unicorn of economic theory - the natural rate of interest - has not been seen in America's natural history. since Hamilton told everyone how wonderful it was that the Feds were going to redeem the states and Confederation's crap paper at par.

I love the author's gloomy conclusion - "A central bank that is beholden to government in this way has lost its independence. Its objective has been subtly realigned to the preservation to the creditworthiness of the sovereign". Duh!@# The illusion of the creditworthiness of the sovereign (governments remain the only serial defaulters in hisotyr) has alwasy been and always will be the objective of a central bank. That is why they were created in the first place.

We have already seen the Federal Reserve choose door (i). They also did so between 1938 and the end of the Korean War. For that entire period interest rates remained "moderate" even as the Federal debt increased parabolically. The question that even Jeffrey Gundlach seems to shy away from answering is how far along we all are in the process of climbing to the new much higher plateau of sovereign IOUs.



 Today was a day that I lathered the face at 7:00, and checked on the prices and the shaving cream is still there. Gold down a nice 35 bucks and bonds up a point and stocks down 8. The Dax down 150 and crude down 2 bucks. A take away from the trading. When the pain is too great to withstand adding to the position, and you utter an "oh , no!", that's when you should be standing solid as a stone wall and adding to the fortress, I think.

Vince Fulco writes: 

I've been looking at some historical chart of the softs and other extreme situations recently and per the Chair's comments it is remarkable how quick and painful the washout can be before the trend changes direction violently and puts on multiples of the initial move.

How many times if we just walked away from the desk for a couple of hours to read, jog, or do anything, would we return back to clover? If only one had the fortitude to stand firm at all times.

Kim Zussman writes: 

A possible key is a human inability to shift attention time-scales, i.e, if one is used to thinking (stressing) ticks (minutes, hours, points), it's hard to switch to weeks or months, then back again — in order to be profitable under different states of the market.

It may also help explain early buying and selling.



There was some VPIN discussion on this list last summer. This might be of interest:

"Markets crash, and so does a paper explaining why"

Markets undergo flash crashes — when stocks or bonds rapidly nosedive in value and then just as rapidly recover — every day. On May 6, 2010, for example, the entire equity market flamed out and then nearly recovered its value all in the matter of hours.

Economic papers can do the same, apparently. Take the recent withdrawal of an paper from the Journal of Financial Markets:

"This article has been withdrawn at the request of the authors and editor. The Publisher apologizes for any inconvenience this may cause. Here is the full Elsevier Policy on Article Withdrawal.



 I have always followed the Baltimore Orioles because in high school I caught for Dave McNally one of their star pictures.

But this story is not about Dave. It is about Cal Ripken, the guy who always played and set the record for the most consecutive games. There probably should be an asterisk in the record book from a story I was told here by a former well-connected resident of Baltimore.

It seems Cal came home to find that his wife and the gardener, or tennis player, I forget which, were having an affair. He beat one or both of them up, got arrested and was tossed in jail overnight. Which meant he couldn't show up in time for a game.

So what happened? He was loved so much by the local people, as being really one of them, one of the working class, that the electricians went to bat for him.

At game time there were problems with the lighting, they flickered on and off. I actually remember seeing this because of following Dave Nalley's Orioles. So that part of the story I know it's true. My friend here said once the electricians heard that Cal had some problems getting to the game they began to see what they could do. There was a rumor he had been released and was on his way to the stadium so the lights came back on. Then they found out he had not been released. So the lights flickered a little bit more, then turned off with the electricians saying there was a major electrical outage problem and they would not be able to get the lights back on for that game.

Cal was released the following morning and able to play the next day's game, keeping his streak intact. That ladies and gentlemen of the dailyspec, and Orioles fans, is the story of "The night the lights went out in Baltimore.



Poor Say (of Say's Law): he wrote that if someone goes to the trouble of spending time and money to produce something, that activity will add to other people's incomes and, therefore, aggregate demand. The reason the man is ridiculed is that his common sense observation contradicts the now standard religious belief that money savings = investment and the economist's creed that bank balances automatically add to the sum of human enterprise.



 1. There are some days that it is good to play at net with a short backswing and some days to play a full court game with big backswings and tremendous top.

2. The feeling of elation from recovering from a loss is much greater than any other gain of similar magnitude, i.e. it feels much better to go from 1 million down to 0.5 million down, then to go from 1 million up to zero.

3. Many of the markets are close to unchanged at the open, i.e. stocks, bonds and gold after tremendous moves yesterday.

4. The yen is at 99.70 yen per dollar and will have to top 100.00 for a cycle to be requited.

5. The sports betters and the market betters do not update their statistics enough to take account of ever changing cycles.

6. Woodson is a great coach who could teach all heads of firms a lot. It is such a contrast to see him trying to proactively assist and support his players on the sideline than the horrible image of Antoni with his smug smile of defeat as he holds his breath and keeps a stiff upper lip pacing on the sidelines as his team is murdered because of some bias he developed from 20 years ago playing in Sicily not taking account of the changing nature of the game.

7. Since the corn sold at a premium of 15 cents to wheat versus its normal 50% level to wheat, wheat has recovered by about 100 cents relative to corn.

8. The Nikkei is now 1000 points below the Dow, and a year or two ago it was 4000 below and 15 years ago it was 20,000 or so above. Does that spread move in trends?

9. It was kind of the f(lex)eds at the central banks to relieve all bearish news about bonds before the auction so that their clients would not even be temporarily discommed this time by the auction. Presumably this is necessary to maintain the 2 trillion or so foreign holdings of us bonds?

10. The VIX hovers about 12 and all who sold premium over the last 5 years have made a fortune, and it will be interesting and terrible to see how they give back all their profits as Sandor mentioned everyone in the pits has done so since the beginning of time. When will The Sage's holdings suffer the same fate as almost every other conglomerate in history.

11. The ratio of DAX to S&P, now at 4.96 having fallen from 5.5 is close to achieving it's 5.0 homeostatic level, thereby showing the forces of consilience between European agrarian policies and our own.

12. It is interesting to contemplate the swings of gold between 1600 and 1550 as it moves inversely with stock markets showing its abhorrence at the 1550 level of egalitarian policies or fear of them at the other. The increase in stock market wealth should cascade into other markets like the metals and oil and wheat.

13. The Knicks have won 14 in a row but they rely on the 3 rs and Melo, and such one dimensional reliance generally and statistically loses in the playoffs as one dimensional activities tend to lose in all other sports and life.



I used drift adjusted time series data, but I realize when one is trading against the drift (never a good idea) drift adjusted data will inflate the trade expectation. For example, using the difference method of subtracting the average move over the time series, X expectation will become X-drift. In a rising market, X-drift will be more negative than X, given a higher expectation to go against the drift. X are real points one might have made or lost; X-drift, I suppose, is for statistical significance test reasons. In a rising market if you are trading with the drift, using drift adjusted data gives you more conservative results, which is probably a good thing. But what about trading against the drift? Any comments appreciated to help me get the drift.



 In reading Scorecasting, well reviewed and recommended by the chair, I came across a point that hits home when looking for statistical causal relationships. When x variable appears to be related to y variable, it is very possible that an undiscovered variable z has a much larger effect, perhaps on both variables. There are examples of this in the book, mostly thoroughly explained in the home field advantage. This is empirically shown to be true across, time, cultures and sports, running at an advantage of 55% to 70% in favor of the home team. Controlling for other things, crowd size does correlate very highly with the home team advantage. But changes is crowd size are shown to have no effect on players performance. Rather crowd size influences officials, but it is secondary affect. The primary affect is officials themselves who have a in bias (most likely unknown to themselves prior to this book) to favor home teams regardless of the fans. Crowd size amplifies or dims this already existing bias. Had the authors not researched deeper this point would have been lost.

Pitt T. Maner III writes: 

It is interesting that there are sites that keep statistics on the refs now too.

The held ball call near the end of the Louisville-Wichita St. Final 4 game by Karl Hess appeared particularly bad but you wonder what the factors and influences are that might have led to it. The game finish would have been much more enjoyable if the Shockers had had at least one last attempt at a 3-pointer to tie the game.

Was it the nearby presence of the Louisville coach Rick Pitino? An ego issue where the ref felt the need to decide the contest? Crowd influence? TV audience thoughts? Subconscious need to end the game and prevent possibility of overtime (desire to get off the court,)? Something a player said (need to payback for perceived questioning of previous call)? A whistle blown by mistake in a hurry with no means to take back (I never make a bad call in an important contest). Lots of possibilities.

Russ Sears writes: 

When watching a game, I have often thought that the bias in the ref could be spotted by whether or not they avenge a bad or close call on one side by giving the next close call to the opposing team. After a moment of reflection, the ref probably realizes he blew the whistle too soon or did not blow the whistle when he should have. However, it appears to me that the avenged even handed blown calls are often one sided. Yet when watching a game, my own biases would prevent me from "counting" this fair.

Perhaps the broadcasters in a national game could be counted on, but it appears to me they have a vested interest to give the losing team something to complain about. If I recall correctly, the tie-up was initially called a great defensive play by Louisville, but then changed to blown call.



 I admitted I was powerless over my affliction to taking small profits.

I made a decision to turn myself over to the care of those who affably might help me as God has helped others.

I made a searching inventory of all the losses I have taken.

I admitted to other human beings especially the spec list the nature of my wrongs.

I am ready and willing, but perhaps not able, to remove these defects.

I humbly ask all my supporters and friends to help me remove them.

I have enumerated the many millions that I have lost and beg forgiveness from those I could have helped had I not had this affliction. My family would be a very wealthy family and would not have to worry about such things as homes and educating their kids had I not succumbed.

I promise that I will make amends to them except when doing so might lead me closer to the grave and a nondescript and economical old age home.

I will continue to take an inventory of my lost profits and exacerbated losses, and when I transgress I will admit it. Readily.

When I jog, and have a peaceful moment, I will meditate on my past transgressions.

I will share the awakening of my profits, if any, with my colleagues so that others afflicted with this ailment can practice the principles necessary to correct.

And I will count. If this affliction manifests itself in day of week effects, than when the two day move is down seriously and the one day move is up, there should be a rise the next periods. I find of the 152 most similar events in the new millennium, the average decline the next days is -0.05 %. When the two day move is up seriously but the one day move is down, there should be a decline. I find the average move the next day of 132 such events is 0.03 %. I find similar random results for intra day manifestations of this terrible affliction. So I will meditate and count some more. 

Russ Sears writes:

An integral part of the 12 steps is accountability. You don't slip off the wagon because you don't want to have to admit it to the group and your accountability partner. Further, you recognize the triggers and you call the accountability partner to talk you down from the ledge.

In October in Canada, I attended an Enterprise Risk Management Conference where several heads of large Risk Management Departments talked to the group. It appears the regulators have adopted a system of 3 level of "challenges". That is they document times risk rules were broken and mistakes were made, either unintentionally or by bad processes at 3 different levels.

The first level was self or departmental reporting. The second level was outside department but internal to company (either internal controls or internal customers) and the 3rd level was external auditors. Each level was expected to have some "challenges" and write up how to improve them, and give a degree to how material or risky the error was. The right number of challenges and the degree of rogue risk was determined. Too little challenges or no serious violations were considered not taking risk management seriously.

The problem is, however, that this only prevents errors or rogue risk happening at the lower levels because it is a top down approach. But most companies fail because of strategic risk. Often in hindsight it is clear the strategy was guaranteed to make money short term in exchange for taking on crippling unavoidable long term risk.

This became clear to me when the Citi Risk Manager talked…The preamble to the "dance while the music is playing" quote played in my head.

They knew the housing market was a bubble ready to burst… But they also knew there was massive bonuses to be made before it struck and destroyed most of their company's equity.Nobody at the lower level was allowed to "challenge" their strategy, no matter how clear the fraud was to these lower level people.

In short, there are some risk rules that should never be broken, no matter how high you get. These may change as the circumstances dictate but they should always be defined. Allowing everyone to hold you accountable should be part of the any trader's 12 steps.

Chris Tucker adds: 

Is there a twelve step program for traders that habitually get out too soon?

(20 minutes to close): "Daddy will you play with me?"

"Umm, give me a couple minutes honey" says he. "Let me sell this first."

He groans but dutifully closes all positions. "What are you selling?" He makes a half-hearted attempt at explanation. Then heads outside for frisbee and badminton.

Then comes in an hour later and berates himself in disgust.

He never called his sponsor so there was no one there to say "Just hold it 'til the close bud, you can do it!"

He makes dinner all the while promising that he'll do better tomorrow. That he'll call his sponsor. That he'll keep at least one contract open, even if it kills him.

And he wonders, deep down, if he really can. Or is it going to go on like this forever.

Rocky Humbert writes: 

Mr. Tucker's whimsy is actually a profound question which is not easy tested:

Over a trading career, which is better: Exiting too early or exiting too late? Over a trading career, which is better: Buying too early or buying too late? (for a long only investor)

I would argue that for most fundamentally-oriented investors, the true killer is buying too early. I believe there are mathematical underpinnings to this. Perhaps other have a rigorous analysis of this problem. I've never seen this debated on the Dailyspec.

Ralph Vince writes: 

I think it depends on how you size your way in. I find I am infinitely better to be too early — on exits as well as entries. But I scale in, gingerly, one toe into the kiddie pool at a time. But this is, essentially, entering and entering on limit orders, whereas to be late at both ends, is essentially entering and exiting on stops.

I'm very interested in your thought process as to why that would be more advantageous.



Nice run of 12 reversals in a row in SP. Reminds me of how Irving Redel would always call up Susan after the market went down 5 days in a row —- "Is Victor okay?".

Alex Castaldo adds:

Today [2013/04/08] the S&P was up! The run of reversals continues!



Chart is labor force participation rate 1972-present. RED arrow indicates infection point.



 "Noisy Cicadas Come Back to Life After Years Underground":

(CBS News) If you live on the East Coast, fair warning, you're about to be invaded, but it's not the zombie apocalypse. It's actually an invasion by billions of creatures coming back to life after being buried since the 1990s.

In one of nature's great mysteries, the Brood II cicadas are expected to appear en masse along the East Coast this spring, which is a ritual nearly two decades in the making. The bugs will make their presence known with a buzzing racket that's been compared to the sound of a New York subway train.

"Brood II is a periodic cicada that hatches out every 17 years," said Craig Gibbs, an entomologist at the Wildlife Conservation Society's Queens Zoo. "The specific thing about these 17-year cicadas is they are going to be a very dark colored body. They have really bright red eyes, and they also have bright red wing veins."

For the New Yorkers interested in Cicada Tracking there is an event tonight at
Brooklyn Brewery (it seems to be sold out but other events are shown and Staten Island Museum has several events

Also, music inspired by Cicadas.

Chris Tucker writes: 

One wonders if there will be a coincidental increase in the population of Cicada Killers– a frighteningly large (although non agressive) wasp that burrows into the ground, captures Cicadas and lays its eggs in them.



 I am pleased to find that Garet Garrett's novel Satan's Bushel is finally available on pdf. Written in 1924, but taking place a decade earlier, it completely captures the gestalt of the wheat market, the players, the speculators, the pit. This book is to wheat speculation as Bacon's book is to the turf speculator. I've always suggested this book to aspiring grain traders. No spoiler, but this book has the best definition I've ever seen of what a speculator is and does. Satan's Bushel is a value adding read. If this pdf is too hard to read, Kindle has it for $2.99.



Aubrey Niederhoffer has an excellent singing voice. He likes to sing "Those Were the Good Old Days" from Damn Yankees. The Bad One sings about how he enjoyed it when "the rack was in fashion. The plagues were my passion". When he gets to the part "like the hopes that were dashed when the stock market crashed" he always looks around three times and turns to me with a sheepish smile.



It is amazing how much more sophisticated the analysis of sporting events and things like sabermetrics are then the rudimentary kinds of analysis that are used day to day by practitioners and—-(one looks around three times to see if any woman's sensibilities might be offended)–sits in our field. 



 Hello everyone,

I note even more metal roofs being applied to residential roofs. I have kept a close eye on a few that are a few years old. I note them now dulling and one funeral home roof is faded and now beginning to peel.

I asked my banker how appraisers are looking at value and he indicated there is now some concern over valuations of metal roofs.

I feel the newer metal roofs, like some investing methods, are untested. I readily admit my strength is in residential construction and apartments.

For now I will take a 30 year dimensional shingle roof over metal until positive tested methods show me otherwise.



Ralph Vince writes:

I was just in Punta Gorda, Fl., which was spit-shined, pristine and caught my eye. I notice all of the homes there have metal roofs and came to learn that it is the result of Hurricane Charlie a few years ago that came ashore there. Those roofs DO look a lot less wind-peelable than their shingle-based counterparts.



 The stool pigeon was often tied up to a stool to attract other pigeons to be shot. Perhaps the President has seen such used as a decoy in his duck hunting forays. Are there activities in our markets that attract us to our death. I remember during Oct 19, 1987, I noticed a 0.25 move from the open at 11 am in stocks and bought massively based on what turned out to be an erroneous print. Often since then I have seen markets hit new lows like bonds the preceding 2 months to this, and then rise to astronomic heights. Similarly for the grains last year that took a temporary bit of change from Mr. Grain at the corn 5 buck level before doubling in one of the greatest bull moves in history. Recently it was gold that plummeted below 1542 before rising a fast 40 bucks in the next two days. Are these general quantitative tendencies? It would seem asymmetric as a rise tends to peter out much more gently than a decline. Does it relate to the necessity of abandoning all hope before rebirth can occur, as in Isiah's Job. How does it relate to romance and markets per se? Inquiring minds find it interesting.

The thoughts are engendered by a reading of the excellent book Six Sources of Collapse by Charles Hadlock. The book contains a mathematical practitioners insights into dealing with collapse as a consultant for Arthur D Little for over 25 years. It contains chapters on the futility of predicting unpredictable things, crowd and herds, evolution and collapse, instability, chaos, non-linearity and networks. Great diagrams and easily accessible mathematical examples provide a framework for each chapter. It's everything that a good accessible mathematical treatise on a important problem should be.

The one weakness is that it is a bit naïve about markets, but much less so than the ponderous and impractical and self aggrandizing treatments that have come down the lakes from the derivatives expert. Hadlock has the excuse of not being a practitioner in markets, and it's counterbalanced by his truly systematic hands on knowledge about environmental disasters and waste disposal. The kind of book that every young mathematician interested in applications should have. Highly recommended.



 The book Applied Longitudinal Data Analysis for Epidemiology by Joseph Twisk is a useful and accessible review for everyone who studies series that have repeated measurements of a subject, person, stock prices, earnings, or markets over time. The methods discussed take account that high values in one period are not likely to be followed by random high or low value in subsequent periods, i.e. the observations are not independent. Such studies are usually found in the medical field where patients are given some treatment and the effects are measured over time. A good example would be how do the various components of diet affect health for a group over time.

There are numerous examples in our field that spring to mind. How do the fortunes of companies devolve over time based on their earnings? How do the fortunes of different markets develop over time? What are the factors that influence the standings and consistency of performance of baseball teams across a season? The book contains methods that are accessible to anyone who has had a basic statistics course and is interested in time series. It starts each chapter with several easily understood examples of longitudinal studies with a few measurements of an outcome like weight gain for each subject. It then shows how to analyze the data assuming the outcome is continuous, dichotomous, dependent on time, dependent on other predictor variables, spaced equally or unequally. It gives a graphical example of each technique used, then shows the model used to analyze the data, then gives statistical output from standard software program that are the results of the analysis, then gives an explanation of the results.

The techniques used are almost always simple extensions of regression using three or four basic computations—- the sum of squares within a subject, the sum of squares between subjects, the sum of squares between groups of subjects at different time periods, and the simple linear regression of how the variations between the above are related to other variables.

There is a very accessible notation used with hardly any nested subscripts or unusual Greek letters used.

Chapters and sections on the design of experiments,nonparametric analysis of the observations, relations with other variables, how to define change and ferret out causality, dealing with missing data, tracking the observations over time, calculating proper sample size to come up with a reasonable likelihood of finding a significant difference appear. The techniques used are generally those that appeal to ones' common sense. They are simple extensions of the t test for measurements between a few groups, and the stability or time dependence of the subjects over time. Rank correlations of the Spearman and Kendall kind are frequently used.

The way to do all these analyses with the software packages Stata, Spss, Spida, and MLwin are shown for all examples. There is a nice discussion of how to use two relatively new techniques GEE and random coefficients. Both of these techniques take account of different slopes and intercepts that might apply to the subjects under study.

I found the book very educational as a review of how to use simple statistical techniques for the study of change over time. The analyses are very different than those used for survival studies. They have great applicability to the kinds of things we study in markets or psychology but are rarely used. All of the techniques and analyses could also be carried out with repeated random samplings from the data. I highly recommend the book as a learning tool for students of change, and a model for teaching modern and accessible methods of statistical analysis. 



To put the size of the bitcoin market in perspective, the total value of the bitcoin market is about the same as the US 2012 commercial tobacco market which was $1.55 billion dollars.

Funny thing about markets and human behavior. When bitcoins were 10 cents each (not that long ago), nobody, not even professionals wanted them. Now, at $160, everybody wants them. There is an obvious market lesson in that.



Back in the pre crisis era (before negative real rates) hardly a day went by when the carry trade wasn't mentioned in some form or another. If the carry boys are still around they must be enjoying the BOJ policy. For example, AUD up 17% versus yen plus a 3% rate kicker, without leverage. It is roughly the same for NZD. I was told they never hedge the currency risk and put on at maximum leverage so returns could be many multiples higher, but I may be misinformed on that part.

Anatoly Veltman writes: 

Of course, a funny BOJ announcement comes out right after your query– which may pretty soon invert the carry trade! Yen may soon become the highest yielding G-7 currency.



What happens when you start feeling a little bit defeated with yourself and in particular in the markets?

What do you all do when you're having a bad day or having a bad few days? Or not even bad, just off.

I'm sure most of you as portfolio managers, traders or the like must in someway allow your results to affect your being? I mean this in the way that Ayn Rand wrote about, how her male characters (especially Hank Rearden) were so committed and dedicated to their path and purpose that that was their sense of self worth.

It's a roller-coaster of emotions. Do you stay on for the whole ride and man up — or get off some times?

Ed Stewart writes: 

Stuff that gets your blood pumping is often best. I used to like sea kayaking (still do but not near the ocean anymore).

Overcoming some physical danger plus exercise makes for a great way to get a fresh perspective and recharge batteries. One thing I used to like to do after a rough day/night/week would be to take the kayak out and do something particularly challenging — on the edge or outer limit of my comfort level, or beyond it enough that the sense of mortality, where every decision and maneuver matters, is exhilarating.

I am not a big fan of intentionally tying ones self-worth to something as fickle as trading or considering such an attitude a virtue. To some degree it "just happens" regardless of what you do, but it can help to check that impulse. Teach a kid something new or help someone else see opportunity or solve a problem in a new light, and it refreshes your memory about all the ways you can create value and enjoy life — while you have it.



 An emerging "flu" may be spreading in East Asia. There have only been 4 deaths so far, so how important could this really be? I have two friends, one is in a think tank dealing with bio-terror threats and the other is at one of the federal agencies. The former canceled her vacation travel 3 weeks hence and the latter did the same, though his is coming up next week. The latter was particularly noteworthy as his wife is pregnant (3 mos) and they had decided (after 4 miscarriages) that they wouldn't travel after she was in her second trimester. Stay tuned. Hopefully, the situation settles quickly.



We have had numerous discussions on this venue regarding stop losses. Part of the surprise from those discussions is that using a stop loss will double your odds of having a loss in the amount of the stop loss.

However the same is true for a profit target. Using a profit target will double your probability of having a gain equal to the target gain. The reason for both phenomena is that in a random walk half of all such trades will get reversed after hitting the target or the stop. The fancy name for this is the Reflection Principle.

Larry Williams writes: 

In a random walk, half of all stops/targets get hit, so if that is not true in several trading systems, does it suggest the market is not random?

Anatoly Veltman writes: 

Electronic markets are far from random. Your broker's HFT frontruns your orders, and non-broker largest HFTs parallel run your orders. Thus your limit (profit-taking?) order is played against by unabling, and your stop-loss order is played against by triggering. Random? Not to your account.

Ralph Vince asks: 

But can non-random ticks, sampled on a bigger time frame, degenerate into randomness?

Anatoly Veltman replies: 

In the sense that all those orders, magnified by HFT mechanism, will carry markets somewhere - sure. The other question is: OK, so 70% of executed trades resulted in robbing the outsider spec - but the HFTs and the brokers have not fully benefited by your loss, because of their high overhead (the arms race, et al). So ok, the wall street salaries, the IT salaries get financed out of your pocket. Then the only way to keep you in the game is to inflate your remaining funds…So the mechanism will continue on…but to what end, if the economy is not picking up? So the result may well be non-random: all prices will go up.

Gary Rogan writes: 

Clearly the natural drift and/or inflation-driven accelerated drift will result in an upward bias that will make a random walk impossible. In addition, if there is an HFT-induced tendency to hit stops and not hit limit orders (by the way are there any objective statistics that prove that?) the question becomes: would an independent observer looking at the data tick by tick, but who is not himself placing limit/stop orders be able to tell that the statistical nature of the tick distribution has changed?

Jeff Rollert says: 

No, HFT is attacking your behavioral biases. Not the academic ones ones. Your bids show your hands.

These are modeled after high yield bond trading patterns.

How would you trade if the book was open and public? That is the point. Trading systems are rational, and your systems are easy prey…seriously, inject the random. To borrow a sports analogy, you can't bore a machine into an error.



Matt Welch, editor of Reason Magazine, will be speaking on Thursday April 4, 2013. Usual place: 20 West 44th St, NY NY. First floor reading room. Start 7:30pm. All DailySpec readers are invited.



 Many bearish things about gold lately. That it doesn't go up with no inflation, that we're in recession. That the dollar is going up. That there is great overhand of stocks. I am reminded of a question that I always ask when we hear rumblings that we are going into recession and someone suggests that it is bearish for stocks. I always ask, "what does that have to do with the likely outcome of the stock market? Will the drift be lower or higher?" Oh, I haven't tested that is the unspoken answer. Same for gold. I have not been averse to considering speculative buying of it on all the dips and one is not averse to upholding the spirit of Gavekal idea that it is good to consider things of that nature when caught in Africa by natives, or in large deposits by flexions. One notes a 20 day minimum and is not averse to considering expectations thereafter even before Dr. Zussman runs it on small tab.

Kim Zussman writes:

Using ETF "GLD" daily closes (12/04-present), new instances of 20 day lows were defined as the first 20 day minimum in 20 days. For these new 20 day lows, the return for the next 5 day interval was positive but N.S.:

One-Sample T: next 5D

Test of mu = 0 vs not = 0

Variable   N   Mean    StDev   SE Mean          95% CI            T      P
next 5D   32  0.0012  0.0317  0.0056  (-0.0102, 0.0126)  0.22  0.828

However 7 of the last 10 instances of new 20D lows have been followed by 5 day periods which were down: 

Date next 5D

02/11/13 -0.027

12/04/12 0.007

10/15/12 -0.005

06/28/12 0.018

05/08/12 -0.040

02/29/12 -0.004

11/21/11 0.021

09/22/11 -0.067

06/24/11 -0.009

01/07/11 -0.007

07/01/10 0.011

03/24/10 0.025

01/27/10 0.020

12/11/09 -0.003

06/22/09 0.017

03/10/09 0.022

01/12/09 0.047

10/16/08 -0.109

07/30/08 -0.032

03/20/08 0.022

08/16/07 0.010

05/10/07 -0.014

03/02/07 0.008

12/15/06 0.011

08/17/06 0.012

06/01/06 -0.026

02/13/06 0.026

12/20/05 0.050

10/20/05 0.026

08/30/05 0.031

07/06/05 0.002

03/22/05 -0.001 

Anatoly Veltman writes: 

Fantastic work, as always. Now, I will ask a few skeptical questions:

1. So you test a historical period which saw the price move from $400 to $1600. Wouldn't you expect bullish historical results of a purchase made just about any random day?

2. So we're having a market in 2013, bouncing around on any piece of planted news from Cyprus, from EU, from Putin, from Japan, from Fed, from WH, from investment banks, from fund characters (the ilk of the upside-down), etc. How will one adjust one's timing of statistically catching the falling knife - given that the timing of such leaks (releases) has significantly changed from the test years?

3. Also, the market mechanism has changed in those 8 years, on two fronts:

-the increased weight of ETFs vs. bullion/futures
-the increased prolifiration of HFT exploratory orders

My gist: it's good to have a study, but there are plenty of caveats that call for increased amount of discretion.

In fact, here is my idea: I've observed this to work at an increasing rate  since the transfer of investment capital from public into the coffers of the banks and funds has been initiated by the Central authority.

So Gold drops too quickly from $1600 to $1563, which rightfully piqued the Chair's interest in the wee hours. So this is what investment banks, playing with unending public capital, do (for a 24-hour play): they buy momentary cheap Gold and sell Oil against it (got to get the quantity mix right). Oil could not be considered cheap following last week's straight rise. Works plenty of times. And when it doesn't (really, once in a blue moon), a short term spread position becomes a longer term hedge, then the books may get cooked, then a rogue trader is disclosed, etc. who knows…But a good statistical trade to be sure. I like it.

Jason Ruspini adds:

If it seems like HFT is degrading certain strategies over time, there might be testable differences between different futures exchanges that support different order types. For example CME supports stop-limits without any additional software, but Eurex and TSE do not. ICE natively supports ice-berging, most don't. HKFE and SFE only support limit orders natively. Does the performance of benchmark momentum or reversion systems on equity contracts differ between these exchanges (without applying slippage assumptions)? They aren't apples-to-apples of course but if HFT has polluted the microstructure for certain strategies, it seems like something should show-up here, even if many participants have ways to create the other order types.

CQG Order Types Supported by Exchange

Ralph Vince writes: 

Interesting points Jason. Timely too, I believe.

When market meltdowns occur, the technologie du jour is the scapegoat. In 1929, it was margin accounts. In 1987, program trading. Tomorrow, HFT.

Not that HFT caused the meltdown, but the fact that they stepped aside and enormous air pockets formed in the faveolate theatre of perceived liquidity.



 I happened to visit this small XII century church near Pontremoli a few weeks ago and I was surprised how easily you can find historic gems that are not well known. There are too many. This millenary building is built on a pre-romanic site in a valley along the main roads of communication through the mountains. The first document about the parish dates to 1148. It was built with stones and cobbled paving coming from the banks of a nearby stream. Its X-century Romanesque layout has remained unchanged. Its inside has been changed and only recent restorations have revealed the ancient Medieval decorative frescoes under the plaster-work and some sculptures. A perfectly preserved pre-Christian idol is also kept in the church. The area of Sorano was settled in Prehistory. Many stelae-statues have been found in the area. These carved stones confirm the presence of settlements since the Bronze Age. As civilizations alternated through centuries, new structures were built over the remains of previous buildings and settlements. However, the signs of past cultures manage to survive until today. Services are still attended daily in this consecrated church. This is probably the reason why the church is so well preserved. It is fascinating how through wars and dramatic changes it was passed on from one generation to the next in exceptionally good condition.

Italy is for sure a place full with history and culture. The artistic and architectural heritage is immense. They are not just "old stones" from dead civilizations. They are part of our ordinary and daily life. They are living testimonies of where we come from and who we are. They help us understand how we got here. They enrich us every day when we visit our "open air" museums. We proudly preserve this patrimony because we feel it is our home. With these ideas and values in mind, Italians will navigate these turbulent times.



 "Jimmy, you can crawl or walk the beams all day without tools, or you can man up and walk the beam."

I was about 17 years old, not too high, 25', walking a steel beam, the crane just set as I tossed a couple of bolts in one side and walked the beam to set another. Dad was ribbing me, "you're not afraid of heights, son, walk it, let's GO!"

I may not fear heights but I sure do not like them. I just did a silly trade. I sold out before the book said to sell. It cost 1/7th.

Now you might say Oh Lack, a point or two is nothing. You silly day traders.

I'll explain it this way… in every racing school and many other sports the world champions teach "everyone looks for the one big edge, but the winners know it's a bunch of little things, done right is what makes the difference."

You know the guys that always win and make it look effortless.

P.S. in retrospect a "get the joke" was 3 am this morning, I was working and the Bloomberg guy said Oh just wait til the Dax opens. SPU was unchanged so I left it alone. Woke up to 7up. 



 One notes a 10% drop in corn in 2 days and wonders what the impact of that on various markets is.

Jeff Watson writes: 

Since 2007-08, farmers have been upgrading their operations due to higher grain prices. Farmers have increased storage to the point where they are more likely to store their grain than pay storage at the local elevator. In general many have made capital improvements like crazy due to high grain prices, cheap money, and increased value of land. The benefit of the lower grain prices is that the consumer will have more money to be able to buy more pick-up trucks, etc. The cattle operator will also benefit with lower feed prices (which will increase his margins), which will be passed along to the consumer. This has been a very historic bull market in grains in it's longevity.

keep looking »


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