I've recently started to enjoy hip hop music. I'm talking Juicy J, Andre Nikatina, real gangsta rap. I never could listen to it before, but now enjoy it very much. Some observations:

1. It appears to be a new form of music, and despite its roots in African rhythms, is a clear break from current pop music forms. It appears to be a form of tone rhythm poems. The structure does not have standard ballad form. It appears to have a refrain.

2. You need specialized equipment to hear the elements of the mix. A regular radio or car radio does not pick up the bass part which predominates the mix. A typical subwoofer set up has a 1k watt amp with special bass speakers. You've heard them in cars 200 feet away driving down the road.

3. The rhythms are polyphonic and multi-layered, varied within songs and changing. It seems to defy normal time signatures. Perhaps more technically trained musicians can correct me here. The various voices of the musicians pick up different rhythms over the sub rhythm.

4. The mixes sound lush, full, but a relatively sparse with only about 5 or six elements. There is typically a piccolo snare drum, a piccolo note pattern defining the chordal feeling, and a big bass part filling most of the mix. On top are varied vocal improvisations with different vocal tonal structures.

 5. The lyrics focus on a narrow range of drugs, sex, money and cars. The word "Nigga" is the most used lyric. For example, a typical lyric will read, "We dem niggas, We don't give a f%$k". I can't tell if they are serious or its posing, but if a white person accused an African American of any of it, the PC police would be knocking down their door. I don't understand what is going on here at all. A friend points out that all pop music deals with sex, money, but normal pop music is much more whitewashed.

Since this is a market forum, it occurs to me that a market position should be like a good music hip hop mix in that it will have a harmonious clean mix of a few good holdings all designed to promote not only a good profit, but a good statistical expectation and variance and express a simple but cohesive theme. For example, recently gold, bonds, yen all went down and have had a nice bounce. These seem like varied and diverse elements but have moved in concert. ES seems to have lagged in its movement. For the last year, ES has not been much of a trader so its good to add other things into the mix.

anonymous writes: 



F**k the losers.



"The Top 100 Selling Drugs":

Hypothyroid medication levothyroxine ( Synthroid, AbbVie) was the nation's most prescribed drug in 2013, whereas the antipsychotic aripiprazole ( Abilify, Otsuka Pharmaceutical) had the highest sales, at nearly $6.5 billion, according to a new report from research firm IMS Health on the top 100 selling drugs in the United States.

Following levothyroxine as most prescribed were the cholesterol-lowering drug rosuvastatin ( Crestor, AstraZeneca), the proton-pump inhibitor esomeprazole ( Nexium, AstraZeneca), and the antidepressant duloxetine ( Cymbalta, Eli Lilly).

Rounding out the top 10 most prescribed drugs in 2013 (in order) were the asthma drugs albuterol ( Ventolin, HFA) and fluticasone propionate/salmeterol ( Advair Diskus, GlaxoSmithKline), the antihypertensive valsartan ( Diovan, Novartis), the attention deficit drug lisdexamfetamine dimesylate ( Vyvanse, Shire), the antiepileptic pregabalin ( Lyrica, Pfizer), and the chronic obstructive pulmonary disease drug tiotropium bromide ( Spiriva, Boehringer Ingelheim).



Every business has its peculiarities. In the article
"The Tell All Diary of a Sundance Producer" by Galt Niederhoffer we get a window into the world of independent film production from this week's New York magazine. 



 I'm feeling inspired today by the camouflaging ability of the cuttlefish.

The cuttlefish uses an ingenious approach to materials composition and structure, one that we have never employed in our engineered displays," said coauthor Evelyn Hu, Tarr-Coyne Professor of Applied Physics and of Electrical Engineering at SEAS. "It is extremely challenging for us to replicate the mechanisms that the cuttlefish uses. For example, we cannot yet engineer materials that have the elasticity to expand 500 times in surface area. And were we able to do that, the richness of color of the expanded and unexpanded material would be dramatically different. Think of stretching and shrinking a balloon. The cuttlefish may have found a way to compensate for this change in richness of color by being an 'active' light emitter (fluorescent), not simply modulating light through passive reflection.


'Parker is an Army reservist who completed two tours of duty in Afghanistan, so using the cuttlefish to find a biologically inspired design for new types of military camouflage carries special meaning for him. Poor camouflage patterns can cost lives on the battlefield.

"Throughout history, people have dreamed of having an 'invisible suit,'" Parker said. "Nature solved that problem, and now it's up to us to replicate this genius, so, like the cuttlefish, we can avoid our predators."

"In Search of Nature's Camouflage"

Chris Tucker writes:

This 5 minute video has astounding footage of cuttlefish, octopi and squid blending into their environments.

The octopus footage at the end is particularly amazing. But I thought the squid was fascinating as it kept its warm cuddly colors on the side of his body that faced the female and the other side of his body colored to warn off other males and it flips as he swims to her other side. It's definitely worth taking the time to watch.

"Ted Talk: David Gallo Shows Underwater Astonishments"



Here is an excellent NYT video on the odds making in Vegas for the Superbowl. Great discussion of the difference between the insiders and the general public. Discusses the proposition bets at length. One quote, "The public wants to bet $10 to win $200, but the pro will bet $200 to win $10 if he sees value."



 One is accustomed to the contumele of certain parties, especially when I point out, as the loose cannon Mr. Kora, who could ruin us all by posting such good stuff, shows that 8 or 8 such events led to substantial profits, a point which one intentionally omitted so as not to self destruct the list. But one is very surprised on a list with so many free market devotees, albeit a conservative here and there, that one doesn't consider the right of a personage to better himself. If an immigrant can gain gainful improvement and housing in this country, why in the world should we stand to prevent his pursuing his happiness and bettering himself. And of course it's good for both parties.

Jordan Neuman writes: 

The Chair is correct of course– ceteris paribus. Unfortunately, it is not ceteris paribus. For example:

In 2009 (based on data collected in 2010), 57 percent of households headed by an immigrant (legal and illegal) with children (under 18) used at least one welfare program, compared to 39 percent for native households with children.

Immigrant households' use of welfare tends to be much higher than natives for food assistance programs and Medicaid. Their use of cash and housing programs tends to be similar to native households.

A large share of the welfare used by immigrant households with children is received on behalf of their U.S.-born children, who are American citizens. But even households with children comprised entirely of immigrants (no U.S.-born children) still had a welfare use rate of 56 percent in 2009.


Gary Rogan writes:

I would like to add that eventually these immigrants start to vote and they vote, by a huge margin, for big government because (a) to them it's a significant net benefit (b) they know of no other way of thinking about the role of the government. Additionally, they are used as pawns by said big government in every way imaginable to maintain itself as the master of us all. And additionally, large flexionic business absolutely love these immigrants because they work for less (good) but as their families are subsidised to an enormous degree by the taxpayers, these business do not bear the full brunt of their cost. As these flexionic businesses are enormously powerful with the government, being flexionic and all, this creates an almost unbeatable coalition of government and crony capitalists to import a certain kind of immigrants to the detriment of us all. 

Greg Rehmke writes:

Research supporting the benefits of immigration to the U.S. is compelling. Welfare programs continue to be expensive and distorting, but vary by state. "Generous" welfare in California is more expensive and damaging to immigrants than Texas programs. But recent studies show the services provided and taxes paid by immigrants (legal and illegal) outweigh the cost of welfare programs including govt. education.

Immigrants run or are key technology people in half of Silicon Valley tech firms, for example. But even low-skill immigrants free U.S. workers to concentrate on higher skill jobs. Immigrant workers in hospitals and nursing homes provide key services.

Here is more information from Ben Powell on Liberty Fund site.

I have links to various articles here.

Stefan Jovanovich comments:

Qui bono? As long as it is that marvelous construct — the economy, "immigration" always wins; and the trivial question about whether or not people are following the Constitutional rules for naturalization can be conveniently discarded. When the question becomes who pays for the price effects of competition from illegal immigrants, obfuscation is needed. But then what else are "studies" good for if not to tell ordinary Americans that their common sense is not good economics.

I do wish Greg would read the footnotes. Mr. Powell is distorting the truth beyond all recognition when he writes that "George Borjas is probably the most established academic critic of immigration. But even he admits that immigrants create net benefits for the native-born." What Professor Borjas actually stated was this:

"The evidence indicates that the wage of the skill groups–defined in terms of educational attainment and labor market experience–that experienced the largest influx of immigrants grew most slowly over the 1960-2000 period. It has been estimated that the wages of native workers in a particular skill group will decline by about 3-4 percent for every 10-percent increase in the number of workers that can be attributed to immigration."

I have come to the conclusion that Libertarianism is, at heart, a theology that wants ownership of property, including the property of citizenship, to always be subordinated to the idea of liberty. Yet, at the same time, people should not be free to exercise the freedom to truck and barter in credit. We are back, once again, in the world of Fourier and George Ripley and Brooks Farm.

Greg Remkhe replies:

I can’t speak for libertarians or economists in general, and I don’t believe economic gain is the most important thing. I think justice is. People have rights and deserve freedom and justice before the law. Welfare state programs and business regulations distorted the immigration process for California in ways very different from Texas. Texas government policies are more open to enterprise and its booming economy is putting latin american immigrants to work. Welfare is harder to qualify for in Texas and enterprises are easier to start and expand.

It is important to separate the consequences of immigration from the consequences of dysfunctional U.S. immigration policy (and distorting state welfare and business regulation).

New competition benefits consumers,but can challenge or hurt existing producers. Immigrants are producers in the labor market and where they compete with existing producers–American workers–they challenge and can hurt both unskilled workers and high-skill tech and engineering workers.

But the challenge part matters too. Imported cars from Japan challenged U.S. car companies to improve their cars. Many U.S. firms met the challenge of imported goods and improved to regain market share and also export. The tens of thousands of immigrant workers employed by U.S. firms helps them compete overseas, and that helps U.S.-born workers in those firms.

And now U.S. companies like Boeing, Ford, Apple, Dell, HP and others are global with goods and services produced by a mix of U.S. employees plus employees and subcontractors overseas. Plus Honda, Toyota, VW and other foreign car companies invest billions and employ hundreds of thousands of U.S. workers, engineers, and designers.

Robert Guest’s “Borderless Economics ” is I think one of the most compelling discussions of the dynamics of the new global economy.

The benefits to the U.S. from immigration and from outsourcing is one part of the story. But the benefit of immigrant entrepreneurs returning home to energize China’s and India’s economy is another major benefit. Hundreds of millions have been helped overseas by the return of inspired entrepreneurs trained at American and European firms. And these now wealthier producers and consumers in China, India, Brazil and Mexico now buy more goods and services from American companies and workers.

All that said… I must agree that a combination of crummy schools and corrupt government in Mexico and other Latin American countries shapes new immigrants, legal and illegal who come to the U.S. to live and work. Crummy schools and corrupt governments in the U.S. make matters worse.

Someone noted that we don’t need to make a wall around the U.S. but instead to make a wall around the welfare state. Over the last couple years, I’ve been recommending the Krieble Foundation’s Red Card proposals. They argue that Mexican working in the U.S. now and those who wish to come should apple for a worker visa Red Card that provides documentation and insurance, but not access to welfare programs.



 Let the Fed note the havoc in the market and do something very temperate today. And as they gather for their resplendent lunch, perhaps with the fake doc attending, let them make some noises to their cronies, perhaps in the men's room or the corridors marbled that the Fed must put things on an even keel, so as to give the market the weather gage.

Ken Drees writes:

Let them never be irryellevant.



 There are many good points in this report of xtandi. First one notes that life expectancy increased from 32 months to 34 months, a measly increase. Doubt very much it's real life significant. And it must not be statistically significant either as the stand deviation must be 5 years. With a sample of 1000. The standard error is 1/6 year or 2 months. But for most of these drugs, they are never tested to treat recurrence, or as a preventive. So thousands of drugs are never tested but the biology makes them worthwhile and a good Dr. can prescribe off label uses. See the web for a book by a Dr. using a multi factorial approach "Beyond" that has cured many knowing of such things and also Chinese uses where they don't care about this ridiculous double blind thing that is not used for decision making in any other field but is used here probably as a natural consequence of keeping out competition and flexionic interaction between regulator and regulated for the benefit of reducing competition.

Richard Owen writes: 

I read on the weekend a bit about Rupert Sheldrake, who was formerly a Cambridge don but was frozen out of the academic establishment for pursuing ideas such as remote reviewing and ESP. He recently wrote a book called "The Science Delusion", a play on Dawkin's book.

But it is interesting to read of Brian Josephon a Cambridge physics Nobel winner and Richard Wiseman a well known "skeptic" of the paranormal at Hereford Uni, saying that "by the standards of any other area of science that remote viewing is proven". Particularly, by the statistical standard applied to medicine and drug trials. Wiseman's view, however, is that exceptional claims need exceptional evidence.

Sheldrake make's an interesting point of the casuistry applied: Theoretical Physicists propound concepts for which there is no empirical evidence at all (e.g., multi-verses, etc.) whereas for the sorts of intuitive paranormal effects the proverbial man in the street believes in (dogs knowing their owners are coming home, guessing who's calling you on the phone), the standard is unobtainable, even though the claims are somewhat isomorphic (e.g., physics: quantum pairing / instant communication, vs. remote viewing)

Does this say more about the quality of medical trials or mysterious voodoo? Worry not, I suppose: a man in a white coat is here to tell you what to think.

"Rupert Sheldrake and Richard Wiseman Clash Over Parapsychology Experiments"

"Could there be proof to the theory that we're ALL psychic?"



Canada, from Jim Sogi

January 29, 2014 | 1 Comment

 I am just back from a ski mountaineering trip in the back country deep in the Canadian Rockies. Canada is a huge country, rich in natural resources, with only 30 million people. The people are relaxed and with a lot less anxiety and tension than Americans. They lack the expertise and manufacturing base to extract much value from the raw resources.

It is a beautiful country. Things are inexpensive, especially since the recent devaluation of the loonie to US .90. There are many new immigrants to Canada from China, India and other commonwealth countries. They have a liberal immigration policy that allows commonwealth members to work there when they are young. I sense great potential in the North.

Anatoly Veltman writes: 

Jim, isn't the potential resting squarely on natural resource prices?

The problem I always had with Canada's potential was economies of scale. This population one-tenth of the US's but spread out over huge territories still needs to be managed efficiently. I'm afraid the government's burden per capita just crowds out too much.

Peter St. Andre writes: 

Here is a visualization of population density.

Shane James writes:

There is a 4 day train trip you can take from Winnipeg to Churchill (which may still be the Northern most point you can live). You can go dog sledding there, meet the remarkable Innuit people and pretend for a short time that you are Ranulph Fiennes or Amundsen.

But it's cold. Ha!



 In a poisson distribution the number of events, e.g big declines in a time period occurs with a specific average rate, regardless of the time that has elapsed. For example, the average number of big declines per month is two. How likely is it to have 2 declines in the month, 3 declines. The time between such events, follows an exponential distribution. What is the distribution of time that elapses between such events? The time between events has a mean of 1 / the average rate, e.g. 1/2 a month in the above example. The variance is also 1/2.

Mr. Vince proposes that the rate and average elapsed time changes conditional on what has happened in the most recent period, a very good proposal, which can be modeled most practically by the use of survival statistics that all here are familiar with, i.e. what is the average duration between declines based on what the most recent event has been. Vince proposes that one look at the likely variations in that time, which may be skewed to the near term or long term.

Rocky Humbert writes: 

My stats are rusty but I believe poison specifies an average time between events (lambda) as a parameter and further specifies that's the actual time between events is random. Others please correct me, but I believe volatility in stocks experience clustering and so the independence assumption of poison is violated.

Ralph Vince writes: 

I'm talking about modelling the times between declines of x% with the fishy distribution, determining lambda. Then testing various past time windows vs futures ones to find a window length such that lambda settles and converges.

Gary Rogan writes: 

Why would it be a reasonable theory that a process where actual sentient being react to a previous decline in some way resemble a process where every event has no informational connection to not only the prior event but any other?

Ralph Vince replies: 

Why not? Has dependency been proven here?



 In the dos-si-do of the Apple and S&P yesterday, one could see a ballad, a microcosm of the purpose of markets, the idea that has the world in its grip, and the weakness and evil and insecurity that lies within the hearts of man.                          

First the market went down 10 points flexionically knowing what the number was going to be. Was it disseminated on a "need to know" basis? Then the S&P went down another 1/2 % as the terrible earnings were released. "The market had no right to go down that much" but it did. And then at 6 pm, the market went up a fast 8 points as what? Perhaps short covering by weak flexions, the kind that knew of terrorist attacks but insisted on getting the bid asked spread in addition. And then as Apple went down 40 points, the market this morning had to go down in anticipation of it.

But, but, but, there are other companies that report earnings. And the worse it is for one, there is the FOMC tomorrow to take account of. But their last action was very bullish. So today, one must anticipate what?

It's a great day for the give and take, the terrible evility of the market taking from the weak and giving to the strong. A Laurel or a Caroline could say it so much better than me. But a poor speculator must trade for a living.



 The beauty of a Martingale strategy is that we have price distributions that are bound at zero.

We are in a casino, where red can only come up on the little wheel X times in a row.

And no one in this business can get past their pre-conceived notions to capitalize on that.

No one.

Instead, the entire industry wants to focus on price direction, the immediate direction of price, which has nothing to do with what's going on after the next play. Nothing at all.

anonymous writes:

Mr. Vince, would you mind expounding on this concept of for the dunderheads like me. I get that a price of a stock is bound at zero (I'm hoping I at least understood that comment correctly), and that red can only come up a finite number of times in a row as a result. How does this help with a Martingale strategy in the real world with a limited bankroll and uncertainty over how many times in a row the wheel actually does come up red?I am obviously not looking for a grail with these comments and realize they got beyond a simple Martingale, but would like to explore your concept further if you're gracious enough to share more food for thought.

R. Vince responds: 

It gets messy quickly now, so I will try to keep it at 38,000 ft. Beyond the next, immediate play, or trade, or holding period, where <<what one has to risk is a function of what has happened to what they have to risk up to that point>>, you are somewhere on a curved line (for 1 proposition. For N propositions, you are in an N + 1 dimensional manifold. So, for 1 proposition, you are in a 2D manifold - a plane. I bound the manifolds at 0 and 1 for all axes except altitude - which is the cumulative expected return. So you are on a surface in an N+1 dimensional manifold.

Everyone is in this manifold, on this surface when the caveat (inside <<…>> above) holds, which includes those practicing portfolio insurance, any type of portfolio re-balancing, replacing components in an index, any type of short or levered ETFs, any managed programs, etc.

And I contend, ultimately, the only thing that really matters in trading (over consecutive trades or holding periods) is where you are on this surface, and possibly, how you are moving about it. Again, the most sophisticated, thorough and ultimately practical (some might argue otherwise) would be the most recent paper with Lopez de Prado and Zhu.

The point is, where we are on that surface, and how we are moving about it, we are either oblivious to or are using to satisfy certain criteria. For example, one who wishes to maximize their MAR ratio would want to be at those points on the surface that are in the sub-manifold of what we all "zeta-points" on it. Another — If one wants to begin to maximize time at or near equity highs, they traverse a path between some loci on the surface and 0,0…0 going downwards with sinning periods, upwards with losing.

Without violating the proprietary ideas of other colleagues, we can look at randomness, and at this hypothetical bounded roulette game in terms of this surface and our criteria.

What to me, at this point in my life, is most interesting about this now is not so much the trading implications, but the more broader applications of this. As a trader, we seek growth, but there are many more functions in life that comport to this same growth dynamic where we seek to diminish growth, and I find applications for it everywhere I look.



SP500 index daily return series 1950-present was checked for close-close declines of more than 2+%. For each 2+% drop day, counted trading days into the past until the prior 2+% drop (wait time between 2% drops). For each drop, also counted trading days into the future to the next 2+% drop.

The attached scatter plot shows each 2+% drop, according to wait from prior drop (X axis) and wait until subsequent drop (Y).

Alston Mabry writes: 

The thing about using an absolute value like -2% is that you have to also look at contemporaneous volatility. Here's a plot of the "days since last 2% drop" value for the S&P (since 1950), against the SD of the % changes for the previous 60 trading days:

And here's a closeup of the area nearer the x axis.

What's not surprising is that long waits occur when volatility is low, and short waits occur when it is high.



 You young'uns might not know who Tim McCoy was. He was one of the first cowboy stars in movies.

I have been lapping up every page of his book, "Tim McCoy Remembers The West". It is a dandy, because he was no drug store/dandy cowboy, he was a real deal cowboy (and Arapaho) who just so happened to turn up in Hollywood, which is just a little part of his larger-than-life life.

It has lots of wonderful history (insights to Custer's Battle I had never read before), movie making, living in Wyoming in the 1880s…and on and on.

Western, Hollywood (you will learn why Hollywood was the start of it all), and history buffs will find this a gem.



 The film White Men Can't Jump features two basketball hustlers: Billy Hoyle (Woody Harrelson) and Sidney Dean (Wesley Snipes).

1. Billy consistently bets his whole account on each game. He gets ahead quickly for a number of games, but also repeatedly wipes out.

2. Sidney, on the other hand, is diversified. He bball hustles, but also runs a food stop and decorating business. He takes a share of the bets Billy fronts.

3. Billy owes hard money. As a result, he has two mafiosos trailing him.

4. Sidney (per Billy) would rather look good than win. He takes risks which don't further his financial goals.

5. Sidney and Billy eventually meet with success by entering a competition funded by sponsors. No money is risked. They have learnt to leverage OPM.

6. When either winning or losing, Billy goes on tilt if criticized. After his biggest victory, having won his money back, he bets Sidney his whole proceeds that "white men can jump".

7. The biggest financial success turns out to be Billy's girlfriend, Gloria. She believes - seemingly irrationally - that her destiny is to be selected for quiz show Jeopardy. Sidney eventually persuades the security man from the Jeopardy studio lot to get her in. Such was her persistence that the irrational became actual.

8. Deception operates repeatedly. There is:

- the trojan horse: offering to play with any partner, having placed preppy doofus Billy in the court stands;
- the thrown game: Billy is paid by some mafiosos to throw a championship match;
- the false friend: Billy and Sidney form a hustling team, but Sidney plays to lose thus hustling his own partner;
- the shakedown: to make a grub stake, a bball player tries to rip off a liquor store;
- rule changes: a hustlee, having realised that he is the mark, refuses to pay up and pulls a gun; and many others.



Do we have any predictions of the path of S&P in the next 5 days… based on the past 16 years, looking at the most similar moves over the last two days, I see Monday up. But perhaps a terrible decline along the road.

Alan Millhone writes: 

Dear Chair,

Is the failure of Obama care and concerns on its bailout making folks jittery ?



Ralph Vince writes: 

I don't know if it is something that conscious, Alan, but surely, whether one alludes to it as success or failure, there IS some economic impact to higher premiums, to the socialization of anything. In this instance, the bigger question, is given that there must be some diminishment in economic activity as a result of this "law," (and if that were not the case, it would be fully implemented at present rather than piecemeal) my concern is what kind of a multiplier effect is there on this across other sectors of the economy.

This, coupled with 10 billion/month less in pumping, and there is a drag out there that was not there 120 days ago. The extent of that drag remains to be seen.

Alan Millhone writes: 

I feel the drag will turn into a good dragging.

The 10B was a poor band aid to cover a deepening economic wound.

I see a big increase of street people walking thru my town. I see increased numbers of people using the Cash lands in my town. I see more U hauls on the road

My local banker CEO says last year he had more charge offs since he has been there. He also says delinquent payments are up considerably.

A local bank is closings its three local locations and basically all employees lost their jobs. Huntington Bank bought the bank.

I have rental property and renters overall having a rough time.

My gut tells me bad times ahead.

Ralph Vince writes:

My GDP models have me expecting the next leg down to be considerably worse than 2008. This is very disturbing to me.I won't delve into obamacare yet.

Anatoly Veltman writes: 

Funny you should say that, Ralph. I haven't taken a position in many years; but it's crazy how charting can work within some minds. When she started coming off the 2009 bottom, I had a conversation with a friend in front of a live but very long-term chart. Looking at it, I explained that penetrating the 2002 bottom by substantial amount, the SP chart has sustained significant damage. At the time, I could confidently state that the 666 low will one day brake. Alas, I added, the chart is imminently Bullish — so I will not be assuming a Short any time soon. Next question was: "How Bullish is it?" And I had to shake my head: "Possibly, new record first…" Well (I was deservingly told), you're no help Anatoly.

For full disclosure: I have since changed my mind about breaking the 666. The sole reason for my change of heart is my belief that by the time that were to come around, the measuring unit (the USD) will not have nearly the purchasing power of 2009. So in real terms, I'm holding to my speculation; but not in nominal terms. To complicate things, the lower we may go right now, the less Bearish I will become. I really prefer to be Bearish at records - and it's harder for me to believe the top is in place when the move down is already in progress. Kinda opposite to Chair's weekend topic…But when Rocky was forced and announced his market call earlier in January — I was forced into seconding him instantly. Partly because we all knew that profit takers will not act out before January, for tax reasons.

David Lillienfeld writes:

I came across some notes I made last year about an interview with Leon Cooperman. Cooperman was commenting about having taken a large position either in student loan bonds. When he was asked about the increase in student debt, the problems graduates are having finding jobs, the lack of much increase in wages, and so on, all of which suggest a coming default, Cooperman just smiled and commented that the bonds were likely to paid off at par by the US government should they default and that he looked at them as being low risk at worst. Last time I looked, student debt was north of 1 trillion, and I think it may be up at 1.3 trillion by now. I don't hear many talking about student debt as the underbelly of the economy these days, but it seems to me that there's a storm brewing there. How long would it take for a default on the first tranche or two of those loans to spook investors?



It is interesting to note that the spu have been down 7 days in a row open to close. Such an event has only occurred 8 times in this century. vic



 We've had some interesting discussions during the past couple of money about power and energy, including some about renewables. So I thought it was interesting to open my NYTimes this morning and see this interesting piece about some differences among conservatives about renewable energy and its economic impacts and underpinnings.

It seems that there is now Green Tea, a reference to Tea Parties given favorably towards renewables. (I guess with caps is one thing and without is another.) No one has talked about BlackTea, as yet, but maybe that's yet to come. What exactly it would mean is well beyond me. There's Texas Tea, which I learned from the Beverly Hillbillies (hey, I was 6 years old—the indiscretions of youth) is oil. There's Mr. Tea, who is either an actor or a device to make tea perfected by Father Guido Sarducci (nee Don Novello) and demonstrated on an SNL appearance (it was pre-Billy Mays, so it wasn't a big seller, I guess).

There are many themes that we’ve been talking about on this site for the last few months that seem to be playing out, based on this article. Couple it with some suggestions that the solar industry may be the next battlefield in the economic war now in its early stages between the US and China (—at least it seems to be early stages. Maybe it’s later along than that, and one has the sense that renewables are clearly ascending in their visibility in American daily life.



 Tennis talk is a common theme on this site, one the chair himself often engages in, and we often do so with an eye towards market parallels.

Yesterday, at the Australian open Nadal beat Federer (commonly thought of these days as the greatest player of all time, but who is now 32 years old, extremely old for a professional tennis player at that level) in straight sets 7-6, 6-3, 6-3 I believe.

At one time, this was a great rivalry, but it was quite evident yesterday that Federer may not quite be what he was a few years ago.

Craig's reference was to the notion that perhaps Federer should have hung it up rather than embarrassing himself. My reference was to Nadal, who, with a dozen or so major victories to his credit, out to be conscious of an exit date for himself, rather than the pathetic decline we see with so many athletes, who so often seem to be the last to see it in themselves.

Perhaps Mr. Manning (who, in my mind is the greatest quarterback I've ever seen) should certainly make net Sunday be his last pro game, win or lose.

That's another of my two cents now I am broke like the Ex Governor of Virginia.

Craig Mee writes: 

The fed deserved the very best after his career and being the absolute gentlemen he is, he took the risk of playing on and having his name tarnished by a defeat like he saw Friday. He was comprehensively outplayed and was at a loss for words really in the post match interview. It is unfortunate some will view this as oranges and oranges. I give credit to him for pushing his limits, but now the tougher question arises of whether to hang up his racquet now or play on for potential further pain. Ralph is quite correct. As for market parallels, it makes me think about when to give a strategy away after it being successful for years.



 One is firmly convinced that the quantitative approach can add much info during crises and during non crises. I have posed 50 queries to the world of statistics about the current decline, and the answers to me appear helpful. For example, Mr. Vince asked if there is dependency in the durations or waiting times until big declines. An answer from this century after 105 trading days when the market had shown a daily change -5000 < market < -30 point the average duration to the next decline of more than 30 points was 37 days. The average duration goes up continuously. When 10 days have elapsed without a 30 point daily decline, the duration to the next one is 57 days. There were 53 occurrences when exactly 10 days had elapsed without a 30 point daily decline after a 30 point daily decline, the chances of a 30 point decline the next day, called the hazard rate, i.e. the chance of dying in medical terms is 9/107. The hazard rate falls to 3.5 % after 10 days have elapsed without such a decline. Thus, we answer Mr. Vince's query.



 One always likes to see the delphic predictions. After a market has fallen 5 % or so, a market writer will say "temporary top is in". The latest one is DeWayne Reeves an award winner. Yes, of course by random numbers it will take about 100 days. Has to be true.

Anatoly Veltman writes:

These things are different for people who must have a short or long position every day, or people who must only invest for great many years and only selectively divest at times.

I think the real question is by what percentage has the market risen (or at what rate) within the current up cycle vs. the current economic forecast vs. after-tax attraction of alternative investments. If that rate has been too fast (which I speculate), then the market may not gain in 100 or even 1500 days from here. The other matter is foreseeable drawdown, which might simply relieve one of any stake. Who can estimate the coming drag? I think the world has been subjected to more than it's regular doze of mismanagement for just enough time to teeter on the brink of critical mass, debt-wise and moral hazard-wise. So I can't exclude that we're in uncharted territory. I continue to hold opinion that so many years of ZIRP will effect the inflation/deflation perceptions in ways that were never experienced by policy makers before. Thus, I'm afraid that years and decades of markets stats have been poisoned for market application directly ahead. But of course everyone will bet in accordance to their agenda - and not every participant is in it to make money. For example, gold bugs are in it for what they believe is a strive for own freedom. There is a lot of currency uncertainty around the world; I speculate that USD will prevail, but many speculate that technology outpaced the regulators - and that alternative currencies will proliferate. Again, unprecedented.

Ralph Vince writes:

Anatoly raises an interesting point, one I have been thinking about as well: Zirp has changed our models, not just the models we are using to gauge today's market, but models in the foreseeable future will be created on data that has been zirp-perverted (and pump-perverted as well).

For example, if 90 day rates were, say, 4%, and the 3 which is currently around 3.62x%, that inversion would certainly be ominous. But we don;t get to see it. For many years, many equities models were driven in large part by rates (because, if modeled, one would have seen back then the very driving force of rates) one of the more famous and widely-followed "in the day" was that of Abby Joseph Cohen.

Zirp-n-pump has perverted these things, and the effect leaches into many other indicators I suspect (breadth, momentum, etc). I find these days we are relying far more on measures of sentiment (which is mercurial in quantification at best) and trend persistence than in the past (who, in their right mind, would have relied on trend following on equities indexes in the past? That was simply a very bad way to go, "back in the day").



SPY lost 2.5% last week. It has been 23 weeks since it dropped more than 2%. From 1993-present, checked for weeks down more than 2%, and the wait time (in weeks) between such drops. Then checked return of the following weeks.

First here are mean return weeks after 2+% drops regardless of wait times:

One-Sample T: nxt wk

Test of mu = 0 vs not = 0

Variable    N      Mean     StDev   SE Mean          95% CI            T

nxt wk    151  0.0020   0.0400  0.0032  (-0.0044, 0.0084)          0.62

Mean up 0.2% with SD of 4%

Here are mean returns of weeks after 2+% drops, for waits between such
drops longer than 20 weeks:

One-Sample T: nxt>20

Test of mu = 0 vs not = 0

Variable   N       Mean     StDev   SE Mean          95% CI             T
nxt>20    12  -0.0021  0.0192  0.0055  (-0.0143, 0.0101)       -0.38

>>Down -0.2% with about half the volatility: SD = 1.9%

(volatility clusters).

This is consistent with the sign of slope coefficient for regression of
next week's return vs wait time (though NS):

Regression Analysis: nxt versus wait_1

The regression equation is
nxt = 0.00240 - 0.000071 wait_1

Predictor        Coef    SE Coef      T      P
Constant     0.002405   0.004269   0.56  0.574
wait_1     -0.0000706  0.0003814  -0.19  0.853

S = 0.0403364   R-Sq = 0.0%   R-Sq(adj) = 0.0%

>> rather than waste time on analysis it is easier to just wait for Rocky's calls.



 "In so far as the statements of mathematics refer to reality, they are uncertain; and in so far that they are certain, they do not refer to reality." - Einstein (1921) "Geometry and Experience"

"In so far as a scientific statement speaks about reality, it must be falsifiable; and in so far as it is not falsifiable, it does not speak about reality." - Popper (1933) The two basic problems of the theory of knowledge

At the end of his life Popper wrote this: What impressed me most was Einstein's own clear statement that he would regard his theory as untenable if it should fail in certain tests. … Thus I arrived, by the end of 1919, at the conclusion that the scientific attitude was the critical attitude, which did not look for verifications but for crucial tests; tests which could refute the theory tested, though they could never establish it."

Or, as Einstein himself put it,"A theory can thus be recognized as erroneous [unrichtig] if there is a logical error in its deductions, or as incorrect [unzutreffend] if a fact is not in agreement with its consequences. But the truth of a theory can never be proven. For one never knows that even in the future no experience will be encountered which contradicts its consequences; and still other systems of thought are always conceivable which are capable of joining together the same given facts." - Induction and Deduction in Physics

The difficulty for those of us who indulge in a taste for political economy is that almost all the "facts" are inductive constructs, whether from surveys or government statistics. We are tempted to find empiricism where there is none and to find insights in tautologies. As Popper himself once put it, it is not philosophically legitimate "when prices of goods fall throughout the economic system, to ask whether 'in reality' the value of money has increased or the value of the goods has decreased." On the other hand, as the pros and talented amateurs on the list have both observed and proven, there is a great deal of money to be made in having the supreme lenders come flex their muscles in your financial gym while pondering the deep questions about inflation and deflation.



SPY 20 day range (defined as 20 day intra high - 20 day intra low ) / (Avg(20 day intra high, 20 day intra low) printing a value of 1.97% = (184.94-181.34)*100/(184.94+181.34)/2

Not many instances since 1993.

Paolo Pezzutti asked:

Kora, what are the implications from a practical perspective?

Kora Reddy replied:

12/13 times SPY (for interleaving trade samples) closed higher 20 days later, but the sample size is too low to make a bullish bet.

3/4 times for the non-interleaving samples, SPY closed higher …

12/13 times SPY closed higher than the current close in the next five days at some point of time ( i.e first profitable exit, otherwise exit at fifth day at close.)

Kim Zussman expands:

Dividing SPY into non-overlapping 20 day periods (counting back from 1/22/14 to 1993), I checked for Kora's low range periods.

Range = 20D HI / 20D Low
The most recent range appears to be the lowest in the series, 1.0198 (1.98%)
There were 11 other instances of 20D range <3%; and the next 20D appears to be very bullish:
One-Sample T: nxt 20d ret
Test of mu = 0 vs not = 0
Variable N Mean StDev SE Mean 95% CI T nxt 20d ret 11 0.0146 0.0161 0.0048 (0.0038, 0.0255) 3.02
Here are the instances:
Date H/L nxt 20d ret
04/07/06 1.023 0.022
12/16/93 1.023 0.023
04/08/13 1.024 0.036
08/18/05 1.024 0.015
07/27/93 1.024 0.028
01/14/94 1.026 -0.005
06/22/05 1.026 0.009
12/20/13 1.026 0.015
01/25/07 1.027 0.021
10/12/95 1.029 0.019
04/01/93 1.029 -0.022
avg 1.025 0.015



 I dreamed that a Sage invited me to Nebraska to play racketball with him. We dined at a McDonalds with Bill Gross and Abraham Briloff. Cherry Coke was served by a very attractive 28 year old woman who was recently appointed the chair of three big companies. Gross immediately said, "My batteries are fully charged and I'm ready to go for another 40 years." The Sage said, "I am ready to complete a super charged acquisition. My gun is loaded." "Apparently neither of us need Viagra. But we've both had our problems with our key men recently." Briloff gave both men a copy of his book "Unaccountable Accounting" and said "please don't fool around with the deferred liabilities on your balance sheet. The Scott and Fetzer acquisition should have been a lesson. The cash flow statement and the income statement show too much of a divergence". The woman led the blind Mr. Briloff to a waiting bus to the airport. I joined him without getting to play a game.

Vince Fulco writes:

On a related note, here's a nice little bit of research and tutorial for the fundamentally inclined.

The Misrepresentation of Earnings:

On earnings misrepresentation, CFOs believe that in any given period a remarkable 20% of firms intentionally distort earnings, even though they are adhering to generally accepted accounting principles. The economic magnitude of the misrepresentation is large, averaging about 10% of reported earnings. While most misrepresentation involves earnings overstatement, interestingly, one third of the firms that are misrepresenting performance are low-balling their earnings or reversing a prior intentional overstatement. Finally, CFOs provide a list of red flags that can be used to detect earnings misrepresentation.

Related paper: "Earnings Quality: Evidence from the Field"

Teaching Presentation Slides: "A Guide to Earnings Quality"




I have been thinking about trying to use the 5 Whys Method to analyze trading errors on my account (and then check the "images" tab for actual users' examples).

But the exogenous events (Black Swans, terrorist actions, bad actors with undesirable or stupid agendas, etc) that are beyond a small investor's control, for example: Das Fed; China changing its economic or monetary policies seemingly at whim; whale trading errors; etc., leads me to think that without either (1) an ultra conservative approach that isn't going to yield much investment return, and/or (2) insurance like put-call strategies that I admittedly know little about, a simplistic equation might look like this:

P = G + D *a * b,        or    [1]
P = G + D * e              

P = investment profit
G = growth of investment
D = dividends (if applicable)
(a) likely risks I know about that are possibly going to occur, and
(b) unknown risks I don't know about that might or might not occur
(a) and (b) collectively = e … an acceptable amount of uncertainty ("Implementing Six Sigma" by Breyfogle III, 2nd ed, Wiley, page 1029)

roughly translates to:

Investment Profit = growth of investment share price + dividends if applicable * risks I know about that are possibly going to occur (beta-likely things) * unknown risks I don't know about that are possibly going to occur (exogenous things)

I view these 'e' uncertainties of the market/s as gravitational-like-affecting forces, similar to a planet (the Market) and its multiple 'e' moons affecting the planet tides. Then, if one doesn't know the orbits of the moons (see 'a' above) and/or their respective orbits are random / erratic (see 'b' above), the 'e' effects exert influences that push and pull the market.  Sometimes the direction is good, sometimes not. 

Which all reminds me of the Chair's recent Lotak Volterra equations information, and a lecture during a university optimization class where Dr. Pugh (Indiana-Purdue Fort Wayne chair of Engineering Technology Dept) went through a very similar discussion about "Why Things that are Normally Stable Suddenly Change".  He was diagramming essentially identical graphs using Hare and Fox populations.

Leo Jia writes:

Why 5 whys?

Welcome to the list, Rich.



 Although I do not post regularly on the Spec-List, I do regularly read many of the postings and conversation threads on this site. I have purposefully placed myself on radio-silence/posting-probation due to just plain financial ignorance, and more importantly, that I have found that I learn much more from people who are more knowledgeable/intelligent than I if I am in learn mode vs. expositional mode.

Part of this problem is my area/s of expertise is manufacturing engineering, quality engineering, six sigma methods (I am a SS Black Belt in my day job, designer of 20 successful experiments, self-taught in Evolutionary Operations, Sequential Simplex Optimization, and Theory of Constraints, blah-blah-blah), and Toyota Production System (TPS) and lean production systems, all of which have almost nothing to do with investing/finance. In the former, I am near the top of the heap as far as successful project implementation goes compared to former co-workers. But I continually pursue auto-didactic improvement.

A few examples would serve to speak to this. At a recent job, I was instrumental in lowering PPM (parts per million defects) from 7.4 to 3.8 in slightly more than one year (that translates to the facilities' production of 21 million assemblies and only making 80 defects, or 0.00000381% defect rate). I didn't do all of it myself, but worked on greater than 70% of it. At another position, I implemented a Kanban system that saved greater than $50k in first month it was used and reduced WIP (Work In Process) by 16.2% in $$$ saved terms and reduced % of WIP by 67%, 55% and 11% respectively in the three areas it was used; then followed that up by fixing their clearly non-functional 5S program in less than three weeks.

Again, these examples are not trivia in standard manufacturing environs, but not relevant sometimes for Spec-List postings and conversations. I have asked a few folks (read: local friends) to apply for ~LIST Membership, to no avail. Personally I recognize the benefit of the SPEC-LIST, and OPEN-LIST for my erudition. I think the friends read portions of the daily speculations website and got scared off. It is such a wealth of knowledge, even though many NFW items never get there. Try as I might, these non-LIST friends do not get the joke, and they're worse off because of those insular mental restraints, and I've told a few of them just that.

~LIST membership places one in a group of extraordinary and obviously gifted individuals. Yet some people wouldn't know a gold mine if they were led there by the nose.

Just a personal comment: The TV shows, "How It's Made", and "Ultimate Factories" are the best entertainment available.

Best regards,

Richard Bubb



 From a shareholders' perspective, Solar City Corp (SCTY) could be a disaster. My concern is the company's future is not in Musk's control. States will likely change their energy policies. If those policies go the wrong way, SCTY's shareholders could be left holding the bag. The odds of those policies hurting SCTY are significant.

SCTY discloses risks in their 10-K. Everything seems proper. However, it seems to me the sizzle, Musk's name, the linking of SCTY to TSLA and such could be distorting the public's perception. That perception and other forces have inflated the company's market cap to unwarranted levels. The present value of their future leveraged cash flows is nowhere near their market cap of $6.5 billion.

On the other hand, if Musk can navigate some tricky turns, SCTY could become another Google.

Henry Gifford writes: 

Any analysis of the industry cannot be complete without looking at the economics of the products the industry produces.

I have found that solar electric systems have an ATR of about 20. The ATR is the actual payback divided by the average claimed payback (Average Truth Ratio).

The financial return from solar electric panels can be calculated in a fairly straightforward way.

Systems now cost approximately $7.00 per Watt. That is the price including panels, other parts, and installation, according to Sharp USA, claimed to be the largest or near-largest supplier in the US.

A Watt is a rate, not a quantity. The rate of one Watt of capacity is at noon for an ideal installation. This brings up the question of how many noon-equivelant Watts of power a system will make in a year. The answer, in the 48 states, is about 1,150 to 1,200. The variation is not as great as one might expect, partly because the sunnier locations are hotter, and panels do not work well in the heat.

Producing electricty at the rate of one Watt for 1,200 hours yields a quantity of electricity called 1,200 Watt-Hours.

The numbers above are for DC (Direct current, like a flashlight battery with a + and - terminal) producted by the panel. There are losses when converting to AC (Alternating Current, as used in wall outlets) and in the wires, leaving perhaps 1,000 Watt-Hours per year. The utility companies call 1,000 Watt-Hours of electricity a KiloWatt-Hour.

As of a few years ago, the US average price of a KWH was $0.09 (nine cents). I do not know if it is higher or lower now, but I know it fluctuates.

To find the "simple payback," which is the years for the system to pay for itself, you divide the cost of the equipment and installation by the dollar value of electricity produced in one year. $7.00 divided by $0.09 yields a simple payback of 78 years.

Note that the panels start degrading they day they are installed, and have a useful life of 20 to 25 years. In other words, the payback period is three times the equipment life.

In places where electricy costs more, saytwice as much, or $0.18 (eighteen cents per KWH), the payback would be 39 years.

Note that my analysis is simplified, and a more sophisticated analysis would include the increasing price of electrictiy, while ignoring the future decreasing value of the money used to buy the equipment, which would make the payback unrealistically shorter, as the increasing price of electricity is a combination of the lowering of the value of the money and the expected increase in the value of the electricity.

And it is worth noting that this analysis does not apply to a typical installation, as a typical installation is not mounted at the optimin angle (latitude dgreees from horizontal) or oriented due south, and located where it is never shaded. Typical installations are not optimally angled or oriented, and are often at least partially shaded. Partial shade degrades the output from all the panels in a series, and can permanently damage the panels. With government "incentives" (something the ATM machine calls cash) ever increasing, it is common to mount panels verticaly (mounts are cheaper) where lower incidence of sunlight and increased reflection greatly decrease output, or horizontally, where increased reflection and increased dirtiness decrease output even more, and with disregard to azimuth (North-South orientation), even mounting them facing north on award winning buildings.

Therefore, from a financial standpoint, it is cear to me that the whole industry is a farce, just a taxpayer supported way of making a social statement while supporting many people highly skilled at filling out paperwork.

Solar thermal panels have, I think, a much more favorable ATR of about 10, but it is impossible to calculate the payback, because calculations require simulations of the amounts of hot water used and the times the water was used, and must make assumptions about the very common installation problems that in typical installations seriously reduce the useful production. But as solar thermal systems are usually not the recipients of tax money in nearly the same amount as solar electric, if at all, solar thermal systems are usually ignored in discussions of the solar industry.

If the price of either solar electric (PV) panels or solar thermal panels drops to zero, the economics of the industry would not change much, as the panels are about 1/3 the cost of a solar electric installation, and perhaps the same for a solar thermal installation.



 The recent plea by the Israeli defense minister (supposedly uttered in private) for Kerry to leave Israel alone coupled with a not particularly flattering characterization of him indicates the level of frustration with him in Israel. This Administration is engaged in nothing less than a deliberate attempt to destroy Israel if only they agree to the terms. Since the US supplies a lot of the spare parts and Israeli weapons, their pleas to agree to self-destruction are not gentle urgings of a misguided friend.

Even if you assume that Kerry is only confused and not malicious, he behaves like a drunk who is looking for his lost keys in the middle of the night under a lamppost, and when asked if he had lost them there replies that that's the only place where he can see anything. Nothing will get better for the US if Israel capitulates, so you have to ask yourself what his (and his masters') real motivation is.

David Lillienfeld writes: 

I see this as one more step in Israel's international re-alignment. Israeli forces were at one time dependent on French arms, until the French decided that selling arms to the Israelis brought more problems than it solved.

Stefan Jovanovich writes: 

David's comment about Israel's use of French military equipment deserves attention. For the decade following the first Suez crisis (1956) France was Israel's sole supplier of aircraft, tanks and naval vessels. During that time Israel was not by any means an "American ally". Eisenhower, who knew how utterly disastrous Korea had been and how weak the U.S. was strategically, wanted to avoid even the possibility of another European war (not exactly in America's best interests then or now), and the Suez crisis offered the United States an opportunity to be "on the same side" with the Soviets and all the anti-colonial member nations of the U.N. (He was also clever enough to know that the British, French and Israelis had utterly destroyed Egypt's military capabilities.) At the same time, it was very much in France's interests to have a foreign "customer" for its own armaments manufacturers, especially if DeGaulle's vision of France as a "third force" was to be achieved. The British came to the party much later, in the 1960s when they provided the Centurion tanks on which the Merkava was based.

All this is, by now, truly ancient history. The United States now has closer financial and technical ties with the IDF than with any other country's military, including those in NATO. (We are not sending Britain or France or Germany or Italy $5B a year in military aid, $4B of which returns to the U.S. for the purchase of American armaments.) I don't think enough attention is now given to how large a force Israel now has (I can understand why it is in their interest to be seen as David against Goliath, but in pure military terms that is far from the truth.) Israel now spends about $15B in its public military budget and (my estimate) another $5-$10B (not including U.S. aid) that is not publicly-disclosed; that puts it on a par with China, if you exclude the money that country spends on what is essentially a jobs program for its equivalent of our national guard.) Israel is the only country in the Middle East that has an independent launch capability. The other countries that can put heavy payloads into the air are Britain, Russia, U.S. France, S. Korea, Italy, Germany, China, India, Japan, Brazil and Ukraine. There is no evidence that any of these countries are eager to provide Iran, Palestine, Saudi Arabia or any other country in the region with free use of such a delivery system, given the fact that the Israeli's have an ICBM (the Jericho) with an 8,000 mile range.

It seems to me that Israeli politicians in control of the government have come to the same conclusion that Reagan did in 1983 when he established the JPMG and Sharon and Weinberger began having what the diplomats call "discussions". The Israeli governing coalition knows that there is absolutely no domestic political risk in ignoring completely the opposition voices of "moderation" (whatever that means); and there is a great deal of domestic political risk in actually doing anything to stop further settlement on the West Bank or reducing the recent Israeli arms build-up. The Europeans won't like it any more than they approved of Reagan's arms build-up; but there is nothing they can do about it. They no longer have the Soviets to fear as they did in the 1980s; but they also no longer have the actual armies that they had then. All they can do is join John Kerry in clucking.

To answer David's question: "No". Morgan did not lock people in a room. That is as much a fiction as the Protocols of the Elders of Zion. The dynamic was the opposite; the question for the meeting was who would be allowed to be in the room and who would be kept out. Everyone knew that the clearing house would resolve the panic just as it had earlier domestic ones. This was not a crisis of gold leaving the U.S. as it did in 1894-5 because people feared Americans would stop crucifying mankind on a cross of gold - i.e. paying its creditors in money rather than IOUs. The issue in the 1907 Morgan meeting was whether or not your paper would be among the notes accepted at par. My own "conspiracy theory" about the founding of the Federal Reserve is that the "good" people in favor of reform et. al. were appalled that the banks had been able to resolve the crisis without "help" (sic) from the government. Roosevelt was particularly infuriated; but the two-term tradition for American Presidents forced him to leave the White House before he and the Progressives could do anything about this monstrous exercise of the freedom of contract.



 I'm currently reading actor Michael Caine's autobiography What's It All About?.

He, of course, was in the movie Zulu, but the book overall is, I think, a very good rags to riches story with experiences cross-secting WWII, the class system in England, the Korean War, apartheid, and the movie business.

There are some interesting life lessons on persistence and dealing with desperation.

If you like biographies, I definitely recommend this one.



 While everyone fawns over Google's purchase of Nest, there's this little piece on whether the Nest thermostat might provide a means for the NSA (or someone else) to go snooping in your home. I'm not so sure that this purchase will work in Google's favor as much as one might have thought from all the hoopla. Google may learn some useful things from Nest, but trying to justify the purchase on that basis may be a stretch. This reminds me in some respects of Cisco's purchase of Stratacom back during the dot-com boom (you remember, when webvan was going to put Wegman's, Safeway, and Whole Foods out of business).



 WSJ today has an article that's critical of companies that do big share buybacks. It features quotes from Chanos, who says he's shorting some of the buyback companies. Much of it seems wrong to me.

HPQ is cited as an example of a buyback disaster — "if only" HPQ had just invested in real opportunities instead of those buybacks. I thought though that HPQ's problem wasn't the buybacks, but the high-priced acquisition of a software company that turned out to be fraudulent. Obviously they would have been much better of if they had used that $15 billion to buy back shares.

The main target of the article though is IBM, which seems like a particularly bad choice. IBM's earnings have grown by a factor of 3 over the last 10 years while its share count had dropped 35%. Furthermore, IBM is one of the few companies to have reduced its share count even during the 2008/2009 period–the count went 1385, 1339, and 1309 million in years 2007, 2008, 2009.

anonymous writes: 

I think your analysis is quantitatively accurate, but the typical bottoms-up analyst has a much shorter lookback period than you do, 5 years at most, and with good reason.

The fact of the matter is that IBM has had extremely low/negative "organic" revenue growth for several years. The CSFB analyst has made the most consistently cogent representation of this argument, and "FCF conversion attributable to shareholders" (FCF post-financing, post-M&A) has been ~70% of earnings and falling … and FCF conversion has deteriorated every year since 2009 as a fundamental analyst/PM myself (of internet stocks).

I would never use a lookback beyond the current management team, and probably 3 years or less. I suspect Chanos keeps an extremely close eye on FCF conversion combined with -ve organic revenue growth, and sees aggressive corporate buybacks within a rapidly deteriorating fundamental backdrop as a form of management corruption, in which management chooses to invest excess capital in juicing their own stock options, instead of reviving the company's longer term prospects. This is endemic of "blue chip" tech conglomerates that no longer know how to generate organic growth.

I am not quite as familiar with HPQ but i strongly suspect it's a similar thesis.  I was totally bewildered by Buffett's decision to load up on IBM in 2011 as were a lot of people who covered IBM. It violated every one of Buffett's own rules.

Side comment: since Chanos is compensated on "negative alpha" instead of absolute return (i.e. if the market is +20% and Chanos's short portfolio is only 10% against him, he is "up 10 percent on the year") he has the luxury of fighting these longer-term wars against these kinds of companies.  It's very hard to fight a stock that's buying back 10% of their float per year, which probably makes them more attractive to shorts who can take a longer view.

Gary Rogan writes: 

Stocks (or rather companies) that can't go organically but don't shrink are like perpetual bonds, but with an upside option in that someone can buy them for the cash flow. At the right P/E they can make a lot of sense.




 "(BSP) Novak Djokovic Upset by Wawrinka in Australian Open Quarter final"

Many market things in this one. But I like best that the last time Warinka played Djokovich he lost by a gnat's eyelash, and that was ephemeral. So this time the odds were 50-50 he would win. But even better than that, I like that Djokovic seems to be developing some character and sportsmanship as he ages.

Ralph Vince writes: 

I was watching it sans volume at the gym, and the IBM stats box kept popping up that ND had an 83% chance to win this match (not unlike many market "fights"). This 83% had me grinding, wondering, "How do they calculate that," etc. as any good systems guy or technician might.

But Jimmy Connors refers to tennis as "a fight where you are 90 feet away," and today's match comports to the notion I am constantly reminded of in life, that "In any fight, ANYthing can happen."



 One would recommend the movie Jack Ryan: Shadow Recruit to specs. It opens with Jack dozing on a mathematical economics book, and then shows scenes at the London School of Economics where he gets his PhD. He is shot over Afghanistan and joins the marines. He meets Keira Knightley, a budding Dr. Who he falls in love with. The story is not from Tom Clancy but made up. And it's eerily true. The Russians wish to create a combined financial and explosive crisis because they're upset about the price of oil. But Jack goes to Russia with some good footage on the highways, hotels, and restaurants there to uncover the plot. Keira, his girlfriend, has to seduce the Russian mastermind while he breaks into the office. She is very homely throughout the picture and there is no romantic interest except for the time she surprises him in his Russian hotel, where he drowns an assassin from Uganda, to make sure he's not cheating on her. The Company is very adept at siding Jack, and has the ability to instantly find the whereabouts of anyone two hops away from a terrorist of 12 years ago.

Nothing is realistic except for the combination of a financial attack in conjunction with the terrorist attack. Out of the clear blue sky I got bids on the way out of the money options in the week before 9-11. And in the previous week, the market looked like it was ready for a Oct 19, 1987 type swoon. It took a week to stabilize a bit before the denouement just as the Russians in the movie allowed the dollar to rise before planning to put the boom on it. There is nice footage of a trading floor, and romance is mingled with arbitrage. Apparently the PC thing is to blame it on the RUsshians rather than the cronies of the Master Terrorist who was so proud that he was able to cause so much havoc and killing with the expenditure of only a medium 6 figure amount.



Table below gives the odds.

–prediction accuracy (assumed to be the same in every game)
–odds of getting it are "1 in X "where X is shown in column 2)

50% 9.2E+18

60% 9.5E+13

66% 2.3E+11

75% 7.4E+07

80% 1.3E+06

90% 763

95% 25

(Example: if you're 95% accurate, then the probability of getting all 63 games correct is 0.95^(65) = .0394 = 1/25 )



For those who believe analogs are predictive: on January 9th the market closed at 1833. The next day it printed a top at 830 at 1842.50 Then it plunged to 1826.25 at 1150 and finally recovered until the close at 1837.50.

Yesterday the move was basically identical, not only as far as the dynamics of price during the day but also the levels touch are the same. The day before, the market closed at 1834.25. Yesterday, it printed a top at 950 at 1843. Then it plunged to 1826.25 at 1210 and finally recovered until the close at 1837.50

The outcome on Jan 13th was that the S&P fell to 1815 down about 22 pts.

We'll see what happens today.



One must remember that the purpose of markets is to take from the weak and give to the strong so they can pay for the infrastructure. The stop loss serves this purpose very well, as it gives to the strong who don't have to worry about losses, since they have unlimited capital available for example at a 1/4 fed funds rate, or diffused from customers after a 15 % sales cost. The stop loss is beautiful because it is sure to get elected. But it leaves the "mark" the "pigeon", the "sucker" with hope so he will come back to the game, and tell his friends that had he not been stopped out, he would have been a wealthy maaan.



 Many different assumptions concerning the carrying capacity of the population and the rate of growth of two competing species and their current positions lead to beautiful and predictable curves in the Lotka Volterra equations for the path they will take to equilibrium. Many of these curves are pictured in google images under Lotka Volterra. The mathematics behind them are covered in most excellent books like Mathematical Biology by J.D Murray. It is interesting to contemplate whether the moves of two markets that are similar to some of the positions of these curves might take a predictable path.

Shane James writes: 

Perhaps looking at one of the two markets as the 'prey' and one as the 'predator' is also helpful

The JPY and the Bonds come immediately to mind.



 Offer and withdrawal + crowd = volatility

"Police calm angry crowd at Wrexham's 99p Stores sale":

Police were called to a discount store to calm angry shoppers chasing 50p bargains in a closing down sale.

The 99p Stores in Wrexham was temporarily closed after crowds of shoppers flocked to a half-price sale which was advertised until 28 January.

However, many became angry and refused to leave when staff put prices back up to the full 99p price.

It has been reported the shop was due to shut because the lease was up but the sale ended when a lease was agreed.



Like the 5 minute mile, I'm wondering if upsets in the first 4 rounds of a tennis tournament create a greater instance of upsets in the back end, like Thomas the Tank Engine's "I think I can". If so, could this effect market pricing in the same way?



The problem with Short Interest is that the data from the exchanges tend to be out of date. Right now the latest data I have is from December 31. - A Reader.

There are at least 2 services that plug into the back ends of 100+ HF's and basically derive a short interest with a 3 day lag (the time it takes to settle a trade). 



Disabled people are 1 in 6 of the population but have spending power the same as gay folks who are 1 in 20. Both control only a quarter as much spending power as ethnic minorities who are 1 in 8. Ethnic minorities control almost a third of total UK expenditure.

All seems internally consistent and reasonable. Good to see the government has such a clean handle on the statistics.

"Why is the Disabled Pound Purple?":

The UK's 11.9 million disabled people are said to have disposable income collectively worth £80bn. Campaign groups regularly cite this figure and find it useful to remind businesses and politicians that disabled people are a sizeable economic force and should not be forgotten.

Black and ethnic minority spending power, £300bn - 12% of the population of the UK, according to the Institute of Practitioners in Advertising, IPA,

Consumer power of the gay community, £70bn to £81bn - thought to be 6% of the UK, according to OutNow Consulting, 2007.

Overall UK disposable income of its 25 million households plus non-profit sector, 1.078 trillion pounds, according to the Office for National Statistics, ONS, 2012



 Balancing time is one of the main issues I have both at work and in my spare time. I have to admit that I have devoted maybe too much energy to work and too much time has been subtracted to family, sports, friends and culture. Time that will never come back and that could have helped develop a more balanced view of life.

I am convinced that a balanced approach brings benefit to both your personal life and business. Workaholic lifestyles may often produce excellent results as your career progresses because of your own commitment, dedication and ambition. Family, cultural trips, sports, hobbies, and romance, however, nourish the mind and enlarge one's horizons and perspectives. Meeting people not directly linked to the professional environment provides possibilities of creative ideas and interdisciplinary solutions. Visiting places and understanding other cultures allow us to see issues from various and original perspectives enriching us with the right degree of flexibility and wisdom.

I am striving toward such an approach. However my time is divided between commitments at work that require full dedication. I work a 5 hours drive far from the family. My "unbalanced" approach is as follows: I spend almost 12 hours a day at work plus at least 4 hours a day studying material related to markets, trading and patterns from Monday to Friday. The weekend is fully dedicated to my girls and we go to the swimming pool, horse riding, playing tennis. We may go to the movies, visiting friends or just playing together. I do my best but I am also aware that being successful in all important areas of my life is quite difficult.

Moreover one should not also underestimate the importance of a satisfactory and fulfilling sentimental life which closes the circle. I believe that the journey is more important than anything else. Living the journey of life every day with enthusiasm and clear objectives is eventually what really matters to me.



Any time the other side knows your positions, you're in grave danger. That happens for most people in currencies and options and other markets run by people named doc. They know what your limits are, what your margins are, whether you've been good or bad, what your proclivities to go with or go against are.

The drastic moves to 530 EST to the gold and currency fixings without any volume in between show how a vacuum to do one in can develop. The situation in options is often worse as in addition to all the other problems, the people on the other side make the margins and have specials dispensations for themselves.



 I wonder if the new technology 4D Geoseis would have applications in other parts of the world and if rights can be obtained that might make it useful as a business idea. For instance, in South Florida I know of a underground utility search company that uses radar, metal detectors, and other devices to look for buried lines before you dig (this is normally a free service from the individual utility companies for the lines leading into your property) on your property that used to charge about $700/day to send a trained technician and equipment to your site.

In the middle of Florida there are several companies that locate sinkholes or potential sinkholes (ie. Karst solution features) under properties and charge significant fees.

So a service that delineates potential fracture zones in high definition before a building or structure is constructed would seem to be very useful or perhaps information that insurance companies would like to know in advance.

As a general analogy to markets one might ask about or think of the potential fault zones that could "reactivate" and cause seismic shifts that have been inactive and buried for many years.

"Hollywood developments straddle earthquake fault, new maps show"

Hollywood building



 The Palestine Exchange is difficult to understand. It's not a stretch to say that some of the companies listed could be gone in an instant. The exchange itself was set up to deal with such matters, but the listed companies, not so much.

The Tel Aviv Exchange isn't what it used to be (on lots of levels). It used to trade on rumor and there was a bit of insider trading back in the day. Previously, many Israeli companies would have listed on the TAE and then, maybe, migrated to the NASDAQ. Such a move was a big deal back then. I remember explaining to the members of one of the investment clubs that I ran back in the 90s that such a move was good. They thought that the move should have been to the Big Board. It was this smallish pharmaceutical company no one had heard of—Teva.

The interesting one is Saudi Arabia. Some of those stocks been sitting around like some of the Kenyan banks were 5 years ago. There's some good values to be unlocked there. On the other hand, valuing banks in Islamic countries is something I haven't yet mastered. Ditto for insurance. There are other exchanges too, not listed on this screen. Did you know there's an Iraqi exchange? I thought it a joke when a friend mentioned this to me last month. He claims that the returns have been pretty good. I think, though, it may be more like the Palestinian Exchange, where the company disappears physically rather than financially in an instant. Maybe by the end of February, I'll have finished a deep dive. It's not as though there can be that many companies to survey.



Of all the big stock rallies or market moves, which ones were centered on an encircling macro development that was able to sustain them for years to come? For example, is the push into internet based activity freeing up global trade and other undercurrents that are less obvious (3D printing) something which has to be taken into account when comparing price earnings and others now or at anytime, i.e shouldn't every separate movement be put into context of a valuation including up upward drift + economic drivers specific to this new distribution. 



 What are the major 3 body markets that orbit around each other in our solar market system and how do their epicyclic orbits relate to each other (in the future)?

Bill Rafter writes: 

I think the most important word in the Chair's sentence is "epicyclic", specifically because it is non-linear. Stocks specifically exhibit non-linear behavior, and seeming have forever. Bonds used to behave very linearly, but now behave similarly to stocks, although contrarily so. We have yet to find the defining characteristics of currency markets, but keep trying, hoping to find useful information relating to other markets. Gold is also a tough one, making one think it is a rigged game. REITS behave like a hybrid equity-debt vehicle. We tend to think of REITS as a free market version of the variable annuity (but without the huge vig).

Shane James writes: 

Arguably, and addressing prediction, the big 3 change regularly.

Simple stuff like the listing the biggest moves in X time periods is a useful, elementary starting point for cross market prediction.

Anton Johnson writes: 

Sadly, our system is unstable with the sub-stellar central mass consisting of the collective Central Banks. Orbiting, and sometimes consumed by, the central mass are the various financial instruments periodically switching in relative predominance as they accrete/disperse assets due to the actions of the brown dwarf.



 Just look at how they continued to reduce treasury holdings right into the crises. They were talking about complete collapse while shelving monetary policy and changing their approach to legislative. It reminds me of the HFT firms who provide large pools of liquidity, but unplugged their systems during the flash crash.

Dallas Fed President Richard Fisher said Tuesday he wanted the taper to be double the size it was — in other words, $20 billion instead of $10 billion. The Fed is still buying $75 billion worth of Treasurys- and mortgage-backed bonds each month. "But the important thing for me is that the committee began the process of slowing down the ballooning of our balance sheet, which at year-end exceeded $4 trillion. And we began-and I use that word deliberately, for we have more to do on this front-to clarify our intentions for managing the overnight money rate," he said in a speech to the National Association of Corporate Directors. Fisher, who this year is a voting member of the Federal Open Market Committee, stressed he would "not flinch" from continuing to reduce asset purchase even if a stock market correction were to ensue.




 Keynes is famous for writing "in the long-term we are all dead". Focusing on the long term may be important but ultimately is meaningless to the individual. He also wrote that for businesses planning the short-term is predictable, while the longer-term from year to year becomes random. For governments multiply this by many factors. Anything in a government budget beyond year t+3 is complete fiction. Wall street convictions say the opposite, that stocks are unpredictable in the short-term. In the long-term, however, stocks will enjoy an upward drift. Fischer Black wrote about this issue in his business cycle theory saying that firms attempt in the short-term to produce for future long-term demand. When they plan and execute well there is economic growth. When they plan and execute poorly there are recessions. The 2008 mismatch being a tremendous oversupply of housing and credit, for example.

In life and business, it is sounds more wise and mature to have long-term thinking, childish to think only of tomorrow. The Sage holds investments forever, yet the insurance premiums collected I am sure are tallied ever day. A Zen philosophers would say we should live in the moment, the extremely short-term. I agree with Fischer Black's thinking. It is good to embrace that the future is highly unpredictable and every decision we make involves time and uncertainty. I still work hard in the short-term towards long-term goals, but expect some variation along the way. The Yangtze has many twists and turns before reaching the sea; Fortes fortuna adiuuat.



 With apologies to "The Moody Blues"  (Nights in White Satin)

Fries dipped in statin,
Never reaching the end,
Burgers I'm eating
With a Lipitor blend.

Steaks grilled with Zocor,
Always hungry before,
Just what the foods are
I can't eat anymore?

'Cause I love them,
Yes, I love them,
Oh, how, I love them.

Gazing at omelets,
Altacor in my hand,
Just what I'm going thru
They can't understand.

Mevacor Ice Cream,
I have shared with a friend,
Cookies and Lescol
I will try in the end,

And I love them,
Yes, I love them,
Oh, how, I love them.
Oh, how, I love them.



 Since you're talking about PEs, I will crosspost this bit:

Listening to Ed Hyman on Wealthtrack. Hyman says he thinks 2013 was like 1996 and that the next few years may turn out to be like the late 90s, as in: +20%, then +30%, +27%, +20% - he specified those percentages - which would mean for the S&P:

year close
2013: 1848
2014: 2218
2015: 2883
2016: 3661
2017: 4394

If you also plug in the earnings growth %'s from the 1998-2000, you get these stats for the S&P:

year: earnings, pe
2013: 107.45, 17.2
2014: 116.60, 19.0
2015: 117.08, 24.6
2016: 136.67, 26.8
2017: 148.44, 29.6

Considering Ed Hyman's comparison to 1996, one can't help but think, "yes, but"…back then we were looking ahead at the interweb and all its spinoffs, and investors thought tech companies would post astonishing future earnings, resulting in the fact that in early 2000, the top 20 firms in the QQQ had a combined PE ratio of 83. The future looked bright.

In the current world, what big factors could drive up the market PE to something like 30, as in the previous post? Two things come to mind in the macro sense:

1. "Developing" countries, especially India and SE Asia, really loosen up the regs and start to take off at an even steeper rate of ascent. Global GDP follows and grows at twice its "normal" rate.

2. A period of serious inflation.

What else?

Gary Rogan writes: 

Being able to map this year on some other years for the purposes of predicting the next few years sounds like wishful thinking. Multi-decade returns from this point on are likely to be subdued because this is somewhere between a "fairly valued" and relatively expensive market. This means little in the next few years, which are relatively "short term" for this purpose, and nobody really knows whether trend following or trend reversals will predominate. And since a number of surprises that will affect the treasury rates are in store, some of which will depend on the actions of a few men and one women, these short-term guesses are likely to remain nothing but guesses. 



 1. The book Too Different For Comfort by Louis-Vincent Gave is one of the best melanges of theoretical and practical insights for investment that I have read. Every business school student should read it as an antidote and every investor should read it for ammunition.

2. The ephemeral drops in the stocks of individual companies from quantum events like earnings misses should be studied and generalized in a scientific fashion for investment and swing opportunities.

3. Smith has the worst record of any NBA player for + and - for long durations of play and has the worst character. Yet whenever the Knicks lose a game without him, there is a witch hunt for the coach. "You needed him to spark the third quarter". I agree that the problem is Anthony. How does a leader like him let a man party late into the night when the games are so crucial and his %s are so off.

4. I often find that at the hour itself like 1 pm exactly there are big moves like in the old days when traders had to hand in their cards on the hour. These moves often coincide with the finales of music on the radio. It's not change. The music has to end at the hour and the pieces have to have a climactic ending to heighten the listener's emotions.

5. Birinyi's book The Master Trader is an amazingly good compilation of money making techniques from a master trader.

6. Everyone talks about the end of gold because other things are so good. But gold has been a store of value for many thousands of years, and it's beautiful so whenever it has a big decline, and the expectations look good, I buy it. It has not been entirely futile

7. My books from the 19th century have the same complaints about flexions making a fortune from inside information from their cronies at the dept of the interior that we find so pervasive and maddening now.

 8. I am reading some books on differential and difference equations so I can better understand excellent books like Applied Probability Models by D. L Minh and of course the fantastic book Evolutionary Dynamics by Martin Nowak. Many of the techniques he analyzes to win the prisoner's dilemma game have direct applications to markets. The best math course for an budding quant investor to take is one in differential equations or difference equations rather than advanced calculus. I find the book Maths by Jenny Olive a useful bedside and long plane ride companion. I find that practicing one's integration is a great antidote for old man's disease.

9. Speaking of old man's disease, a certain sage's cash flow statement shows that his company regularly pays a cash service rate of 11% versus the accrued service rate of 38% on the earnings statements.

10. To what extent do companies that have a high sales per employee ratio and a higher % of revenues coming from activities related to the dept of the interior performance than the average?



 In the late 19th century, trolley and train service to Coney Island made it the premier amusement park in the world. Millions of people rode the vehicles for a nickel and it became a middle class retreat from the hot concrete and buildings of the city. Three race tracks held big stakes races, and two hotels with 800 suites (the Brighton Beach Hotel and Manhattan Beach Hotel) were opened to cater to those who wished to partake of the gambling and amusements. The hotels were still there when I lived, and like many old hotels of that era, like the Sagamoor and the Berkeley, they lived on until the depression before going belly up.

The boardwalk was built in early 20th century and the sides were lined with solariums and bath houses. Handball was played in each of the bath houses, and Artie was one of the best in the 30s. No equipment was needed and it fit the depression era.

 Artie was very handsome and was the pick up man for the girls walking on the boardwalk. But as he pointed out, he'd meet them and stop them, and then he'd have to turn them over to his friends because he never had a nickel for the coffee. I once had to admit when I was 30 and the National squash champ and supposedly a millionaire from my well publicized merger business that I couldn't go out for dinner with a friend because I couldn't afford it.

The teens played football on the sand in the winter at coney island. And Artie was very good at all aspects. But he got his nose broken 18 times because they didn't wear a helmet in those days, and he was younger and better than any of the players. He had his arm broken many times, and that ruined his handball game and he became a B+ player. But amazingly he could still hit the off the wall shot and pass a football like the old days.

His father Martie thought he was the greatest of all time in everything and when the coach at Brooklyn College dared to take him out of a football game for 5 minutes, he sent him a blistering letter which the coach read to all the players. He was called All American from that time.

 A day with Artie for me started at 8 am when we would drive to the tennis courts with our permits to sign up for a court. As we went there, Artie would bemoan that every car ahead of us was getting there first to sign up so we wouldn't get a court until noon. He had a group that he played doubles with, and he had the most perfect service swing I have ever seen, but he was not overly accurate. After the games, I would sneak in about 5 minutes of hitting the ball back over the net between games. But I preferred to watch the semi pro football and baseball games that they held at the big park.

I loved watching him play however, and eventually my uncle challenged me to a game of tennis. And I was able to beat him at 8 even though he was 5 years older than me, and a very good handball player already.

After the game, we would walk 10 blocks to get an iced watermelon from a stand and then walk to Nathans for some moo goo gai pan and a mazola-based french fries that they still use. Then we'd walk to the fenced off checker area on west 5th street, where I'd watch 100 checker players, including Tom Wiswell play games.

 Brooklyn has always had the best checker players, and people like Boland who weighed 500 pounds, would have their families save for them and finance them because they were geniuses. Many of the greats were gassed during the first world way and died. Now they still have the same fenced off area, but there is not one checker player left. They're all Russian chess players. Next to it they built a bandstand, and the last time I went there Franki Valli was playing before 50,000 for free. And I waited to hear him. But he didn't start until 1 am, and I left because I had to bring A. back to his mother.

West 5th street always had many handball hustle games going, and my uncle was the best player. He played dozens of money games against Stevie Sandler, who always had an angle whether stolen typewriters or a dumped game at his finger tips.

I played paddles there rather than concentrating on tennis as my parents begged me. And I became the best. I invited a honey to see me play in a tournament in my first year in college thinking that it would be a breeze. But my first round was against a Howie Hammer and to my chagrin he beat me 21-17.

I was a horse's ass in those days, very self centered, and absorbed with my great success and publicity in squash. I wish I had spent more time in reflection and learning. But people mistakenly thought later on that because I was so good at squash, that I could be good at trading. I wasn't and am still trying to improve and make up for the defects in my training and persona.



Think You Have It All? Not Without A Personal Poet On Retainer

Sure you made a jillion. Made it with a social media triumph that allows hordes of vacuous people to spend their days sharing pictures of their cats with millions of friends online. Or maybe with a brilliant derivative that destroyed the economic future of a small country in Europe.   You earned your jillions. And you bought all the boy toys that were supposed to make you happy. You’ve even begun the laundering process of this money by giving bits of it to environmental and cultural organizations, thereby earning the right to be endlessly surrounded by chirping Gaian groupies and anorexic graduates with fine arts degrees and meaningless titles at large museums, all seeking to glom even more from your bottomless pile.   But it’s not enough. Why? Because every Tom, Dick and Jane billionaire is doing the same — except Jane who bought a lot of girlie goodies instead of boy toys.   So now you’re thinking: Mike, how do I set myself apart from the billionaire herd? Here’s my answer: With a personal poet on retainer. Someone to elevate just another multi-million dollar wedding, christening or bas mitzvah into an event that will ring down the ages. And not only bring you this singular joy to which only great wealth is entitled, but memorable rhyming discomfort to your enemies as well. For the poet’s quill can sting like an arrow as well as happily tenderize like a good stool softener.   Interested? You betcha. But you’d best get in touch with me promptly. Before someone who hates you and has even more money gets to me first.  

Email to mike AT wallstreetpoet.com [replace _AT_ with @] . Serious inquiries only.

Wallstreetpoet's [Michael Silverstein's ]  newest book is The Devil's Dictionary Of WallStreet.



The man from Dallas is talking [13:20 EST 2014/01/14]. How about a fake decline when he provides a dose of free markets and questions the decline in velocity that the manipulation of the short term rate below the natural rate has caused. vic



What are the major 3 body markets that orbit around each other in our solar market system and how do their epicyclic orbits relate to each other ( in the future) ?

Alex Castaldo suggests:

I would say Stocks, Bonds and a commodity such as Gold or Crude (I am not sure which of these two). Crude is probably more closely related to the macro economy. 

Jeff Watson replies:

One must never underestimate the importance of the grains, which I would include in the 3. While they can be both cyclic and periodic, they do not observe Kepler's laws of planetary motion.

Bill Rafter adds:

IMO the most important word in the Chair's sentence is "epicyclic", specifically because it is non-linear. Stocks specifically exhibit non-linear behavior, and seeming have forever. Bonds used to behave very linearly, but now behave similarly to stocks, although contrarily so. We have yet to find the defining characteristics of currency markets, but keep trying, hoping to find useful information relating to other markets. Gold is also a tough one, making one think it is a rigged game. REITS [Real Estate Investment Trusts] behave like a hybrid equity-debt vehicle. We tend to think of REITS as a free market version of the variable annuity (but without the huge vig).

Duncan Coker wrote:

If the original three bodies are the sun, moon and earth. I believe the markets equivalents would be equities, bonds and the euro/$. Put another way they are ownership, credit and money. Unfortunately there are no Universal laws that govern their relationships, but there are relationships.

I just visited a planetarium yesterday and it is astonishing to see the really big picture. Elliptical patterns like the solar system planets follow are seen in many places.

David Lilienfeld wrote:

Equities, bonds, cash, gold: the permanent portfolio .

From Peter Saint-Andre:

You're both right.



On rare occasions one comes a person whose instinct in a specialized field (such as law, medicine or investments) is almost always right.

I saw this is law, where an older lawyer I knew would immediately point me to the right answer, even before the research had been done. I imagine this is also true of a doctor who at any early stage usually seems to have a feel for the right diagnosis (House?). Or an investor who can tell immediately that something sounds good, or bad.

But I also once knew a company general counsel whose instincts about legal questions was virtually always wrong. After privately making fun of the fellow for some time, it occurred to me this was equally valuable. All I had to do was ask his opinion and I could feel reasonably comfortable going the other way.

I see that Secretary Gates has much the same approach. In his new book he says (quite amazingly, so he must feel strongly about it) that Joe Biden has been wrong on virtually every military and national security issue for forty years. And when asked in a television interview broadcast today whether he went too far, Gates recounted the following anecdote:

"Mr. Gates said on one occasion, when driving back to the Pentagon, Adm. Michael Mullen, then chairman of the Joint Chiefs of Staff, noted that for once Mr. Gates and Mr. Biden had agreed on something in a meeting. Yeah, I said, that is why I am rethinking my position.”




Google Part 1: Framework (January 2, 2014).

Google Part 2: Google Goes Underwater (January 5, 2014).


I apologize. I realize an additional discussion is needed. Without understanding renewable energy, Google’s strategy may be difficult to understand. Unfortunately, renewable energy has acquired baggage in the media, some of which is undeserved. Nevertheless, that baggage clouds objective discussions about energy, environment and policy.

This part may disabuse some of their preconceived notions about renewable energy. It will describe markets few know exist. What may disrupt many is the prime mover is not the federal government.

Most renewable energy connects into the nation’s infrastructure at the distribution level. It is intrastate commerce. As such, most renewable energy is not regulated by the federal government. It is regulated by individual states.


Each state developed unique programs to create, market, and consume renewable energy. No two states have the same program. A renewable energy program in one state may be slightly different from a renewable energy program in a nearby state. In addition, states are reluctant to share renewable resources with one another.

While this may sound odd, most states’ objective is to force their constituents to consume renewable energy certificates. The consumer is generally unaware because most of the process is hidden, but not secret. The state’s energy service providers, not the consumer are the principals who are responsible to assure consumers receive and consume certificates. Motivating energy service providers (load serving entities or local distribution companies) are financial penalties should they fail to deliver enough certificates.

Some may wonder why states focus on certificates, not renewable energy. It turns out, states are interested in renewable energy per se, they are primarily interested in native-born renewable energy. Certificates are evidence that renewable energy consumed by state’s consumers was produced within the state.

In the future, this focus may change. However, there are practical reasons why states have a parochial view of renewable energy. One is jobs. They want new jobs associated with a state’s renewable energy program to remain within the state.

While jobs are important, states’ biggest driver is a concern over their natural capital. States are finding what was once plentiful is now in short supply.

Natural capital is air, land and water. For decades, states limited access to their natural capital through the permitting process. If a new business needs to dump their emissions into the water or air, they need a permit. If they need to dispose of waste products, they need a permit.

Up until recent times, permits were relatively easy to acquire. Governments, companies and individuals saw natural capital as a free economic good.

As populations and economies expanded, states’ natural capital became depleted. Concerned about oversaturating their native environment, states were forced to limit new permits. They found too much pollution was bad for their constituents, their politics and their economies.

In addition, constituents became more informed about chemicals in the air, land and water. As they learned more, they became more concerned. In addition, as medical technologies advanced, the connections between chemical exposures and health outcomes became better understood.

States can no longer issue new permits in or near counties that exceed health standards. They cannot issue permits in or near counties that are nearing those limits. States should not want to issue new permits that will cause neighboring states to incur liabilities.

There is a good reason why states should be concerned about neighbors. Encroached states have and will sue other states. One such case is currently pending at the Supreme Court (http://tinyurl.com/l3wxx8k). This issue is about cross-border pollution. Specifically, the air in some states may meet environmental standards. However, pollutants from their power plants and refineries drift across state lines, preventing neighboring states from meeting their obligations.

No matter how the Court decides, states’ problems will persist. While they have a wide range of options, most will use a smart combination of renewable energy and the newly formed power markets. That combination will automatically displace some of the state’s bad actors.


Here is how it works. It turns out; everything appears correlated. The most polluting sources of energy are typically the most inefficient sources. Inefficient facilities are gas-guzzlers; they require large amounts of fuel to produce small amounts of power. That combination causes them to be technically and economically inefficient. They become economically inefficient because they consume large amounts of fuel to produce small amounts of power. If they consume large amounts of fuel to produce small amounts of power, they must also generate more pollution per unit of energy.

The numbers are huge. In fact, a typical power plant’s primary product is waste. Its secondary product is energy. Incredibly, modern coal and nuclear plants waste 70 to 75 percent of the fuel they use to produce electricity. These are considered the nation’s most efficient plants. Older coal and gas plants can waste up to 90 percent. That difference has to go somewhere. A lot is lost to waste heat. In the case of coal and natural gas, a lot is physical waste. Most of that physical waste consumes the state’s natural capital.

Pollution and efficiency are correlated. Environmentally inefficient plants have high production costs. Therefore, another correlation appears. Environmentally efficient plants tend to be cost leaders. Cost leaders always win in the nation’s power markets.

Many confuse production costs with levelized costs. Levelized costs were important in the old scheme, where utility assets were regulated. Power markets do not care about capital, overhead or other fixed costs. All they care about is the direct costs needed to produce the product, or the unit’s production costs.

This may help explain why investors are interested in renewable energy assets. Renewable energy is a clean source of power and it has very low production costs. In fact, the production cost to produce power from a solar panel or a wind turbine is near zero. That means renewable energy’s gross margins are the highest in the market.

Here is a trick that investors, policymakers and consumers love. Whenever a wind plant or a solar panel produces power, it will always become the market’s cost leader. As cost leaders, solar and wind power will always displace the most expensive producer. As mentioned discussed, the most expensive producer is usually the market’s most polluting producer. Consequently, when dispatched, renewable energy not only reduces market-clearing prices, it reduces pollution at the same time.

Think about this from point of view of the state. If the state offers investors incentives, the state and its constituents will see immediate returns. Those incentives will cause the power market to deliver lower wholesale energy costs. The market will sideline the worst actors in the market, giving the state cleaner air, water and land. The state should see increased economic activity. The state should have happier and healthier constituents. The state will also avoid costly lawsuits from neighboring states.

In fact, the net costs of the state’s renewable energy credits could be zero. It could even be negative. One point is certain; the net cost of renewable energy certificates has been overblown.

As more states think about the possibilities, they are more likely to consider options that include renewable energy. However, each state has unique needs and requirements.

The nation is in the early phases of renewable energy. Huge amounts are already planned. Because the programs are young, it is not a surprise each state might take a slightly different approach. Nevertheless, most states have been using a common feature of renewable energy certificates.

Renewable energy certificates are fungible derivatives of various sources of renewable energy. One big difference between states is their portfolio. Some states prefer more wind. Others prefer other renewable sources. Many really prefer solar.


Some states carve out special certificates. A favorite for 16 states and the District is a special carve out is for solar power (other states offer additional incentives). These certificates are commonly called solar renewable energy credits, or SRECs.

There is a practical reason why states prefer solar. It is about another correlation. It turns out a state’s economic activity is roughly correlated to the sun’s position. As the sun rises and sets, the state’s economic activity rises and sets. As economic activity increases, so does demand for power. Since the sun’s position is directly correlated to solar power production, solar power production is naturally correlated to daily demand curves, making solar a natural peaking asset.

Historically, peaking generators are the least efficient power plants in the fleet. While their capital costs are low, their production costs are high. When dispatched, they set [high] market-clearing prices. They are also the nastiest units when it comes to environmental impact.

If solar is naturally correlated to the grid’s need to dispatch peaking units, solar ends up displacing the dirtiest of plants. Solar also displaces the most costly of plants. Thus, solar power shaves off market-clearing prices while it cleans the air. As wholesale market clearing prices drop, so do consumers’ retail prices for electricity.

When it comes to solar, it seems everything is correlated. The state wins. The economy wins. Consumers win. The environment wins. Taxpayers win. That is the point of view of states. It is an important point of view because they, not the federal government, control the playing field.

Of course, there are losers. Solar has a significant impact on oil, coal, nuclear and natural gas units. By shaving of market-clearing prices, solar reduces gross margins for all market participants. For the marginal generators, solar removes revenues.


There are no federal programs, which create, manage or regulate renewable energy certificates (credits or tags). There have been Congressional attempts to create a national standard. There have been Congressional attempts to create a national product. However, all attempts failed.

What did not fail was Congress’ desire for federal facilities to mimic state programs. Under Section 203 of the Energy Policy Act of 2005 (42 USC 15852), Congress requires federal agencies to use renewable energy as part of their supply of electricity. Each year, the Act ( http://tinyurl.com/7r3l3ct) increased the amount of renewable energy needed by federal agencies until fiscal year 2013. At that point, most agencies were required by statute to use a minimum of 7.5 percent renewable energy. On average, the executive branch met the mandate on time.

At this point, the federal program could seem a little confusing. If no national renewable energy credits exist, if no national standards exist and all states offer different programs, how does the federal government buy renewable energy? The answer is they do it badly.

Good or bad, the federal government is in a pickle. Federal agencies, including the Department of Defense, are reluctant to transgress on states’ environmental policies. As such, most agencies will go to great lengths to avoid adding new pollutants to states’ air, land and water resources.

On a macro basis, it appears the nation is using up natural capital. As populations and economies expand, there is less room for new pollution sources. If the federal government or any other outsider pollutes a host state, arguments will flow. It is about money. It is about local economies. It is about states’ rights.


Google understands the big picture and regional pictures. Their energy strategy is about energy markets and infrastructure. However, their primary focus is connecting their use of energy use with company infrastructure.

As will be discussed in the next part, Google will become renewable energy’s biggest winner. While it will take years to complete, Google is quietly building a competitive advantage. Google's competitors may find this advantage difficult to beat. Better, Google is creating a barrier to entry that some competitors cannot overcome.



Pam from the Princeton Review Is giving us a very hard question today [2014/01/13] in the market. She has quit her job at the Princeton Review and now is in charge of befuddling market participants.

The spu has been up 4 days in a row. Yet it is lower than it was 9 days ago. Ha. Happens only once in the Good One's death, — not since 2008, previous one in 2004.



At least in terms of small cap, the recent ratio of growth to value is subdued compared to 2000-02. Attached is ratio of small cap growth ETF to small cap value ETF (IWO/IWN).



We have been having rather tame volume. Birinyi's studies show that monthly declines in volume for the averages are bearish as of 2010ish. It would be interesting to update this, and to see if there is a seasonal tendency for volume to decline in Jan. Regardless, the forces that specialize in unleashing weaks from their trades will have to come up with something very volatile shortly to ply their trade.

Bill Rafter adds:

For decades our research shop has studied volume data, and almost all of that was a waste. Most of the fruitless effort was in trying to find significance in volume-weighted price changes. We also attempted to find useful seasonality in volume. Again, no happiness. Yes, there is a significant drop in volume between Christmas and New Year’s, but knowing that will not make you money. However we have learned and now use relative volume alone as one of our major indicators for buying both indices and individual equities.

What we found useful (and very much so) was that the best volume period to be considered depended upon whatever price history was relevant. This should not be shocking. For example, why would you look at monthly averages of volume if the financial world was upended only 10 days ago, or 70 days ago? Anyone averaging data over say a month, 50 or 200 days will be hard-pressed to find significance. This creates an interesting feedback loop in that we use volume to predict future price, but we use past price to tell us what volume data to use. Reminds one of Alice in Wonderland.

We found a similar parallel in analyzing intra-day data. Again, decades ago I came up with an idea for using intra-day vectors of O, H, L, and C to identify the future path inter-day. (I have previously posted information on it here.) It seemed so mathematically elegant that it had to work, but of course did not. And I gave up on it probably about 10 years ago, before I learned how to adapt periods under review. Recently I remembered the old work and tried it all over again with newfound success.



It's fairly well known that Value Line's Ranking System hasn't been working all that well over the past decade, but a separate question is how reliable are Value Line's self-reported performance numbers, and how achievable they are in live trading. It's easier now to answer that question because since 2004, there has existed an etf, ticker FVL, that holds the 100 rank 1 Value Line stocks, equal weighted, with quarterly re-balancing.

The table below gives the annual returns of FVL (taken from Morningstar), along with the returns of rank-1 stocks as reported by Value Line. Value Line reports the results for both "allowing changes each week" and for "allowing annual changes", and these two options are shown in separate columns. Because FVL re-balances quarterly, it can't be expected to match either of these two options exactly.

The table shows that FVL is tracked reasonably closely with both of Value Line's self-reported performance. FVL's annual average return of 4.6% is just a bit below the two self-reported averages of 6.0% and 4.7%, which is in line with what you'd expect based on management fees, trading costs, etc. (Year 2012 is an odd duck — VL's self-reported return of 17.2% for "allowing annual changes" is a bit of an outlier.)

This finding shows that Value Line's self-reported results can be matched fairly closely in the real world.

















 "Gambler 'Killed Wife' After Losing Bank Millions"

As Artie said. "All gamblers die broke and become degenerates. Don't gamble".

Richard Owen writes: 

This is such an incredibly sad story. I think I recall reading on spec-member, Mark Goulston's, blog the idea that the suicide rate is higher in young men because they attach so much to their perception of other's assessment of their competence. Thus experiencing a material failure can make them do insane things. In contrast, women are much more self-assured plus their parenting of children, who can be unintentionally cruel, has prepared them to cope readily with criticism.

I recall reading a statistic that in the UK, if you strip out inherited wealth and the like, almost 100% of individuals of net worth over £50m come from one of three categories: (i) immigrants, (ii) they attended boarding school, or (iii) they were Jewish. What is the common factor among these categories? Probably some element of "otherness" in their upbringing. British boarding schools of the era of those featured in the statistics were brutal places where bullying was a standard ingredient in toughening up the kids. There is a great book by Sir Peregrine Worsthorne ("silly Perry" as Thatcher once called him) called Democracy Needs Aristocracy. One point he makes is that part of how aristos used to earn their place was the excruciating right of passage of attending a boarding school. Ironically, the spine building experience that foreigners now pay through the nose to obtain has disappeared through their own subscriptions. To attract foreign wealth, 'brand' boarding schools have been turned into a combination of five-star hotel and country club.



 David Attenborough did an interesting AMA (Ask Me Anything) on Reddit. Nature, it seems, is full of lies, murder and downright meanness.

What has been your most distressing/upsetting moment in your career?

Seeing chimpanzees kill monkeys, they do this to eat them. They chase them, set an ambush, catch them, and tear them apart…

A chimpanzee does in fact tell lies. If you can believe that. Also, when some Colobus monkeys find a very precious piece of food, it calls the alarm call that it would make if a snake were to arrive, and all the other monkeys run away and it gets the food.



In the days of my youth, there were two national department stores, Sears and Penney. It was a fierce rivalry between the two. Penney tended to do better at the soft goods, Sears, the hard goods. Regardless, they competed against one another. Over the last couple of decades, it seems that rivalry waned. I can now definitively state that this rivalry is back on. Competition, the essence of America! It seems that both companies are in a race to see who can get to Chapter 11 first. Or maybe Chapter 9.



 Are the low prices in ags related to the drop in oil since oil is used for fertilizer to grow ags?

Jeff Watson writes: 

Partially, but the crops have been very robust worldwide, there's lots of supply, and remember that we're coming off of a major bull market in ags that started in 2007. That explains some of the gravity as for the past 5 months, one has been able to sell any strength in the grains and make money. This market behavior almost reminds me of the 80s. Since during this bull market, farmers have added enough storage to make many elevators redundant. Sometimes, if you watch the front month of wheat or corn, it will be up a couple of cents while the rest of the grains are down a few cents. That's the grain companies trying to shake some of that stored grain loose from the farmers. One can make money off of that.

Jack Tierney writes:

Maybe this is part of the reason, from the president.

U.S. EPA modified its proposed 2014 renewable fuel standard rule last year after the White House raised concerns about production targets being too high and based on unreliable analyses, according to documents from interagency reviews of the draft proposal.

EPA's proposed rule released in November calls for the first-ever reductions in the amount of conventional, corn-based ethanol and advanced biofuels that refiners must blend into gasoline. Its release shook markets for corn and energy and alarmed biofuel producers scrambling to secure investments.

The rule would require refiners this year to blend 15.21 billion gallons of renewable fuels into petroleum-based fuels — lower than the 18.15 billion gallons that Congress anticipated when it wrote the RFS into statute in 2007.



With the rise of easy profits and all things net 2.0/3.0, I could swear I am starting to see stupider and stupider consumer ideas. It really brings back memories of 1998-2000 although I am more attentive this time around and not involved in the daily sellside grind. I wish I had examples immediately at my fingertips. I will have to try to collect a few.



A Case of Hutber's Law:

Hutber's Law states that "improvement means deterioration". Patrick Hutber is the much missed City Editor for The Sunday Telegraph in the 1970′s. His law was founded on his cynical observation that a stated improvement, mostly to be found in business, actually hides a deterioration.

I feel sure we've all been in receipt of a letter, most often from a utility company, that informs us of some wonderous improvement in their service, only to be attached to the loss of some other useful aspect of their service.

Another area where Hutber's Law is to be found is in updates to computer software. I don't want to sound too much like an old fogey, resistant to change, but I'm stumped to do what was simple in one version, yet is oh so complicated or impossible in a newer, or so-called improved version.

Hutber's Law lives on.



 Yesterday, eastern US states ran out of power plants. Today, the challenge is not as daunting, but if you live or work in the DC-to-NYC corridor, please turn off your lights — or we might do it for you.

PJM Interconnection, the electricity grid operator for more than 61 million people in 13 states and the District of Columbia, is extending its appeal for the public to conserve electricity into Wednesday morning. The call for conservation is prompted by the continuing arctic weather across the region PJM serves which is driving electricity consumption to record levels.

Early this morning, market prices for wholesale power ramped up. By 07:00, they reached $400 per megawatt-hour in Mid-Atlantic states. NYC's prices passed $300. Demand will continue grow until the peak arrives, which is normally around 5 PM local time.

From Chicago to Boston, grid operators are making phone calls asking large power users to voluntarily drop load. Grids will offer cash for some consumers to quit consuming. Those with thin tariffs (low cost and low reliability) will find their power automatically curtailed.

In the meantime, power markets are rewarding almost everything in the inventory, including oil. If you have a standby diesel generator, it may pay to run it for a few hours. In fact, it appears that is what may be happening.

Carder Dimitroff adds: 

This will benefit generating companies like Exelon (EXC), NRG Energy (NRG), Calpine (CPN). It will benefit transmission line companies like ITC Holdings (ITC) and AEP. It will also benefit demand-response companies like EnerNOC (ENOC), Comverge (private) and OPower (soon-to-be-public)

It will not help or hurt local distribution companies like Pepco Holdings (POM) or Consolidated Edison (ED). These companies only provide transportation services.

While these numbers are huge, they will not have much impact on Q1 earnings. It is a flash in the pan. Cold weather will clear and low prices will return. Worse for producers, 40 degrees now feels like 60. As a result, consumers' conservation habits have become embedded. Those habits will continue until summer.



For those who thought that European troubles were a thing of the past and that European banks must be OK, it's worth taking a look at France and Italy. France has been talked about as the sick man of Europe for a while now. There are too many links to offer. But Italy just came out with a report about continuing unemployment problems. Given that there remain serious problems in two major economies in Europe and they show no signs of resolution any time soon, can European troubles really no longer weigh on US markets?



 It seems that the Monday Night Football (MNF) schedule and DJIA component company selection processes have much in common.

Since the MNF schedule is set in April, prior to the start of the season, the NFL league schedulers and television network personnel seek to predict both pertinent team pairings and those which will result in high viewership numbers. Early in the season, super-star players, team rivalry, prior playoff matching, team's home market size and fan fervency are paramount. It would seem that after the first several weeks, a transition in importance would occur towards the competing teams W/L records, playoff and division standings, and perhaps an added spoiler component during the last couple of weeks (there is no MNF the final week of the regular season).

Contemporaneously, prior to odds-makers incorporating the MNF schedule as a metric, does the selection committee pick better performing teams than the sports book rankings? Separately, perhaps there is a deleted team outperformance effect, or the rising to the occasion big-stage effect to consider.



Mini crashes might serve to stabilize things in the larger picture if they clean out accumulations of stop orders and discourage their use and the use of over-leveraging. I am not sure why nanex thinks every event like this is news - is there really evidence that they are more common, or is it just that they happen over a compressed time frame? Back when some of the electronic contacts were fairly new, one of the first strategies I used was to set scale limit orders below swing points since little stop runs were often not fully followed by the big contract and tended to reverse quickly.

Craig Mee writes: 

It reminds me of arm wrestling. If there is a stale mate on even ground, you can feign weakness quickly in order to hit the opponent with even greater force when he is not expecting it.



 Frigid temperatures and snow in northern climates often barely make a dent in daily routines. Yet place the same weather in a more southerly climate not used to it and the daily routine is often put in a tail spin.

Exercise and sport training is generally done best done progressively building upon a base in conjunction with one's skills and ability. Without that, you're going to be prone to injury.

What are some methods to extend your conditioning and preparation in the markets without setting yourself up for a tailspin or injury?

Examples might span from research on potential economic developments, statistical modeling, risk measures for loss minimization and profit maximization, expansion of the breadth of products traded, etc.

In contemporaneous markets, for example, you might ask how have markets become conditioned to the Fed's monetary policy and what might be the spillover effects to this stopping and the weather changing?

anonymous writes: 

Very true. I've noticed that when we in the southern states get hit by a major devastating event (like the flood that nailed Nashville a couple of years back) it merits about 30 seconds of national coverage because someone happened to film a schoolroom trailer being washed away down the Cumberland River.

Yet should NY or NJ get hit with some major adverse weather event, every minor inconvenience gets covered and the major ones become "national news" — and, of course, require immediate, and enormous, federal relief programs. Meanwhile the citizens of states like Minnesota and Wisconsin manage to dig themselves out of all sorts of major floods, snowstorms and tornadoes with hardly a word.

What's happened to the descendants of the Atlantic coasters who initiated and successfully implemented a revolution? Now it's become more common to whine and seek federal largesse…and if received, will be it tax-free.



 In light of Manchester United's current predicament, Sir Alex's old words should be revisited for current managers and punters alike.

"Only through success can a manager become master of his own destiny," Ferguson wrote. "Success unlocks all the doors. Set against a background of two or three trophies, decisions can be made with a ring of conviction, players accept what you are saying without doubting, supporters sustain their belief through the inevitable setbacks and you become a figure of authority without the need to look over your shoulder. Success achieves all these things as well as giving a manager security at home, knowing his job is safe."

They have been overachieving the last few years only because of Sir Alex. He hand picked his successor to ensure his legacy remains intact by setting up his successor for failure. Moyes walked right into the shiv.

United will be getting everything they deserve and more in the coming years. The potential cascading financial effects of not qualifying for the Champions League will be massive. What goes up must come down. It looks like Government Motors invested at just the right time.

Shirt sponsorships and future stock performance is worthy of a study in its own right.

keep looking »


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