[The company said] the target for its general insurance business was
“challenging” following disaster-related losses.

"Zurich Defends Accounts as Ackermann Exits After CFO’s Suicide"

Using some pop psychology, I would anticipate that what exactly is referred to as "challenging" has some bearing on the magnitude of future declines. In this case some financial target being "challenging" simply means that there is no way in hell they will meet it. If however the business environment is described that way it's likely to mean two things: all hell is breaking loose and the management not only lost control but doesn't want to take responsibility for what's going on.

Victor Niederhoffer writes:

A study of use of "challenging" and NYSE might show some evidence of future inordinate declines a la Sornette but taking account of both side of the distribution, not just one tail, i.e. a real study.

Here is a 2007 study of that hypothesis which is somewhat "challenging" on a number of fronts. 

Ken Drees writes: 

I find this Stunning.

The poetry of the the modifier word "healthy" pointing to cash flows as in blood flow that sustains "a strong and resilient balance sheet", the body of the corporation, juxtapositioned against the wan image of a very "dead" monitor, (CFO), of the bloodflow of the corporation's health under a "sheet" at the morgue.



 My daughter's friend married and Indian man, whose mother taught them the "secrets" of Indian cooking. The main base to the Indian dishes is a huge pile of super finely chopped white onions simmered for hours to a light brown sauce that is the basis for many delicious Indian recipes. Hence the value of onions in India. The other secret, for another post, is the toasting of the seed and spices before adding them. It really enhances flavor. 



 One repeats that Tom Wiswell wrote 30 books and he considered the book he was writing of quotations of advice for board players and others the best book he ever wrote although it has not been published. All of his aphorisms are very very good for kids and there are about 500 of them in Edspec.  One I believe that is most important for business is "never get in over your head". Whenever Tom got into a complicated position he'd shake his head and say "I think I'm in over my head. I have to simplify" He never lost for 25 years or so. I've heard that from others in business also. I would be a wealthy man if I followed that advice.

Pitt T. Maner III writes: 

Here is a link to some of Wiswell's proverbs on an older page on Daily Speculations, and here is an interesting site for the chess players with Mr. Davies advice on learning from the strong part way down.



 "Follow your bliss" was a philosophy that resonated deeply with the American public—both religious and secular. During his later years, when some students took him to be encouraging hedonism, Joseph Campbell is reported to have grumbled, "I should have said, 'Follow your blisters.'"

If you follow your bliss, you put yourself on a kind of track that has been there all the while, waiting for you, and the life that you ought to be living is the one you are living. Wherever you are—if you are following your bliss, you are enjoying that refreshment, that life within you, all the time.

A quote about Campbell from George Lucas:

I came to the conclusion after American Graffiti that what's valuable for me is to set standards, not to show people the world the way it is…around the period of this realization…it came to me that there really was no modern use of mythology…The Western was possibly the last generically American fairy tale, telling us about our values. And once the Western disappeared, nothing has ever taken its place. In literature we were going off into science fiction…so that's when I started doing more strenuous research on fairy tales, folklore, and mythology, and I started reading Joe's books. Before that I hadn't read any of Joe's books…It was very eerie because in reading The Hero with a Thousand Faces I began to realize that my first draft of Star Wars was following classic motifs…so I modified my next draft [of Star Wars] according to what I'd been learning about classical motifs and made it a little bit more consistent…I went on to read 'The Masks of God' and many other books.



 For those interested in reading up further on the flexions and Ms. Wedel's work, the latest issue of Pacific Standard magazine has a nice introduction to this aspect of her work titled "Meet the Flexions."

I only have the print version and am unable to link to a soft copy, but the website for the magazine is

The article is particularly timely with the Prime Mover lately attempting to transmogrify himself into the creature from Jekyll Isle by sheer force of flexionic will.



I am reading a book on equity risk premiums and it provided a nice frame work to view bonds and stocks. The equity risk premium P is fairly stable over time, meaning the excess required return to hold the riskier* asset of stocks over bonds. So when bonds go down, for example, as they are now, riskless rates are going up. This means the required return for stocks = riskless rates plus P, in now also higher. So either the future prospects for stock earnings must be better, or stocks must go down now to make up the difference. That seems to be the battle we will be in for the post Bernanke world. One eye on earnings, the other on bonds.

*Note the last few years has proved there really is no such thing as a riskless rate, real rates can stay negative for a long time, and sometimes in bond risk is higher than equity risk. But all that hurts my brain too much to contemplate.



 Is anyone familiar with writings they would recommend on casino risk management?

You rarely hear of a casino going bust, unlike traders, brokers, etc.

Some of this may be because they are as much a market maker as principal (although NYSE specialists go bust). And there is always zero risk core cash flow from slots, poker tournaments, etc.

But I was wondering if casino's use things like hard stops for the P&L etc. irrespective of statistical distribution expectations? And if they dynamically size their risk relative to house capital by opening and closing down tables as suits? And do they have per player stops too? You get kicked out regardless if your winnings exceed a hard stop?

On a different bent: Phil Ivey, who shook down the Punto Banco desk at Crockfords still hasn't been paid.

Is the below correct that a casino will withhold existing winnings if they suspect you only of card counting (as distinct from refusing to play further with you)? Do the rules or small print somewhere allow them to disbar you from certain 'mental strategies' as distinct from cheating?

"The Curious Case of Poker Pro Phil Ivey's Punto Banco Rake"

Whether what Ivey did was illegal isn't what's being decided. It doesn't need to be illegal for a casino to consider it a violation of its own rules. Counting cards in blackjack, a practice that isn't anything like "edge sorting" but is similarly frowned upon by casinos for giving players an advantage over the house, isn't illegal either. However, a casino can withhold winnings and bar players for counting cards if they want.



 Riding my motorbike today, I had that feeling I get occasionally of the bike being propelled by itself going a little too quick and a little too easily and feeling a little bit too free, some might say almost traveling seperately from the bike.

I get the feeling in the swimming pool too occasionally, very occasionally, or running off but doing it a little too easily.

On a bike that's the moment you know you must pull your head in and regain control (though it's just the opposite for sports) because danger lurks, just like after having a good series of trades in the market.



One notes that real estate stock prices have declined about 30% from recent highs in line with the increase in mortgage rates. One believes that big collapses in stock prices in markets around the world have to an inordinate extent been preceded by big declines in housing prices. The housing prices have not declined but the real estate stock prices which presumably are signaling same have. It would be interesting to test whether there is a negative predictive correlation between housing stocks prices and the S&P composite. All the statements in my note should be tested.

Rishi Singh writes: 

Chan, Erickson and Chang (2002) is an amazing book for REITs that discuss structure and an overview of the studies done on them. It was recommended to me by a real estate professor back in Virginia and I loved it.



The market has finally refuted the hypothesis that it can't go up when quantitative easing is going to taper. A popperian change of the guard.



 It is rumored that today AAPL placed their 10 year paper at 10yrTbond+75bps, which means about a 2.4% rate, if I'm reading the screen correctly. Given that the yield on AAPL's equity is about 2.9%, that's a nice positive cash flow way to conduct a buyback and still keep your overseas cash hoard protected from taxation. Not that it matters (or has any magical power), but for the equity to get to a 2.4% yield, with a divvie payout of $12.20, it would need to hit about $508.

Not to jinx it, but I will point out that AAPL recently peaked at 513.74.

Victor Niederhoffer writes:

One should take account of the fact that for many purposes empiriclaly and theoreticlal, especially in a world without taxation the value of debt + equity is a consant. So if debt goes up by 1 billion the market value of common stock goes down by 1 billion. The modigliani miller theorem.

Rocky Humbert:

I don't think many CFO's believe M&M is actually true in the real world. Those who do have seen their companies go bankrupt. Like many investors, I have preferences, and I'll generally put a higher valuation on the equity of a company with lower leverage even if the ROE is lower. I'm sure activist investors will disagree with my bias. M&M doesn't take correct account of risk adjusted ROE I believe. And it's hard to test my bias quantitatitively since in the long term, the overleveraged guys who went to B-school all blow up. Survivor bias etc.



A couple of weeks ago we had a back and forth about the bond market's behavior. I want to add one more possible explanation to my list of "whys." I read a pundit last night arguing that the iMarkets have a ton of foreign reserves … and that's why this won't be a repeat of 1998. Interestingly, this is possibly bearish for US Treasuries. That is, the iCOUNTRIES may be selling their treasury holdings to support their currencies in the face of capital flight and a growing balance of payments deficit. This might continue until they run out of money and are forced to have violent devaluations. Just a thought…



 I'm looking for some inexpensively-valued stocks in India and Indonesia. (I know, I know, Russia is supposedly cheap too.)

I looked at the big caps in the India ETF's and they don't look cheap for a country that is suffering from the early stages of a capital flight. And I don't trust my Bloomberg for finding diamonds in Chanakyapuri.

Does anyone have some favorites? As Sergeant Joe Friday would say, "just the tickers, Ma'am

(Don't be shy. I only harass Mr. Rogan when his stocks go down.)

Many thanks.

Leo Jia writes: 

Would Rocky kindly explain your rationale in buying India? Is it mainly due to the devalued rupee and your belief that it is a short-term event?

Rocky replies writes: 

Whoa. I am not buying iNDIA. I inquired whether anyone has some favorite tickers there so I could do some bottoms-up research on stocks. We are in the early innings of a capital crisis — things could get MUCH worse — including hard exchange controls. About 3 years ago, I undertook the same exercise in Greece, and I could not find any companies which meet my overly stringent requirements for investment. India, in contrast to Greece, has some very attractive macro aspects and the question is whether there are companies that at some price reflect a good opportunity.

From a trading (as opposed to investment perspective), I have no insights.



 For the history buffs, this is a really cool set of depression era photographs in color

Also, while I'm on the subject, I would not recommend the book The Worst Hard Time: The Untold Story of Those who Survived the Great American Dust Bowl by Timothy Egan. While the author does an excellent job describing the period, the book goes on too long painting the picture of the day ad nauseum. I had to put it down after 2/3rds in. 

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

Sorry to hear that Vince didn't like this book. It was among the non-fiction titles my library book club included last year. At year end we generally review the group's opinion on our choices — this was selected as the "best" of the non-fiction selections. It resonated especially well with those older members who felt that their parents had informed them fully on just how bad the Depression (and the weather) really was.

It also demonstrated that Steinbeck's Grapes of Wrath presented only a slice of what actually transpired…and that those stuck in the Oklahoma/Texas area had no place to run or hide — and that FDR's plan to plant two million trees where trees had never grown was a great "works" project, but one with little chance of success.

More important (at least to me) was Washington's (and the east coast power elite's) ongoing indifference to problems in "fly-over" land. When one of the major dust storms engulfed the Capitol, remediation bills that had lingered in Congress for years, got passed overnight. 



It's interesting to see bonds up so nicely while equities are so down. Gold and oil are jumping up. Even some small banks are up. I wonder if it's the drums of war sounding. Recently I put up a color colded watch list sorted by change. It was interesting to see the comovements and divergences up and down from day to day.



 "Runner Larry Williams Takes First Place in Five Events"

Scott Brooks writes:

Congratulations, Larry!

Al Mabry writes:

Is that a picture of Larry…or Mark Spitz?

Jeff Watson writes:

Most heartfelt congratulations Larry.  It takes a lot to impress me, and I am impressed.

Larry Williams writes:

Thanks to all for the kind words.

It was not as much if an accomplishment as it might appear. There were only a few other competitors in my age bracket this year. In some events I was the only one.

Getting back in shape (a year ago I was on crutches for over a month) was the real accomplishment as I see it. Stressing and old body and getting back into a training routine was comforting. I had been there before and it felt really good. Just really slow. Adapting, well trying to adapt for the altitude, was a challenge that I failed.

My real 'victory' was the joy of competition and meeting other old guys to run/play with. When we lined up for our races we invariably would forget our lane assignments; once we realized that we all really got a good laugh.

Happy trails to all.



 My 3 year old son recently transitioned from a glide bike to a real pedal bike. For those who are not familiar with glide bikes, they are basically small bikes with no pedals that kids ride by pushing with their feet and gliding on. Here is the type we got for my son (which I would highly recommend to anyone).

We got my son's glide bike after he turned 2 years old. It took him about 3 weeks to figure out, but not long after that he was gliding 20+ yards and could cruise at an adult's slow jogging pace, which looks pretty fast when done by a 2 year old.

So, when we recently got him a real pedal bike, I wondered how quickly he would be able to pick it up, given that I new he had good balance on a 2 wheeler. Yet, even I was shocked when on the third push, he took off riding and went about 50 yards with no aids. Basically, the glide bike made it possible to completely bypass the training wheel stage. Just this morning he rode all the way to the local park.

Anyways, it got me to wondering about the learning process in general. How often do learning aids end up hindering progress (or at best being tangential to progress)?

Common examples might include:

A music teacher that teaches a "cheat" method that ultimately thwarts progress for years.

You get interested in investing and trading, and an "expert" hands you a book on technical analysis, suggesting it is all you will need to profit

A coach who teaches a pet technique rather than proper form

Using calculators in a basic math class in a way that might harm the development of efficient mental techniques

I wonder what things I have unknowingly accepted and used over the years that have made me poorer, more ignorant, and less skilled than I might otherwise be. What are the best techniques to identify and avoid such pitfalls in the future.

Jeff Watson adds:

My son bypassed training wheels as well. When he was 3 and a half, I got rid of his trike and bought him a small bike without training wheels. The way I trained him to ride was to have him put on a safety helmet, then I made him get on the bike and I balanced him and started pushing, running next to him while he pedaled. I must have pushed him a good 400 yards until he started to get the hang of it. Once he discovered the gyroscopic effect of the wheels, he figured out how to balance, and was riding within an hour on his own. Not to say that he did not wipe out, which he did frequently, but he climbed back on the horse every time. Within a week he was an accomplished rider, and wanted to ride with the older kids.

He was an early learner though, swimming 3 different strokes by age 3, and diving and doing flips off the side of the pool by the age of 4 and a half, and surfing and doing skateboard tricks (ollies and kick flips) at age 5. I suspect that he was able to do these accomplishments because there was only positive encouragement and we told him that he could do anything he wanted, despite his young age.



 In an attempt to slow the degradation of my offspring's minds into ipad driven oblivion I took them to the Science Museum in central London today. They had both been many times but there are still many nooks and crannies yet unobserved. Their father has a particular pull towards the space exploration section as it was his childhood dream to walk on the Moon (a dream he pursued all the way to applying to be aircrew (fighter pilot status) in the R.A.A.F. two decades ago).

Anyway, there is currently a show being put on in one of the auditoriums called 'The Energy Show'. The show basically goes through many different forms of energy (Kinetic, nuclear, etc etc) in a child friendly way. The use of Van Der Graaf generators and exploding balloons of H2O2 always wins over the youngsters. A delightful use of Albert Einstein as a guide was also very interesting. If any specs are passing through London in coming weeks with young ones (7 - 100 years old) then I highly recommend it. (And while you are there….sneak off the the section on space travel).



This is a visual representation of non-payroll tax receipts by Uncle Sam. Now I fully know that corporations and individuals are incentivized to find accountants who will keep these numbers as low as possible, but that tendency does not change over time.



It might be good for the collective unconscious for Erica  to come up with some increased claims to be reported at 8:30 gmt today.

That's a prediction. 

A song was heard on a bus sighted with the initials Camp K, circa 2 Mass Avenue —-Petroiska.



Is the high-open in a day compared to the open-low much closer to equality than would be expected in a random walk with standard deviation and expectation similar to the stock market, (an expectation of 0 per hour and standard deviation of 4.5 per half hour and 6 1/2 per hour with 7 half hours per day might be very close to reality.) If so, can any predictive systems be devised from it, and are there other markets where similar excursions could be limned? 

SPU3 Open High Low Close
8/23/2013 1660.0 1662.5 1652.5 1661.4
8/22/2013 1644.0 1657.5 1643.5 1654.8
8/21/2013 1646.0 1654.7 1636.3 1636.5
8/20/2013 1645.3 1656.5 1643.5 1650.6
8/19/2013 1651.2 1656.5 1643.0 1644.9
8/16/2013 1655.5 1661.0 1650.0 1651.1
8/15/2013 1669.0 1669.0 1655.5 1655.7
8/14/2013 1690.5 1692.7 1681.2 1682.0
8/13/2013 1689.2 1694.4 1679.2 1690.8
8/12/2013 1679.7 1688.2 1679.2 1687.1
8/9/2013 1691.0 1696.0 1682.5 1686.2
8/8/2013 1695.7 1696.8 1684.5 1693.7
8/7/2013 1687.2 1689.2 1680.8 1688.2
8/6/2013 1698.8 1700.3 1688.9 1693.9
8/5/2013 1701.0 1704.7 1699.0 1702.5



 I have been emailing my 8-year-old grandson a daily quotation or one-line advice (about sports, learning or life in general), which he seems to enjoy.

But I am running out of quotations and pithy advice relevant to a young person. Does anyone have either a good source of these, or some particular favorite quotes or advice?

Many thanks,


Ralph Vince writes: 

Here's some for you Dan. You may want to edit them for a younger mind, plus, you may not agree with all of them, but these are some that come to mind as I sit here and thing about it:

1. Don't try making sense out of it. You're in an insane asylum – things are not going to make sense, people will do things that don't make sense, that they cannot adequately explain. People don't know what makes them tick, only that they tick.

2. Happiness, of course…is all in your head. If you don't know that, if you haven't come to that realization, you will never be happy.

3. The Bull Market Syndrome. People, when they are met with success, take personal credit for it (bull markets breed geniuses), and when they are met with failure, blame luck.

4. Actually, luck is responsible for both! If you can only die by being struck by lightning, eventually, you will die by being struck by lightning! Conversely, if a man were to live forever, and bought a lottery ticket every week, eventually, he will win the lottery, with a probability that approaches certainty. Just stay the course, keep doing today what you must do today. As Woody Allen says, "Fifty percent of success is just showing up."

Luck Trumps Brains. To get luck, keep showing up each day with your shoes on.

5. Creativity trumps money every time.

6. Fortunately in life, you don't have to succeed at everything you do, only a few things. One success often justifies all prior attempts.

7. You can buy great a education – you can not buy brains.

8. The Oswald Principle: Usually, the best course of action in life, is to take no action (and usually, the best thing to say is nothing!). The guys in jail or there not because they didn't do anything. Usually, you should just sleep in! If nothing really bad happens today, as my friend Oswald said to me in eighth grade, it's been a good day!

9. You don't have the problems you think you do. Actually, the only real problems are health and criminal problems. Everything else is just a frivolous, meaningless nuisance.

10. Never say never. Everyone, however righteous they may claim to be, however upstanding they say they are, will, under the right circumstances commit the crime. A cold morning, wet, hungry, tired, angry….they'll do things they never dreamed they would!

11. Everything is going to be OK. It always is.

12. You never know what's going on in someone else's life. Before you do or say something nasty to them, realize this. Perhaps they have just gotten some awful news of some sort. You never know what is going on in someone else's life.

13. Don't pressure yourself. Just take care of today's things today, and relax…we got all the time in the world. The proper attitude in performance of anything, be it athletic, mental, etc., is a kind of relaxed, aware, confident attitude. You see it manifest in sport all the time (Ali, Ramirez…..or hitting a gold ball).

14. Don't complain and don't explain.

15. Don't react or engage emotionally with others. There is great power in stoicisim, in a cold, blank, stare back when others are trying to engage you in a fight.

16. Similarly, if it is someone you love or must live with, trying to engage you in an argument, practice avoidance. Just try not to be around them, to avoid them. Go out for a walk.

17. Live "in the tunnel," but think outside of it. In other words, deal with the mundane, immediate issues at hand, think as out-of-the-box as you can.

18. You can always "lift" more than you think you can.

19. Women will be as bad as they are allowed to be.

20. You should pray for your enemies — you need them. You need to have some enemies to keep life interesting.

21. Treat those you love as though they were going to die at midnight.

22. Your body is a record of how you have cumulatively cared for it.

23. The easiest way to learn things in life, is through observation. Sit back, watch all the ways everyone around you will figure out to how to screw up.

24. There are two ways to learn something. The easy way and the hard way. With the easy way, someone tells you something and you learn it. The hard way is the way we usually learn things, and we usually don't learn it the first time through. So the easy way, you see, is the equivalent of a windfall. (note to teachers – you can cause the easy way in others if you can convey a different perspective on a problem, a manner wherein the person learning thinks, "Ah, I see it now."). The moral here is that there is no point lending money, time or advice to help people out if they aren't going to listen to you, if they are going to insist on remaining on their own vector, unchanged by your advice, wherein they are going to learn their lesson the hard way with or without your giving them time, money or advice. So don't give it unless they are going to incorporate it.

25. Do not succumb to the suffocating culture of comfort. If you are comfortable, you are in trouble, you just don;t see it heading towards you.

26. Remember – your best trades are ahead of you.

A commenter writes: 

The time to abandon is when you have to step UP into the lifeboat (or raft). Any other time is premature. 

Vincent Andres writes: 


A creative man is motivated by the desire to achieve, not by the desire to beat others.

All philosophical con games count on your using words as vague approximations.

A refusal to vote represents a definite expression of political opinion, a rejection of the candidates & the programs offered.

Credit is not…a magic piece of paper that reverses cause and effect, and transforms consumption into a source of production

if men want to oppose war, it is statism that they must oppose.

Man is not a lone wolf and he is not a social animal. he is a contractual animal.

and many more from A. Rand here.

The highest laws of the land (America) are not only the constitution and constitutional laws, but also contracts - H Arendt

The most radical revolutionary will become a conservative the day after the revolution. - H Arendt

Concentrated power is not rendered harmless by the good intentions of those who create it. - M Friedman

"Governments never learn. only people learn." - M Friedman

"Humility is the distinguishing virtue of the believer in freedom; arrogance, of the paternalist."

It takes a special sort of man to understand and enjoy liberty - and he is usually an outlaw in democratic societies.

The average man doesn't want to be free. he wants to be safe.

Sorry if not all quotes are appropriate for a 8 years old.

There are many specialized twitter accounts who deliver 1 or several quotes per day. There is one for Ayn Rand.

Anonymous writes: 

Try to always practice good manners; be particularly polite, deferential and prepared at bars, gas stations, convenience stores and parking lots for these places are fraught with others over-valuing matters and ready to imprudently defend their claim.

There will be fights, unavoidable fights, they will find their way to you, you don't need to look for them.

Paolo Pezzutti writes: 

It's not how to achieve your dreams.  It's about how to live your life. -Randy Pausch

Throughout the centuries there were men who took first steps down new roads armed with nothing but their own vision.  -Ayn Rand 



 A commenter asked if Rocky was my real name. The "rocky" moniker was assigned to me by a certain former secretary of the treasury when we were colleagues at a still-surviving investment bank. The circumstance leading to the naming was that lunches were being delivered from a local eatery in brown paper bags marked with one's first name — and several people on the trading desk had the same first name. The future treasury secretary opened my lunch bag by mistake and was revolted by my choice of brie and english mustard on a granary bap. As the group's so-called "rocket scientist," a proclamation was promulgated that theretofore all of my lunch bags would be marked "rocky" instead of my real name. The future treasury secretary was fortunately ill-informed, because prior to my employment at this firm, my expertise had been in Missile Systems rather than Rocket Systems. Had he known that, my moniker would likely have been Missy instead of Rocky, and I would surely have gotten into more pub brawls as a result.



 "A Penny Saved is a Partner Earned: The Romantic Appeal of Savers"


The desire to attract a romantic partner often stimulates conspicuous consumption, but we find that people who chronically save are more romantically attractive than people who chronically spend. Saving up to make a particular purchase also enhances one's romantic appeal, as long as the planned purchase is not materialistic. Savers are viewed as possessing greater general self-control than spenders, and this perception mediates the relationship between spending habits and attractiveness. Because general self-control also encourages healthy behaviors that promote physical attractiveness, savers are viewed as more physically attractive as well. However, general self-control is not always coveted in potential mates: dispositional and situational factors that increase the need for stimulation reduce the preference for savers. Nevertheless, capitalizing on the general preference for savers over spenders, people are more likely to deceptively describe themselves as savers when completing a dating profile than when completing a private questionnaire. Our work sheds light on how a fundamental consumption behavior (spending and saving decisions) influences the formation of romantic relationships.



 For anyone looking for a fun and (I believe) safe used car, for a kid or as second car for self, consider a Saab. Because discontinued by GM and parts have at times been difficult to get, used Saabs sell at very low prices.

For example, I have a 2007 9-3 wagon with leather seats, sports package and whatever. Edmunds used car prices lists at around $6,000, while equivalent Volvo would be $9 or 10,000.

My repair guy says parts are now readily available. And a Dutch sports car maker who purchased the brand is introducing a 2014 Saab model, to be sold starting in 2013. Pictures available online. I would think now that new Saabs will now be sold together with parts availability will begin to bring prices back to normal used car levels.



This is just a "gee whiz" observation, but emerging markets are really in the dumps. EEM (the big emerging markets ETF) is only about 10% above its 2011 low, while SPY is up about 50% over the same period.

According to Morningstar, the P/E for EEM is 10.4, vs SPY at 15.4. Price to book is 1.3 vs 2.2 for SPY.

Seems like a reasonable deal to me and reminds me of the Nikkei when it was in the doldrums and only Rocky was interested. (And Dan Grossman as well.)



 My wife informs me, and from what I have witnessed at the local markets, that when she is buying local produce depending on what skirt she wears, how she does her hair, and which expression she wears upon entering negotiations, the goods will be priced accordingly.

Of course, any sign of our children will push prices through the roof. At a local doctor recently, when I printed my name in pen on the card, prices of medication went up 10 fold and the doctor's fee quadrupled.

It's best for me to show signs of limited knowledge if I can to stop the outflow. Even better, have others outside of your family purchase an item for you. But even then bills and receipts are doctored with dealers and slippage ensures. There is no end to how you can get hauled over the coals. Bit like taking on the Fed for the last 20 years.



Why in the name of the good one, should bonds be going down on news that the taper will be reduced by 25%. By how much are interest rates affected by an additional 25 billion of liquidity a quarter or so. None of my books on liquidity preference versus expectations seem to think it should be anything like it is. What a tendency to supine submission we mortals have.

Tyler Cowen writes: 

That is exactly my feeling. I have been asking this question for about two months now and nobody has a good answer for me…

It's as if only the current flow matter and the stock of liquid assets somehow fades into irrelevance. Strange.

Rocky Humbert writes:

Excuse me, gentlemen, But can either of you please explain the raisson d'etre for any investor (i.e. someone who buys and holds to maturity) to have purchased a 10 Year TIP at a non-trivial negative real yield — and which has been the case since QE started in earnest.

I submit that your perceptions of befuddlement may be due to price anchoring/recency bias — and that a previous dislocation due to fed interventions is finally being corrected. Investors are now sensibly demanding a positive real return on their fixed income investments. Sensible, unless we are in a persistent deflation. But if a persistent deflation is in the card, the stock market's nominal earnings expectations are horribly wrong.

I further note that bank CD rates are not rising with market rates. To me, this is a potentially ominous conundrum with the following potential explanations: (1) There's little demand for loans. (2) Bank capital rules are limiting their purchase of marketable securities. (3) Banks are funding their loans with overnight excess reserves. (4) Volker rule-type fears are limiting participation. (5) Banks have been told that short-rates won't rise for a really long time.



 The fact that the Dax was up 3 ratio points against the US markets shows that the largesse of the flexions on our numbers is not withheld from those who make recipes for the bernaise and bechamel sauces in Brussels .

Alan Millhone writes: 

Dear Chair,

Am afraid the bernaisacky sauce might upset my stomach.

Note Dow was below 15. That is upsetting enough to many without adding any sauces.



Kim Zussman writes:

It was dyspepsia from absence of Bernanke sauce.

Peter St. Andre writes: 

I really need to write a little poem that starts with "Ben Bernanke makes me cranky"…

Gary Rogan contributes: 

There once was a man named Bernanke

Engaged in some bad hanky panky 

But he went AWOL

and skipped Jackson Hole 

And now the markets are cranky.

Craig Mee adds: 

Bernanke the captain of Fed
Resembles Titanic's, Smith Ed
Evades all bergs, engines full out
Bond infinity, no damnable doubt
"Untapered, untwisted, now screwed", he said.



While others ponder the existence of the universe, there was a perfect example of buying on the news. Also deception. The headline was "Fed has consensus to taper". (as if that was bearish). Stocks dropped to a 2 month low, and then calmly went up 15 big points in a minute when the deception was unraveled. A perfect example of how fear can lead you to losses that one has no right to receive. And to think that all the 100 banks and public relations people on the distibution list had a heads up well in advance according to Bus Insider's template. 



 Woodrow Wilson, like so many people, found Jews somehow "different". The best analogy I can offer is Lincoln and black people; Lincoln may have been the Great Emancipator but he was physically uncomfortable to be in the same room with someone whose skin was "racially" different even if the person, like Frederick Douglass, had a color no darker than Lincoln's own sallow hue. Just as Lincoln still dreamed to the end of his life that the slaves would be freed and then all get on boats and go back to Africa and the Caribbean, Wilson was an ardent supporter of Zionism because it fulfilled the hope that one day the lower East Side of New York would lose all the Hebrew signs. That desire did not prevent him for courting the financial and political support of the mostly Democrat "Our Crowd" any more than Lincoln avoided doing his best to appease the strict abolitionists who were the bedrock of his Republican party.



I found this collection of "40 Maps That Will Help You Make Sense of the World" quite fascinating and a few are important to know.



 "Bank of America Intern Moritz Erhardt Found Dead After Working Long Hours"

Investment bank intern, 21, on £45,000 worked 'until 6am for three nights in a row' before he was found dead in his London flat.

What a culture. I believe the 100 hour work week became a self-fulfilling prophecy in city culture. It started as an exaggeration in one generation, but was interpreted as gospel by the next.

If senior dealmakers were made to be the last men out the office, you would suddenly find a large percentage of deal work rendered superfluous.

This is probably the most extreme (and sad) example of the Balassa-Samuelson effect that bringing productivity efficiencies to service businesses is much harder than non-service. Because it is hard to measure. Therefore everyone BSs and it become a war of rhetoric as to who works the hardest.



"The Many Lives of David Geffen: Billions of dollars and decades of hits later,
L.A.'s impresario of cool is reinventing the role of the Hollywood

Cool required no specialized knowledge. Cool could be bought (though, one hoped, not for cheap). Cool was hip plus market demographics. Instead of a tastemaker like Ertegun, companies now had a "coolhunter," a kind of market researcher who went looking for the adolescent styles in the streets and then passed them along to the suits. Geffen, easily bored, petulant, insecure, unburdened by history, and blessed with the plastic enthusiasms of the fifteen-year-old impulse buyer, was attuned to this new market-oriented spirit in a way that the erudite Ertegun could never be.



 On a visit to the Botanical Gardens today, I found myself thinking about the purpose of leaves in trees as a way of improving my knowledge of markets. I picked up some oak leaves and tulip tree leaves and saw many veins in them. The veins seem to provide more paths to exchange nutrients and perform photosynthesis. The leaves are very light, so they maximize their surface area relative to volume, thus giving them more opportunity for photosynthesis, and probably preventing an excess of loss of water through evaporation. But in handling the leaves, I was amazed at their toughness, like a abalone. In researching the subject, I learned that toughness of leaves, i.e. the amount of cellulose in them, is now considered the main way that leaves survive. It also reduces their palatability to predators.

What can we learn from leaves about markets. Perhaps a wider range at a price below increases their resistance to death? Perhaps a stronger book of limit orders (in contrast to Mamis's dictum that the larger the buy limits the worse the price?). 

What can we learn from the roots of trees? I wish all my people would learn to have strong roots rather than deferring to the latest fashion or predictive hour? In general the trees change with the seasons? Can we learn from trees about ever changing cycles? The summer has been very different from the previous spring and winter this year. It always seems to be. Strong moves in one market, i.e. the bonds have overwhelmed the rest. And of course my favorites, the theory of uniform distribution, — why do trees together reach the same height,and my favorite of favorites, the theory of least effort which relates in part to how branches curve to have the same forces on them at all levels of the branch. But I know nothing about trees compared to the rest of you. What can we learn? How can it help us?

David Lillienfeld writes: 

Let's play with this idea a bit further. We know that photosynthesis occurs in response to the presence of sunlight, and varies in response to such presence. The process takes place in specialized organelles. Might the organelles be like market makers? Without them, the leaf dies, ie, they are vital for providing the liquidity (energy) the system needs to survives. They need an external energy source to function, and in the absence of that energy, the supporting system (the leaf) dies. Though I'm not certain of the fact, I would expect that in the presence of sunlight, chloroplast number increases, much as market makers increase in the face of liquidity.

The analogy works to a degree, but I'm not sure where it might take us.

Alan Millhone writes:

I am not a stock forrester but can relate how the leaf veins branch out into many openings found in British Draughts Player.

The lines of play that go in many directions and studied and learned well gives you solid footing and deep roots of knowledge for a strong game at the board.

I can see where stock research in a methodical way can benefit the trader.



 It used to be that employment was a direct function of output /price. What is this mumbo and desire of the Fed to get inflation over 2% a year. Low prices are good. On a recent visit to Japan, the prices there were much lower than the US because there had been no inflation there in 10 years. That made us want to purchase things.

Anatoly Veltman writes: 

Interesting to note that in centralized economies the cause and effect are different. When I went to Russia with lectures in 1995, they couldn't comprehend that bad economy does NOT bring forth inflation. In their past, bad economy would bring official price hikes, as government deficit spending would immediately levy all goods and services.



 There have been 5 occasions when stocks fell by more than 200 Dow points in a day and bonds the same time fell by more than 1/2 a big point 3 of them occurred in last two months including last Thursday. This has many market implications including the changing the guard of the relation between bonds and stocks, and the importance of liquidity preference.

Rocky Humbert writes: 

Agree 100% with Vic's astute observation and hypothesis. Mr. Market is seemingly at the point in the economic cycle when good news is bad news for financial assets. What's difficult to believe is that in the current cycle, this inflection point is occurring with lackluster GDP growth (i.e. substantial output gap in domestic and global economies) and high unemployment. These facts help explain why the 2 year Treasury is not backing up.

One surmises therefore that Mr. Market is trying to find an equilibrium yield in the long end of the curve with no prospect of further aggressive manipulative Fed interventions. Since the current easing cycle began (and before the Fed started buying long-dated securities), the extreme of the 2/10 spread has been +288 bp. We are currently at +248 — which gives a price anchored sense of magnitudes to where we may be headed. If the curve steepens another 40bp, that will coincidentally also put the 10 year TIP at about +100 real yield — all of which is sensible, consistent and not a panic overshoot. This will also put the 10 Year Treasury at about 3.2%ish.

I'm not making any predictions about the effects of this on stock prices. Except that I would expect stocks to get into some potentially serious problems should the 2/10 spread quickly widen past 300bp as that will represent a new regime (as Vic says, "changing of the guard"). There are too many other variables to be more precise. Including the relationship between nominal yields, yield ratios, etc. I will note that bank CD rates have not been increasing with market interest rates. This can be interpreted numerous ways but it's an important fact for investors.

Gary Rogan writes:

Perhaps this is as simple as the market is taking seriously Ben's statements that he will keep the short end of the rates low, but is determined to use any good news, fake or real to taper/stop the QE. There is just going to be less money for any kind of financial assets so that any rates not controlled directly by the traditional Fed manipulations so that their prices all have to go down, stock, bonds, and everything. The market must believe that the Fed sees real danger in continuing QE and it thus must come to an end almost for sure. This has puzzled me for a while since I can't see how any kind of housing recovery can be sustained with higher mortgage rates nor how the US treasury can afford the higher rates, because I expect the deficits to start increasing again. But Ben's term is coming to an end and he probably wants to leave on a certain not that only he can judge to be the most optimal for his post-Fed future. In a couple of years it could be deluge as far as Ben is concerned but not in a couple of months. Perhaps he just doesn't want the QE in place when he leaves.

Anatoly Veltman writes: 

This is an unusual Ponzi, in the most important respect: that there is no official to call it. Alas, where market is bound to err, the market will focus on public sector Ponzi alone. The more important is the derivatives Ponzi, and that's what is liable to cause 90% market contraction off of whatever pinnacle.

Happened twice already in new millenium: with .com stocks, and then with bank stocks. Yet, most participants' philosophy is that it can't happen. Or has no right to happen? What right is there to take a billion-dollar underlying, re-hypothicate it without an end in sight, and pass it for a trillion-dollar book? Mr. Market is bipolar; trying to fit it onto historical precedent will work, for most of the trading days — but not for the most important trading days.

Jeff Sasmor writes: 

It's also possible that this is a trial balloon and that there will be feedback from the market reaction into what the fed does.

If interest rates rise and choke off the housing market wouldn't they act to reverse that?

"Plans within plans," as the Guild Navigator said.

Rocky Humbert writes: 

Anatoly is of course correct that markets go further and trends persist longer than reasonably sane people expect. The most recent examples of this are the Platinum/Gold spread; the WTI/Brent oil spread; and the 2008/2009 period. But his conclusions about "most important trading DAYS" are not only disproved by the duration of these episodes, they are also suspect in the context of investment and wealth accumulation — as the power of compounding requires time.

There remains no evidence that ANYONE can consistency anticipate or profit from the "most important" trading days. Those "important" days pale in the fullness of time as we see over and over and over again. Furthermore, he can (as I do) lament the Fed's mechinations. But they in no way resemble a Ponzi scheme. A Ponzi scheme requires new money to pay off old money, and can persist in perpetuity so long as there is sufficient new money to pay off old money. So long as the Fed has a printing press and the ability/willingness to expand its balance sheet AND THE US DOLLAR IS STABLE, the status quo can and will persist. Social Security (as a standalone entity) is a better example of a societal Ponzi scheme.

Further to the "status quo," among the things that I find most remarkable about the past few years is the relative stability of the major currency markets. Sure there have been some violent moves. But the Dollar, Yen and Euro are all within a couple of percent of where they were exactly 20 years ago! . Even the Chinese Yuan was trading at about the same price twenty years ago. (They devalued it to about 8 in 1994, and then gradually moved it back towards 6ish.) Lastly, does anyone remember Bill Ackman's breathless announcement from a couple of years ago that he had a massive call position on the Hong Kong dollar … and that they were going to be forced to imminently re-value their currency. With his problems in JCPenny, Herbal Life etc, he should consider unplugging his Bloomberg and read "All Quiet on the Western (sic) Front."

Gary Rogan adds:

I expect that they can't live with the effect of the rising 10 yr and mortgage rates even as they stand today. My initial supposition when Ben first started the tapering talk was that he wanted to puncture the stock bubble, but can't afford to puncture the bond bubble. He seems to have punctured both. The genie is out of the bottle and with all the loose talk emanating from the various Fed associates it will now take a pretty dramatic action to reverse what looks like a looming crash for most asset classes.



 In this society, the notion of someone having any backbone is quaint. It is also wonderfully discordant with the realities of the society. Expediency has become our byword. Vision and courage are in short supply. Let's face it, few will take a risk unless it's with someone else's money.

And our government is the best at using OPM's to mitigate risk…..well, the risk of their political cronies.

Jeff Watson writes: 

The aforementioned men can be found on the few trading floors that are left, in back offices trading their own accounts. Ayn rand summarized it best when she said:

"The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice."



 There is an amazingly good set of articles by William Goetzmann including articles estimating the expected return on stocks, a framework for analyzing returns, the drift in earnings after announcements, and innovative Dutch Securities to capture land value in the US in the late 18th century.

The book with Ibbotson, The Equity Risk Premium, is one of the best books on markets I have read and will bring you up to date with all modern portfolio theory. A must read for all serious investors who wish to be brought up to date on how economists analyze markets these days.



 Some recent observations from my vacation in Singapore:

1. Kinnevik's 'Zalora' is by far the most visible online shopping site in Singapore

2. As house prices risen, the Singaporean population have turned against low skilled labor in a big way. Not to lose the next election the PAP is making it tougher to immigrate

3. A high speed train between Singapore and KL is in the making, might be positive for KL real estate prices among other things

4. As the case in most of Asia the subway in Singapore is day and night compared to NYC. It's silent, fast and efficient

5. The biggest change since my last visit 7 years ago is the entrance of the (mega) casinos. The government doesn't let locals gamble

6. The Singaporean government publicly says they like to reduce the labor force through efficiency measures.

7. The container harbor seems to have expanded several miles on the coast

8. The best restaurants in Bali are comparable to anywhere in the world

9. Bali still feels like a third world country, much more so than Thailand for example

10. Don't surf in low tide, you risk injuring your ankles (the market analogy; don't go in over your head)

11. The building boom in Dubai is still very much in full swing

12. Emirates' rapid expansion has meant deteriorating service, but still way ahead of any Western airline

13. All the 'real' work in Dubai is done by foreigners. The 25-30% of the population that are local mostly work for the government

14. Burg Khalifa is not only the tallest building in the world (at almost twice the height of Empire State building) but going to the top is 10x less painful and faster than the Empire State experience.

15. Dubai is everything that Singapore aspires to be.

16. Dubai is full of American chains and US celebrities endorsing the brands. IHOP, Shake Shack, Starbucks and the list goes on and on

17. Amazingly the price of car service from the airport is almost exactly the same in Singapore, Dubai and New York.



 On the way to my graduation from Purdue two weeks ago, I headed to the light rail to travel to the airport.

As I awaited the train, a slew of grown men dressed up in My Little Pony garb were on their way to a conference about four blocks from my apartment. Baltimore in successive biweekly periods has hosted a My Little Pony convention for adult men, Comic-Con (sp?), and soon a Grand Prix race that annually loses millions. But it is the former that was so bizarre to me, that I was very pleased to reach this article, which may be one of the most random, insightful, odd, and funny analyses of academia, counterculture, and exercises in wearing random costumes in public.

Enjoy or shake your head… this is a step into the weird…

"The Dread Pony"



 I was speaking with a sailor friend recently about the new boat designs for the Americas Cup race. They are now completely foil keel, which means very little of the boat is actually in the water, and more like hovercraft. The sail coverage and mast size to boat size ratios are at an extreme, with the mast now double the length of the boat. They are incredibly fast and incredibly unstable. To move the boom requires a mechanical device rather than sailor sweat and strength. Sadly, there was a fatality in this year race and more than one lost boat. All this means a captain must react well ahead of the wind and conditions to stave off disaster. This reminds me of another activity many are involved with on the site.



 I've recently enjoyed reading Hedge Hogs: The Cowboy Traders Behind Wall Street's Largest Hedge Fund Disaster, the story of how Amaranth blew up. It's essentially a story of one man who was successful for a while and took on unbelievable amounts of risk trading natural gas futures while all of his supervisors, mostly the fund's owner but some others as well lost all control or even desire for control. The book greatly details the actual trades and talks about many related personages, but it left me puzzled about how the trader who was mostly responsible for this disaster lasted this long. He had made a huge amount of money prior to blowing up, and even though he appeared to be quite intelligent the reasoning behind his trades are either inadequately or perhaps truthfully described as being close to random. He suddenly takes a liking to certain types of spreads and just bets on them evidently without much more than a seemingly unjustified belief that they will widen.

At some point he essentially became the market and and had to keep up the spreads by continuous buying until the fund blew up. The main trader and some others are portrayed as sociopathic degenerates driven by irrational beliefs as well as a strong desire to win at all costs. I would be interested to hear some energy trader's or any commodity trader's opinion about the book.



 The following is a short review of the Jobs film. Mild spoilers ahead.

For the better part of my swim yesterday, I was trying to put some things into perspective. So it was fitting that I ended up going and seeing Jobs last night, as it offered the type of message I sought.

The biopic, starring Ashton Kutcher, provides insight into Steve Jobs' life from his time at Reed College until he reassumes control of Apple in 1996. Kutcher provides a solid-B performance as Jobs, never quite catching the man's tone but certainly perfecting his gait. It isn't exactly a polite portrayal either, as it highlights Jobs' mean streak toward members of his own family, his indifference to friends, and his master obsession with perfection.

But the major theme of the film, what it takes to be good versus what it takes to be great, shines. And Jobs' vision of changing the world and making computers and other devices an extension of his customers lives is outstanding. Jobs' challenge to create a marketplace for something that doesn't exist (the Apple II personal home computer/iPod/Macintosh) is evidenced in the challenges of short-term minded stockholders and blunt media criticism, against his vision of the long-term and his products' impact on the world.

I found the film more enjoyable than the Social Network, as it's far more human and void of Aaron Sorkin dialogue spoken at a 100 MPH (though Sorkin vehicles remain a guilty pleasure if only for the writing and neurotic characters). Jobs provided a reminder of some of the startups that I've worked on in the past, when some people want it to be a business and others want it to be a hobby, and the divide that occurs. It's evident that Jobs' philosophy has rubbed off on Ashton Kutcher, who has really taken Jobs' message of "being great" and spread it to the masses (though his audiences are too ignorant to hear him). Kutcher has actually been a very successful and vocal tech investor in recent years, and the Jobs portrayal appears to have realigned his thinking.

The film begins with the announcement of the iPod, but immediately back tracks to his time as a dropout at Reed College. From the onset, he's shrewd, a master negotiator, and insanely detailed to the point it drives his small staff crazy in his father's garage. Overtime, we see Apple grow, and with the appointment of John Scully, the Fortune 500 CEO mindset competes with Jobs' disregard for costs or compliance. Lots of long-shot hallway walks set up nearly every termination or ousting from the company.

The film was well written, though the tensions between Jobs, Scully, Ronald Wayne, and even Gil Amelio were a bit soft. I think Amelio, despite his small, small part might have been missed cast. But Matthew Modine plays an outstanding John Scully, and seems to have found a niche as in the CEO role like he did as John Thain in Too Big to Fail.

In the end, this is a simplistic biopic of Jobs, catering to the masses. It's a simplistic view of Jobs' rise to prominence told in a Save the Cat style format of rising and falling. This isn't a tale of great hope — but it highlights the extraordinary achievements of Jobs as best it can, and provides a fantastic last two minutes that offer a subtle reminder of when you leave the theater… What path will you lead?



 Selfies: in line with a 200 year old trend of selfishness in our language:

"The 'selfie' is just the tip of online narcissism's iceberg"

How does this effect or has this effected the market? Possibly deception becomes greater as does flexionic behaviour as people happily "stitch" one another up without batting a eyelid.






 Many years ago one followed the Wall St. Journal stock-picking / dart throwing contest. The Journal claimed that the expert stock pickers were well ahead of the darts over many iterations. Holdings in those days were all mutual funds or indices. So for a first foray into individual stock ownership, I bought shares of "TCBY treats" - a frozen yogurt franchise - which was touted by the analyst in WSJ dart contest.

His analysis was, "The balance sheet looks good". I checked his background and he seemed well educated and reputable (remember this was pre-enlightenment vis. shibboleths of Ivy degrees and name shops).

I never checked the balance sheet because it was unlikely my novice reading would provide more insight than the market, and in any case the analyst was trained, experienced, and (in essence) endorsed by WSJ.

Some time later the analyst could point to brief intervals when TCBY was higher. However as you might guess the stock went into a long/slow slide into oblivion.

Following recommendations without understanding their basis and the motives of the recommender is risky business.

Rocky Humbert writes: 

Dr. Zussman is absolutely correct. One should never ever listen to any recommendations or thoughts that I espouse as my motives are suspect; my analytics are flawed; and my thought processes are clouded by insomnia and senile dementia. (I view these albatrosses as my secret edge in the markets.)

Furthermore, I myself follow Dr. Zussman's advice religiously and assiduously avoid reading newspapers or books, avoid conversations with intelligent people and spent 23 hours per days in a saline-filled sensory deprivation tank (from which I emerge to occasionally pen SpecList posts.)

Gary Rogan writes:

I have been told by many people, on multiple occasions, and for a variety of reason to avoid stock tips, mainly because you can never know exactly why the person likes them and also because they are unlikely to fit into your "trading system" (and I would guess investment system). I find this advice hard to evaluate. I suppose if one knows some stats of the person's previous picks this makes it easier. If you can deduce that the person isn't simply talking their book, that's probably better as well. But fundamentally, a stock can't know that someone has recommended it to you. If you have a system, you should at least know whether the person intends for the pick to be a short-term trade or a long-term investment and judge accordingly. Rocky doesn't give a lot of stock tips, so what should one think of one when it suddenly appears? Hard to know. On the other hand, I think I have a pretty good idea who Rocky really is and he is an upstanding member of the community with a good track record, and can't possibly be thinking of moving AAPL significantly by talking about it here, so is it really wrong to follow his recommendations?



Attached is 15-minute chart of Shanghai A-Share Index, starting from morning of Aug. 5th to 1:50pm today [August 16, 2013]. If you can not read the numbers very well, the highest is marked as 2191 and the lowest (about the 10th bar from the right starting at 10am today) is 2061. The 5th bar from the right starts at 11:15am and is the last bar before lunch break at 11:30. The 4th bar from the right starts at 1pm and is the first after the lunch break.

There were some huge and sudden buy volumes on large cap stocks right before lunch break. The reason is unclear at this time.

(A small note about this chart: in China rising price bars are red, falling price bars blue or green).

Alex Castaldo adds:

See  this news article "China Trading Error " for a possible  (after the fact) explanation.

Leo Jia follows up:

Everbright Securities has admitted it as a trading error and has petitioned to the authorities to void the trades, but it seems that the authorities didn't approve.

But the complication is what happened after the "error". All stock trades are T+1, so Everbright could not sell what it bought on Friday. To the best it could, it redeemed as many stocks as it could to ETF shares and sold the ETF shares on Friday. It also greatly increased its short positions in the index futures, resulting it being the largest short position holder of the index futures with a total of 7130 contracts. Everbright claims these are all defensive activities.

Clearly all these will cause more stir in this coming week. But what is important is to see how the authorities will treat this case after their investigations. The short positions give people reasons to question that it could very well be a calculated activity to manipulate the market. The hope is that the authorities doesn't open a door now for similar type of manipulations in the future.



 I'm just curious: why is the rice market small when the crop is so popular all over Asia and Asia has so much population? Is is because the Asian country make it a priority to be as self-sufficient as they can be even when it's not economical?

Leo Jia writes: 

As a picky rice eater, I think the large varieties of rices segment the rice market. All these rice are not the same at all though they may look very similar. The majority of rice produced in China is a hybrid rice developed by a contemporary Chinese scientist named YUAN Longping. Its mouthfeel is horrible, but it is much cheaper and contributed largely to feeding the large population in the country. Sogi-san commented that rice in Japan costs 4x or more than it does in the US. I am not sure if he referred to the same rice, but to my taste, some Japanese rice are much better than the American one.

There are two rice futures in China, but to my understanding they are both of some small varieties and therefore traded thinly.

Jeff Watson writes: 

Rice is a thin market because the insiders want to keep it that way, and the export market is small compared to other staple grains and grasses. Furthermore, rice tends to be consumed in the country of origin. We export around 3 million metric tonnes if memory serves me correctly, which is about half the US crop.



 Not having a legal background, I was under the impression that contract law was a phenomena of say the last couple of hundred years. And naively I have always been a big believer in a gentlemen's agreement under many circumstances.

In a entertaining book called Men of Salt by Michael Benanav on the dying camel transported salt trade between the Sahara region of Taoudenni and Bamako, Mali, a reference to the ancient use of contracts surfaced. As the nomadic saying goes, "whatever leaves the head, does not leave the paper". Looking back in life, all things considered, how often would it have been in every parties' benefit to have terms clearly laid out in writing?

Only 1/2 way through, I highly recommend the book for those who enjoy the subject of adventuring through Africa in all its forms.

Stefan Jovanovich writes:

Contract law, in a form we would recognize, goes back to Justinian's Code. But, as with so much of modern life and practically all of Continental European law, Justinian's Code was regulatory; it specified which contract would be enforced by the state and which ones would not. The notion that the parties themselves could make an agreement about what they would do in the future comes almost entirely from the English common law. That was the legal experience of the people who signed the American Declaration of Independence and the Constitution; it was so thoroughly the basis for their understanding of what "the law" should be that you can find no direct reference to "the common law" in either document.

As for not having a "legal background", Vince, have no fear, we are back to Justinian's Code; the idea that parties can actually make an agreement between themselves without reference to the state is as obsolete as Morgan's belief that "the character of the borrower" is all that matters in commerce. Now, in this age of progress, we all get to sign the same printed forms.



 A note and a chart today from Warren Mosler .

Funny how little attention, if any, is focused on how corporate profits are a function of federal deficit spending?

Ideological conflicts?

Nothing new about the idea that deficit spending and profits are related: [from Wikipedia]

"Kalecki's most famous contribution is his profit equation.     P_N=C_P+I+D_g+E_e-S_w

In this model total profits (net taxes this time) are the sum of capitalist consumption, investment, public deficit, net external surplus (exports minus imports) minus workers savings."

The above chart shows US Corporate Profits YOY change, quarterly (source: BEA).

In any case, without an increase in net exports or some kind of material increase in credit expansion the decline in the federal deficit is highly problematic.

Gary Rogan writes: 

But what if reducing deficit spending encourages "capitalist" investment? Kalecki's equation also assumes that all the "workers'" wages are spent. If all the money printing stopped and interest rates rose what would be the effect on savings by "the workers"? These types of equations are static identities with some simplifying assumptions and ignore various feedback loops. Seems pretty similar to the Keynesian assumption that government spending like crazy has exactly the same positive effect as companies and individuals making their own spending and investment decisions. It is well known that when consumers are aware of deficit spending they reduce their own spending in anticipation that they will eventually be taxed (and I assume inflated out of their money) to eventually pay for that deficit spending.



According to my reference "A Market Profile is an intra-day charting technique (price vertical, time/activity horizontal) devised by J. Peter Steidlmayer".

Price is plotted on the y axis.  At the end of the day using tick data a histogram or probability density is plotted in the x direction showing essentially how much time was spent (or how many contracts were traded) at a given price level. (For those interested there is a video presentation on the CMEgroup web site).

Some Chinese trading software has this feature built in. The volumes corresponding to price levels can be shown together with the price chart.

Years ago when I first discovered it, I was very fascinated as it appeared to work very well as a very good indicator for support and resistance levels. But later I found that it was only calculated (or simulated) and did not contain real facts, and I haven't paid too much attention since.

The issue I had is this. Say at some point someone bought N number of shares of a security at price X. Clearly, the software has no problem of recording volume N at price X, but the problem it has is to correctly remove the volume of the current seller(s) that was previously recorded when they bought. As a result to me, the volume profile might just be a guess work.

Did I miss something? Any comments on how one can better use this feature?



 My Dad and I went hunting for diamonds in Arkansas almost exactly 40 years ago in the Crater of Diamonds State Park after a long drive from Alabama. We started out in the park about 9 AM and in about 30 minutes it felt like 100 degrees F and 100% humidity and that was about all the digging we were up for. My recollection was filling up a jar with the crater dirt which had a greenish cast characteristic of weathered kimberlite from a deep mantle source. We were staying in a nearby hotel in Delight, Ark., the home of Glen Campbell, and must have spent the rest of the day in front of the A/C drinking lemonade watching dust and flies move about in the heat outside. Seems like we made it back to Vicksburg for a quick visit of the battlefield after that.

It's a fun place for kids though and an unusual one of  a kind park to visit— but go when it's cooler if possible.  A good rain seems to help with the diamond hunting too.

Here is the latest story from the park:

A 12-year-old North Carolina boy picked up a five-carat diamond shortly after entering a one-of-a-kind Arkansas state park last month. "We were probably there about 10 minutes and I was looking around on the ground and found it on top," Michael Dettlaff told "It was very glassy. Very smooth."



Morgan Stanley states: "China relies more on indirect or transaction-based taxes, such as business tax, VAT, and consumption tax".

I just noted during the last few days that retail sales tax is about 20% in China. I wasn't quite clear about this number before as Chinese stores never charge for tax, i.e., tax is never itemized on the receipt. Plus, all merchandise are marked with prices including the tax.

I only noticed this at the cashier of Metro (the German warehouse store) when she told me the total price was 630 yuan but I saw on her monitor a number of 530 yuan. Looking carefully, the total of 630 included a tax of 98.

Ironically, the Chinese prefer a quoted price including the tax. The first culture shock for American businesses as I experienced years ago was that Chinese buyers don't like to see a quote with tax listed as extra.

This is an interesting article: "How China's Tax Structure Crushes the Poor".



 Have you seen this opinion piece by Jason Richwine: "Why Can't We Talk About IQ".

The reason "we" aka the enlightened cannot talk about IQ is that "we" don't want to know what the test mean any more than the group spokespeople who dislike what they presume the results of the testing show. Neither side of the supposed "debate" wants to accept the wisdom of the 14th Amendment.

"Race" - as crudely defined in this article - i.e. people of northeast Asian descent, European lineage, sub-Saharan African descent, Hispanic Americans - is so innately stupid a categorization that it has only one purpose - to somehow use skin color as a marker of innate capabilities. People of Northeast Asian descent, i.e Japanese, Koreans, and Chinese from Northeast Asians represent a small group of entrepreneurial minded self selected emigrants. If one were to test the descendants of similar European groups - Huguenots, Moravians, Jews, English Catholics, the IQ results would be disappointingly similar.

My father, who created the modern IQ test that is the cause of all this fuss, wanted people to be tested every 3 months so that the test could serve its proper function - which is to measure a person's changes in cognitive abilities. When he offered to sell quarterly testing services to the New York City and other "urban" schools for the same price that he was selling annual testing (in order to avoid any suggestion that he was trying to channel stuff his customers), they turned him down flat. The school bureaucracy knew what a threat such an offer was; it would make it that much harder for teachers to avoid individual accountability.

Cognitive science - the new sociology - will do everything it can to avoid using IQ tests as a measure of progress. It will be far more profitable for academics to create yet another "group" question - i.e. are "black" people really more stupid than whites, er, Europeans. If the answer is "yes", the subsidies are guaranteed to flow; if the answer is "no", then clearly there is no reason not to have further quotas in favor of having the skin color of every occupation match the color wheel of the population at large.

IQ testing is only useful as a measure of the changes in individual ability; and like all monitoring of organisms the testing needs to be done repeatedly over time for there to be any meaningful results. Dad was able to get a few odd schools to submit to regular testing; what made his experiment interesting is that he had both the parents and teachers participate. The result was what common sense would predict; the children who made the greatest progress were those whose teachers and parents also made the greatest progress over time.

His conclusion: "Genius cannot be taught; everything else responds to practice and effort."



 Have any of you heard about Cart Life? This is a fascinating article about the creator.

"'Cart Life': How Richard Hofmeier game became a success story":

Cart Life is a special game. The management simulator, depicting the lives of three street vendors, is one of those rare titles that touches you on a personal level as you try to balance both your work and personal lives in an unforgiving world.

It's truly remarkable that it was developed by one man - Richard Hofmeier - and his recent scoop of Independent Games Festival awards was no less than he deserved after everything he has put into the project.

"The Making of Cart Life":

For Hofmeier, there's a certain beauty in the monotony of this sort of work, or at least in the way that humans approach and cope with monotony, and it's this appreciation that provided the theme for Cart Life. "Watch Chinese factory workers sort decks of cards and pack them – it's mind-blowing how beautiful this act can be. Listen to Ghanan postal workers cancel stamps; they're working the stamps on the envelopes like drums, and they're whistling – it's the sweetest music. Games are especially effective in cultivating very isolated realms of prehensile expertise. What's funny is how this prehensile expertise has infected so many game makers themselves, and many of them only want to make new games that utilise their own mastery of old systems. I wish I'd [owned] a copy of Cart Life when I was 11 or 12 years old, so I'd have black belts in areas like punctuality, detailed memorisation of disposable information, typing speed, and consumer math."



 This article shows results of experiment on the E-Coli bacteria detailing the survival or death of the bacteria in response to the way it handles introduced exogenous stimuli. The upshot is that small changes in exogenous conditions can lead to large substantial differences in outcomes. Surely a rich field for market related phenomena looking at how small changes in one input (say rates) may lead to large movement in other markets (say currencies) when the dependent variable is already under some stress.

Pitt T. Maner III writes: 

This is a really interesting field.

It looks like bacteria have been "hedging their bets" for quite some time. And they have a type of "memory" that influences their response to current environmental conditions. On a larger scale it is interesting to note what happens to the ecology of a system when a "keystone species" is removed. The field of "synthetic ecology/biology" looks to have important findings for a wide range of fields and the bacterial algorithms already developed are being used for engineering problems.

1. "Bet-hedging in stochastically switching environments":

"We investigate the evolution of bet-hedging in a population that experiences a stochastically switching environment by means of adaptive dynamics. The aim is to extend known results to the situation at hand, and to deepen the understanding of the range of validity of these results. We find three different types of evolutionarily stable strategies (ESSs) depending on the frequency at which the environment changes: for a rapid change, a monomorphic phenotype adapted to the mean environment; for an intermediate range, a bimorphic bet-hedging phenotype; for slowly changing environments, a monomorphic phenotype adapted to the current environment. While the last result is only obtained by means of heuristic arguments and simulations, the first two results are based on the analysis of Lyapunov exponents for stochastically switching systems."

2. "Memory in Microbes: Quantifying History-Dependent Behavior in a Bacterium":

"Your average bacterium is unlikely to recite π to 15 places or compose a symphony. Yet evidence is mounting that these 'simple' cells contain complex control circuitry capable of generating multi-stable behaviors and other complex dynamics that have been conceptually linked to memory in other systems. And though few would call this phenomenon memory in the 'human' sense, it has long been known that bacterial cells that have experienced different environmental histories may respond differently to current conditions [1]–[3]. Though some of these history-dependent behavioral differences may be physically necessary consequences of the prior history, and thus some might argue insignificant, other behavioral differences may be controllable and therefore selectable and even fitness enhancing manifestations of memory."

3. The work of Professor Robert T. Paine and the concept of the "keystone species" where an organism has a big effect relative to its abundance:

"It was a ritual that began in 1963, on an 8-metre stretch of shore in Makah Bay, Washington. The bay's rocky intertidal zone normally hosts a thriving community of mussels, barnacles, limpets, anemones and algae. But it changed completely after Paine banished the starfish. The barnacles that the sea star (Pisaster ochraceus) usually ate advanced through the predator-free zone, and were later replaced by mussels. These invaders crowded out the algae and limpets, which fled for less competitive pastures. Within a year, the total number of species had halved: a diverse tidal wonderland became a black monoculture of mussels1."

anonymous adds: 

 OK, what about Slime Molds (particularly, Dictyostelium discoideum). It has the absolutely stunning biological characteristic that it spends much of its life as thousands of individual cells and other times as a single entity.

When times are good for Dictyostelium doscoideum its 'cells' wander off and enjoy themselves. However, in less hospitable environments the 'swarm' of cells coalesce and form a single entity.

Apparently the cells emit acrasion (or AMP) that contains information useful for other cells

When things are starting to look tough the cells pump out increasing amounts of AMP and the cells begin to cluster….Other cells follow these trails and increase to mass towards it completed whole.

Now, I wonder about the stock market. During the regular upward movements most of the components are doing their own thing, following their oscillations generally higher…. When 'it' hits the fan, the correlations between the stocks increase rapidly to 1.0 and they form a single bearish, growling entity.

Now without pushing the analogy too far, I wonder if stocks 'transmit' statistical information (AMP to follow the analogy) to each other (in this context they would not transmit as much as 'exhibit' some form of common statistical behaviour) that forced the behaviour of component stocks into a more correlated state.

Testing possibilities are legion.

Gary Rogan writes: 

My general objections to giving some purpose to the market have to do with incentives, or more precisely lack thereof to do anything in particular.

I read a whole chapter of a book on a slime mold presented as an altruism study. The reason it was presented like that is that when the individual slime mold cells cooperate, only the lucky few that join the growing "mushroom" at the right time get to propagate because they get to form spores only at a particular state of development of the hastily arranged colony. Nevertheless, when presented with a choice of dying for sure or maybe propagating (and the cells only cooperate when they are close to death) they chose to cooperate and propagate. There is also some amount of deception involved when the cells jokey for position, but not a lot, since any particular placement is hard to achieve.

What is the equivalent reason for stocks to cooperate?

Bill Rafter writes: 

Should what you say about stocks transmitting statistical information occur, it would mean a relative decline of idiosyncratic volatility. That is something we have studied, and found that when the going gets tough, the idiosyncratic vol grows faster than the market's vol.There are some other measures of "group think" that are good indicators of both the broad markets and individual assets.

I would posit that stocks do not transmit info, but their owners do. Consider the case of futures in which one market takes such a hit as to require significant margin calls. Human nature being what it is, the public sells its winners to finance its losers, and non-related markets dive along with the primary.



 Pitt has inspired as usual some cross field thoughts. I recently read "You Know Me Al" a compilation of all Ring Larnder's baseball stories. And it struck me that nothing has changed in baseball in the last 100 years. All the plays were the same. And the travel and romance was the same. Alibi Ike for example went into a tailspin and lost his team the pennant when he alibied about the engagement ring he bought for his girl and she overheard it. The owner of the Pittsburg team in those days was a woman who liked scholarly guys from Yale. There were guys on every team that knew everything and antagonized their teammates so much that they couldn't stay on the team. And the sabermetrics that the coaches used was very similar also.

I was thinking. What plays are there in baseball that are similar to what the market does. The streaks that each team has at home and away. The records after this pitcher or that pitcher is against rigties or lefties. The records after home and away games. The double plays, the triple steals, the inducement to get into a fight to get a player kicked out of the game, the crooked umpires, the thrown games, the emphasis on the world series money for the coaches, the travel expenses. All the same and related to markets. The problem is that I don't know anything about baseball. And many here, most here know much more about our national pastime than I do.

Could you suggest some areas from baseball that the market might copy, and that might lead to interesting hypotheses about markets that would be useful predictives to test. I have to admit that with my limited knowledge of baseball, when Larry Ritter challenged me to come up with 100 of such, before he would tell me that his thesis student, the fake Dr. received a fake doctorate, it was hard for me to come up with them, even with the Collab's able inspiration.

Pitt T. Maner III writes: 

One of the things I have wondered about is why sports techniques that appear to offer statistically better results like Rick Barry's two-handed "granny" basketball free throw or maybe knuckleball pitching in baseball are so infrequently used.  Is there is a fear of using unorthodox means of winning, a fear of looking stupid/uncool, or just not wanting to stand out from the way it has always been done?
Here is a film about knuckleball pitchers that some of the baseball fans might enjoy:

"Knuckleball! is the story of a few good men, a handful of pitchers in the entire history of baseball forced to resort to the lowest rung on the credibility ladder in their sport: throwing a ball so slow and unpredictable that no one wants anything to do with it.
The film follows the Major League’s only knuckleballers in 2011, Tim Wakefield and R.A. Dickey, as they pursue a mercurial art form in a world that values speed, accuracy, and numerical accountability."

David Lilienfeld writes:

For Os and Bosox fans, there was actually an interesting piece in today's NYTimes about both teams giving some thought to the knuckleball. It sounds like the Os want to build their pitching staff around the pitch–or at least many of the pitchers. I'm hopeful that they succeed, not simply because I remember Hoyt Wilhelm in an Orioles uniform (ah, those not-so-golden days of Jim Gentile, Brooks, and Dick Hall), but it also raises the prospects of longer-throwing pitchers. I don't just mean longer careers, though there is that. I'm also thinking of more innings pitched, 4 starter rosters and the like. Having come of age during the Orioles pitching trifecta of 1969-71, I find the idea of a 4 man starting rotation appealing. The notion of "one-hundred and one, and then you're done" isn't a mantra I'm partial to. Some have suggested that Sandy Koufax's retirement after winning only 165 games (I think he has the fewest of anyone in the HOF who wasn't a reliever–and I also can think of few who would argue that he doesn't belong there) is testimony to the need to rigorously monitor pitch count. Perhaps, except that Koufax's well-known arthritis (he used to ice down his elbow for up to 2 hours after each outing) resulted from an injury running the bases, not from pitching. Pitchers weren't coddled the way they are today. It's been suggested that better swing guidance has resulted in better hitting players requiring pitchers throwing with greater finesse or power. Perhaps. I'm pretty sure that's not true for the knuckleball pitcher, though. Having watched Jim Palmer pitch, I doubt the idea applied to him, either. His slider broke down and his fastball would rise. I don't care how good your swing might be, you still have to figure out how to contact the ball, and that's something batters had a devil of a time doing. The same was true of Bob Gibson. Now Denny McLain and Steve Stone are great examples of a pitcher destroying their arms in the name of pitching performance. But I don't think that was as common as some would suggest, and if their arms weren't coddled, they would be fine dealing with today's batters. After all, there haven't been a surge in HR production, or even extra bases (esp triples), which I might expect if the effects of the improved swings were that probative. I don't think there have been two seasons where there was improved hitting performance (absent PEDs) requiring changes in pitching staffs along the lines that we've seen. It's like writing–with PCs and MS Office, writing has become easier, far easier, than in time past. Has writing become any better? Has the average speed of a fastball increased during the past 20-30 years? What about the degree of breaking balls? In almost 50 years, no one has come close to the Koufax curve. That wasn't a matter of an "improved arm" and it would have broken just as much (well, maybe less well with reduced amounts of pitching) today as it did then.

In short, I look forward to the rise of the knucklers and the return of the 4 man rotation and pitching staff sanity. 



Alan Millhone writes: 

Dear Chair,

You think we have problems.

Yesterday I took my house guest back to Columbus to catch his flight back to PE, South Africa. There are problems. He lives in the largest and poorest province. No jobs. Little food. Rent the movie KING ME on iTunes or Amazon and if in USA be thankful for what we have. Lubabalo says we have the best food and plenty of it. It was a pleasure having this poor but exceptionally talented Checker player in our home and I roomed with him for a week at our National Tournament.

Depends on who you are on what you can openly say. That is very sad.

My remarks above can be published as anyone deems fit.



Here is Gordan Haave's Story: 

Some time ago my now ex-wife decided that my daughter's sleep away camp should be 11 hours away in Eastern Tennessee. How it got to be that way is a long and convoluted story, sort of like my first marriage. But in any event she has been going there for years now and loves it, and my daughters sheer desire to get me to leave the second I drop her off and her tears upon pickup has me convinced of it's merit as a character building month of her life that is worth the money and hassle. Plus in the many years of drop off and/or return we have developed our own ritual of spending the night at the Hilton in Memphis and walking across the street to Benihana for dinner.

This year was my son's first year for sleep away camp, and of course it was in Eastern Tennessee about 20 miles away from my daughters camp, only they didn't start or end on the same day.

So the end result was my having to drop my daughter off one week and then pick up my son a week later in Tenn. Since it is actually closer to Connecticut than it is to my starting point in Oklahoma I decided to drive on to Connecticut and spend a week with family and friends rather than go back to Oklahoma in between the drop-off and pickup.

One sign that I am getting older is of course that I can't do the drive like I used to. Back in the day I would do the Oklahoma to Connecticut drive with one stop in Indianapolis (half way). Once, when my mother had to go straight into surgery for her cancer I drove it straight through without stopping.

This time on the way out I did Oklahoma City –> Memphis –> Harrisonburg, VA–> to my dad's house in Stamford.

On the way back I did Stamford –> Harrisonburg –> Knoxville –> Memphis –> OKC

The podcast of course is the greatest friend to the long distance driver. This time around I listened to The History of Rome which was once a weekly podcast (but still available) that ran from 2007 to
2012. Here is the wiki page.

I highly recommend it.

It was from this podcast that I fist heard the term Vespasian Sponge.

According to the podcast when Vespasian became emperor he was still dealing with the horrible fiscal mess left by Nero. One of his solutions was to let the tax collectors run rampant. He looked the other way while the tax collectors robbed the citizenry. Then, when they were wealthy, he would become the champion of the people and arrest the tax collectors and seize their ill-gotten gains, which he would of course deposit in the treasury.

As described by Suetonius in "The Twelve Ceasars": "They were, at any rate, nicknamed his sponges — he put them in to soak, only to squeeze them dry later. "

For some time now I (like any regular reader of Washington's blog) have viewed the banks and the government as essentially one and the same, and the two political parties as representing one pro-bank and pro-war party, that then squabbles over meaningless things in order to have us think they are in effect two different parties.

While I still feel the same way about the political parties, the recent fines and criminal inquires against JP Morgan have me wondering if perhaps I was wrong. Instead of the banks owning the government (or being one and the same) that in fact the banks are simply Vespasian Sponge's.

Having bankrupted the country in all manners of spending (particularly raining bombs down on people on the other side of the world) the politicians figured that it was easier to let the banks steal from the population, (and then to squeeze the money out of them) then it was to just take the money directly from taxpayers.

In any event, on a website with a wonderful history of nicknames for certain business figures, I propose that we start referring to certain eminent flexions and bank pres's as "The Sponge".



 This chart is interesting. It comes from a passionate market historian, Robert Prechter and his Elliott Wave group.

However, I disagree with it. A local maximum in interest rates is established only after they peak out somewhere and start declining again. So this illustrious list of busts and crises is not happening during the spike, but at its end.

A classical cart and horse problem. Framing Bias will make it appear that each time a spike in interest rates happened a crisis happened. The reality is likelier that each time a crisis could no longer be shoved under the carpet, when the economy could not sustain playing on the house money, when the illusory money effect succumbed to gravitational pull of reality, when the epidemic effect of the meme played out the asymptotic end of the S-curve, no one was willing to pay more for using Other People's Money (OPM). Interest rates are a willingness of people to undertake risk. Yet when this willingness becomes a larger risk than the aboriginal risk, a crisis comes.

Also, in the customs I learned on this list, there is always a chance that endless other financial crises have come along the curve too. Not sure, just checking with the specs which other key crises have happened at the troughs of interest rate cycles? Have there been any or as many?

Steve Ellison writes:

Yes, there is always bad news around, and any number of events could have been annotated at the low points on the chart, too.

Here is an example
I posted on the site in 2005.

One of my prized possessions is a chart of stock market returns in Venita Van Caspel's book "The Power of Money Dynamics." Each year is annotated with a reason to have been bearish that year:

1934: Depression
1935: Civil war in Spain
1936: Economy still struggling
1937: Recession
1938: War clouds gather
1939: War in Europe
1940: France falls
1941: Pearl Harbor
1942: Wartime price controls
1943: Industry mobilizes
1944: Consumer goods shortages
1945: Post-war recession predicted
1946: Dow tops 200 - market "too high"
1947: Cold war begins
1948: Berlin blockade
1949: Russia explodes A-bomb
1950: Korean war
1951: Excess profits tax
1952: U.S. seizes steel mills
1953: Russia explodes H-bomb
1954: Dow tops 300 - market "too high"
1955: Eisenhower illness
1956: Suez crisis
1957: Russia launches Sputnik
1958: Recession
1959: Castro seizes power in Cuba
1960: Russians down U-2 plane
1961: Berlin Wall erected
1962: Cuban missile crisis
1963: Kennedy assassinated
1964: Gulf of Tonkin
1965: Civil rights marches
1966: Vietnam war escalates
1967: Newark race riots
1968: USS Pueblo seized
1969: Money tightens; market falls
1970: Cambodia invaded; war spreads
1971: Wage-price freeze
1972: Largest U.S. trade deficit in history
1973: Energy crisis
1974: Steepest market drop in four decades
1975: Clouded economic prospects
1976: Economic recover slows
1977: Market slumps
1978: Interest rates rise
1979: Oil prices skyrocket
1980: Interest rates at all-time highs
1981: Steep recession begins

(Van Caspel, 1983, pp. 124-125)

Unfortunately, I have the 1983 edition, so the chart ends there.

A modest attempt to bring the record up to date:

1982: Double-digit unemployment
1983: Record budget deficit
1984: Technology new issues bubble bursts
1985: Dollar too strong
1986: Dow at 1800 - "too high"
1987: Stock market crash
1988: Worst drought in 50 years
1989: Savings & loan scandal
1990: Iraq invades Kuwait
1991: Recession
1992: Record budget deficit
1993: Clinton health care plan
1994: Rising interest rates
1995: Dollar at historic lows
1996: Greenspan "irrational exuberance" speech
1997: Asian markets collapse
1998: Long Term Capital collapses
1999: Y2K problem
2000: Dot-com stocks plunge
2001: Terrorist attacks
2002: Corporate scandals
2003: Gulf War II
2004: High oil prices
2005: Trade deficit



 The system for selling life insurance seems kind of multi-level to me.

Around here there are a bunch of reps that sell Northwestern Mutual, which may be the highest rated life insurer. When you go the websites of those reps, what you see is not promotions of life insurance but rather promotions for starting a career in selling life insurance.

Scott Brooks writes: 

That's how many life insurance companies do their marketing. Prospecting by hiring..

Put out mass hiring notices, bring people in, hire the ones that can fog a mirror. Promise to reimburse them for licensing and promise training.

The first step of training…..take this memory jogger and make a list of 25 (50, 100…as many as you can get) people that you know. Now, we'll prioritize them by your relationship with them (i.e. who will take your call and meet with you if you request a meeting).

You manager will go with you to these meetings. You will watch him give the pitch (that is your training). If you're lucky, he will help you get some referrals.

But more than likely, they are going to churn and burn thru your warm market and then move on to the next guy.

anonymous writes:

When I was fresh out of college and trying to decide what to do with myself despite a science degree, I got wind of some company called Primerica offering interviews in the area. I decided to go in and find out more despite me being the farthest thing from a natural salesperson you can find. I am not extroverted, and don't enjoy the jibber jabber of the sales game. Nevertheless, I decided to keep my mind open and give it a shot. I figured the worst that would happen is that I would waste some of my time. Red flags were going off in my mind during the interview, as to Scott's point, I was not getting the feeling there was much screening going on, breathing was probably enough. Even at that age, I was used to tough interviews, and while I was proud of my academic background and credentials, I didn't get the feeling it mattered one bit. Instead of having the good sense to walk out right there and call it a day, I let him pitch me on how successful he and the organization were, and how I could be too! I had to put together a list of names of people who I might be able to get to attend a pitch meeting for term life combined with a family of mutual funds or some such (this was pre ETF days) self managed instead of the "whole life" thing. I was unwilling to provide a large list but I did start with a few. By the time I had gone to two of the people's homes with my "manager" and uncomfortably tried to pitch them life insurance, feeling bad about it the entire time, I had almost had enough. The topper was a regional sales meeting I went to that can only be described as a cult gathering. I said my goodbyes at that point and moved on to greener pastures. Ironically, when I went to pitch one of my family friends the life insurance, he only agreed to hear it out if I agreed to sit through some MLM nutritional scheme he was hawking (can't be 100% sure it was Herbalife as this was years ago, but I suspect it was). I get a laugh out of that thinking back.

I guess someone at the top continues to make money off these schemes, as I have been out of college quite a while now, and I still see Primerica, Herbalife, and other MLMs (for lack of the other word that is coming to mind) in existence.

Scott Brooks replies:

I actually got my start with Primerica (it was called "A. L. Williams" back in 1987 when I was introduced to it).

Anonymous is right, there is a bit of a cult following…..quite a bit depending on the organization you are in.

I have to admit that I got VERY LUCKY with my upline. He was a good man and a good salesmen. He took my 22 year old butt under his wing and taught me how to properly sell, properly close and how to get referrals.

So yes, I started out by making a list of people that I knew and taking my manager to see them, but it worked out well for me….but I was, by far, the exception to the rule.

I recall that my manager gave me a VHS tape and said that this was the presentation training. Take it home along with the presentation flip chart and learn it.

He did the same with what was called the "Bob Safford 3rd Party Referral Close" VHS.

I took them home and sat in my parents living room watching those VHS tapes over and over and over. I recall we had one of those VHS players that had a remote control with a cord attached to it.

So I'd hit play, rewind, play, rewind, play rewind…..over and over and over. I'd write down exactly what the presenter/narrator said and then I'd practice over and over again until I could say the presentation perfectly. I would then practice on not just saying the words, but working on my voice inflection and body language….which leads me to my next point.

My manager also gave me sales books to read (i.e. Tom Hopkins "How to Master the Art of Selling"). And I read them.

I guess what I'm getting at is that I was extremely coach-able. If my upline told me to do something, I did it on steroids.

Now, I don't want to make it sound like my manager just gave me stuff to read and watch. He actually trained me and worked with me and let me pick his brain. He was a good guy and I'm very grateful to him for all the help he gave me to get me started.

It only took a month or two and I was the top salesmen in the office. I quickly moved up the ranks of A.L. Williams eventually becoming one of the youngest Senior Vice Presidents in the history of the company at the age of 24.

Now, don't get too excited about the SVP thing. It was based solely on sales and recruiting. So it wasn't a real position, it was more of a title.

But I quickly peaked at ALW. At age 24 I was done. Why? I quickly discovered that I didn't like "recruiting" people….I wasn't into the whole MLM thing. But most importantly, I figured out very quickly that even though ALW had decent products that they offered, there was no way I could truly do the best job for my clients with a limited amount of products and services to offer. I did like the financial aspect of the business and the prospect offering my clients more and better solutions.

So I tendered my resignation during the summer of 1989 and went out on my own and opened my own financial planning and investment practice with an independent regional BD.

And that's when my real education started. The next two years were the real school of hard knocks for me. I didn't have any kind of a real pedigree or Ivy League education (heck, I went to Southeast Mo. State U. and my degrees were in biology, chemistry and psychology with minors in physics and math… business or finance or anything).

I had to figure out how to do it on my own. I had get out and hustle. I had find prospects and get referrals, mail out referral letters and get on the phone to call the people I mailed letters to 3 days later.

My goal was to get ~ 12-15 referral letters per client (I was really good at getting referrals). From those referral letters, my goal was to get 4-6 appointments and close 1 1/2 - 2 sales.

It was a rough life but it was profitable and I made a decent living. But after 5 or so years of doing that, I figured there had to be a better way….and that's when I started to plan for a transition from commissions to fees…..and process that took me several years to accomplish. But that's a whole different story….one I might write about someday if anyone is interested in hearing about it.

A commenter writes: 

I think it would be fascinating to hear the story in your last bullet. A key thing in business is finding mutual benefit in folks respective contact books. With the six degrees of separation being probably more like two or three in the specific 'sub sector' you're interested in, getting positive "referrals" is key. But, normally, there is a social limit on how much you can share back and forth. So 12-15 referrals is pretty amazing… what was your secret?



A question for Kim or Victor: Since IWM has more stocks than SPY, does it follow that daily returns on IWM are closer to the Normal Distribution than SPY? - A Reader

Victor Niederhoffer replies:

It does, as a consequence of the Central Limit Theorem .

Kim Zussman replies:

Let's look at it empirically. Here is the "Anderson - Darling" test for normality of daily SPY returns, 2000-present (SP500).

Next is the same test for IWM (Russell 2000 ETF), 2000-present.

Rocky Humbert writes: 

Vic, I'm not sure that the central limit theorem is the right paradigm. An unknown is whether the covariance within the two groups is sufficiently different to offset the CLT. I have never tested this. And testing is tricky because you need to use compounded total returns with dividends reinvested. The index and stock prices produce misleading results because dividends are greater for big caps.

Intuitively, I believe that most of the perceived differences can be explained by 2 things:

1) the dividends…which is really just a duration effect and 2) the reality that companies leave the R2k only when they are incredibly successful or when they die. Stocks only leave the SP500 when they die. They never leave the SP500 and go to the R2k when they are successful. So over time, the perceived differences are a micro sampling of a survivor bias between the 2 indices. Not sure how to test this theory…

What we do know is the implied volatility of r2k is almost always higher than the implied volatility of the SPX. I think this could be an analogue to the fact that out of the money puts are more expensive than out of the money calls. Put another way, if you are long SPX and short r2k in equal dollar amounts, you will usually make money during violent and persistent market downdrafts. I think this is proof that the distributions are different.

Victor Niederhoffer writes: 

Those are good points you make about areas that I should have considered in estimating the departures and distributions of comparative performances. It is also amazing to me that the statistical tests, especially the Kolmogorov Smirnov, show such departures. I am a great believer that the risk premium on untried and small stocks is much bigger and that they should perform better and that buying two handfuls of them will have a limiting distribution that converges to a return a percentage or two above the 8 % you get from the average NYSE stock. I must go back and check my premises. It reminds me of how I told the people in my family to buy the riskiest vanguard over the counter fund, and they tell me that they are always getting notes in the mail that the funds I recommended are being sued by their holders as the worst performing funds in history due to all sorts of wrongs of a practical and theoretical nature. I mean this response in a humble and appreciative way although it is sometimes hard to communicate that by email in the face of all the errors that are elicited.

Ralph Vince writes: 

Like everything else in this realm, it depends on the unit of time used in analysis. If you use annual data, things play much more nicely to Normal. The shorter the time unit used, the less so.



 This article in the New Yorker seems to be making a splash "The Software That Builds Software".

Software that builds software is as old as the second day that the first piece of software was written. The second day, because coder (what we may now call a 'programmer' or a 'developer') realized that the computer target could do some of the work, deterministically, without typographical error, faster, and in some axes of metric, 'better' than a human can, and started to build tools.

And so tasks are delegated to the computers to perform

I am and have been active for years in a project which uses computers to building and test software, to ensure NEW software conforms to coding conventions for portability [1]. The testing computers are geographically disbursed, and it is unlikely I will ever physically see any of them that I do not own. Some do not not even have an independent physical existence, but rather exist 'virtually' inside other hardwareThey retrieve 'source code' from a distributed version control system. The article mentions 'git' and 'github', but we use another older variant. They are controlled by a textual and webbish control and status display interface [2] called a 'buildbot'

For this piece, to get some graphics, I just 'told' the control interface, via a text command, to start a job; I could have done it graphically, but I can touch-type much faster than I can move around a website with mouse-clicks:

lsb_bb> /msg lsb_bb force build app-checker-x86_64

and it acknowledged the request, and will assign it to a specific machine perform (there are several identically capable machines in that stable, and the software does 'load management' to assign it to an available 'worker' slave unit

11:35 =orc_orc> force build app-checker-x86_64 11:35 =lsb_bb> build forced [ETA 7m35s] 11:35 =lsb_bb> I'll give a shout when the build finishes

and as it build it updated the display [3], and keeps a viewable log of the process [4]

A few minutes later, the 'master' of the 'buildbot slave' tasked with the work 'told' me the work has been completed and that the test had succeeded:

11:42 =lsb_bb> Hey! build app-checker-x86_64 #91 is complete: Success [build successful] 11:42 =lsb_bb> Build details can be found here

This is not at all uncommon or magical, although it can be difficult to get 'right' in the usual case. Think of Mickey Mouse in the 'Fantasia' film. Those mops can get uppity [5]

I am not all that clear, beyond the 'gee whiz' factor why the article cited considered this remarkable. It just seems 'normal' to me.



 There are three videos in this article, all of them are quite fascinating. The last one I found particularly cool — a sandbox for science museum installation that demonstrates how topo– maps work by projecting color and topo lines onto the sand. Watch as he makes it rain with his hand and the system shows the water flowing off the watershed and pooling in the catchment areas.

"Here’s what the immersive, 3D computer interface of the future will feel like"



 I recently read this article about Snowden. It began:

The recent revelations by the whistleblower Edward Snowden were fascinating. But they - and all the reactions to them - had one enormous assumption at their heart.

That the spies know what they are doing.

There are professions where you have to daily prove your competence, sometimes multiple times. I was recently talking to an appliance repairman who was on his 9th call of the day and he found and fixed the problem every time. On the other side of the spectrum are professions where if you go through the motions for extended periods of time and your competence (other than not offending the people you shouldn't offend) is hardly tested at all, like say counter-intelligence people, mid-level government bureaucrats in many but by no means all departments, movie reviewers, judges, etc.

Almost everybody has to do SOMETHING right in the sense that they can all screw up enough to lose their jobs or businesses, but clearly there are extremes depending on how objectively one's success is measured, both in terms of it even being possible or in terms of how much information is available by those who evaluate them, and several other factors.

I wonder where the people who contribute to pricing securities on a daily basis fall within this continuum?



 It would be nice if you could just put your money in mutual funds managed by established, well-regarded front-men and outperform the market.

I was recalling a discussion on the spec-list literally 10 years ago in which a Lister advised that if you want to know when/what to buy, then just take a look at what Mason Hawkins, Bill Miller, Marty Whitman (all of whom manage mutual funds available to the retail investor), and a few other names (all of whom managed hedge funds unavailable to the retail investor) were all doing and imitate them.

At that time, Hawkins, Miller, and Whitman all had great reputations. Furthermore, if you were to read an interview with them, they could make very compelling cases for the stocks that they owned.

What happened to their mutual funds over the next ten years?

I think it's important to separate their "alpha" returns from their "beta" returns, and this is something that can be done very easily at, where they conveniently provide, for the past 3, 5, 10, and 15 years, each mutual fund's alpha and beta.

Here's a table.


 Marquee investor / mutual fund ticker / 10-year alpha vs S&P / 10-year alpha of fund category vs S&P / fund category

Mason Hawkins / llpfx / -1.77% / -0.36% / large blend

Bill Miller / lmvtx / -6.16% / -0.36% / large blend

Marty Whitman / tavfx / 0.47% / 1.06% / MSCI EAFE

So let's take a look. Mason Hawkins' fund LLPFX's alpha was -1.77%. That means that given his beta with the S&P 500, his fund returned -1.77% less than it "should" have. Now his fund is in the "large blend" category. We should consider whether his negative alpha came about just because he was in "large blend" stocks, and they just had a bad 10-years. In fact it turns out that "large blend" mutual funds had an alpha of -0.36%. So that could explain some of Hawkins' negative alpha, but not all. He under-performed.

Similarly Bill Miller's fund LMVTX had an alpha of -6.16%, not good by any measure. His fund is also in the "large blend" category, so that only explains -0.36% of his large negative alpha.

Marty Whitman's fund TAVFX had a positive alpha of +0.47% vs the S&P. But he's in the MSCI EAFE (basically "international / developed world") category, which itself had a positive alpha of +1.06%. Foreign stocks happened to beat US stocks, and that more than explains Whitman's positive alpha to the S&P.

So all three of the marquee mutual fund managers mentioned 10-years ago by a Lister (who himself is very knowledgeable and experienced) failed to add any risk-adjusted extra goodies, and in fact they took something away from what you should have gotten based on the market risk that you took with them.

I've always enjoyed reading intelligent analyses of individual stocks, but that's probably something I should do just for fun, not with any expectation that it will make money.

Gary Rogan writes:

Bill is a gambler who bets huge on things he can't possibly know with any degree of certainty. He is very smart so usually his bets pay off. He is still a wild gambler who given enough time will blow up, or at least lose a lot of capital.

Buying a lot of inexpensive stocks with stable fundamentals when they are down, either relative to their historical valuations or to typical long term average ratios of P/E or P/S, in multiple areas, is still gambling like everything else, but a much more stable form of it that's not likely to blow up unless the market blows up and you can still beat the market.



 To what extent does the basic passive electronic, the inductor, which opposes change in current have a similar role in markets.

If two inductors are coupled, a voltage is induced in one by the magnetic field coming from current flow in the other inductor. The car and television use this effect among other important applications like transformers and radios.

To what extent does a component like an inductor, perhaps one market coupled to another have uses in market work? To what extent do other electric components give rise to useful hypotheses?



 Performance artist Marina Abrambovic's checklist below intersects somewhat with the investment communities.

"What is Performance Art" from the Marina Abramovic Institute

What are some of the frequent concerns of Performance Art?

· De-objectification of art

· Relationships between performer/audience and time
· Relationships between performer and audience

· Relationships between performer and him or herself

· Relationships between performer/audience and environment

· Relationships between performer/audience and art medium

· Relationships between performer/audience and the body

· Limits of bodily endurance/experience

· Slowing down, speeding up, or repetition of physical movement

· Incorporation of chance events

· Execution of highly staged and dramatic events

· Execution of self-imposed instructions

· Voluntary abandonment of free will

· Juxtaposition of media or phenomena that do not normally coincide

· Publication of private experience

· Privatization of public experience

· Personal and social implications of voyeurism

· Personal and social implications of art as commodity

· The nature of subjective experience

· The nature of universal experience

· Social, political, and existential concerns such as racism, sexism, politics, history, mass media, economics, poverty, philosophy, spirituality, mortality, interpersonal relationships, empathy, the human condition, and more

· Explorations of artist as art-object or art medium



The Upside Down Man now says he was wrong about stocks. He's been bearish since 1990. While the market gains a few hundred %, he 's wideley followed. He's caused perhaps as much damage as the chronic bear at Barrons. William Morton invented anesthesia. Dr. Warren at Harvard didnt believe it and pooh-pooed it. Bah Humbug, the Harvard kids said. When Morton subsequently performed the operation Warren started crying. "Gentleman this is no humbug". Many who had derided anesthesia honorably committed Hari Kari. Considering the harm that The Upside Down Man has caused, some suitable expiation would be appropriate. Perhaps similar to Hsieh, kindly mentioned by Mr. Owen, absolute silence and no tweets for at least a year.



Equities up near all time highs. Softs, metals, bonds all down at or near multiyear lows. One of the hardest things is to pick the turning points.



 How did newspapers make money anyway?

Formerly the bulk of newspaper revenues came from Classified Advertising with margins in the 80-85% range. Biggest income producers were Help Wanted (especially those ads aimed at "Executives and Professional." Now and others have reached a far broader readership, with an easier search protocol, and the ability to submit resumes electronically.

Two other big money makers were Real Estate (private home sales, home rentals, and apartment rentals (really big in urban markets)), and Automobiles (mostly used). Once again the net won out by incorporating 360 degree filmed shots of all rooms in a home/apartment - readers no longer had to trust in veracity of copywriter (me). Use of pictures for autos on web was a big reason for shift - again a picture was a better sales tool than words. But a newspaper ad with a pix cost way too much

General/National advertising (Ford/MacDonalds/Proctor & Gamble/Nike, etc) were big income producers but split their "buys" and had already begun to move more into TV — local dealers/retailers/food marts/electronic stores, though, spent tons - moved some of that to the web also.

Absolutely huge dollars and margins in political and/or issue advertising — especially campaign ads. Definitely paid the highest rates with NO discounts for frequency of ads or number of appearances.

Retail advertising was very competitive and, consequently, margins were much smaller; many of these advertisers switched some of their advertising to the web but few switched it all.

The big money makers in newspapers remain those in smaller markets with lots of elections and, ideally, without a nearby Wal-Mart. Generally, most smaller towns are one-paper markets and rates are set to insure generous margins (Gannett owned very many of these and they add substantially to the bottom line). However, consumers of local papers like to see bylines by local people — and they demand that coverage be provided for most civic events that big papers would normally ignore (so if the publisher gets too pricey or too indifferent to local events, the staff hears about it, and advertisers act on it). Locals are also are very interested in coverage of high school activities (football, band, and cheerleading are huge.

Political advertising for every office from the Prez down to county Animal Control Officer bring in dollars — local radio gets very little of any as most stations have limited reach and few committed advertisers.



 Sports are selling a dream to the kids of one day making it.

People watch sports because we mirror the players' motions in our heads. People imagine they did what the stars did, despite the impossibility of it. But you throw drugs into it and most will reject the idea that they mirror substance abuse. You put drugs into it and it is like finding out the secret ingredient to your favorite restaurant is small dose of poison or that their bakery is rat infested and did not pass the health inspection. It has to be dealt with harshly once exposed, or it is like a player shaving points for the bookies, it can and will destroy the brand.

Body building was still a sport when Arnold did it because it was not known they all took roids. Now it is like pro wrestling, a freak show. Nobody want their kids to become a bodybuilder, except bodybuilders. Finally, it is cheating, nothing to be admired, anymore than messing with accounting to get your bonus while ruining the company. If you had lost money to a drug cheat, it is easier to comprehend. For runners EPO is like playing Russian roulette. Your heart can literally explode, as you dehydrate. Now this is like World com executive cheating and knowing that it could destroy them in the process. Or a Ponzi scheme, wanting the good life at least while it last, despite the misallocation and destruction of wealth that goes well beyond their millions.

Craig Mee writes: 

That's true, Russell, excellent points. What I'm thinking is that sports may in fact drive advances in clean drug and herb technology that benefits the human body more than it wrecks it, or advances other sciences where they need to push limits like space travel. I, too, worry about the children. I wonder what will happen to trying to improve your performance and competition–the very nature of sports. But hopefully what started out a bit dark may lead to good things. 

Chris Cooper writes: 

There already is plenty of overlap between drugs that make you healthier (when taken in moderate doses) and drugs that improve performance. Look at the list of drugs taken by Lance Armstrong, for example: testosterone, hGH, EPO. All of them make you healthier when used moderately. But elite athletes have the motivation to increase dosages to potentially unsafe levels, which is where concerns about safety spring from. I have no problem with the use of PEDs, but I abhor the lying and cheating that normally accompanies it.



 Zimbabwe is opening a stock exchange that will only trade shares "appropriated" from other parties. Only blacks may participate.

"Zimbabwe to open a "blacks only" stock exchange"

A commenter adds:

Words fail me. But if there was one country in Africa that needed foreign investment more than Zimbabwe, it would have to be the CAR (or whatever it's now called). If there were any capital left in Zimbabwe that could be moved out of country, I'm sure it's already moving. I guess it will be another generation before the country gets its act together and develops a legal system worthy of the name.

anonymous writes in: 

I used to live in Zimbabwe and now live in Durban South Africa – but I go visit frequently.

I would move back to Zim tomorrow if Mugabe went.

Zim runs totally on US dollars – banks ATMs, all cash is the US dollar.

The economy is starting to pick up again and the shops are starting to fill up with foreign goods.

But Mugabe and his sidekick the Indigenisation Minister Kasukuwere are the problems – both are bloody mad.

But that said Mugabe is one of the healthiest 89 year olds I know.

One thing is for certain – every election Mugabe makes outrageous statement of his future intentions- then he rigs the elections - wins -repeats his outrageous statements at his victory speech - then you never hear anything again.

But there is always a first time with this mad man.



 The Brits are making excuses for their poor showing at the swimming world championships by blaming their "fast pool" training venue:

"It seems to have the perfect depth at Ponds Forge [olympic pool] of three metres, because it's all to do with the resistance in the water," he said. "Also, there is the consistency of the water. Because it's got ozone and oxygen in there it's very buoyant, so that allows people to swim faster as well."

"All our swimmers who go there post really fast times," he said. "They then can't replicate it later in the year, and they think that is working against them.

What is the symbolic ozone and oxygen in a market that makes it
sustainable and allows consistency? It's probably another reason not to
over trade across many markets because it's quite difficult to get the
ideal market balance…and then when you have great success you may
think that is the new norm and hamper further progress.



There are lots of treasures to be found in My Lunches With Orson conversations over lunch with Orson Welles by Peter Biskind. It's a very good book. 



Is this the next credit crisis? An interesting picture by Zerohedge.

He has picked it off a Goldman report, which collected data from world bank.

Is it quantifiable?

keep looking »


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