The stress test failure's are all positioning by the Fed to insure there is a buyer of Treasuries when they depart. Just like Toyota is hit with recalls every time GM's inventories get bloated. The Central Planners are simply using shareholder money for their own public/private purposes. Banks are actually overcapitalized for the current loan volume. Moreover, bank disintermediation is beginning to happen at an increasing rate, as why should a bank be in the middle. The banks will offer safety and buy treasuries– the smart money will leave the banks and lend to entrepreneurs. Watch the LendingClub and Prosper.com etc. as they emerge.



 Here is a list of golf aphorisms written by a friend of mine. He is a competing low handicap golfer of just 20.

You can't win a tournament on Thursday, but you can definitely lose it.

There is no picture on the scorecard.

It is good to compete. It brings out the best of your abilities.

There will always be new swing ideas and people in your ear about mechanics. Stick to the swing that is natural and successful for you.

Approach the toughest hole with the same strategy as the easiest hole.

Golf is a test of your will versus the course, the natural elements and the tournament.

You can't walk off the course and go back to the range.

Play with what you're hitting that day be it hook, slice, or draw.

Have just one or two "swing thoughts" for the day.

If a putt lips out but you hit it the way you wanted, that's all that can be asked.

Learn how to play in different conditions and environments. It won't always be 75 degrees and sunny.

Sometimes hitting the driver 300 yards isn't the best play. Figure out when to be aggressive and when to be tactical.

Always forget your bad shots or good shots for that matter. Focus only on the shot at hand.

Sunday on the back nine you may have to change tactics completely.

Often times a bogey is a great score.

Never get angry with the course set up, the greens, or pin placements. Everyone plays the same course.

Approach practice like a tournament. Make each practice shot live and relevant.

-Austin Williams USC 2014



The Best Of, Compilation and Live albums were all revolutionary to the record industry. They came to the forefront apparently during the '73 oil spike. Vinyl shot up in price and record companies substituted the cost by removing production and recording costs.



 I went to Puerto Maldonado, Peru in the Amazon to evaluate Haitians traffic into Brazil and was stymied by a planned gas crisis.

I'm sitting in a 30' riverboat at the town's ghost port fishing information about the Haitians from the captain, a tour guide, lovely senorita in a halter top, and an observant five-month Tamarin Pocket Monkey (Saguinus fuscicollis) that resembles a squirrel with a human head and a golden mane of a lion. The keen boy is one pound of Olympic gymnast with a prehensile tail, and quickly opens my hardcover of L. Ron Hubbard's worthy The Problems of Work to chapter one and hides between the pages. I tweak its tail, and he makes a face before diving into a subsequent chapter, and so on through the book. The little wiggle is ADD from sipping the guide's soda and captain's beer, as well as eating anything sweet you hand it. Finally, he exits the book and scampers to perch on the captain's shoulder as he describes the human smuggling.

"Ha!" exclaims the skipper, as the others nod in agreement. "Don't believe what you read about the Haitians. There is zero in Puerto Maldonado, however for the past three years about fifty of the nice people go in transit daily through town and for 200km as the parrot flies to the frontier. It started when the earth shook…" In 2010, the catastrophic earthquake that crippled Haiti's economy sent a tsunami of refugees flying into Quito, Ecuador, a country known for its lax immigration policies, where daily they board buses and pass along National Geographic's Highway of Dreams up over the 15,000´ Andes, through rainforest Puerto Maldonado, and three hours more by coyote vans (to the tune of $1000 per refugee) to the border. Once in Brazil, the immigrants are welcomed to plenty of farm and town menial labor. The situation is a model of the daily flux of Latin illegals into USA. Last month the BBC said an estimated 5,600 immigrants have arrived in Brazil since 2011, however the articles I had read claimed tens of thousands have arrived with Brazil as the popular choice as Latin America's largest economy.

Human smuggling has captivated me ever since I gave water five years ago to six comatose illegal Mexicans who had collapsed in the shade of my California trailer sucking barrel cactus for moisture after being abandoned on the adjacent Chocolate Mountain Bombing Range and wandering for two days in an 110F inferno and explosions. In years to come, I would bust the wind atop Mexican freight trains with hundreds of illegal Central Americans traveling through Mexico to the Promised Land USA. Americans know what changes the illegals have wrought in the Land of Liberty, and I expect to find in Puerto Maldonado even greater ones. US media coverage has portrayed the border town as overrun with thousands of refugees and, if true, the divergent gene pool of tall, dark, gregarious Haitians would in quick generations forever alter the Peruvian body frame, mindset, and jungle instinct.

A yellow canary walks out the senorita's cleavage, and flutters to post on my foot. She grabs the bird onto her lap and raises eyebrows at me, as if it has been trained to fetch.

 Just then, a five-gallon container of gas arrives, and as the captain reaches for his wallet, he explodes, "The town has gas fever!" The guide explains, as the skipper decants the jug, "Puerto Maldonado is the only town in Peru that is on gas ration. The national government has declared our pueblo of 138,000 the largest consumer of petro in Peru, and a week ago issued ration cards. Each citizen is allowed five gallons per day, and the town economics has become complex." Five gallons is enough for a dweller who owns no vehicle, generator or trade, and yet other businesses would have come to a standstill had it not been for sharping gas. When one neighbor has no use for fuel, he fills his daily quota and sells it at a profit to another. For example, Puerto Maldonado is the starting point for visiting Peru's southeastern jungles of the Tambopata Reserve, or for departing to Brazil or Bolivia. However, the agencies are short to fuel their buses and boats, and so we have conversed for two steamy hours waiting for the jug. "Next week each ration card goes down to one gallon per day," moans the guide. "So today may be my last tour until the crisis is ironed out."

"The fuel is being siphoned into Brazil," explains the senorita, petting her bird. The monkey races along the roof. The price of gas is $5 per gallon in Peru; however, across the border in Brazil's remote rainforest it demands nearly double that. "Forget the Haitians; we're in a state controlled gas war for our life and liberty," they insist. Fists slam the rail. "The common denominator of the Haitians and gas smuggling," yells the captain over the motor, "Is the corrupt National Police." They take bribes at the border to 'look the other way' as thousands of Haitians and tens of thousands of gallons of petro pour into Brazil. I tell them I want to jump ship, which is now putting along the Madre de Dios, to go to the border to see firsthand. "Don´t worry," assures the tour guide."There will be time for that after you see the 20' black caimans and 6' giant otters at the Tambopata Reserve."

 Tambopata National Reserve is a wildlife sanctuary in the Peruvian Amazon that brims with 165 species of trees, 103 species of mammals, 1300 of butterflies, 90 of amphibians, and 6500 of fish. From the first step into the reserve, my San Francisco Giant baseball cap is covered with butterflies that the guide theorizes is due to my flower shirt, as they alight on no one else. However, I smell like the only member who doesn't use cologne, perfume or aftershave. A 8" black tarantula, that the guide identifies as a Chicken Tarantula with a reputation for eating birds up to the size of domestic fowl, walks the opposite direction. When I put my hand down to let it cross, as with smaller species at my desert home, instead of crossing it goes around. Further on, we hop over a drive of black army ants a footprint wide and audible in their rustle. The yellow headed soldiers laboring under huge swinging mandibles are described in a short story that in my youth was first a terror and then a curious fascination. Leiningen vs. the Ants is set in the Brazil rainforest not far from here. The story centers on a scrappy plantation owner called Leningen who stubbornly refuses to abandon his plantation in the face of a seemingly unstoppable mass of army antes. My guide drops and picks up one by the abdomen, and asks, ´Would you like a demonstration of how the natives suture wounds?' Though there is no cut, I thrust a pinky with a joint crease that he lets the angry ant bite, and, urging through my spiked pain, 'Wait - the ant would rather lose its head than let go,' he deftly twists off the body as the remaining head neatly staples the crease, and it has been worth the price of admission.

 At the end of the 90 minute hike through this mysterious land lays the principal attraction named Sandoval Lake which is an oxbow lake off the Madre de Dios. It was formed by a wide meander in the stream over the course of about 500 years that cut through the curve to abandon this mile-long crescent body of water. We paddle with two other tourists the circumference within a few feet of turtles, macaws, and two tribes of Squirrel and Howler monkeys, as fish jump aside the canoe. Philodendron epiphytes crown 30' palms dropping inch-thick roots to the water. When the guide identifies a dozen Cormorant cranes that sit as tamely on giant lilies as if this is Eden, I know I could revolution the fishing industry in the Amazon basin by introducing a technique I saw on Nature TV using trained Cormorants as 'lines'.

The aquatic bird of the family Phalacrocoracidae in the Amazon has purple plumage, about two feet tall, and the usual long neck and body, with a hookbeak and throat pouch for holding fish. In China and Japan, Cormorant are famous for fishing on shallow rivers. Cormorant fishing is also an old tradition in Greece, England and France. To control the birds, the fishermen tie a cord neckerchief near the base of the bird's throat that prevents them from swallowing larger fish, which are held in their throats, while smaller fish go down the hatch. The fisherman paddles a canoe, much as we do now, except with a dozen Cormorants standing like tenpins, and when the fishing territory is reached the fisherman commands his fleet with a wave of the hand into the water where they dive and bring up fish. They are free to swim away but do not, instead returning to the canoe, the fisherman reaches down their throats and pulls out the larger fish, and rewards them with smaller ones. He may gauge the size of the day's catch by the tightness of the neckties.

 The strategy is not unlike the border I plan to visit tomorrow where the Peru Immigration and National Police make the human and gas smugglers cough up big bribes. Early the next morning, I board a hired car in Puerto Maldonado for the three hour ride with six others at the exurbanite price of $15 since the chauffeur has paid through the nose for scavenged gas. The national newspaper La Republica on the car dash confirms what I saw earlier that for the last three days drivers in the capital city have lined the streets with their vehicles waving ration cards, yelling for trades as if were a commodes pit, and wait and muscle in to buy miniscule amounts of fuel. The newspaper reports that of the 32 gas stations normally operating in town, only four are open and selling fuel. Vehicle movement along the jungle fringed highway is sparse and has slowed to a crawl due to the gas shortage. The driver doesn't question that I want to see the frontier town of Inapari, flanking both countries, and return the same day. However, when we arrive at the crossing that normally allows people to mingle within the town limit for 24 hours without officially exiting one or entering the other country, a lanky Peruvian National Policeman in the regular gold on black uniform yokes me into the small wooden immigration office.

I'm ordered to a hard bench with a clear view out the door of the primitive crossing where a six-man force of National Policemen fleeces one after another Brazil bound 30' wood trucks with blue drums of gas piled in back. Brazil doesn't need the wood, of course, but requires the lower price fuel at the expense of Puerto Maldonado where garbage is piling in the streets because there is no fuel to send out the trucks for collection. The scene is as was described to me in the tour boat and by townspeople. Because the truck drivers are foreigners they are spared the ration cards and are free to buy as much fuel as desired. Each of trucks carries nearly a full tank of gas plus three 55-gallon drums for a total of about 200 gallons at a profit on the other side of $3 a gallon for a total per trip of $600. This is a fortune in the Amazon basin, enough for a man to start a family and new life. The locals say the planned gas crisis is not resolved because the National Police who are tied to the national government are taking a profit.

A quirk is that Brazil is the world's second largest producer of ethanol fuel. Together, Brazil and the United States lead in the industrial production of ethanol fuel, for nearly 90% of the world´s production. Brazil has the world´s first sustainable biofuel economy and is the leader. The reason is millions of sprawling fields of sugarcane ethanol which is the most successful alternative fuel anywhere to date. In 2010, the U.S. EPA designated Brazilian sugarcane ethanol as the most advanced biofuel due to its 61% reduction of total life cycle greenhouse gas emissions, including direct and indirect emissions. However, Brazil needs the base petro to add their ethanol to, and it´s being siphoned from Puerto Maldonado.

The leapfrog story of my pursuit of human and gas smuggling at the Peru–Brazil frontier ends surprisingly in a little bedroom off the hard bench. The National Policeman sees me staring through the window at the palmed bribes taken by his men, and utters, 'This border is like the Mexico–US border. Do you know what I mean?'

'Now I understand. I live thirty miles north of that border and have crossed hundreds of times. It is corrupt, with bribes taken for human and goods trafficking. Is that what you're saying?' It's the first time I've seen a Peruvian National Policeman shake in his boots.

'Go to the bedroom!´ he demands, and scuffs after. He motions me to sit on a bunk, one of two double-deckers jammed into the space where another corpulent National Policeman snores exhaling beer fumes. He starts awake, arises, approaches with a leer, and they strip search me, investigating every detail except for where the sun doesn´t shine. I must account for everything including where I got each coin in my pocket – in change at a café, grocery store… ´Aha!' shouts one, pulling my room key. ´Where did you get this?´ Meanwhile, through the bunkhouse window, a van of Haitians pauses at the crossing, the driver shakes hands with the National Policeman who smiles and looks away, and the load passes into Brazil where they´ll likely work the sugarcane fields.

The National Policeman flicks through my passport searching for the week old visa entry stamp at the Lima airport. He riffles more slowly a second time, and then a third in exasperation bending each of the 52 pages of my new mint US passport. I would blame him for adding one year's wear in two minutes, except the document is a travesty of the US government. Since 2007, the State department has issued only biometric passports, which include RFID chips, and each page having a historic background print in blue of Americana scenes including the Mayflower, covered wagon, steam train, the Liberty Bell, Statue of Liberty, Mt. Rushmore, and so on through the now rumpled deck that is my passport. They are beautiful engravings but to accept a normal blue ink visa stamp on a blue background is like trying to read this black ink on a gray background. Finally, the official finds the nearly invisible visa stamp, grunts, and orders me out the building and back on the road again.



This is a technical observation but in doing some housekeeping and looking at S&P 500 futures data going back to 2000, we are almost at the point where a roll adjusted continuous time series is the same as the non-roll adjusted time series. In other word since 2000 there have now been almost as many positive carry months as negative carry months for SP futures. The changing of the guard if memory serves was some time in 2008 when short term rates (cost to borrow) became lower than the dividend yield of the cash SP 500. At that time the term structure of futures went into backwardation and there it has remained.

Charles Pennington writes:

We should thank 'anonymous' who told us back then that backwardation would be good for stock investing.

anonymous clarifies: 

My supposition [was] based on comments by Philip Carret in his 1931 book The Art of Speculation.
Mr. Carret talked about periods when stocks "carried themselves"
because their dividends were sufficient to cover the cost of borrowing.
As of today, stocks are still carrying themselves, as Mr. Coker notes.



 In a departure from my usual micro market type of post, I have been looking at the 'Fed Taper' issue from the perspective that the Delphic Ones at the Federal Reserve must find (dare I say, coerce) a marginal long term buyer of the securities on its balance sheet to exit the process with reputations intact and without market disruption (remember 1994 anyone?)

This constant litany of impossible to pass 'stress tests' coupled with current and coming regulatory overreach into core banking activities may make the ownership of any type of assets other than Treasuries very difficult for banks as they are currently structured. The evolution of Japanese banks from financiers of global growth in the 1980's to earning a few basis points on the 20 year JGB is a reasonable analogy of what is in store. This has far reaching consequences for the bond market if remotely in the ball park.

The need of governments to create 'stability' in economic systems that thrive when there is instability is an ongoing deleterious influence on banks. It happened in Japan, is happening in Europe and appears to be beginning in the United States.

Without instability/ volatility there is no growth. The banking sector must take risk and be rewarded for it. The above is so full of holes I am almost embarrassed to post it, particularly as it is so far off piste from my usual literary excursions to this site.

It is, however, a potential long term influence on the US bond market so I thought it might be worth hitting send.



A kind of a longish article, but the gist is as follows: there is a framework, supported by experiments on droplets bouncing off vibrating liquid surfaces (and those vibrations having been caused by those very droplets), that helps explain the observed statistical nature of quantum reality as particles interacting with their own pilot waves.

Can market events create their own pilot waves that guide future events in a seemingly unpredictable fashion?

"Fluid Tests Hint at Concrete Quantum Reality"



 There are Silverback gorillas in Uganda that I remember well from an encounter 15 years ago with a 500 lb. male and his harem of four females. I was told by my guide, armed with only a machete and fast feet, to avoid gazing into the eyes of the gorillas. That strategy has always seemed dumb to me with bears, big cats, hoodlums, and so forth, and so from five steps away I peered without animosity at the Silverback. He stood on hind legs with no shoulders to speak of and gazed back with yellow eyes as if it were a board game and he wanted to trade his harem for mine, four English lasses. The guide behind me got nervous, and started to thump his chest to show dominance as the gorilla pounded thunder out of his, and then ran up a branchless 20-meter palm and showered coconuts down on us. The trade was never made or the gene pool or Africa might have taken a turn.



 We all know by now that one of the main purposes of the market is to create more flow so that the public can do the wrong thing. The market accomplishes this in a infinite variety of beautiful ways. One of the unobtrusive ways is through colors as in the Peacocks tail. The various quote machines flash red when down on the day and green when up on the day. Many markets, much too many for chance, flash from red to green incessantly until they attract your notice and lure you into an unprofitable for you trade. Right now Crude has flashed red to green to red about 1000 times in front of one's poor wherewithal.

Art Cooper writes: 

This is straight out of Las Vegas's playbook, where the slot machines ("One-armed bandits") are set up to maximize flashing lights, noise, etc. especially highlighting the (very rare) payouts.

Hernan Avella writes: 

Yet, it is remarkable that participants keep depending on the same limiting media tools which shape their understanding of the system. I watched this video from a leading computer programmer and it got me thinking about the possibilities if one steps out of the conventional offerings. I'm convinced that one has to design their own tools to watch the market, given our propensity to fall for deception and traps, specially of a visual kind.



 The morning turned in to a burlesque show for the shorts.

Victor Niederhoffer writes: 

They finally gave us a down day. The kind that hurts the most when you're short and waiting for the down day to cover.



 A hundred years ago Milutin Milankovich, a Serbian scientist/engineer, didn't have much to do as he was a POW held by the Austrians. So he calculated the pre-historical temperatures of the Earth, based entirely on planetary distances to the sun. Several other scientists persuaded him to go back quite far in time and eventually he calculated the temperatures back a million years. Of course at that time there was no way to prove his work, until in the 1970s data from Antarctic ice cores became available. It turns out his calculations were very accurate, as were similar calculations for Mars and Venus.

If someone a century ago could calculate Earth's temperature a million years ago, the global warming claims of one camp seem to lack significant credibility.

Stefan Jovanovich writes: 

Milankovic's theory is this: "variations in eccentricity, axial tilt, and precession of the Earth's orbit determine climatic patterns on Earth"

The theory of the warmist researchers is that "the addition of combustion gases - most importantly, CO2 - from man-made uses of energy to the earth's atmosphere determine climatic patterns on Earth".

The reason for the falsifications of data by warmist researchers– I assume here that no one denies that these have occurred– is that the theory of man-made global warming requires a dramatic increase both in temperature and CO2 levels during the period when people have been burning stuff. If that cannot be found, then the theory has to contend with the very data that Al Gore found so persuasive– the Vostok ice core samples– and explain why CO2 level increases seem to be a result rather than a cause of the rise in the earth's surface temperature. That non-modeled data (i.e. the ice cores were actually dug out of the earth, not created in a computer model) is inconvenient and true. The Vostok data shows that changes in temperature always precede the changes in atmospheric CO2 by about 500-1500 years.

The usual rebuttal to this evidence and the fact that its data is entirely consistent with the Milankovic theory is something like this: "yes, it's true there is a delayed correlation; but that ignores the more important fact. Once the rise in CO2 levels start, they take over as the most important climate force."

But here, too, the actual non-modeled data presents a problem; the declines in earth surface temperatures that begin the "ice ages" occur precisely when CO2 levels are at their highest. If the Hansen theory's forces are so strong and can overwhelm the mere changes in the Earth's orbit, then how can the 'weak' signal can start an Ice Age when the strong Hansen signal says the opposite should be occurring?

The answer to that, of course, is the usual ad hominems that are the ever available rhetoric of the progressive mind: (1) you don't understand, (2) you haven't read our secret data and (3) you are too stupid to understand these things.

I think we have another definitional problem here, HA. "Complete(ly) unbiased description(s) of meteorology-climatology science practices" do not get written by people who write: "as a historical science, the study of climate change will always involve revisiting old data, correcting, modeling, and revising our picture of the climatic past. This does not mean we don't know anything. (We do.) And it also does not mean that climate data or climate models might turn out to be wildly wrong. (They won't.)"



 All due respect, the slam against female CEOs is only because there are so few of them in the CEO biz that men can still poke fun and smear. Once there is a substantial percentage of progesteronic/estrogenic CEOs around, the model will magically "get better".

Or so I feel.

Ed Stewart comments: 

M, it is not necessarily that the lady CEO's were not up to task, but rather that desperate companies looked to "pass the buck" to a female CEO at just the wrong time. And the reason i think is that it is still a "newsworthy" or "progressive" thing to do, so the company can get good press about it (particularly in the tech industry) and appear to be innovative without actually accomplishing anything of substance. As very few women, even highly intelligent women, are truly tech oriented, they tend to bring in "Jargon-filled, MBA dialect" solutions which tick off companies that have an engineering culture, etc.

A counterpoint (with regards to performance) is TJX CEO C. Meryowitz who came in in 2007, who many credit with an outstanding performance that has vastly rewarded shareholders. She also worked up the ranks and was not "cherry picked" and placed on top at the last minute.

On a related note I firmly believe all men should consult as many women as possible in order to understand the modern consumer economy. So much of the spending makes such little sense to so many of us (men) we are completely lost. For example my wife was shopping at Lululemon early on, (a store I laughed at as ridiculous), I didn't think whole foods would catch on and continue to grow, TJX seemed like a bunch of junk no one needs - but to Meryowitz's (and my wife's) credit it is now one of the stocks that I own with the largest unrealized gains, in spite of not doing well this year. 



Did Bacon's invisible hand guide these institutions investing in the "alternatives model" at just the wrong time? Darn cycles changed again…

At what point do they at least partially
throw in the towel and barrel back towards a higher % in US stocks?
Perhaps a new guru will rise up to replace the old Yale one, the with a
record of superior returns based on an unconventional and innovative
approach - holding an over-allocation to US equities.

From this WSJ article "Big Investors Missed Stock Rally":

Corporate pension funds and university endowments in the U.S. have missed out on much of the rally for stocks since 2009, following a push to diversify into other investments that have had disappointing performances.

Some argue that the shift stems at least partly from an effort to ape the strategy of David Swensen, who has long led the endowment of Yale University.

A 2012 paper written by Mr. Goetzmann and another professor at the Yale School of Management, Sharon Oster, argues that university endowments often invest in hedge funds simply to catch up with their closest competitors, rather than to achieve top returns, a shift the professors call "herding behavior" and "trend chasing."



I think it would be helpful to have a demarcation, as it were, between holding periods in research studies.

Arguably (perhaps very arguably), there exist repeatable & tradeable phenomena whose holding periods stretch from microseconds to a period approaching 2 days. I would posit that a graphical representation of 'Forecastability' on the vertical axis and Holding Period' on the abscissa would present as a rapidly declining exponential function of some sort.

One would also put forward that if we then started again from a holding period of thirty days or so then once more the chart would show an upward slant (though not exponential)

The puzzle is the part in the middle between about two days and a month. In terms of 'Forecastability' versus 'Holding Period', we are left with a 'U' - ish shape with an extended flat period in the middle.

One further suggests that the Stock Index Futures, Currencies (major not EM), major commodities and Long End Interest rate futures belong at the shorter end of forecasting reliability whereas physical stocks, short end rates and EM ccy's belong at the other end.

It's kind of like a Forecastability Curve (in the same vein as a yield curve). Just like a yield curve there are liquidity preferences et. al.

Something to ponder.



 Within 2 blocks from where my sometimes office is, where the spec party was held, there are the retail outlets, Bed Bath and Beyond, Best Buy, Staples, Whole Foods and Coach. (all within 1 block from Time-Warner building.) One finds that they rank 496, 497, 499, 499, and 500th worst of the 500 companies in the S&P 500 with declines for the year of -25% for Bed Bath, to -38% for Coach.

There are only about 2 establishments that are listed in S&P 500 not in that category I would guess within that 2 block radius. I believe this is not chance. Does it mean I am a hoodoo? Or is it related to the dynamism of the vigorous that are not located in the Time Warner. Or is it related to the poor performance of big box retailers. Or the excellent performance of these companies in the previous 5 years. The average S&P stock is up 6.2 % for the year. One believes there is some deep truth in this geographic excursion.

anoymous writes: 

One recalls that there were at least a few Woolworth's retail stores in that area in the mid 90s. (A big one near 86th and 3rd, I think). I'm unable to draw a parallel to the fact that they have a skyscraper named after them on lower Broadway, but as far as retail disasters were concerned, they left a lot of open space in Manhattan when the last stores finally closed.

Jeff Rollert writes: 

There are buildings with poor traffic characteristics. I keep a list of them in LA. When a retailer moves into one, I sell their stocks. Period. I have found they have either passed the point of scalability for their market or for their real estate staff/advisors.

It 's a variation of "never push a bad position."

A commenter writes: 

This sounds like the skyscraper rule gone retail.



Was Friday's range (June 20th), the lowest ever intra-day range % ( as in (high-low)*100/avg(high,low), since Jan 9th 1995? (including the x-mas holiday season).

Steve Ellison writes: 

I find the 10 lowest true ranges in the S&P 500 emini contract in the last 2 1/2 years to have been (on a close-to-close basis):

       Date        Range
  12/30/2013    5.00
   8/17/2012    6.00
    8/5/2013     6.25
  11/27/2013    6.25
   3/16/2012    6.50
   5/13/2014    6.50
   3/12/2012    6.75
   1/23/2013    6.75
   12/9/2013    6.75
  12/27/2013    6.75

Thursday's 8.25-point range is tied for 28th place, and Friday's 8.50-point range is tied for 35th place.



 Symantec's chief operating officer, Stephen Gillett, has an impressive resume that includes executive stints at Starbucks, CNET and Best Buy. He's also a level 70 paladin and priest with a particular focus on healing abilities. If it isn't clear already, we're talking about the online video game World of Warcraft.

"I put my qualifications on my resume when I apply for jobs," Gillett said. "Here's my guild. Here's my ranking. Here's my biggest online achievement. Some people look at it and say, 'What the hell is this?' And others will be like, 'That's exactly what I'm looking for.'" It paid off. It helped him land a job at Corbis, and eventually Starbucks. Starbucks (SBUX)CEO Howard Schultz hired Gillett to be the company's chief information officer when the company was in a rut in 2008.

-"Why I Put World of Warcraft on my Resume"



 I noticed the great Lobagola move in gold of late. What can we learn from it this time?

[A LoBagola, as described in The Education of A Speculator
by Dr. Niederhoffer, is a phenomenon whereby a market makes an
historically large run in one direction, usually up, and then at some
unpredictable point begins an equally extreme run back to where it

1. The pace of the elephants on the way down set the underlying conditions for the reversal. The expectation studies must include the number of failed reversal attempts, as well as the usual measures.

2. In actual migrations, elephants selectively eat trees/plants without killing them, the plants re-grow and the elephants eat them on the reversal (coppicing effect). Hence, elephants are able to use the same migration route because they know that the resources in these areas will be available to them. In markets, the footprint of the move can be observed in the patterns of time and volume and untouched bids and offers.

3. The most difficult part of trading lobagolas is: "nobody knows when they come back". Qualitative observations about the nature of the migration might help. There are two main causes for elephant migration: resources and human intervention, the latter also is known to be able to change the path of the elephants. Some classification studies (not retrospectively) in market moves is appropriate.

4. One of the worst mistakes a speculator can make is to go against the reversal phase of a Lobagola without noticing is part of a sequence. And here, nobody knows if they will come back.

5. Lobagolas in currency markets follow different patterns, these seem to be mostly "resource" driven.

Any other thing specs have learned from trading lobagolas?



Henry George has the insight that all business decline cycles started from excess rents. Presumably the rents in those stores which on Fifth Avenue run $ 3,000-3,500 a square foot per year, but for office space in Time-Life itself rent for only $65.00 a square foot per year, are too high for the companies to make a profit.

Let's say they are $ 500 a square foot. That means a 10,000 square foot store has to cover 5 million a year in rent. If rent is 15% of sales, that means sales of 35 million a year from 10,000 square feet or 3.5 thousand a year per square foot. That's $12 a day per square foot to break even. That seems high. The willingness to pay such rates is probably a symptom of decay or bad management?



Open local dynamical systems when pushed further from thermal equilibrium by energy flows, minimize their energy-mass dissipation but also optimise their information and synthetic complexity over time, through the reiteration of archetypal, convergent, asymptotic, analogical feedback processes which have canonical symmetries associated with aesthetic beauty and proportion in art, design, and architecture.

- "Is there a new law of thermodynamics?", Constructal Law Conference, Nanjing, China

One is not sagacious enough to tell whether this is sublime or mumbo.



 Watching Messi in the world cup game for Argentina I had the thought that the longer the game goes on, the more the defense forgets about the opposition's marquee players and what they are capable of, and the more they begin treating them like any other player, hanging off slightly in defense.

At that point they show their brilliance.

Just like the markets.



 Dear Mr. Niederhoffer,

I have noticed of late more U-Hauls in my area. One local renter of storage garages has recently added U-Haul rental trucks on his lot. I also notice the largest U-Haul dealer in the area is now advertising for truck unloaders for people moving and needing extra help.

A trend?





Dear Victor,

We discovered your review of our paper [link] and just wanted to address a few of the points you raise and correct some erroneous statements.

a) We do not stitch our time series together, but simulate a standalone P&L equally allocated between the various instruments. The correlations between markets are indeed present but irrelevant to the estimate of the t-stat which is simply estimated using the daily returns of the strategy i.e. signal*next day (or next month) returns, which are for all intents and purposes uncorrelated (even if the signals themselves are obviously not). The resulting t-stat measurement we feel is made more robust by the fact that t-stats are also significant for all sub-periods and all individual asset classes. We therefore don’t understand your comments about overlapping 5 month windows or the correlations between tickers.

b) Your interpretation of our regression results seems strange. We are simply looking how much the market moves on the subsequent day (on average of course), conditional to a certain value of the signal (the normalised five month trend). We find that when the signal is 1 at one sigma (not one percent!), the next day return is three times bigger than its long term average, i.e. the return of the long only strategy. We find difficult not to see this as “economically significant”; besides, the trend following industry has certainly made very significant profits in the last thirty years.

c) Our “armchair explanations” are proposed as possible (plausible) explanations for which we do not have direct statistical evidence. Still, we refer to recent, well documented academic papers based on surveys that pretty convincingly show that most people have “extrapolative expectations”, i.e. they tend to follow trends. See Shiller, Menkhoff, Hommes, Greenwood & Schleifer, etc.

Looking forward, we believe that long term trends will persist, albeit delivering a strategy with a low Sharpe ratio. There is however only our best guess based in part on the results of our paper that shows that trend following has delivered a highly significant Sharpe over a long history.

Sincerely yours — the authors of “Two Centuries of Trend Following”



 This article "scientists find achilles heel of antibiotic resistant bacteria" discusses a potential breakthrough in combatting antibiotic resistant bacteria. Apparently some of these organisms build up a 'wall' that becomes impenetrable to known drugs.

One wonders if a similar phenomenon occurs every day in markets at the low and high price. Considering just the low — perhaps as price goes lower the market builds up more and more resistance to the selling, with the conditionality thus created in the data thus leading to greater and greater future expected returns for a given holding period, say, into the close at which point the market price once again becomes subject to buying and selling pressures.

A touch further down this track and one might consider a 'Palindromic Reflexive' relationship between increasingly ineffective selling and rising market 'antibiotic resistance' to said selling.

One readily accessible test is to use 'risk reversals' as the 'antibiotic resistance' factor and price acceleration/ deceleration as the other factor. If, for example, the risk reversal developed a skew towards put options over call options and the price continued down and the RR skewed more etc in a 'reflexive' fashion…. but then all of a sudden the risk reversal stabilised while the price kept going down then that would be a potential sign of 'resistance' to downward price movement that may signal future reversal….. There may be a potential reversal approach somewhere within.

HDAS Capital writes: 

When looking at the wall building process of price discovery, it's useful to take out the microscope and see (count) what the "bacteria" is doing. Is it canceling orders at greater rate than trades per price level? Does it take longer to trade through the bid or the offer? And what happens to the next price in the sequence?



Now that stocks are at an all time high, gold at 20 day high, and bonds near their highs, even corn up 2 1/2 this morning, and the euro between 135.5 and 136.5 for 25 days, what will the evil market mistress come up with to create flow and induce us to do the wrong thing?



 I've always felt the story of The Boy Who Cried Wolf has many lessons for traders. The story from wikipedia is below:

The tale concerns a shepherd boy who repeatedly tricks nearby villagers into thinking a wolf is attacking his flock. When one actually does appear and the boy again calls for help, the villagers do not come thinking that it is another false alarm and the sheep are eaten by the wolf. The moral stated at the end of the Greek version is, "this shows how liars are rewarded: even if they tell the truth, no one believes them". It echoes a statement attributed to Aristotle by Diogenes Laërtius in his The Lives and Opinions of Eminent Philosophers, where the sage was asked what those who tell lies gain by it and he answered "that when they speak truth they are not believed".William Caxton similarly closes his version with the remark that "men bileve not lyghtly hym whiche is knowen for a lyer".



 I thought this was a fun read. Some excerpts below.

"The Biology of Risk" :

In one of my studies, conducted with 17 traders on a trading floor in London, we found that their cortisol levels rose 68 percent over an eight-day period as volatility increased. Subsequent, as yet unpublished, studies suggest to us that this cortisol response to volatility is common in the financial community.

A question then arose: Does this cortisol response affect a person's risk taking? In a follow-up study, my colleagues from the department of medicine pharmacologically raised the cortisol levels of a group of 36 volunteers by a similar 69 percent over eight days. We gauged their risk appetite by means of a computerized gambling task. The results, published recently in the Proceedings of the National Academy of Sciences, showed that the volunteers' appetite for risk fell 44 percent.

Most models in economics and finance assume that risk preferences are a stable trait, much like your height. But this assumption, as our studies suggest, is misleading. Humans are designed with shifting risk preferences. They are an integral part of our response to stress, or challenge. When opportunities abound, a potent cocktail of dopamine — a neurotransmitter operating along the pleasure pathways of the brain — and testosterone encourages us to expand our risk taking, a physical transformation I refer to as "the hour between dog and wolf."

One such opportunity is a brief spike in market volatility, for this presents a chance to make money. But if volatility rises for a long period, the prolonged uncertainty leads us to subconsciously conclude that we no longer understand what is happening and then cortisol scales back our risk taking.

In this way our risk taking calibrates to the amount of uncertainty and threat in the environment. Under conditions of extreme volatility, such as a crisis, traders, investors and indeed whole companies can freeze up in risk aversion, and this helps push a bear market into a crash.

Unfortunately, this risk aversion occurs at just the wrong time, for these crises are precisely when markets offer the most attractive opportunities, and when the economy most needs people to take risks. The real challenge for Wall Street, I now believe, is not so much fear and greed as it is these silent and large shifts in risk appetite.

I consult regularly with risk managers who must grapple with unstable risk taking throughout their organizations. Most of them are not aware that the source of the problem lurks deep in our bodies. Their attempts to manage risk are therefore comparable to firefighters' spraying water at the tips of flames.

Stefan Jovanovich writes:

One of the luxuries of sitting in the bleachers here in Spec Park is that you have all this time between innings to ask yourself questions about what the players are doing on the field.

Gary's referral to the latest wisdom from the New York Times raises a new query: Isn't "risk" simple the word that is used in financial theology instead of "sin"? Everyone is against it, but no one can define it until after someone has lost a large amount of money.

P.S. The suggestion that "firefighters' spraying water at the tips of flames" is foolish is dead wrong. That is precisely where the water is supposed to go so it can disperse the gases that are the actual fire. One of the first things shipboard firefighters learn is precisely any water sprayed anywhere else is not only stupid but dangerous. When the Forrestal had its fire, the greatest danger to the ship came from too much water being used; it almost sank the ship.



Kospi [Korea Stock Price Index] crossed the 2000 level 79 times so far…each occurrence as a bar on the chart.

Is this typical of round numbers? You would think that by say 100 times, speculators will give up on whether the event is bullish or bearish. Or is this what a "soft-landing" is?














 Christopher Matthew is a professor whom I have no trouble endorsing. Based on his work so far, he offers as much promise as Gary Gallagher did when he was starting out as a teacher. Mathew has worked up his PhD thesis into a great book I recommend you buy, A Storm of Spears - Understanding the Greek Hoplite at War. (Less than $7 on Kindle).

P.S. He is editing a volume on the Battle of Thermopylae. We will soon have an opportunity to spend/waste more money on "something with Greeks".



 I came across this article lately with lots of good pictures: "17 Bookstores that will Literally Change Your Life".

It got me thinking about one of our last remaining bookstores in NYC, Strand. Strand sells both used and new books. They were able to sell new books at lower prices because they purchased and sold reviewer’s copies at a 50% discount to the listed price. It used to be that if they did not have a reviewer’s copy in stock one could put an order in to be notified and the book held for a number of days when a copy did become available. But the industry has changed. Reviewer’s copies have become relatively scarce. A large section of their basement used to hold the reviewer’s copies. Now that is down to a few shelves worth. I have not even tried to order a copy and have noticed that the shelves behind the information desk no longer contain those copies put aside for those who have asked. The new books that are not sold as reviewer’s copies are discounted by much less than the discount at Amazon.

Strand still has a used book section for University press books, but I notice that many of those have “not for resale” stamped on the sides. I have no idea what the legal liabilities are for those initial sellers, Strand or the ultimate buyers when they are resold anyway. Strand still sells used art books typically at a 40% discount. Most of their shelves are still devoted to used books.

Many of the book stores of the 17 pictured, unlike Strand, are attractive. Strand now has air conditioning, unlike the hot basement in the summer in ages past. But attractive it is not. Ages ago we had Scribner’s on Fifth Avenue, which was attractive but is long since gone. The next best in that regard was probably Rizzoli, which recently closed its NYC store. They are apparently looking for a new location. It’s a real shame that NYC does not have one of these great book stores aside from Strand. But I have been as guilty as so many others in browsing at those stores and then buying where I could get the best price. Even Barnes and Noble has changed in that large sections of their stores now sell items other than books, often games and such for children.



I'm not a technician so I may have this completely off, but the Baltic Dry Index is making 12 month lows coming off a head and heck. I'm told that my suggestion of the HAN is off because the decline wasn't immediately after the right shoulder and the necklines were declining, but it makes me wonder about China.

John Bollinger writes: 

The point of studying such formations is to identify the underlying psychology and then act on it if appropriate. Perhaps, a core understanding might help? Richard Schabacker, Humphrey Neill, John Magee and Richard Wyckoff are a few of the authors that might throw some light on the matter for you.





 Dear Muskaan,

Daddy is proud, despite his strong belief in the value of humility, at your fantabulous accomplishment.

At this school leaving examination, which also happens to be the first public examination you have taken in your life & conducted by the Indian Council of Secondary Education, you have accomplished what none so far have in your gerontocracy. Your score on each of the subjects is higher, into the high 90s, than your father could achieve or his forefathers could. Well surely you indeed have also scored higher than any other student in your school.

Soon as the results sprung out on the internet, all over the country there was a frenzy of several million test-takers discussing their accomplishments with their peers. Yet within such a busy patch of time, even as a budding teenager, you have been resplendent in speaking to me for such a length of time, even if in five pieces of conversations. This assures me, your values are deeply family driven. The simplicity with which you can internalize a big moment deserving a big celebration as this was proven yet again, when you chose to order Pizza from Dominos and savour your victory just with your family. This is touching.

Yet, as you step forward further to be much more on your own, the value of networking and connecting can hardly ever be over-emphasized. Education and performance at exams are often solitary sojourns, wherein a good student puts in endlessly long hours working on her own abilities. Wisdom however, will be in being able to apply it. The more adept you hereon become in connecting and building on your rapport with everyone, the more you will be able to utilize your learnings.

Your leanings towards numbers is apparent right from your early schooling days wherein you scored a perfect 100 in maths and high 90s in science subjects many times through years. Yet, at this key public examination, I am gratified to note, that you have done equally well in languages. The power to express is definitely as important as the power to ideate, visualize, observe, calculate, infer and deduce. The big difference between those who end up spending their entire life-times in laboratories and those who create products that fill up stores worldwide with customers is their ability to take their work to masses. I urge you to keep growing your repertoire of expressions, vocabularies, diction etc. throughout your life. Not only for enriching your ability at communications, but also for the fact that literature is the mirror of society, do invent some time to read some of the finer classics. I also urge you to begin reading Ayn Rand with a goal of triggering your own thoughts around her ideas. Yes, you got it right that while you have been progressing well on Java, C++ etc. etc. you must not lose out to any other on your ability at the old world languages as English and Hindi.

Since you do have a clear focus to put in your entire might into seeking an admission to the top Engineering Colleges in the country couple of years down the line, I will share a few recommendations of some of the finest books from an era gone by long ago and yet these are still likely the best.

To master Differential & Integral Calculus, hunt down the two volume compendium by N. Piskunov that was originally published by Mir Publishers but now out of print. An amble around the old and used book-stores markets to ferret out such jewels is yet another indulgence an erudite person must begin to savour. Over the years, the nourishment your soul may find in the company of old and difficult to find books, will surely drive your passions to be not just a good but a great learner.

To get an in-depth grip on High School and beyond Physics locate the book by Resnick & Heliday. It may subsume your mind, but it surely is worth it to create a solid foundation that will last with you.

Yet another out of print book, but surely a master-piece on Organic Chemistry was written by I M Finar. Locate it.

While you delve deep into grasping concepts, you must recognize that it is practice and practice alone that makes not just men but women as well perfect. Solve as many computations as you can each day. Go down to the steps where you went wrong and it at these steps you will iron out the wrinkles in the crevices of your sub-conscious mind so that your thinking processes are evolved through this humbling process of knowing where do you err, in advance.

An old world saying, that a good mind lives in a good body. So, I am sure you will be keeping an even focus on keeping building a good health. Yet, with the evolution through my and your generation, it may be apt to believe that a good mind and a good body are held together by a great personality. So, somehow do find the time to indulge in competitive activity on the stage (in college) and surely at the sports-field.

Lastly, yet most importantly, I gave you the name Muskaan. Your name derives from the Urdu word that means a beautiful smile. Over these years, trust me, not just because your are my daughter, I have and others have felt you have been gifted with a smile that is rare. Yet, in the recent several months in the run up to your exams perhaps, there is a recurring frown on your forehead way more than your magnetic smile. Please learn right away, early enough in life, that consistent and sustained achievement is seldom feasible while existing at extremes. The concept of optimality applies to every human endeavour. In any case, the goal of life is the pursuit of happiness and to lose your miraculous smile for sub-goals of life is something I will want you to avoid. The same way that you balanced your achievements across languages and numerical subjects, I wish for you, that you achieve a life where work and play are so finely inter-woven that each journey of achievement is as much a joy for you as each milestone will bring.

While your immediate goal and focus for the next two years is the Engineering College Entrance test in India, which without an argument is the most competed for exam in the world, since God made too many of us in this part of the world, I need you to study Statistics and at least one human science at an appropriate time. Even while the study of natural sciences is so much complete in itself, each of us will use our abilities within the human dilemmas. What can be cognized by man is what truth is. Everything else is within the domain of postulates. So the approximations and the imperfections, that create all the opportunities, must be studied well too.

The first time ever someone's eldest child writes a public examination and beats daddy in each and every subject is a joy that comes to only some. What a bliss you have brought me. Hereon, while you keep beating me in every next exam you write, I need you to know, you will create a happiness multiplier function, should you achieve with elan, grace, happiness and health.

Here's to my rock-star, a big congratulations! Keep moving forward, with your focus, zeal and hard work and yet do it with happiness, health and a continuously growing personage.

An amazed father!



 Refreshingly old school, and I thought a good fit with some of the other pursuits of dailyspec readers:

"Even in the Digital Age, These Young Champs Still Care About Marbles" :

PITTSBURGH—Bobby "Bobbo" Narr, a sunny fifth-grader with flaming red hair, can wallop a baseball but prefers shooting marbles.

His sister and cousin are former national champs, and this month he has been spending two hours every night with his coach doing marble drills at his neighborhood court, a 10-foot cement ring under a steel bridge.

"Gotta practice to get better," says Bobbo, who warms up his thumb with 50 short-range "tap shots." Every year, his goals are the same: Qualify at the county championships, then win a national title. The 91-year-old National Marbles Tournament, which runs Monday through Thursday in Wildwood, N.J., claims to be the longest-running youth sports event in the country. Last year, Bobbo finished eighth in the nationals.

Playing marbles has mostly died out but thrives in pockets across America including Pittsburgh. The city has thousands of mibsters, as players are called, and about 40 former national champions, including many from the same families. In some neighborhoods, the passion that normally follows Little League baseball and Pop Warner football surrounds little spheres colliding inside 10-foot cement rings.

Marbles, as old as Ancient Rome, and the root of billiards, bowling and golf, was popular in early America. Abraham Lincoln played to relieve stress during the Civil War. In Pittsburgh, a marble-playing tradition was fueled by the booming glass industry, which preceded the making of steel in Western Pennsylvania.



If Round Numbers, perhaps because they are the easiest multiples of other numbers, attract attention and thereby either a struggle or a release of pent up tension occurs around them, then the antithesis of a round number may likely be a prime number.

Do markets move past prime numbers with least activity/least resistance? If that is so, there should be evidence that the often talked about supports or resistances are observed to occur much less frequently around such numbers than may be in a consistent with randomness world.

If the numbers are a human invention (the choice of the base that all of us stick to is surely a convention, since the mathematics of the universe still remain the same whichever base of numbers any may choose), due to which variable behaviour around different types of numbers observed in prices may only be explainable, then such behaviour may be observable in time too and not just prices.

Perhaps the Senator has studied behaviour of markets through prime numbered years? Perhaps Kora may quickly run through his numbers cannons a study on prime numbered trading days from the lowest low in the last century?

Do markets move more than consistent with randomness or less around prime numbered prices? Similarly do markets move or less than consistent with randomness in prime numbered price bars?



 You've heard of the Big Mac index. I propose the Cappucino Index. I'm in Tuscany, Italy now. Cappucino and espresso are €1. Spaghetti dinner is €6.5 - €8. Brunello di Montalcino wine is €20-€40. You can't touch a cappucino in Hawaii for less than $5. I saw Brunello di Montalcino wine for $475 in NYC on the way over. The dollar is strong despite the advertised exchange rates. Things do not seem all that depressed here in Italy despite headlines to the contrary. There are fewer Japanese tourists but I did hear Chinese spoken. Italians are friendly relaxed and smile easily. The restaurants are unpretentious. The wine is wonderful, inexpensive and varied. Our villa is a huge abandoned hotel and restaurant. It's a bit odd without any staff. In NYC on the way over there were more new construction and little babies than I've ever seen.



The word "Huh" appears spontaneously without any root in all languages. Is there a regularity that appears spontaneously in all markets? The minimum on Monday? The big up open? The liquidation at the close from margin calls? What's your word?

David Lillienfeld writes: 

Huh is a palindrome. Palindromes seem like a good system idea.



My dad died on April 6, and I miss him quite badly. He was my best friend, mentor, partner, and confidante. His death has been the hardest thing to deal with in my life, ever….and I have dealt with death before. Father’s day was always an event in our house growing up, even bigger than Mother’s day. It was equal to Mother’s Day in our adult house, and my lovely wife and son always made sure I got a decent amount of swag.

Before my dad died, I spent a lot of time with him reminiscing, and just getting to know him. Over the few months while he was waiting for Charon, he offered much valuable advice. Here is a very tiny sample of some notes I collected, but some tidbits are very apropos for Father’s Day.

1. “Lying to protect someone’s feelings isn’t lying. It’s called empathy.”

2. To my son, “someday during a job interview, the HR guy will ask you “What’s your greatest weakness?” This isn’t an invitation to be honest. This is a test to see how well you can answer a stupid question.”

3. “Debt is oppressive and can be evil if done for the wrong reasons. If you’re going to go into debt for something, make sure it’s worth it.”

4. “Always go for women you think are out of your league…..you will be pleasantly surprised.”

5. “Compliment her shoes.”

6. “Always stand to shake someone’s hand.”

7. “Nice guy’s don’t finish last but the boring ones seem to”

8. “Never allow the little head to do the thinking for the big head.”

9. “Treat the woman of your life like a queen.” “Worship her.”

10. “There’s always money out there, but you need to hustle for it…..it’s not going to drop in your lap.”

11. “When you are forced to do something, don’t complain, the work won’t get done any faster.”

12. “The first one to mention price in any negotiation usually loses.”

13. “When asked for a loan from an acquaintance, respond with, ‘My banker told me he would not invest the bank’s money in grain futures if I would agree to not loan my money out.’ Then hand the acquaintance the banker’s business card.”

14. “There is life outside of business.”

15. “The first one to get angry loses in everything.”

16. “Personal thrift in all areas of life will pay big dividends later.”

17. “When I’m gone, the entire family is your responsibility…..be fair and just.”



I found this article very interesting but highly flawed: "Why Smart People Struggle".



 One found this Ted Talk on the Constructal Principle the most stimulating video about markets I've seen in the last years.

Gary Phillips writes:

Configuration - Evolution - Performance

Humans and animals instinctively nest before giving birth while price intuitively reverts to the mean or fair value time regulates gestation before each moves away– driven and sustained by an evolving flow structure that moves price and people more effectively and is fueled by monetary and human stimulus.

Richard Owen writes: 

I couldn't tell in my naivete if the video Vic kindly shared was genius or stating the obvious. Or indeed, stating the tenuous: "life is a function of force times distance and energy" is a bit like saying "the pop charts are a function of quantum mechanics". In some fundamental sense yes, but, well… um.

I have spent the afternoon trying to manipulate 600mb of data. With rudimentary tools on a regular computer, this is is not very efficient and requires souped up DBs and subscriptions to a cloud and so forth. This is despite my processing requirements being very simple.

As is typical with such affairs, I end up with fifteen applications and fifty browser windows open, trying to speed read this, that and the other, with high tonnage of adverts and so forth. Thus everything slows to mud.

This experience seems to have been a constant throughout my years of using computers, despite Moore's law and my task business task being somewhere in complexity along the lines of what IBM was tinkering with back in the 1950s.

I then start to wonder if the constructal principle isn't subject to its own law of relativity, such that just as light is constant in speed despite all available rocketships, so are my cromagnon perversions a constant despite all available processing power. Now hmm, where's that Miley Cyrus video where you can almost see her nips. I'm sure I had that loaded HD on youtube somewhere.



As you might know, my dad died on April 6, and I miss him quite badly. He was my best friend, mentor, partner, and confidante. His death has been the hardest thing to deal with in my life, ever….and I have dealt with death before. Father's day was always an event in our house growing up, even bigger than Mother's day. It was equal to Mother's Day in our adult house, and my lovely wife and son always made sure I got a decent amount of swag. Before my dad died, I spent a lot of time with him reminiscing, and just getting to know him. Over the few months while he was waiting for Charon, he offered much valuable advice. Here is a very tiny sample of some notes I collected, but some tidbits are very apropos for Father's Day.

1. "Lying to protect someone’s feelings isn’t lying. It’s called empathy."

2. To my son, " someday during a job interview, the HR guy will ask you “What’s your greatest weakness?” This isn’t an invitation to be honest. This is a test to see how well you can answer a stupid question."

3. "Debt is oppressive and can be evil if done for the wrong reasons. If you’re going to go into debt for something, make sure it’s worth it."

4. "Always go for women you think are out of your league…..you will be pleasantly surprised."

5. "Compliment her shoes."

6. "Always stand to shake someone's hand."

7. "Nice guy's don't finish last but the boring ones seem to"

8. "Never allow the little head to do the thinking for the big head."

9. "Treat the woman of your life like a queen." "Worship her."

10. "There's always money out there, but you need to hustle for it…..it's not going to drop in your lap."

11. "When you are forced to do something, don't complain, the work won't get done any faster."

12. "The first one to mention price in any negotiation usually loses."

13. "When asked for a loan from an acquaintance, respond with,"My banker told me he would not invest the bank's money in grain futures if I would agree to not loan my money out." Then hand the acquaintance the banker's business card.

14. "There is life outside of business."

15. "The first one to get angry loses in everything."

16. "Personal thrift in all areas of life will pay big dividends later."

17. "When I'm gone, the entire family is your responsibility…..be fair and just."



All systems that move tend to devolve to a structure and shape that increases the current through it. Thus, when a contract changes from June to September like SPU today, there is a increase in volatility and fearfulness to induce those who are long one to switch to the other, especially if they are long so that they can't get out of their positions without an extra curren(T)cy to the top feeders.



 Below us stretches the Colton yard of San Bernardino. The Pepper Street Bridge shakes like a California earthquake as a mile-long Dirty Face snakes under and east from the Pacific to who knows where. That's one attraction of hoboing.

We wheel and watch the red-blinking FRED at the end of the train disappear about midnight on May 30, 2014. 'The only sure thing about freight hopping is you know where you are, and not where you're going,' I advise 22 year-old MoJo, the strapping son of two journalists who is the political writer for the Mother Jones Washington DC branch. He fancies to get that far the hobo way, but there are no promises.

'The lights seem brighter than my previous time through three years ago, and the tracks twice as busy, with three times as much graffiti, and more colorful,' I wonder aloud. Below us, on the bridge embankment under a willow tree, four tramps including one female boisterously celebrate Horace Greeley's 'Go West, Young Man' and the hobo California dream where one may pick breakfast off an orange tree and sleep under the stars at night.

Anxious to jump into a boxcar, rock-and-roll, and see what lays ahead, we trundle past the bos and into some Eucalyptus. Within fifty paces huff and puff three sets of locomotives heading up under the Pepper Street Bridge. We may choose: A mixed freight with three engines, an Intermodal container train with four locomotives, or a 'Dog' of assorted cars with two rust bucket engines that would side considerable and ditch us 'out on the farm'.

We approach, the blast and clank of the yard cloaking out steps on ballast and the smell of diesel and oil camouflaging our nervous body odor from the RR police, or Bull. The ladder of a freight reaches to three feet above uneven right-of-way and we climb aboard a silver hopper down on its springs with cement for a softer ride and having the trimmings of a front and back 5'x8' porch with a portal of shoulder width that enters a hobo 'hotel room' in the superstructure of the car. MoJo crawls in to try it for size as much as to stay out of sight, as the crunch of ballast under heavy boot drops closer and closer.

'Gentlemen!' booms a baritone, as a yard worker grins up at us. 'You'll need this wherever you're bound.' He passes up a twelve pack of RR bottled water normally reserved for the engineers that you must not lose faith in humanity anywhere.

'This train is due to leave right after we get the F—king Rear End Device fixed, so lay low, good luck, and I never talked to you.'

 In minutes, the orderly process of a train departing a RR yard begins with the hiss of the Westinghouse brake line filling with air, an eerie electrical click in the same direction to test the connection, and, finally, highball! - two long blasts of the locomotive horn, with a staccato beat of couples stretching to our car, and the train leaps off the track for a second.

We clear the Pepper Bridge and in three hundred yards roll over with a clank of Americana the Colton Crossing. Located directly south of Interstate 10, this great steel frog determines the fate of every train tramp who's ever caught out San Bernardino full of juice and hope. The junction is one of the most historic and busiest in the USA where the south-north BNSF rail strikes the west-east Union Pacific. It was the 1882 scene of a bloody war between the lines, but tonight moonlight peacefully streaks the rail as our BNSF train nudges north over the clatter-clatter of the joints and into the star-spangled night.

The juxtaposition of Executives and Kings of the Road along the rails in American history is spectacular. Andrew Jackson was the first president on B&O in 1833 to ride the Iron Horse. President-elect Abraham Lincoln rode his famous Inaugural Train Journey in the winter of 1861 on NY Central trains from Springfield, Illinois in a trip that was considered full of potential dangers. Several Southern States had already withdrawn from the Union, and assassination attempts were possible. For these reasons, the train schedule was tightly controlled with stops as short as possible to coincide with service requirements of fuel and water for the steam locomotive from his hometown to the inauguration in Washington D.C. In Philadelphia Lincoln for first time learned of a plot on his life when his train was scheduled to pass through Baltimore. A hobo cloak and dagger train of events followed. Lincoln opted to smuggle aboard with the famous detective, Allan Pinkerton, through Baltimore and safely into Washington on a separate train that no one else knew about. While Pinkerton stood guard on the porch of the last train car all night Lincoln stayed just inside the last car in a lower booth, and was safely delivered disguised into Washington in the early morning for the Inauguration.

Harry Truman in Plain Speaking makes no bones about his hobo roots:

I was eighteen years old, and I'd just finished high school and knew I wasn't going to get to go to West Point. So I took this job as a timekeeper for Santa Fe RR)… There were about a hundred hoboes in each camp, and I got very well acquainted with them. My job was to keep tabs on them, to keep track of how much time they put in, and then I'd write out their paychecks for them. And they weren't bad fellows… Not in any way. Most of them had backgrounds that caused them to be hoboes. It was one of the best experiences that I ever had because that was when I began to understand who the underdog was and what he thought about the people who were the high hats. They felt just like I did about them. Some of those hoboes had better educations than the president of Ha-vud University.

Meanwhile, rolling over the California salt flats, I explain to the Mother Jones political reporter that the principal tie between Executives and Kings of the road is their grass-is-greener view of the American Dream: The Executives whom I take out want the freedom of independent travel. The tattered Kings I ride with want money and power. There should be a Prince and Pauper Company to please both.

The palm skyline of greater Barstow, California fills the horizon at sunrise. Our hopper is parcel of BNSF Railway, the second-largest railroad network in North America, second only to the great Union Pacific RR. BNSF has three transcontinental routes for high-speed links between the western and eastern United States, and we are riding the only southern link from the Pacific to the Mississippi River. It is safely said BNSF trains travel more rail miles and hobos than any other North American railroad. With a system of 24,000 miles of track, especially in the west, it hauls various commodities, most notably coal and grain, as well as intermodal (container and truck van) freight. The locomotive color is orange, black and dashes of yellow.

 The BNSF Barstow employs over 1000 workers and is a traditional hobo bottleneck. An unseasoned hobo is doomed to aimlessly walk and duck about the yard until he's ticketed for misdemeanor trespassing. I expect many spottings, but not to be collared. The Barstow yard is a major hub for transportation with a 'hump' for classification. Hobos speak of going 'over the hump' in Barstow in order to reach Los Angeles and the Bay area because except for through trains all of the incoming cars are re-sorted here. MoJo nearly jumps out of his overalls at the first crash of a car that has been backed up onto the 20' crest and the couple 'cut loose' so it becomes a 'silent roller' that rolls by gravity for up to a half mile from the hump track onto any of 48 classification tacks. We call this 'shuffling the deck' and it's better to watch than be in a car crashing at 8mph into its brethren string of cars. I was once thrown 15' in such a shuffle and wish never to repeat the experience. Once the cars are sorted into destination strings, locomotives are attached and on they move across America.

Barstow is also the first crew change point on the BNSF for northeast bound trains. Crew change towns are as important to hobos as the old time water tanks where steam engines (that yielded to diesel-electric in the 50s) took on water and hobos. Now train riders board and debark at the crew change divisions that take place 'on the fly' where the crew literally steps on a slow-moving freight as the previous one steps off – and hobos must do the same – or more likely it takes five to twenty minutes to change. And yet, our locomotives a half-mile to the front 'dynamite' releasing a blast of compressed air that is heard for miles, and signifies the train has probably terminated and is going to break up. A yard worker on a quad confirms this, tells us to lie low because the yard is 'hot' with security, and advises us to take a tunnel under the bowl of sorting tracks to the north side yard and look for units heading up eastbound. I'm a cookbook of adventure knowing liberties are given, and taken at risk. Emerging from the far side of the 100-yard cool tunnel another yard worker in a pickup spots us and lifts the mike of his radio.

Hoboing is game theory and the stage is the freight yard. A game consists of freedoms, barriers and purposes. The freedom is the open road, the barriers are the strings of cars, watchful towers, deadly silent rollers, and the sweat in your eye that may lead to a misstep. However, primary among these is the necessity in a game to have an opponent or enemy. There must be a continuum of problems which there are in a freight yard, and to have sufficient individuality to cope with them which is given. Now the game begins.

The Barstow yard is three miles long and a half-mile wide with the typical configuration throughout the USA of two main lines (with traffic in opposite directions) feeding into either end, usually under a highway bridge, that quickly fan into a wide swath of some fifty tracks that are littered with strings of some 500 freight cars on hold, fueling locomotives, yard locomotives pushing segments of trains around, the yardmaster tower, outbuildings, and stacks of RR ties and miscellaneous equipment. Barstow is a hobo blockade to most because it is HOT with a high security presence. Our primary opponent is the Bull, or Cinder Dick.

Oddly, in these days of tightened security since 911, it's still as easy to jump a freight train as it is a jet plane. The railroads in the financial squeeze have farmed the Bull duties out to private security firms which send a young man in a starched uniform driving about the yard in a white truck looking for inclusion and tuned to the radio for tips from yard workers and the towers. MoJo and I had just completed climbing over the 13th string of cars to get to the other side of the yard when that white truck stops ten feet away with only a set of gondola wheels separating our legs from his. I hunker down to peer between the 3' metal wheels and gaze into the eyes of a fresh, crew-cut young man in white with a silver star staring back and grinning. I guffaw, arise to heels, walk around the wheels, and introduce myself.

'Just trying to catch an eastbound and not touching anything.'

'I've been getting reports on you guys all over the yard all day. What's up?'

'Did you ever climb over 13 strings of cars? It takes five minutes per track and it's hot so we welcome you.'

MoJo pipes, 'We know there's an Amtrak at 9:54pm, if that's any help.'

'Just follow the caged center rail for another mile to get to the Amtrak station, and there will be eastbound freights as you walk leaving on both sides of the cage.'

'Thank you,' I settle, and we quickly walk away. The truck backs along the other side of the string of cars following our progress for five minutes, and then leaves. 'What a surprise!' I suggest. 'A sympathetic security who has clued us on how to catch out.'

 We hike to the unstaffed Amtrak station and guzzle icy liquids for thirty minutes in the Harvey House Railroad Museum. Fred Harvey's Harvey Houses are a household name among hobos and Amtrak passengers throughout the west. An innovative restaurateur, Fred Harvey created the first restaurant chain in the US and developed the Harvey House lunch rooms, souvenir shops, and hotels that served passengers on the western gridiron of the early otherwise 'wild' west. The Harvey family continued to run the business until 1965, and now with the closing of most of the depots, many like this one in Barstow have been converted to Amtrak stations and museums. I pop a cold soda and gaze over a collection of dated RR nails of which I have a complete hand-collected set from 1901 to present.

Then we retrace along the perimeter fence for a mile until finding a 'hole'. There is always a break in the fence behind a bush where other hobos have pried it open for yard access, and we scoot under like squirrels to secret in pines to study the busy eastside tracks. Within minutes, two trains roll up, and then a third. The only obstacle is the caged center rail, a dual 4' high chain link fence that protects the workers from the high speed passenger train, and that MoJo takes with a bound as I boost myself standing on a pack. We board a mixed freight for the shade of a lumber car, and catnap on plywood until a nightmare strikes. The train begins to move the opposite direct of our intent, so I shout, 'Your pack - Throw it w-a-y out.' He does, and, 'Now you!' The freight is rattling 5mph and a little faster than an escalator and we haven't had a chance for the lesson on how to disembark on the fly. Rather than step down the ladder, MoJo leaps from the car lip 6' above the ballast and arches as high as a basketball rim before dropping like a sandbag. He alights in an absorbing tumble albeit in the opposite direction of the train, and dusts himself off as I yell, 'Watch me!' and simply step to the bottom rung of the ladder and then another 2' down to the moving ground. 'That's one kitten toward the life of a Catman,' I tell him, and he smiles like one.

The smile drops as the container train on the adjacent rail jolts in the correct direction, and as I move for the ladder express, 'That's how fast things happen in a freight yard.' We board because it's a priority train bound for distant places. Container cars are the 30-40' metal boxes mounted on flatcars that haul merchandise intra-country or overseas. There's usually a narrow well in which to sit at the ends of the container on the flatcar, and it's advisable to take the rear one to avoid a shifting load in an emergency stop. Double-stacks are containers mounted two-high on a flatcar, and our ride taken in a hurry was sounding two long whistle blasts for imminent departure. These are called intermodal trains because the containers are shunted from rail to truck to ship. Intermodal transport is the current wave of transport with 7 of 10 ten trains that we've seen being containers and piggybacks, whereas five years ago it was a third that many.

In our rush to board we selected the front porch of a container flatcar to avoid the scorching sun. This means that if the train emergency stops (happens once every cross country trip) the riders may be thrown forward and off the car. A fast moving train with 100+ cars that emergency brakes takes about a mile-and-half to stop. I was hit in a VW van once by a 20mp freight and carried on the cowcatcher for a quarter-mile down the rail before it halted and I let go the steering wheel and fell through the window. On mean, a train emergency stops every ten hobo travel days usually due to an animal, person or car in the track, or an uncoupled brake hose. I've remained safety conscious of emergency stops, and insist that MoJo and I, with one hand each, grasp a 2" vertical bar on the container door for eight straight hours until Needles, Ca.

 This is not just any container train but a pure JB Hunt 'unit' train. JB Hunt, a Fortune 500 company, since 1961 has been one of the leaders in Intermodal transportation with 12,000 company trucks as well as independent drivers, and 47,000 trailers and containers, with contracts with all the major rail carriers. Let's take a typical unit container train. It consists of 130 cars, each car is about 60 feet long, and it's pulled/pushed by four 65-foot long locomotives. The cars are 7800 feet, the locomotives add 240 feet, for a total of 8040 feet.

Loaded freight cars are designed to weigh close to the same when full, 125 to 145 tons, makes no difference if it is fuel, coal, barley, a container, or scrap iron. A typical modern train runs three units on the point and one pusher at the rear. I would say a good average for a train these days is a mile-and-half and speeding 65mph. 'Intense,' coos MoJo, and I recall my basketball coach drilling, 'You miss 100% of the shots you don't take.'

Our JB Hunt train parallels Interstate 40 for an hour and outraces every vehicle on the road. This stretch from Barstow to Needles twins the famous old west Mojave Road that is now a dirt trail that I walked in one week once, running out of water but sucking it from barrel cactus. The JB Hunt boxes surprisingly have only a thin plastic seal and easily could be broken into, unlike the heavy lock on my container home in the California Sonora that's refurbished with a loft, waterbed, office and library.

Approaching midnight, we roll with still clenched grips into Needles, California. This whistle stop oasis located 100 miles north of my Sand Valley digs often boasts on national weather reports the hottest place in the country, and in the comic strip Peanuts, whose creator Charles Schultz lived in Needles as a boy, Snoopy's brother Spike lived in the desert near where we finally release the vertical bars and heave stiffly over the side. Spike frequently heads to Needles to partake the town's nightlife, which I agree is primarily howling with the coyotes. 'I don't want to be stuck here,' I explain, 'But we must change cars.' We board a few cars aft on the rear porch of a flatcar with a double-stack just as the brakes click, the line hisses, and the freight whooshes into the night. It has taken less than five minutes to change crew. Now we stretch out and sleep while crossing the Colorado River and beyond, for there is no better siesta than on a freight that rocks like a cradle where nothing can disturb you until the next crew change.

We surf the rail out of California and into Winslow, Arizona, with the Eagles Standing on the Corner Statue that is a catchout point for hobos with a catchy line to their song Take it Easy… 'Such a fine sight to see'…' and then the crossing bells clank for the thousandth time and the train pushes on. MoJo admits to quitting coffee for the trip and is well into a full beard. He asks about my shoulder tattoo of a mouse with a smile and teardrop in one eye to which I justify that on the road when you're smiling you'll soon be crying, and when you're crying you'll soon be smiling.

This is our state on striking Belen, New Mexico. Most hobos ride the rails in confusion. They get on a train sober with a bottle of wine or whiskey, and drink it down in the first two hours of the ride so they'll be sober again to debark at the next division town. They pause in one of these junction jungles to clean up, perhaps to work a temp job, panhandle, or visit friends. As long as their stomachs are full and they remain on the move they're happy. However, the boxcar tourists I ride with travel with purpose: to see the nation, to get from one place to another, or to learn of themselves. I believe that to live fully one must have, in addition to a means of support and something to do, a higher purpose. This resolve, to be a goal at all, must have counter-purposes or purposes which prevent it from occurring. There must be individualities which oppose the purpose because if one lacks these it is nearly certain he will invent them.

 We 'plastic people', as the grimy traditional hobos call us for our cards and perhaps appearance, are abetted in our travels by three tools of the trade that most conventional bos will never know about but would give the gold in their teeth to own. The first is the Rand McNally Handy Railroad Atlas of the RR 'interstates' or main rails. I also carry system maps for Amtrak and Greyhound in 'poor man's laminations' of clear sealing tape. But the trump is the Crew Change Guide. Otherwise, you'd face as a green bo entering the rail system a great many pieces of paper whirling about a room that would be confusing until you picked out the one piece of paper by which everything else is in motion. This is the Guide that has replaced the hundreds of sheets of notes and yard sketches that I made on my initial runs in the 80s.

The Guide is shrouded in mystery that I now can clear. The author was a folk hero named Train Doc whom I met at a Dunsmuir RR festival in the 80s. He is a Vietnam vet who became a New England nurse's aide while spending all his free time freight hopping and recording details about the thousands of yards: where to catch out, jungles, supply stores, where the units 'head up', fences, and bulls. Since train hopping is technically illegal, he titled the guide From Birmingham to Wendover: Alternative Travel Guide to Cool Camping Places so that if a law official discovers the text it won't incriminate the rider. The Guide lists no author but in the 80s everyone knew and Train Doc confirmed to me that he wrote it to help others in searching out the freedoms of the open road. Train Doc is an Ed 'Lilywhite' Norton look and talk alike if you remember Jackie Gleason's TV Honeymooners. I tell people the Crew Change Guide is the most laboriously researched book in English literature and the most helpful in a narrow topic range.

Now adrift in the middle of New Mexico, MoJo studies his IPhone Googlemap and Yelp (whenever near an Interstate or bridge) as I compare his data with the Crew Change Guide. My compass is deflected by the metal car and rail to point forever east and is useless. We jump down in late afternoon in Belen, a railroad community that exists because of BNSF, located on I-25 thirty miles south of Albuquerque. The omniscient Guide and IPhone concur that there are a Valero gas station and Blake's Burger a half-mile through a weed patch and west on Reinken Ave, and so we hoof it.

 Hobos own their own Golden Rule in the form of an Ethical Code that was created by Tourist Union #63 at the 1889 National Hobo Convention in St. Louis, Missouri. Sandwiched between Rule #1 ('Decide your own life, don't let another person run or rule you.') and later laws on yard and jungle conduct, tenets #2-10 deal with town behavior, as follows:

2. When in town, always respect the local law and officials, and try to be a gentleman at all times.

3. Don't take advantage of someone who is in a vulnerable situation,

4. Always try to find work, even if temporary.

5. When no employment is available, make your own work by using your added talents at crafts.

6. Do not allow yourself to become a stupid drunk and set a bad example for locals.

7. When jungling in town, respect handouts, do not wear them out.

8. Always respect nature, do not leave garbage where you are jungling.

9. If in a community jungle, always pitch in and help.

10. Try to stay clean, and boil up wherever possible.

In keeping, we wash up at the Valero one at a time, and then gulp great draughts of Gatorade, milk, and juice without burping. A kind lady hands me a bottled water and newspaper, and then returns fifteen minutes later with burgers and fries for my partner and me. A young Hispanic with gang tattoos presses $2 into my hand that I pass to the Valero girl clerk for feeling bad that she overheard me quip that it is odd for someone in a railroad town to never have heard of Amtrak.

Start, charge, and stop. Wait. Start, charge and stop. A repeating cycle of action that MoJo calls 'intensity interrupted by nothingness' is the hobo way. After the long lope back into the Belen yard we face catching out. Each RR yard demands about an hour of taxing multi-tasking in finding and boarding a car, the iron steed breaks the gate, and now we will look at another eight hours of countryside roll by like National Geographic except with the elements of sun, wind, insects and odors. We have chosen a piggyback to ride from Belen. The Piggyback is a flatcar that carries semi-truck trailers. One leans against the big tires and views 270-degrees of flowing scenery from under the trailer belly albeit a few dangling brake cables. The piggyback doors are sealed flimsily like containers and so bulls frown on pig riders, causing hobos to secret between the rear wheels. I've also ridden side-saddle like an old west Indian shielded outside the tires through hot yards. I used to say, things blow around and away on 'pigs', so everything should be roped down. I no longer say that because this is my first ride on a pig with wind blinders that have come into vogue in the past couple of years. The blinders stretch from nearly the tires to the front prong to block the breeze, still allow a view around and under, and screen prying eyes from the outside. A piggyback train such as this is a priority, third only to Amtrak and container trains, that I favor all in accordance with the seagoing adage to admire a small ship, but put your freight in a large one because the larger the load, the faster the voyage and the greater the profit.

Across the Rio Grande flies the blundered pig into the night.

Ft. Worth!' announces MoJo, glancing up from his glowing IPhone, as though neither ever sleeps. This is the BNSF headquarters with spokes east, west, north and south, but we conjecture this train of truck trailers is northbound along the dense Southern Transcon. The Southern Transcon is the main line of the BNSF between Southern California and Chicago. It was completed in its current right-of-way by 1908, and now serves as a mostly double-tracked Intermodal corridor. The route is one of the most heavily trafficked in the western US with an average daily of over 100 trains with each averaging one to 1.5 miles in length, like ours.

It's a fast five minute crew change in Ft. Worth as we hold fast with beef jerky and Gatorade. The 'hobo diet' while stuck on rolling stock day after day is one of the most effective with the fewest hunger pangs because there is so much to watch. Quick in and quick out is the way I like a yard, and before the train picks up speed it glides by the tremendous WalMart distribution facility beneath the setting sun. WalMart, a few months ago, announced the opening of a new online fulfillment center that the train wheels slowly by so that I have time to study the lot. I thought WalMart was big but this nearly 1 million square-foot facility proves it's huge. With 4,100 stores within five miles of two-thirds of the US population, WalMart gains a significant advantage over Amazon.com by positioning this online distribution building in the center of its empire. I estimate 500 parked or rolling company semi-trucks in the building lot before our train whisks us out of sight. Yogi Berra said, 'When you get to a fork in the road, take it,' and we did that.

It's deliciously incongruous how one may pack for the hob life or for the WalMart life. The WalMart life is supported by millions of homes cluttered with items of want and need in a ratio of about 10:1. On the other hand, we have packed streamline to move quickly cross-county like hobo chameleons resembling, as the need arises, the yard workers in freight yards and normal citizens in stopover cities. Our ostensible school daypacks weigh about 30 pounds (sans liquids) and contain little more than earplugs, electronic handhelds including a set of walkie-talkies, credit cards, a hundred dollars in the inseams, flashlight, compass, day's supply of food (beef jerky and trail mix), toothbrush, pen and pad, paperback, 20' length of rope, tarp, and windbreaker. A compressible 40F sleeping bag is toted inside at the top, and the pack is soft to squeeze under fences and into cubby holes, without loose straps to catch on passing machinery. The key to our disguise is a pair of overalls – he has coveralls and I a pair of bib-overalls - that protect our citizen clothes beneath and walk easily into any RR yard.

 We set our course on the ocean of rails to the north. I warn, freight riding in the east is far different from the west with more towns swamped on one another, single tracks, more sidings, and fenced yards with higher security, but, after all, we will see industrial America through the back door. Magnificent! Up through the Texas Panhandle, as MoJo calls out the towns from his IPhone Googlemap, 'Amarillo… Oklahoma City… Wichita!' yells MoJo as if it's a tornado. He's enthused. The metaphors of trains are many. Life is a string of beads, and a train of moods, and as we pass through them they color and enlighten if only we can see our goals.

Kansas stretches on like a mat of grass occasionally rolled into lumps and crisscrossed by a gridiron. This is the heartland of America. In east central Kansas the rail becomes single and our train goes 'in the hole' on sidetracks frequently to allow higher priority intermodals to pass from the same or opposite directions. Our rate is suddenly cut in half to an average 30mph for the next 24 hours. Hundreds of single-horn toots blare day and night at clanging crossings. BNSF serves over 1,500 grain elevators located mostly in the Midwest with Kansas among the leaders. Had we chosen a mixed freight through this grainland the chances of being 'ditched' beside one of these towering silos and having to walk the rail for hours to civilization would have risen.

Train whistles are used to communicate with other railroad workers on a train or in the yard, as well as with the savvy townspeople. Different combinations of long and short whistles – like a Morse code - each has its own meaning. They are used to pass instructions, as a safety signal, and to warn of impending movements of a train. Despite the advent of modern radio communication, we endure many of these whistle signals hourly. A succession of short sounds is used when an emergency exists, or if persons or livestock are on the track. It sounded when a Northwest train I was on once braked for a blow-up dinosaur placed in the rail by a tramp who wanted to board from his favorite fishing spot in the Rockies. The most common signal is one short as the train is approaching a public grade crossing. Highball we've identified as two long blasts, and three shorts while the train is stopped means backup – which notifies the hobo to get off or be ditched.

Kansas City!' is the morning call, to which I frown at the ambiguity until he murmurs, 'Kansas'. I stiffen to an exclamation point. KC, KC is a RR nexus that throws spaghetti tracks out N, S, E, and W. A hobo nightmare. I make lighting compilations in about seven theaters of possibilities as the train bowls past the four story bright red 'Kansas City Southern' barn sign and into the BNSF Argentine Yard. We peak under the blinders barely daring to breathe least they flap. This BNSF classification yard is the largest with 780-acres on the on the system. I see an intermodal hub center, a hump with 60 sorting tracks yonder down the rails, a car repair shop, a large diesel shop, several other outbuildings, the main tower with a cyclopean 360-degree glass, and beneath it dozens of scurrying yard workers in and out of vehicles. I'm reminded of the book 70,000 to 1.
MoJo seems daunted. 'I want out.'


'I've allotted one week away from the political swamp for this trip and this is the fifth day. I have to think about returning to Washington DC.' I see his point, but the timing is poor. The highlight of the Argentine yard is it's hemmed like a prison - has been for miles - by a 8' cyclone fence topped with razor wire.

We visually sweep each side of our flatcar and see nothing but rows and miles of hundreds of other strings of cars, buildings, and an army of workers corralled by the cyclone fence. The crew change will be on a dime here, and we choose to hang tight and look for a break in the fence while rolling. But first, there's a light jar toward the rear as half our train is cut loose, leaving us a half-mile long with four snorting engines. A lone white van stenciled Renzenberger pulls aside the lead unit, and the outgoing crew climbs in as the incoming crew exits and mans the locomotive. Operating a fleet of thousands of such vehicles thought the nation, Renzenberger is the recognized leader in providing crew transportation to and from their call motels. Hobos use them also, and I've hitched rides twice right to the waiting locomotives.

Even as I chuckle in reflection, the hoses snake with turgor, brakes click, here comes the drumbeat, and the car bolts forward with our necks jerking like Jack-in-the-boxes. Nonetheless, we survey the fenceline on both sides for breaks to escape. There are some, and the train does pause, twice in the five miles between KC, KC and KC, MO, and yet I won't let the reporter depart. Both sides of the sewn track between the two KC's are seedy industrial and residential wasteland where those colorful rail riding hobos have been replaced by the bag lady, welfare sponges, gang bangers, and stew bums. We cling to the safety of the flatcar knowing the fence prevents them from getting to us. 'That's ok,' MoJo resigns.

Trapped, I've never been on a faster freight. Four locomotives roar with a half-mile load streaking at 70mph up and down roly-poly Missouri. In a bucking wind we pull our sleeping bags up to our chins falling into an uneasy slumber on a hard crazed vibrating bed. Crack! Crash! The freight is suffused in alternating light and darkness. We've driven into a near tornado and the wind blinders flap wildly dumping buckets of water into the sleeping bags. The metal floor drops to 40F, and MoJo vows dryly though chattering teeth, 'This is the test.'

The best strategy is to fold into a G note and meditate on sunrise until passing out. There's always a morning after. It sounds like something from a Woody Guthrie song, but it's true, This land was made for you and me. One comfort of hoboing that takes some getting used to is if you don't know where you're going you can't get lost. But we've come very far. People travel to wonder at the height of mountains, the waves of the sea, at the long rivers, and the compasses of the ocean, under the circular motion of the stars, and they pass by themselves without wondering who am I that is often discovered on the rails. This is what I hope for MoJo. We've been riveted to the rails for 3000 miles in six straight days from LA via Texas to Chicago, a speed and distance record without a layover for me.

'Chicago!' Situated in a broad valley 17 miles southwest of Chi-town, the Willow Springs Intermodal Yard stretches two miles, yet with about 20 tracks is only one-third of a mile wide. Our flatcar sits smack between two highway bridges that we study around the blinders of the piggyback like Kilroys. Nearby, a 40' truck trailer like ours is being lifted into the air and placed squarely on a nearby railroad flatcar. Another giant crane is removing piggies from a flatcar to a road. The nearly absurd thought arises that an intermodal hobo could remain on board in a hammock lashed under the piggyback and be conveyed up and off the flatcar to the road, a semi hooks on, and he continues to hobo the Interstates sheltered by the wind blinders for as long as one could endure the tire tossed pebbles and dead skunks.

Willow Springs is BNSF's second-busiest intermodal yard, performing about a million lifts a year. Its key customer is United Parcel Service whose mid-west facility located next door handles two million packages daily. Packages bound for UPS distribution facilities less than 400 miles away are trucked. Greater than 400 miles, there's a train ride in that trailer's future… And that's where BNSF comes in. It takes 10 percent of UPS's total domestic ground volume. Like a passenger train, the trailers aren't held until they're full. They depart at assigned pull times scheduled to meet train cutoff times. The packages are read on a conveyor belt three times en route to the proper piggy trailer. It's driven next door to the Intermodal yard, add one hobo if you wish, and it's off to a dozen major destinations.

At Willow Springs, 99 percent of the units handled are trailers rather than containers, and today there are about 3,000 look-alike trailers scattered across the terminal and five loading RR tracks all go where they're supposed to go, followed by computer. It seems the only thing not tracked by computer these days, not counting the GPS in MoJo's IPhone, is the hobo.

Freight riding falls somewhere between chess and war. In chess, there are the same problems and movements but if you lose you pull the pieces out the box and start again. In hoboing, you can get hurt or caught by the big, bad Bull, and it's illegal. But in war, the enemy is trying to shoot you. There are many life lessons from each, and on this trip we have learned much of the recent changes in the rail commerce. The train industry among all has been progressive in America. As a wise man never lies down on the tracks of history to wait for the train of the future to run over him, each year I go out on the rails to see innovations. If there is a recession underway in USA the railways refute it. In the past five years, there are twice as many trains, four times as many intermodals (containers and truck vans on flatcars), yard workers use quads instead of walking the lines, RR bulls have been replaced by private young security, and, attesting for the hobos, far more and colorful boxcar art reflecting more youthful train riders. One change in technology has brought about the greatest hobo evolution in history since steam yielded to diesel-electric in the 50s. It is the addition of wind blinders to semi-truck vans like the one we rode screened in wonderful privacy from KC to Chicago. These piggybacks have always been a favorite with a wide view and shade under the belly, however no more may security pick off bos rolling through yards. The blinders have made us hotshot hobos.

The reporter has gained a universal education from the rails. Have you ever seen a retired man who pined for his desk? MoJo would rather ride the trains to Washington DC, but there's no time. We hunker under the piggyback and don our 'goin' to town' clothes for the first time in nearly a week. For me, it's a blue pinstripe shirt under bib overalls and for him a clean black windbreaker. It always seems impossible until it's done. We hop down - take a minute to relocate our landlubber legs – and shy to the east side of the yard onto a dirt track that meanders as pleasantly as an old English lane through a woods bordering the Des Plaines River to the Willow Springs Bridge. We look like train tramps to train tramps, like yard workers to yard workers, and soon will blend in with regular citizens. A brakeman bathed in sunshine waves like a windmill thinking we are exiting crew, and we greet back. Once down the bridge embankment we walk two blocks north along Willow Springs Road to a Speedway station with a Subway shop. After a meal, a taxi whisks us for twenty minutes to Chicago Midway Airport where he jets to DC and I encounter former President Carter exiting the Miami bound plane I'm about to board. The Secret Service and FBI hardly take note of this hobo or could guess how I got here in the last six days.



 Do the markets engage in old skool breakdancing?

"Breakdancing" appears to be a variant of "peacocking", or behaving in an over the top or flashy manner for the purpose of attracting women.

Is the market is breakdancing for this purpose?

The key to breakdancing from an observer's point of view seems to be the center of mass.

If you watch a head spin you see some interesting properties with the diameter created by legs and arms vs. rotational speed (as also seen in figure skating). You also see that increasing speed is used as momentum that carries the dancer into a quick transition.

Is this also true in for the SPU, bonds, currencies, and crude oil, and agriculture.



 Just Jim Dale at the intimate Roundabout theatre (The Road to Mecca,The Threepenny Opera) near Bryant Park offers a garland of goodies from delight-meister Jim Dale, a thesp wit' de best. Just Jim Dale is a piquant, effervescent mix–UK Music Hall, vaudeville-style shtik, classic theatre outtakes, reminiscences and ha-ha riffs on Harry Potter.

Um, maybe the word shtik is slightly misleading. That word provides a hint of slightly non-U humor and devices. It is not the consummate expression of a merry jokester like the ineffable lithe stage presence of Jim Dale.

Two-time Grammy Award® and, Tony Award® winner Jim Dale (né Jimmy Smith) provides a classy performance, with memory of the UK, his roles in serious films (Joe egg), his award-winning song for "Georgie Girl" and his bravura all-voices audio series of the complete 7-book series of Harry Potter. He does funny walks, recalling how, as a small child at the Music Hall in his tiny town, he was bowled over by the audience guffawing at the clown acts of the comic. At 7 or so, he decided he wanted to be making audiences laugh like that.

Directed by Tony winner Richard Maltby, Jr. (Fosse, Ain't Misbehavin'), Just Jim Dale is a re-charging station, a laugh-jogging, no-scatology (except for his mock-mumbled irk whenever he mentions Harry Potter) tour-de-force. At the Roundabout until mid-August, Just Jim Dale is bracing, particularly if your theatre memory extends to the delightful "Pete's Dragon," to the "Carry On" series, pieces from the 70s, and if you are familiar with both Oscar Wilde…and Will Shakespeare.

If you're partial to the Bard, Dale does a remarkable wraparound… rap around…Shakespeare in our everyday expression—even if you think nary a word of Will Shakes ever passes your lips.Dale goes up hill and comes down, well, dale, as he flounces and flaunts the endless skeins of daily phrases and vocabulary doilies that stitch our speech. None of several thousand words and phrases would even be found in the language but for Stratford Will.

Best to see the show with locals, as the Wednesday tourist crowd tends to be a "feed me!" crew—they don't brighten at the plays native Yorkers have been savoring for decades.

Dale inhabits the stage without a drop of support for 90 minutes—other than his rotund piano accompanist, Mark. The slim and fit Dale does not disappoint.

Even if you're a career-class grump, this will jolly you.

And the kicker?

This sprite-like talent-rich prankster is an amazing 78. Performing a 90-minute set sans intermission, 6 days a week. Quite the magic.

At the Roundabout, 111 West 46th St; 7:30-9 pm nightly



 The focus on debt and "paying for stuff" is a distraction from the real issue of the future - The coming explosion in productivity growth.

We are on the verge of a massive increase in productivity that will result in (among other things) the replacement of most workers with automated processes and artificial intelligence.

Just consider transportation. We will not need bus drivers, cab drivers, truck drivers, airline pilots, railroad people, etc. For example, "Rolls Royce Envisions Crewless Drone Freight Ships".

The need to "offshore" work to low wage countries will go away because wages are not paid to automated processes and devices with artificial intelligence.

The entire notion of a division of labor economy will change. The identity of "I, worker" will increasingly lose relevance.

Thinking about "paying for stuff" using the old model that needs "new workers" to fund "retirement benefits" might be (close to) reasonable for a few more years, but it will soon be 100% obsolete. It is already extremely short-sighted. Note, by "soon" I mean within my lifetime, not within the next few years.



 The Constructal Principal where all flows move to the most efficient and point of least resistance and the prevalence of round numbers, one believes has a certain comity and unified cause to it. The question is, is it predictive as well as descriptive.

Gregory Van Kipnis writes: 

It is macro descriptive, for sure, and it's micro predictive if you have enough information. In personal discussion over the past few days with sports analysts, everyone agreed on its relevance to predicting outcomes in football and hockey (probably other sports as well). If you study the teams, their bio-physical make up and their play strategy (spreading out vs bunching) you can pick the winner with high accuracy. As for markets though, so much is invisible. To understand and predict each event's outcome so much has to be divined.

Orson Terrill writes: 

The options volume and open interest clustering at rounds as a partial explanation is good, and also reinforces the idea that there is a structural preference for the round (the standard strikes). What the Chair says about there being a point on the battle field where doves fly so both sides can come to agreements, and get their needs met, is also an excellent nuance that is worthy of consideration.

When I was taking game theory in school, with a Harvard educated game theorist, the Chairman's round number observation was always on my mind in that frame work; there are multiple scenarios(games) that can explain many situations in markets, and make a prediction if you have the information (what van Kipnis said).

SolarCity Jan 2016 Calls

The 10 rounds are ~35% of strikes, but account for ~75% of the open interest.

Column 2 is open interest, column 1 is the strike (rounds are highlighted).

       [,1]   [,2]
 [1,]   8.0    1
 [2,]  10.0    1
 [3,]  18.0   15
 [4,]  20.0   66
 [5,]  23.0    1
 [6,]  25.0   29
 [7,]  28.0    3
 [8,]  30.0  202
 [9,]  33.0   19
[10,]  35.0   31
[11,]  37.0   14
[12,]  40.0  874
[13,]  42.0   31
[14,]  45.0  264
[15,]  47.0   74
[16,]  50.0  487
[17,]  52.5   66
[18,]  55.0  148
[19,]  57.5   76
[20,]  60.0 3346
[21,]  62.5   60
[22,]  65.0  148
[23,]  67.5   78
[24,]  70.0 1605
[25,]  72.5  146
[26,]  75.0  571
[27,]  77.5   92
[28,]  80.0 2117
[29,]  82.5   23
[30,]  85.0  209
[31,]  87.5   31
[32,]  90.0  425
[33,]  92.5  117
[34,]  95.0  602
[35,] 100.0 2296
[36,] 105.0  382
[37,] 110.0  134
[38,] 115.0  619
[39,] 120.0  244
[40,] 125.0   88
[41,] 130.0 1873
[42,] 135.0    5
[43,] 140.0  204
[44,] 145.0   16
[45,] 150.0  283
[46,] 155.0  892
[47,] 160.0   20
[48,] 165.0   15
[49,] 170.0  391



As we completed 110 trading days on Jun 10th 2014, we had 19 ATH readings. Below is a study with the details of rest of year returns from 110th trading day's close to last trading day close of the year, data since 1950, on $SPX

1) ROY %, when there is no single ATH reading as on 110th day

n    31
wins    20
% win    65%
avg (%)    3.15
med    6.04
max    29.04
min    -33.67
avg win    11.13
avg loss    -11.35
t-test    1.28

2)  ROY %, when there is at least a single ATH reading as on 110th day

n    33
wins    27
% win    82%
avg (%)    5.43
med    6.07
max    27.82
min    -16.89
avg win    8.59
avg loss    -8.77
t-test    3.62

3)  ROY %, when there are 10 ++ ATH readings as on 110th day

n    21
wins    20
% win    95%
avg (%)    8.73
med    9.93
max    27.82
min    -16.89
avg win    10.02
avg loss    -16.89
t-test    5.00

Birthday drinks are on me if you had guessed that -16.89% was the worst and the one and only loss is in the year 1987.



A very interesting thing I found on twitter today. I will leave you with this thought: "History rhymes?"

Michael J @mjb4632 tweets:

"Thin markets" was a topic of debate during the 1934-37 rally. This table highlights NYSE Turnover of Shares"



 I have been considering the many symbiotic relationships that exist between capitalist enterprises and the welfare state. A common theme of many of these relationships is that their foundation is in encouraging consumers to pull their time preferences as far forward as possible, which of course creates room for others to capture as much of that person's income (from whatever source, including government subsidy) as possible.

What is interesting is that when this is done, it seems to create an entire mini-economy that in my mind represents a distortion. I say distortion because the ill effects are often subsidized, which further fuels the mini-economy's growth and turns off the self-correcting mechanism.

For example, we know that eating large quantities of junk food and processed food is bad for health. The consumer is satisfying a short term desire at the expense of long term health, which I consider a form of time preference shifting. And of course this is heavily encouraged by the system, to the extent that the a large % of the population considers a very unhealthy diet to be normal. This has become so normalized that many do not see why they are so fat, because everything they have known tells them that their choices are normal.

This creates health problems and obesity. What do you know? The treatment of all of these largely self-inflicted illnesses is a huge business. Now if costs for these diseases were borne by individual consumers in some way, the system would not become "supercharged" because there would be a self-correcting mechanism– the ability to pay for treatment.

However, with the shifting of medical bills to the state or to various insurance schemes that do not allow for risk-based pooling of similar risks, the system does become supercharged. The medical system can treat the self-inflicted medical problems at great cost, indeed that cost to the "system" is often privatized and converted into various profit streams. The self-correcting mechanism is now gone and has been replaced by an incentive to perpetuate the system, and even enhance it.

Every step of the way the unthinking person is pushed through the system and as a result feeds the system. For example, there is a massive interest in promoting large portion sizes. It is a business that wants to increase sales. Cereal bowls are 2X what they used to be but most people hardly notice, etc. Middle income shoppers feel size = value so portions have been super-sized.

The smart people continue to make real choices, but if you look around it is clear that many people don't actively make choices, they just respond to the environment and what is in front of them uncritically. When they develop medical problems the costs are then distributed and the profit is targeted.

At the extreme, the system seems to be creating an entire class of citizens who basically have zero control over their lives. They are steered the great majority of the time for the benefit of other people's profit, with zero awareness of this fact. It is an odd system. Since it will not be changing any time soon and indeed appears to be durable, the best thing for ones well being might be to accept it and profit from it, without undue moralizing. It could be that crony capitalism is not the distortion of capitalism that libertarians think it is, but is in fact the real capitalism– the version that has staying power vs. the one that is just transitory and dependent upon a liberty minded population.



Italian anchovies that cost the moon are silvery-white gorgeous and silken on the tongue, not very salty and worth every penny.



Daily all time highs in SP 500 (natural log) vs date.

 For example latest record close for S&P was 1951.27, ln(1951.27)= 7.576

 At times a new ATH follows closely after another ATH, but at other times there is a considerable gap or "bullopause".

 The last Major Bullopause lasted 1375 trading days, from October 10, 2007 when the S&P failed to exceed its prior close of 1565.15 until March 28, 2013 when it set a new record close at 1569.19. From then until now the pauses have been quite short, none exceeding 34 trading days and usually much shorter.



In looking at the S&P 100 index members which have earned a median of about 15% for last 5 years, not counting the recent additions, and not counting those that were dropped which were probably few, one notes a surprising number very close to 100 as of date:

company name/ price

Amgen 117

Raytheon 98

United Tech 120

Berk Hath b 128

Anadarko Pet. 103

General Dynam 121

United Parcel 103

Johnson and J 103

Schlumberger 106

Chevron 124

Mcdonalds 101

Occ Pete 100

Exxon 102

The question emerges whether this is a random phenomenon at 13 out of 95 or whether there is an inordinate flow to 100. The related question emerges as to whether a stock that breaks through 100 from below tends to outperform versus one that breaks through from above. The crisp files should answer this readily.



Martin Feldstein's editorial in today's WSJ notes studies that show inflation is more related to short-term unemployment than to long-term unemployment and that the former has now declined to levels consistent with more inflation and wage pressures. He is concerned that the Fed might be slow to react in response, which is a fear I also hold.



Another day another 10 day or all time high. Out of 610 days since the beginning of 2012, 194 of them were new 10 day highs. Is this good or bad for the future. Some words from Bejan about markets flowing to ever higher and more efficient steady state seem of resonance. But scary divergence relative to bonds.



 I have a signal for when you should short companies. It was a fascinating insight from my female friend.

Do it the minute they choose a woman as CEO. This isn't because the woman won't be competent. It will be because the boards don't think the company can be saved.

They shove a woman out in front so she will take the fall!

This is after decades of inbred cultures of irresponsibility, denial, arrogance, lack of innovation, and crappy service have brought a once good company to its knees.



The VIX index is almost nearing the top 1-centile value of 10.66 (since 1990, when the data is available). Funnily VIX cash index (VXX only can achieve ~ 60% move of VIX cash index, if one gets it right, since 2009) points to an explosion to the upside, while $SPY is not doing an inverse move of that magnitude, and is non predictable… since the 1990s.

Below are non-interleaving-30 calendar day period 12 instances when VIX closes with in 101% of the top 1 centile known value at that date with a look back till 1990.

And here is $SPY for corresponding dates … apart from 16th February 2007 nothing significant seen on $SPY.



 What do you call it when one of your friends pretends that he's criticizing you while really praising and exonerating you. It's not "your own man". It's a variant of "the perfect lie". You pretend you're blaming your friend while really praising him. "We called silver top at 950 but it really went to 10 before cratering so we were wrong." As Harry Browne said, "Well, if this guy considers himself wrong when he misses by just 5%, he must be incredibly accurate. I better sign up now."

Gary Rogan writes:

I have seen Woodward do it a number of times. Some may remember "the threat" to Woodward from the White House a little over a year ago after "Inarguably, Woodward has had greater access to the White House than any other journalist in town."

Kathleen Parker: The Obama White House 'threat' to Bob Woodward matters

Now Woodward is somehow sure (from the Newsmax article) that "Obama didn't intend to do something dumb… He just wanted to do the humanitarian thing and get Bergdahl released, "and then they failed to manage it."

I mean what else can it be? In the olden day the King never knew all the bad things that happened to the simple people, he was always deceived. But he always meant well.

And those who watched last Sunday's Fox's morning program saw how Woodward gently (well OK, snidely) made fun of a conservative talk show host because she just can't forget about Benghazi. What's a man to do if he has to maintain access? Or maybe this is about more than maintaining access. There is no reason to anthropomorphize these animals.

Russ Sears writes:

In track it's called "missing his seeded time". The only thing I have personally experienced that comes close to the lies traders to themselves and others is runners and their training and Personal Record. If you don't believe me talk to some fat person who has been to jogging for over a year and hasn't lost any visible weight, how their training been going.

A PR in most big races that have entry times now must be validated. Often in a race like Boston, the NCAA Track Championships or the Olympic trials, the times are so stringent that the racer often peaks before the race and then race day conditions are never as perfect as they were on PR day.

But in track, in minor races, coaches must give a "seed time" for the race officials to pick the lane and the heat that often are unverified. A seed time is suppose to be from a recent race, but rarely are they verified. The good coach will whittle his best runners times down to give him the best lane/heat. Then of course after his race, when his times are higher than seeded, "it wasn't his day".

Its unspoken but understood if he had the best time on the team, why he missed his seeded time.

George Zachar writes:

This seems like a first cousin of the "humblebrag", which is when you, usually consciously, try to get away with bragging about yourself by couching it in a phony show of humility, like "your inflatable inner-tube is way cooler than my 80-foot yacht. You get to be so much closer to the water and to nature. I envy you, I really do."
Perhaps it should be called "humblepraise".



 Heller wrote in Catch 22:

Seven-cent Maltese eggs cost the sellers in Malta four and one-quarter cents each to procure. Milo is actually buying the eggs from himself in Malta, which means that as a seller there he is making two and three-quarter cents each egg. After he resells the seven-cent eggs to the mess halls for five cents each, he is still making a three-quarter cent profit per egg.

However, it turns out that Milo's Maltese eggs are actually one-cent Sicilian eggs which he has secretly shipped to Malta to drive up their value, yielding him another three and one-quarter cents profit per egg.

In short: in all these dealings, where Milo is the producer, consumer, and middleman (twice), he can afford a two cent per-egg loss, because overall the syndicate is making six cents revenue per egg. And everyone has a share.

I'm involved in a cash grain deal that is turning into something like this.

Duncan Coker writes: 

I can only fictionalize (a la Heller Catch 22) what arbitrage Jeff has in place and the exotic transport involved. Buying Ukraine wheat shipped via ex-Russian military transport vehicle to the Black Sea, to load into barges to go down the Bosphorus to Istanbul. Then by freight via the Suez to Singapore for delivery against the Hong Kong futures sold for August. Just one possibility.



You cant be 2 -1 sets down in a major 3-4 in the 4th and serve 4 second serves…and expect to win…

Exhausted? Nerves? What's the trading equivalent …or like the serve in tennis …what is the trading equivalent when you can't force the issue?



Slower-running female scorpions are quicker to sting, possibly to compensate for not being able to escape as quickly as their male counterparts. Could this ever be true about "slow" markets?



 One notices that crude has been building a nest around the level of 10250. One wonders whether nest building has anything to teach us about markets. Apparently its a biological imperative for birds and others.

Ed Stewart writes: 

How could the nest be defined. I noticed (including today) a sequence of 4 CL closes within the day's range that was prior to that. Is closing price proximity a good measure of nest building– if defined relative to the recent past. Gold seemed to be a very well built nest– just before the break.

Hernan Avella writes: 

I found this article about ant nests very interesting.

Despite some "agents" beliefs that the numbers themselves have any significance, volume/time/activity clusters are all results from local interactions, . In the ever-changing cycle of consolidation-expansion, the consolidation phase is like a living architecture building process (nests). Researches have discovered three main rules of nest building in ants: "The ants picked up grains at a constant rate, approximately 2 grains per minute; they preferred to drop them near other grains, forming a pillar; and they tended to choose grains previously handled by other ants, probably because of marking by a chemical pheromone". One often sees the liquidity asymmetry games (big bid, small offer) as the building blocks of this structures. Traders (algos), like the ants, follow the patterns of the bid/offer and consolidation begins. This process has moments of high predictability and increase competition.



 Each bar is a day where that S&P Close was never breached afterward (to date) (i.e. S&P never fell below that level up to now).

Kora Reddy writes:

Adding to the fun, I looked at whether and when a newly crossed round number is revisited again.  All except the crossing of 200 and 500 were revisited at some point in the future ranging from 1 to 812 calendar days.



without exogenous concern
sans respect nor deference
for what or whom preceded
just an internal preference

ever changing context
predictability they crave
these traits not found
in the home-of-the-brave

old formulated solutions
for a state-of-flux enveloped
knee deep in past bias
game irrationally developed

it is a self-evident gift
hell sent, but heaven bent
it's dimson and then some
all else is just sentiment

everything is always different
to some degree
everything remains the same
it has to be

if you catch my drift…



 Yesterday while driving I heard a report of strong auto sales of both domestic vehicles (particularly trucks) and BMW and Audi. These would show up in the Daily Treasury Report as revenues in categories such as customs duties and excise taxes. Today I went looking for them, and sure enough the recent data is positive.

I tend to think of those categories as a good upstream surrogate for discretionary purchases. There are excise taxes on auto sales, gasoline sales and even on tanning salon sales.

In the linked chart
, SPX is shown as an historical reference. In my opinion there is not a definitive causal relationship. Historically this had been distorted by the "Cash for Clunkers Program", for example.

But maybe there is a retail recovery.



Whatever the market does… will be. Whatever the market doesn't… will not.

Some may argue that the market is overpriced relative to SPX's p/e ratio which is trading at about +1 SD above it's mean, but p/e ratios have no predictive capacity, especially in high cap indices like the SPX, and since the 2008 crash have become seriously skewed because of their high values attained at that time.

So where does today's market fit in with past markets? Maybe the answer is, it doesn't. And, maybe this is the reason traders, pundits and analysts, are having such a hard time getting it right. And, why their models, which are all predicated on past price action, aren't working - because they're backward-looking. And there's the wrinkle, the ultimate post hoc fallacy of the "it's overvalued" crowd. It's an arbitrary judgment of past earnings, past price action, and past situations. Past performance does not dictate future returns - the future determines the future.

Traders are hard-pressed to explain the present, nevertheless the future. Markets are in uncharted territory and there have been structural changes to the markets, as a result of the crash and prolonged qe/ zirp contamination. The markets reaction to the taper is a glowing example of how fate can be twisted. Historically, bonds sold off and the curve steepened when the fed tightened. Instead, post-taper money, paradoxically flowed into both assets,as the curve flattened.

Stock prices are rising, earnings yield, dividend yields, and 10 year yields are rolling over. Debt levels are not-an-issue and liquidity is sanguine. One thinks that as long as treasury yields are kept in the basement, there should be a continued risk-on, yield grabbing skew to stock prices, irrespective of fundamentals, past economic models, or aggregate financial ratios - and maybe valuations will follow- or not.



 It may help to remove some of the heat from further discussions if we can all agree that individual liberty was never any American's birthright. The idea that people should be left alone and not harassed by officialdom was as radical an idea as the notion that God does not need appointed intermediaries to translate the message of faith.

Exhibit 1: The Oath of a Freeman

And June 1st was the anniversary of Mary Dyer's execution on the Boston Common.

David Lillienfeld writes: 

Since your citations are more than a century before the Declaration, I'm not sure I'm ready to accept your proposition. What are your distinctions between a 1776 definition of individual liberty and what you would characterize as what was viewed as the birthright?

Stefan Jovanovich replies: 

Franklin, who opposed actual slavery of other human beings, was wise enough to edit out of the Declaration of Independence Jefferson's indictment of King George for making white Americans "slaves". Jefferson, who never saw anything wrong with the enslavement of black and copper-skinned people, had thought it was a telling indictment and a politically appealing one to be added to the 1776 "definition of individual liberty". Franklin knew better. Neither Jefferson not anyone else i 1776 had a good answer offered to Samuel Johnson's question: "How is it that we hear the loudest yelps for liberty among the drivers of negroes?"

You really must sit down and actually read the Declaration of Independence, David. There is no definition of individual liberty in the document; if you want to find even a hint of that radical idea, you have to fast-forward nearly a dozen years. First, you have to watch the country go through a ruinous civil war and catastrophic financial default. Then you get to watch the genius and wisdom from experience of Washington, Franklin, Morris and (to a lesser extent, although the academics like you give him the greatest credit) Madison produce the first official confirmation of the rights of individual citizens in American history - the U.S. Constitution.

Here are a few things for you to consider as you follow the lesson plan:

1. The Declaration of Independence has no legal authority as far as the United States of America is concerned; it was the unanimous Declaration of the thirteen united States of America. That is why it is the favorite document of people who want to believe in absolute "states rights" and, like Justice Sotamayor, in a legal authority that is not required to be confirmed by the votes of the actual citizens of the country, as the U.S. Constitution has been.

2. If you read the document carefully, you will find that it has absolutely nothing to say about individual liberty; it is very detailed in its descriptions of the abuses by the King and his ministers and agents against individuals but those violations are mentioned as justifications for the rebellion that had already occurred in and around Boston, not as wrongs to be corrected in the laws of England and America.

3. War messages never, ever contain assertions about individual liberty; they only speak of "the people" and "the state". Note the entire absence of any statements about individual liberty in Jefferson's Wow finish: "That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor." The colonists are telling King George what the new boss is going to do; they are not spending any time telling him what the distinctions will be between their sovereign authority and the one held by the old boss.

I offered "my citations" as a reminder that Americans have not yet been gifted with individual freedom from birth. The arrival at Plymouth did not change that; neither did 1776. Thanks to the war veterans who were the majority in Philadelphia in 1787 and those who were a majority in the Congress in 1868 we have, as a country, made a more than decent start at establishing, once and for all, that people's natural rights come before everything else at law. But, we are still very far removed from Jeff Watson's ideas of freedom; and it is the worst kind of schoolie propaganda to assert that this is a nation founded "in liberty". We Americans (and the foreigners unfortunate enough to be snagged in our courts) have a few specific individual rights that can, with money and luck and honest judges, be successfully asserted. But, as too many of our List members know from painful experience, "the law" spends most of its time telling the citizens that the sovereign is right even when it is clearly wrong and then charges "the people" extra for the privilege of reminding them who is boss.



 On the stack of current books here at Chaos Manor is Geoffrey Wawro's book on the Outbreak of WW I and the Collapse of the Habsburg Empire; its title is A Mad Catastrophe.

Professor Harrison should stick to economics; he really has not idea what he is talking about when he discusses WW I. His biggest folly is his belief that "at the critical moment the advocates of war, civilian as well as military, were able to dominate". The advocates of war had been dominating the discussion for the last three decades (some people would disagree with me and say that it was more like four). When Eisenhower, who had studied the Great War, warned about the rise of the "military-industrial complex" he was telling Americans that they were in danger of following what the Europeans had done in the years leading up to
1914. "The war" had been actively planned in France ever since the fall of the Second French Empire; the entire country was encouraged to raise its population growth so that the nation would not be outnumbered by the Bosch. The politics in Germany and Britain favored military spending as a way to keep the factories going; heavy industry in both countries found itself under ever increasing pressure from the rise of the "new" economies of the United States and Russia. All the countries except Britain had developed mobilization plans to put millions of soldiers on trains and move them to the borders.

Wawro's books is far too detailed to summarize, and I can't recommend it for reading because he presumes that you already know a great deal about the subject before you read the first page. But, I do recommend his scholarship; and I do endorse his conclusion. The Habsburgs thought that a war in the Balkans would end the half century of declining authority. They had surrendered North Italy, been soundly whipped by their supposed allies, the Germans, given up political control to the Hungarians, seen the Serbs and Greeks go from being vassals of the Turks to independent sovereign nations and watch the Russians become the rising superpower in the East. From the palaces in Vienna this looked like insult piled on top of humiliation. What remains amazing is the Germans' willingness to go along with the Habsburgs' notion that their armies were worth something. The Germans were so credulous that they counted on the Habsburg armies to defeat the Serbs and defend both Germany and Austria-Hungary from the threats of Russian mobilization. The taxis at the Marne did not save the French in 1914; it was the defeat of the Austrian armies by both the Russians and the Serbs that forced the Germans to shift men and artillery to the east to prevent the threat of having Prussia itself overrun.

What Eisenhower did not say but could have is that Americans also have to be careful about making the mistake the Germans made in two world wars. As countries we are both better off at going it alone than in signing up allies, especially before a war starts. The record of joining a fight as a latecomer ally is an excellent one (the U.S. in WW I and II; Prussia in the final campaign against Napoleon); but neither we Americans nor the Germans should ever plan a war that depends on other people doing any serious part of the fighting.



I found this research paper very interesting:

"Political Extremism is Supported by an Illusion of Understanding"

We found that people have unjustified confidence in their understanding of policies. Attempting to generate a mechanistic explanation undermines this illusion of understanding and leads people to endorse more moderate positions…several psychological factors increase extremism, and attitude polarization is therefore hard to avoid. Explanation generation will by no means eliminate extremism, but our data suggest that it offers a means of counteracting a tendency supported by multiple psychological factors. In that sense, it promises to be an effective debiasing procedure.



The Mankiw Model has a great history for predicting where the weekly fed funds rate should be, using inflation and unemployment (two inputs which have enjoyed a tremendous track record in trading short-duration rates for many years).

The model started going off the rails about two months ago, and now calls for fed funds, currently at .09 to be at nearly 2.00. The data is on a tab in the weekly Barrons data I track in excel for on my website under the "links" tab there I believe. The tab on excel is found by hitting the F5 key.

anonymous writes: 

Ralph, I could not get the link on your website to work. The Mankiw model (from his blog) is reprinted below for interested readers:


The Liquidity Trap may soon be over.

About a decade ago, I wrote a paper on monetary policy in the 1990s (published in this book). I estimated the following simple formula for setting the federal funds rate:

Federal funds rate = 8.5 + 1.4 (Core inflation - Unemployment).

Here "core inflation" is the CPI inflation rate over the previous 12 months excluding food and energy, and "unemployment" is the seasonally-adjusted unemployment rate. The parameters in this formula were chosen to offer the best fit for data from the 1990s.  You can think of this equation as a version of a Taylor rule.



Does anyone know if there is a Predictive Value to a stock's short interest ratio?

Bill Rafter writes:

Short Interest (SI) is a good area to research. We do a lot of work with it in our shop, and use it in our trading. However, the question you posted was specifically about the SI Ratio, something we consider unworthy of attention with a very few exceptions. If that ratio is all you are going to focus on, we suggest watching a good movie instead.

Many people simply look at the SI Ratio because it is available, say on Yahoo, Google or the Nasdaq websites. The problem is that ratio is more dependent upon changes in volume than changes in SI. Volume is also an area worth your attention, but not in that ratio. We maintain that there are better SI ratios to look at rather than that one. But to do that you are going to have to spend some time getting the data, which means not only SI and volume, but outstanding shares, insider ownership and institutional ownership. Then you will find the profitable relationships, but anticipate considerable work.

We have only found the volume contributor to the SI Ratio useful when in a price explosion the volume exceeds the number of shorts. That circumstance suggests that the price explosion (of a high-SI stock) is a result of short covering, which has now been exhausted. Obviously don't buy that stock!

Phil Erlanger is the regarded expert with SI data. His approach was to find stocks that one liked (say on the basis of momentum or whatever) and then look for SI patterns that would enable a greater run-up. We took the opposite approach, looking to first find good short interest patterns, and go from there. What we found was that Erlanger's approach is the better of the two if one is taking a cursory look at SI. That's because fully half of the stocks with high SI deserve it – they are headed south. Of the remaining percentage, about half of those mill around going nowhere. That leaves about a quarter of high-SI stocks overall that benefit positively, a few of which really take off.

Despite the above warnings, we would not purchase a stock without at least making ourselves aware of the SI.



A 6-8 points decline is now called a 'panic'. "Incorrect ISM Manufacturing Survey Briefly Causes Market Panic" 



I found this hour long video on why gambling is so bad highly entertaining.



I have spent a great deal of time of the last 50 some years looking at volume and found nothing of great value. That may reveal my intellectual weakness or is volume the Emperor's New Clothes kind of story?



I did some computation lately and found the following results about correlations. These results show me something I did not realize before.

Given time series A, B and C. Say Corr(A, B)=0.2, and Corr(A, C)=0.05. With this, one would think that to help understand A, C is useless. But that is not always the case. If one combines B and C and gets series D, where D = B & C, one may find Corr(A, D)=0.3, which means C actually can be very valuable in studying A. This can be understood as the combination of B and C and can eliminate some elements in both B and C that are negatively correlated with A.

Would anyone share further lessons on this?

Alex Castaldo adds:

Before I read this I had not realized that correlation is not transitive (i.e. if A is correlated to B, and B is correlated to C, it does not follow that A is correlated to C). It does not directly answer your question, but it shows that the behavior of correlation can be rather unintuitive.



 Disney seems to have the "princess" market captured. But it has difficulty getting boys to be ardent fans.

Do they hate men? It would seem so with their last two blockbuster movies, Frozen and Maleficent.

(Spoiler alert: skip this paragraph if you've seen it or want to experience whether it is man-hater fantasy for yourself): Maleficent turns the old "sleeping beauty" on its head and castigates men in doing so. As a young fairy, Maleficent meets the future king, then an orphan, and has a budding romance. They must soon part ways, sealed with the future king's words, "True Love's kiss" on departure. When the bounty of the whole kingdom is put on Maleficent's head as she grows, the boyfriend betrays his love and cuts her wings off to become king. Maleficent in turn puts a curse on his new born daughter, Aurora. The daughter is put under the care of incompetent fairies to hide her from Maleficent, (apparently any lady that follows a man is a fool) but all knowing Maleficent ends up taking care of the girl. Maleficent soon regrets putting the curse on such a innocent loving girl. Therefore a prince is brought in to kiss a comatose Aurora to no avail. Maleficent proclaims there is no cure for the curse because there is no such thing as "True Love's kiss". That is until Maleficent kisses her (apparently women alone can have true love), then Aurora reawakens. Aurora returns Maleficent wings and the kingdom is soon inherited by Aurora.

Movies in general, but especially Disney movies, have made their fortune on feeding the fantasy of changing how the world is into how it should be. Maleficent is no different, except how it is is a world run by ruthless men incapable of love. Only women are capable of love. Are the progressive so sure they are right that the world only needs empowered women in the future that they are willing to show boys they are only capable of hate and crimes against humanity?

When over 60% of the college Bachelors degrees are granted to women and an even higher percentage of Master degrees are women, one begins to question how much "empowerment" society can take. Young girls are cutting into the "math and science gap". But the boys' "reading and language" gap is remaining and growing. Will we miss educated men in the workforce? Do we really need diversity, or just certain diversity?

The old Disney has taken some heat for racism. Yet Walt had enough business sense to keep blatant hate out of his world and theme parks. But will the new Disney survive when the ever changing cycle changes once again and we see discrimination for what it is: stereotypical hate.

Stefan Jovanovich writes:

 Anonymous is right, but I think he omits a part of what Walt called "the wonderful world of entertainment" - games. I have not seen any data on the gender gap for players of video games; but Eddy assures me that it remains a world that is almost wholly male.

While waiting in the lobby of UNC's ambulatory care hospital yesterday for my number to be called, I watched a young boy and his older sister and their mother (the kids were, I would guess, 4 and 6) deal with the problem of a piece of trash. The waiting area had receptacles for both recycling and garbage. The trash was, in the view of the mother and sister, recyclable so the boy was instructed to put it in the green waste. He put it in the garbage. He did not do it out of contrariness or confusion. He saw both receptacles and even hesitated before making his choice. He chose the garbage because the recycling container just had an opening; the garbage had a lid with a handle that had to be lifted. The genetic impulse to do something was too hard to resist. To their credit the women did not complain or lecture; I think they understood what was going on as the boy returned to where they were sitting and resumed standing in front of his chair and playing with his miniature trucks on the seat. After watching all this, I could not resist saying "You go, guy", knowing it would elicit the appropriate response from my wife - a fairly gentle punch to side of my upper left arm.

P.S. I take the statistics about the gender of Master's degrees as confirmation of what my wife told me when we met in law school at Berkeley 41 years ago and enrollment was going from being 97% male to a more equal ratio. "Now that they have 'let the women in' law, as a profession, will go from being an elite profession to being what people do when they can't figure out how else to preserve/achieve higher social status after finishing college."

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