An eminent columnist asked me how do you spot a charlatan. I would refer him to EdSpec the chapter on hoodoos or the OED definition of hoodoos: "A hoodoo is not confined to steam locomotives. I have know a hoodoo diesel rail car." (I have know a hoodoo personage or trait in markets). A charlatan never admits to a loss and gives false and misleading reports of his results, and threatens you when you try to test his results or ask him how to start a hurricane et al.

anonymous writes:

A tactic I have seen a lot is the attempt to get some initial, simple form of compliance, even as small as, "Excuse me, sir, may I ask you a question?" The con counts on the fact that many people, especially when caught off guard, will answer yes. One small act of compliance opens the door to the next, and then the next, and so on.

One advantage of running errands while listening to an iPod, is with the earbuds in, I can just practice ignoring people entirely. But that issue of getting small "gateway" acts of compliance certainly bears on many situations.

Russ Sears writes: 

Their significant other is too afraid (or perhaps in on the con) of them to admit the charlatan is not perfect. A good man's wife will talk him up, but if pressed will always admit some flaws they wish they could fix.



Big G, from anonymous

January 30, 2017 | 1 Comment

 I guess I'm oblivious of the goings-on in those 7 countries.

The map shows 7 really rotten (and now forbidden) apples, plus the 3 unaffected ones (whose citizens are more likely Western university educated):

"Google Tells Offshore Staff To Return To The US After Trump Executive Order"

How did the US hi tech sector manage to pick up all those enumerated in the story? And why would it rely on future inflow from exactly there?

Phil McDonnell writes:

A certain eponymous person was sent from the googleplex to Zurich to act as a liason to the home office software resources for all the many remote development offices. They had offices in all the major euro cities, muslim cities, Moscow, India, China and South Korea. Some offices were acquired when big G bought a software company like in Moscow. In china they built the local presence around a guru named Lee but it proved to be a disappointment and was closed.

The goal is two pronged. They want to attract world class talent and to maintain a presence in every country in the world. One has been to many lunches at the googleplex. In my estimation the majority of people there were not born in the US.

If one were to conclude that this is because Goog wants to take over the world I would respond that you are warm. You are just not thinking big enough. They simply wish to take over the universe.

anonymous writes:

Sounds like "Big G" is the IS (Information Services) strong-arm of Freemasonry. The new non-contingent being—one token ring to rule us all.



While everyone is in a lathered-up blather about executive orders and screeching, we gotta keep our eyes on the ball. I for one can't get sucked up into political noise when there's money to be made.

Nearly everyone I speak to is looking for three things:

1. A pullback in equities.
2. Interest rates have bottomed and will now approach more historically normal levels.
3. Volatility is bound to increase in the coming months and perhaps years.

And the degree of which I am hearing this makes me quite certain none of these are in the cards. Tomorrow may be a great day to sell equities, shorter term, on any strength. The month of February should be, by my reasoning, a gentle, sane chop with an upward bias, in a bigger, grander, continued bull market. As far as rates go–I don't know, but I am surprised at the lopsidedness of sentiment regarding #2, above. But as the late kid from another (classier, as it were!) suburb of Cleveland used to say, "Don't fight the Fed."



 Speaking of Bullshit detection, all men fall for one or another version of this:

"The Professor, the Bikini Model and the Suitcase Full of Trouble"

anonymous writes:

I had Prof. Frampton for a course in mechanics back in ~1983. I wouldn't have predicted this whole episode, but it's true that he seemed naive about, and even wholly segregated from, anything outside of physics. It's easy to envision his losing his wife because he probably didn't make an emotional connection with her. Then the "bikini model" came along, feigned an interest in his physics as well as him, and got him hooked.

I think it then became a mid-life crisis. He got caught up in the excitement of doing a drug deal, to the extent that he jotted "back of the envelope" calculations of the intended profits. Those jottings may have sealed his fate in the trial.



The goal to training is to teach your body to maximize recovery. Therefore most hard days are followed by an "easy" day, and I would try to sync my body to my training. On the hard days I wanted to feel fresh at the start and on the easy day to feel I needed one, but to be ready for the next hard day.

I generally also wanted to have a 7 day cycle where I completed speed work, tempo work (near race pace or a race), pacing workout (longer speed work) and a long run during the week. And then a 3 week cycle where, the first week I could introduce more or different hard work, and second week get comfortable with it and 3rd week build strength from it.



Life we take for granted,

we still horripilate at the scent of our end [Have a Will?]

When we think of the thanatic

We freq become emphatic

Docs, like folks of other sort

have devised abbrevs to retort

Thus a man deemed NGMI

Is a Not Gonna Make It guy;

ART, or Approaching Room Temp, means Dead

[or so it's said]

    Far less dire, SIO, now don't scoff

happily translates to Sleeping It Off

Contrarily, that mess covered with a bloody cape

Is a patient in PBS, Pretty Bad Shape

    Another way to put it <sigh>

    Is FTD, Fixin' to Die

Despite the best efforts of meds 'n' docs all day

He might still be GDA — Gonna Die Anyway

    Some patients then become GPO

    Good Parts Only: lungs, veins, scro'. . .

Should you find them sluggish, full of lead

They're now GRAFOB, Grim Reaper at Foot of Bed

    If patient expires, Paws Up, PU,

    Take a hard look at the consequent view:

His LRO, Luck Ran Out, his blood once red

now, alas, HBD, He just Be Dead

    "Discharged downstairs" means sent to morgue

    to celestial transfer. Please don't forgue

At scenes of accident, he's DOTS

Dead on the Spot, zero finesse

    If the crash was gruesome, no breath to spare

    he'll be DRTTT, or Deceased Right There, There and There

Beating Off Angels, or BOA, as docs arrive

Is CPR on hopeless folks who won't survive

    Yet there's hope, CD, as there's the Coffin Dodger

    eluding inept KHB, Knife-Happy Blade, a surgeon botcher

The hurt may prevail over horrendoectomy

the lasting surgical result of foreverectomy

    But sometimes, DTTM, the worst to bod or chromosome

comes to Don't Transfer to Me! patients with LWS –

    Low Wallet Syndrome



 Surfing Magazine, the 52 year old major player in the world's surfing arena, died the day before yesterday. After a long illness she finally died of shrinking circulation and disappearing ad revenue. Surfing is survived by sister publication Surfer Magazine, both owned by Ron Burkle's Source Interlink, a media company.

The business of surfing has always gone through boom or bust cycles among middle class Americans and is currently in a bust. Total revenues over the entire industry are way down…they're also down in the highly correlated skateboarding industry.

Surfing Magazine was founded in 1964. It competed against John Severson's Surfer Magazine, an older publication that was known as the "Bible of the sport.". Surfing was the brash young cousin of Surfer, often beating Surfer in key circulation and ad revenue indicators. Surfing quickly adopted and promoted the shortboard revolution, the influence of psychedelics in the 70's, the punk styles and hip hop influences of surfing in the 80's-2000's. Surfing Magazine was usually ahead of the curve, defining the Zeitgeist of pop surfing and promoting the hell out of it. She could never totally eclipse Surfer Magazine, no matter how much she tried. Surfing Magazine had a good run, but the internet and a finicky, low attention span public finally killed her. The internet hit both Surfing and Surfer magazines very hard, pulling reader's time away to other media, resulting in the print editions being composed of flimsy issues with few good stories and fewer paying ads. Surfing and Surfer Magazine's owner, Source Interlink decided to pull the plug on Surfing after owning the magazine since 2000. One finds suprise that they lasted this long, they're not even on the magazine rack at the beach convenience store. Surfing Magazine will exist as a brand with a reduced online presence. Meanwhile Burkle's company cut Surfer Magazine from 12 to 8 issues per year in an attempt to cut costs.

The surfing fad is over and will most likely go into hibernation for a few years or decades.

Fads can be finicky creatures. One never knows when surfing will be fashionable again to middle America, where the big money is. I am personally conflicted between the business and spiritual sides of surfing. The good thing is that no matter what the industry does, there will always be a hardcore group of surfers at every beach. There will be less overcrowding at our breaks. One will always find good boards and accessories.

Some companies will do very well during surfing's exile. Yvon Chouinard's socially conscious Patagonia provides fine surf apparel and outdoor supplies. They are a strong brand with a loyal, affluent following. Steve Pezman's elegant Surfer's Journal is reader supported and is published 6 times a year. Made of the finest paper, the photography, articles, interviews and stories are first rate. Pezman's magazine is geared toward an older, affluent group of surfers who can pony up the $66 bucks or whatever a year for a subscription. It's a minor irritation that Surfer's Journal promotes, as the Chair calls it,"The idea that has the world in it's grip." Many of the survivors in the surfing industry share that same "progressive" belief.



No one asked, but here is a qualitative list, some have been tested but not all.

10 reasons to be bullish US equities

1) stocks futures term structure is positive carry
2) term structure of bonds positive slope (1 vs 5 vs 10 vs 30)
3) overall CAROR of SP since 2000 of 4.6% is well below average
4) crude and natural gas near decade lows
5) credit is expanding
6) strong dollar good for consumers
7) global trade has doubled since 2000
8) ending of marijuana prohibitions
9) solar and battery technologies
10) prospect of tax reductions

10 reasons to be bearish US equities

1) 20 trillion in US debt to refund next decade
2) 16 years of war since 9/11
3) Inflation cutting into real returns
4) Euro affects on Southern Europe
5) tariffs or VAT hurt consumption
6) possible restrictions on flow of labor
7) poverty rates in US still high at 15%
8) entitlements underfunded
9) single party rule overreach
10) education cost/benefit in decline



Two Professors at the University of Washington are developing a course based on BS detection. The syllabus has some useful reading in the links.

Mr. Isomorphisms writes: 

I'm skeptical that professors can teach students how to recognize bullshit. This used to go under the name "critical thinking", which is what liberal education has claimed to teach for a long time.

Education levels are now higher than ever before; is there less bullshit or better critical thinking about it, than in decades past when education levels were lower? Why not?

And why is "big data", among all other bullshit, such a powerful buzzword today?

The Decline & Fall of IBM by R X Cringely has partially answered my questions about why a former economic keystone has abandoned all reason and now churns out cognitive "analytics", which I'm sure we can all agree does not make sense or exist.

"IBM tells the customer what to do, not the other way around" is Cringely's description of the dancing elephant. A partial answer to the obvious follow-up questions is that (as Herb Simon noted 50 years ago) the dynamics of large organizations/ teams are what drive output, not "market" forces as normally construed. Your promotion does not depend on whether the customer likes your work, but whether your boss's boss does. "Cognitive" and "behavioural" are good signals of bullshit.

It's fairly clear to me why Facebook and Google are funding the big-data-analytics-machine-learning movements: They're monopolists with large ad revenues and special share classes; they don't get punished by their shareholders for weird hires (eg, Ray Kurzweil).

There is a compelling case for the self-driving lorry, but really Google X is doing whatever it wants; that one or more of the blue-sky projects could theoretically benefit shareholders at some point is not the reason any of them are funded.

IBM, FB, and GOOG then hire academics who otherwise have no useful skills out of their universities, thus driving demand for machine-learning academics. Since (unlike in traditional scholarship–say the study of pre-Islamic poetry in the Arabian peninsula) having written good papers is less important to GOOG than the ability to commit clear code, and since their screening process is itself derived from academic bullshit (whiteboard exams asking about algorithms & data structures), they create demand for bullshitters with certain characteristics– a pipeline of demand for big-data machine-learning bullshit. See Laszlo Bock in the NYT or Steve Yegge on his blog almost a decade ago. These do not work — but the questions are already written, and everyone else is doing it. That's my personal theory.

Further questions:

- how does university-professor recruitment like the above differ from other examples of industrial research over time — Xerox PARC, Bell Labs, JPL, Salomon, etc?

- when will this all end?

- what will the HBR write about next?

- what "actually" teaches people to think critically?

- are science and mathematics classes antithetical to critical thinking? (I notice mathematicians are incredibly bad at critical thinking. Pascal made a related comment in his 1664 memoirs. Further comments could link Soviet scientism to poor critical thinking skills.)

- why did "big data" and "algorithms" (literally translated: ways of doing things) catch on among all the other kinds of bullshit in this particular zeitgeist? (My answer: we live in a scientistic age where money and technology have replaced religion's former role, eg in providing moral guidance– see for example the prelude to "The Right to be Lazy" )

Pepper White's interesting book Learning to Think at MIT recounts that interaction with industry is what "makes" M.I.T. a success. Though engineering companies may be bullshitting themselves in this requirement, asking for a higher degree before an experienced engineer can move up in the company drives experienced engineers into M.I.T. as they try to skill up, brand themselves, and raise their salary.

The contact between professors and managers-to-be is what brings real-world knowledge into M.I.T., as well as research money/contracts to do real inventive work for major engineering firms, when the master students do get those management roles.

So, another question:

- why is the interaction between "silicon valley" (broadly construed) and academia leading to "productive" interchange? This book –out of a university press, P.U.P.– mentions a 1982 essay and I'm sure, besides Orwell's famous essay on political bullshit, we can find innumerable screeds against lying and bombast going back as far as we would like.

A salient feature of the analysis of bullshit, to me, is that Universities do put out some of the most informed, solid, truthful, and well-researched books, as well as the bullshit everyone is surely familiar with, be it from finance academics, machine-learning academics, or cultural theorists.

It would be too easy and quite wrong to say that business professors, ML professors, economists, or cultural-theory professors are full of shit–even though we can observe credible causal mechanisms and a wealth of examples of people holding such posts, who are routinely full of shit. The answer has to be more complex.

Orson Terrill writes: 

Isomorphisms asked what teaches critical thinking skills. Rigorous symbolic logic with all the proofs, like that seen in any solid discrete mathematics course, and a hard study into philosophical logic, which has much of the same content, but without flowing into set theory, and instead has a hard look at fallacious thinking via the many fallacies.

Isomorphisms replies:

A distinction between "broad logic" and proofs is an important one. Most mathematicians lack common sense (logicians and PLT theorists even more so), and most forms of argument have not been formalised within logic. For example centuries passed between St Anselm's ontological argument and Gödel's formalisation of it within modal logic. Lawvere, an avowed communist, attempted to formalise Hegel over a century after Hegel's death. If you want to argue that proofs make one wise, you'll have to contend
with the inventor of category-theory's communistic views.

The people who impress me with their critical thinking ability often display a study of history (not necessarily a college major or war buff). Some professional anthropologists–Lumonier, Malinowski, Chagnon–have impressed me with their critical thinking. (Although of course academics of any stripe often get sucked into their irrelevant peer-only backwaters. Anthropologist backwaters just happen to be leftward of business professors'.)

Method acting, like art crit, subjects the student to painful critiques of their performance. To advance a thesis, it seems like hitting people where they care–their religion (philosophy class), their pocketbook (trading), their creativity (art & acting)–making them see they were wrong where it really mattered–may be part of the key to improving students' critical thinking. The things that students don't care about–their required essay about some boring book, a proof of a fact/about an object they never inquired about–don't seem to have any impact on the core person.



 Hamilton, as a merchant son of the Caribbean, probably understood what the Hanover's central bank had done for Britain in its wars with France for the entire 18th century. He wanted to do the same thing for the United States - to bind the saving and money hoarding citizens' interests to those of the Army and Navy's chronic need for funding. The City could buy the Crown's debt knowing that the Bank would always stand ready to be a counter-party. Ideally the Bank's notes would be convertible into specie but in any case they would be legal tender.

We seem to have come full circle. Just as Britain had nearly borrowed itself into debtor's prison, the U.S. has racked up extraordinary debts. But there is no reason to worry. The Fed can do what the Bank of England and the few surviving country banks had done: funnel all their depositor's money into government debt. The ironic result was to reassure everyone who had money that their savings would be completely safe. If that left businesses with no hope of borrowing from the banks, it also left them free to make whatever private deals they wanted outside of the Crown's regulations. It also meant that no usury laws applied. The notion of crowding out, which still holds sway, is based on the assumption that only banks can create credit. What Britons found was that they could look to shares and participation rights for speculation while keeping the bulk of their fortunes in the bonds that paid so many thousands a year to the eligible young men whom Ms. Austen used for heroes.

Now, if only someone could bring back a mind that could write about families and money and their sense and sensibility.



 This is an unusual paper on collective decision-making by bison–when herd behavior hurts. In which bison have a tough time with environmental cues, discernment of natural vs. man-made areas, and avoidance of ecological traps.

"Mortal munchies: For bison, collective behavior hastens decline":

"In a fusion-fission society, the herd frequently separates and regroups into new clusters. Just one animal who has located a tasty patch, and returned to tell the tale, can be the agent of bad information transmission for many." 


"Collective decision-making promotes fitness loss in a fusion-fission society":

"More generally, our results suggest that when the environment has changed such that environmental cues no longer reflect reliable determinants of fitness, collective information processing may actually be detrimental to fitness."



A study has shown that the behavior of wasps is affected by supply and demand.



What are the 10 things you would strictly warn a man assembling a comeback so as it's more or less guaranteed to happen.

Leo Jia writes: 


There is no where for one to come back to. 

Perhaps we can visualize someone lost in the hilly jungle. He was on a peak. Now, for some reason, he is lost in the jungle somewhere near the valley, feeling miserable and wanting to go back.  The reasons that could make him feeling miserable include: 1. he can't see the sun; 2. other creatures are bugging him; 3. it's quite wet; 4. his former buddies are all on the peak.

But he did not realize that 1. he does not get sunburn nor get bothered by wind; 2. there is a lot of fish to eat; 3. he won't get thirsty; 4. while his buddies are standing still, he is conquering the entire territory with peaks and valleys.

So one should strive to have life's fullness.



 There are some interesting observations in this little piece "5 Big Ideas in Education that Don't work":

1. Spending for education, as for health care, is high in the US, especially compared with the results.

2. All the thinking about charter schools and the like should probably be focused instead on other topics. In 5 days, of course, that won't much matter as we will have a SecEd who sees charter schools as one solution to the problems of the US primary and secondary education systems. Then again, maybe she may be too busy shutting the DoE down to care much.

3. Class size doesn't likely mean anything close to what advocates of smaller classes claim it does.

But hey, why let facts get in the way, right?

Mr. Isomorphisms writes: 

I believe if you look into those "facts" you will find they are contentious.

To orient yourself there was a counter-documentary produced against "waiting for superman" by some brooklyn area elem. ed. teachers.

Think about 3 things to start:

a) spending varies widely, covarying with parents' success/$

b) "spending on education" itself is ill-defined. do you pay teachers more (and for what? more degrees? VAM*?) or pay for better science lab? Or pay for support staff (which is what the counter-documentary advocates) to help keep the kids quiet? Greg Wilson posted a book claiming that "what works in education" shows the highest returns to removing the most disruptive child from a classroom.

c) the metrics for success itself are bad. You can read the College Board's own rhetoric about the S.A.T., which they say measures "college and career readiness".

* The American Statistical Association says value-added modelling is not sufficiently good for decision-makers to rely upon it.

There are several EconTalk episodes dealing with education. You can look into the work of the researchers interviewed; I found those analyses wanting. As with the economics literature on college earnings (eg David Card). There is a reason Angrist & Pischke call the study of returns to education an econometrician's pastime rather than a success.

John Taylor Gatto: "Trying to change education is like wrestling a pig. The pig is going to get away and you're going to get dirty." (from memory)

I recommend Gatto's book (lauded by the WSJ) An Underground History of American Education for those who are interested in the topic. There is also some Brookings research finding, eg, poor students with few-to-no family members who attended university, will apply to Harvard only (1 moonshot, and it's the same moonshot for all), when they would be better served applying at -1, 0, +1, +2 deciles above their SAT-score ability — for example a solid state school or the best community college. Those students often cannot tell the difference between 3rd decile and 8th. 

Stefan Jovanovich writes:

From Gatto's wonderful screed:

"In 1899, James spoke to an idealistic new brigade of teachers recruited by Harvard, men and women meant to inspirit the new institution then rising swiftly from the ashes of the older neighborhood schools, private schools, church schools, and home schools. He spoke to the teachers of the dream that the entire planet could be transformed into a vast Chautauqua."

James' Chautauqua dream is what textbooks, in fact, became: the sanitized politically-acceptable consensus opinion. Those made my father his - at one time - considerable fortune; and had almost nothing to do with his own education.

At the end of his life my dear father fully came to terms with how he himself had actually been "taught". He had had tutoring from his own father almost from the day he was born. As soon as he could wear pants, he would set out every morning with grandfather and his work crew; he would be sat on the porch of whatever house they were working on, literally with an apple and a reader. When he was 5 1/2, he got rheumatic fever so he was spared having to go to school; instead he spent the next 2+ years at home, reading. By the time he was ready to go to school, he was doing a daily reading for his father and mother and two older sisters in whatever newspaper or magazine they wanted to hear that evening, whether it was in Polish, Serbo-Croatian or English.

"I had a 19th century aristocrat's home schooling," he told me. By the time I actually had to sit in class each day, my mind was already fully formed so I could learn from the good teachers and ignore the bad ones AND follow the cardinal rule for both."

That brought the usual laugh from both of us. For those who don't know it, the cardinal rule in schooling is: "write down everything the teacher says and then write it back down again when you take the examinations."

What was sad, for him and for me, was that his John Stuart Mill education was not to be repeated.

What saved me, at least somewhat, was growing up in post-WW II Bronx and Harlem. The schools were on double-sessions and the education bureaucracy that now rules almost every school district was already in place. If you really didn't care about your "permanent record", you could literally skip out on entire semesters and go to the Polo Grounds. I didn't have to "go to school" until Dad started earning a respectable executive salary and we moved to Westchester. I don't think, until recently, that I ever fully forgave him for the tortures of being sent to "good" schools.



 It is mandatory these days to show the bio of a businessman in movies as evil and duplicit. Such is the case with The Founder. This one was apparently designed to highlight all the defects that the Pres. is supposed to have. Also to show the business itself in a negative light based on theft of ideas, cheap products, and breaking of contracts. Apparently an agreement with McDonalds to pay them what they wanted from a blank check was reached and a side agreement to pay a royalty was also discussed. The movie makes it seem like KRoc cheated the Mcs. But there were teams of lawyers in the room, and the written agreement didn't contain any such language, and since the sums involved were in the hundreds of millions, there's no way that the agreement wasn't litigated and found wanting.

There is very good footage of what it's like to be a direct salesman and how the sale begins when the customer says "No". Also, if you can get behind the biased anti business propaganda, for someone who understands business, there is much to enjoy about the details that go into success. I particularly liked the training on a tennis court to get all the logistics of preparation efficient. Also liked the back and forth between a supportive and admiring future wife, and a virago, or as Jeff would say, a termagant similar….



 That video showing Jahangir Kahn working out and some (Championship) tournament footage of Jahangir's matches? That's a great video! … along with the scene of Rocky Balboa-like training, excellent.

I agree a rope skipping workout is key, weighted or not, because it teaches a player the value of the little low hop, being up on your toes between hits or cover runs, and jump rope trains you or readies you to learn the amazing split step feetwork maneuver.

Split Step Basics

My preference is the one foot step in, push off (liftoff) the court floor off that foot, spread and bring feet level or parallel to land softly into a below athletic body position height, with springy bent knees and feet on the pads ready to support a cut or step off and go where the ball is or where you read you should be tracking it down. A split step to return serve is also a solid technique.

I'd put the 2.5 pounds or more in a weight vest or even in the pockets of a player Vs putting on ankle weights that pound the ankles bones pretty badly (as I personally learned the hard way).

Running down hill, fast feet training drills and sprinting build speed, too. Highish reps in drilling, along with variations in intensity or what is referred to as interval training using a system, like the one I like which includes going very hard (then short rest), then soft (short break), then medium (breathing exercises training break), and back up to hard again is a good form of leg and endurance training.

That interval work along with periodization or training to peak for big events or chosen timeframes or even athletic seasons are invaluable training techniques.

Weight or resistance training for the legs, core + upper body is good with free weights and machines once a certain age is reached, say 14 or 15? Body weight until then. I'll send my body weight only exercises if u'd like? Next year light weights, huh?

On Court training and drills are really good because the mechanics turn into their being on auto drive, with efficient, sophisticated feetwork, hand eye coordination enhancements, and finding personal rhythm and trust, which happens both there on the practice court and is enhanced by playing competitive matches of varying challenge levels (soft or weaker, equal and pushing, and teacher or inspiring). That drill that Jahangir demo'd where he's angled off to one corner is great training ground stuff. Volleying the ball with the forehand then switching to the backhand is great, especially factoring in possible grip changes, racquet take backs and feetwork adjustments that could even surpass what you see from J.

Definitely feetwork IS also eyework taking in everything and watching opponent + reading the spin and bounce of the ball, and it's almost meditative mind work in training it (your feetwork). Moving your feet efficiently and effortlessly becomes almost instinctive or second nature. Whenever time is short, pressured, shrunken, or stolen when up front, it does make it seem like then in the middle of the court closer to the "T" and especially in the backcourt things seem like they are going in slow motion. I use 20-28 feet back middle of the court training to push RB players to not retreat and to dominate that area and steal time from their competitor with cutoffs while also being very much closer to hallowed center court after hitting balls to place it in front or in back of that middle court area.

Another feetwork builder is running stairs or the stands in gyms, stadiums or colosseums. One step at a time, 2 smaller steps in stadiums, 1 then 2, knee pads lol

Split Step Drill

Do feetwork skills drills. One I like a lot is sort of like a game of hopscotch. The player faces and steps along a line alternating one foot stepping and then the other. Land one foot to then push off the ground into a low leap up with both feet leaving the court, split the feet apart, softly land feet adjacent to one another wider than shoulder's width apart. Then keep going along the line switching feet. Repeat all along the squash service line, moving east to west a couple reps, rest, repeat.

Another is reaching the "T" and stepping in and using the one foot split step, my favorite over the 1-2 step in and after 2nd step lands hop, split and land. That's slower in games, too. As the player jumps and is off the court I toss a gettable ball within range of a lunge or cross step … now more cross steps because they're so amazing. Expeditious feetwork.

Another drill is to work on a sort of grapevine move. Face the right sidewall and using a first step crossover in front and past the lead left foot with the right foot to move along the "rail" while facing it. Follow the first crossover step with a crisscross left foot behind right cross step. Then continue with a right foot crisscross and finish with a left foot crossover and then swing with a skeleton, ball-free motion. That's a really good drill and it can be a very effective way to learn how cross steps work specifically for you. That kind of movement helps you learn biped balanced feetwork and how it can be combined into feetwork moves that can set up the player to hit the ball and shoot disguised, accurate, versatile shots in tough situations. Cross steps can also allow a player to make amazing digs or gets. And they can set the legs to hit shots, like a superpowered boast from deep on one side into that sidewall that diagonally crosses the court into either the front wall then sidewall or sidewall then front wall or even right into the crack or crotch of the front wall - sidewall corner. Strong legs opens up greater stroking power potential. Strong feetwork brings that power to life and makes your court movement and stroking confidence soar.

Janangir won 555 matches in a row, Paola Longoria 150, Kane in the 130's, was it 136 or 137? Yeah he, Jahangir IS amazing, but J just might say Hashim, the patriarch of the Kahns was better in his day based on his artistry with a racket in hand and his amazing longevity. Who knows who the G.O.A.T. really is? Fun to ponder though. I'd match my backhand serve against any …



For those interested in pharma/biotech investing, or simply interested in innovation or public health, here is an interesting, easy-to-read study recently published by the FDA: "22 Case Studies Where Phase 2 and Phase 3 Trials Had Divergent Results".

To paraphrase the political scientist cum statistician Andrew Gelman, the problem with the Neyman-Pearson statistical decision framework (set a null hypothesis, perform a statistical test to accept or reject it) is that the difference between statistical significance and non-significance is itself non-significant. Computer models are often inaccurate, and even animal surrogates may not be predictive either. We often don't understand how a drug really works until it is put into clinical use.



 1. All the Fed governor speakers have become bearish for the stock market as they are fish out of water and can't believe that the elected doesn't share their view that central planning and regulation and higher service rates are good.

2. The years ending in '07 have had an inordinate number of big declines in the stock market since 1847.

3. There are hoodoos in the market and basketball. Noah has a tremendous negative number of points against while playing for the Knicks, and now Yellen has that same negative number for the stock market.

4. The statistics on sports now are much better than the statistics on the market. When are the market sabermetricians going to calculate + and - numbers for each market while another one is up or down the way they do routinely in sports. For example, how do stocks do when crude is playing up at noon?

5. The grains are beginning to be affected up by the gravitational influence of the big rise in stocks.

6. The thing that always leaves me in a foul mood is when someone comes up to me and says "I've read your book and I want to say that Reminiscences of a Stock Trader and your book are my favorites."

7. The best history book on a city ever written is Gotham by Morrow and Wallace.

8. The palindrome has been bearish on stocks for 90% of all days since 1980. How much has that attitude hurt his returns since year end 2008 for example.

9. I can't open up to a page in Tim Ferriss' book Tools of the Titans without coming up with at least 2 great ideas that I wish I had practiced. However, Ferriss seems very naïve and many of his gurus are charlatans.

10. Jahinger Kahn they say is the best squash player of all time, but he seems relatively slow on his feet, and his way of skipping back to the center after every show seems dysfunctional for a fast player.

11. The biggest canard relating to fixed income is that crude price moves are ephemeral and don't effect the long term rate of inflation or ppi or cpi.

12. The Hong Kong market and Japanese market and the money supply have big but neglected influence on the US markets.

13. Every ring of market makers with a handful who set the price has been shown to be involved in self dealing activities that on average when investigated has lead to 9 figure fines without much attempts at repudiation.

14. The stock bond ratio has gone up about 25% during the last 6 months.

15. Many markets go up on very light volume to the European opens and then crater.



 I took cues as a youth watching The Rifleman, Gunsmoke, Cisco, Zorro, and Texas Rangers ('one war, one Ranger') ride in and clean up a town of outlaws. I read the same in L'Amour, Max Brand, and Walter Van Tilburg Clark. Over the years, I've added a few tips of my own on how to infiltrate a lawless town, not necessarily to clean up, take over, or win the moll, but to just get along with everyone and learn.

I arrived in Slab City and in a glance knew it would be my laboratory. It was a matter of devising a way to penetrate. There were eight steps to the technique. The town is one-square mile of two hundred characters who seemed to have stepped out of a Shakespeare tragedy, so everything could be done by foot.

•    Identify the ten most influential individuals

•    Institute a method to win each over

•    Bump randomly into each

•    Tell each a different adventure story for rapport

•    Provide unique help such as medical or legal advice

•    Give matchless gifts, as others are forgotten

•    Accept nothing in return

•    Use the girls to get to their powerful guys, and vice versa

The targeted 16 included: the Mayor, Music Range proprietor, Salvation Mountain manager, the meth maker, drug dealer, his strong arm, leader of the bombing range recyclers, best thief, top arsonist, leading prostitute, ringleader of illegal alien smugglers, the hostel, library, and junkyard owners, primary crooked cop, and military chief of security.

The adventure stories circulated, and the recommendations by these powerful people trickled down through the population. Now, at the close of the second year at Slab City, the fruit of my labors are being harvested.

I'm having the time of my life. That signals the time to leave, as I did with jobs, sports, and teaching, at the pinnacle of success, to go on to the next laboratory.



 Thanks to my son in law I got a chance to talk with the trader, professor, and gambler recently. The interview ran on Benzinga.com and specs might find it interesting and of possible value

Edward Thorp is one of the most well known figures on Wall Street. Throughout his venerable career he's spent time as a mathematics professor, hedge fund manager, blackjack player, and author. "The father of the wearable computer," recently released his sixth book, "A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market." Marketfy's Tim Melvin recently caught up with the Wall Street legend to discuss his career and outlook on investing. Below is their conversation, slightly edited for length and clarity.

Tim Melvin: You're really considered to be one of the fathers of quantitative investing, which brings up a certain picture of a guy with a bunch of computers trading wildly. But as I go through the book, you really have a tremendous Warren Buffet-kind of Ben Graham influence on your approach to investing. Can you talk a little bit about that? Because that really surprised me.

Edward Thorp: I came at the securities markets without basically any prior knowledge and I educated myself by sitting down and reading anything I could lay my hands on. I began to get oriented, and then I discovered how to evaluate warrants, at least in an elementary way, and I decided that was a way that I could apply mathematics and logical thinking and maybe get an edge in the market.

Melvin: So you weren't trading like a mad man, like what we think of quants today. You were setting the trades and letting them run, right?

Thorp: Yes, initially it was slow trading. We'd put on warrant hedges and watch them and every so often, if there was a big move in the underlying stock, we'd change the ratio of warrants to stock. And then that evolved into revertible bond trading and we did pretty much the same thing there. So, then [Thorpe and co-author Sheen Kassouf] both went on to careers managing money.

I started a hedge fund in 1969, after meeting and talking with Warren Buffet for a while in 1968. He'd been running a hedge fund for about a dozen years, and he was just shutting down. And it turned out that stocks were at manic highs then. Which is why he was shutting down, and for me, it didn't matter because I was putting on market neutral hedges. Something people hadn't been doing before.

Melvin: Now, in the book you talk a lot about statistical arbitrage, I know you stopped doing it in about 2002, according to an interview I read. But it's a term that's used a lot. I don't think anybody really knows what it means that's not in the business. Could you kind of describe that a little bit?

Thorp: Sure. As you actually will have seen by reading my new book, "A Man for all Markets", the idea was discovered by us back at either December 1979 or January 1980. The root idea was a researcher discovered that if you took the stocks that had been the worst performers over the last two or three weeks and bet on them, they would tend to outperform over the next two or three weeks, and the reverse was true too. The stocks acted as though they had some unobservable true value that wandered along some unknown curve, and they set a range back and forth around this curve, and followed it. Sometimes demand would push them up too high, for a while. And sometimes supply would push them too low for a while. So he ran a simulation where he bet on the 10 percent that were the most up for the last couple of weeks, and sold them short. And then bought the ones that were the most down for the last couple of weeks, and set up a hedge portfolio.

Now you might say, "Where's the hedge?" Well, if you have a diversified pool of stocks that are kind of randomly chosen, they'll tend to track the market. So the ones that were up the most, we would short, and that group tended to track the opposite of the market. That is, it would tend to move as though you would short the market.

On the other side, we had a pool that were long and they tended to track the market. So when you put them together, the long and the short sides, the market effect was pretty much cancelled out. Now, of course, there were a lot of other effects, all these stocks were traveling around their own random way around their market factor or market component. Well, we got rid of the market part.

So we said, "Gee, this is an interesting new source of profit." We looked at this and found out that it was somewhat riskier than the other things that we had in our portfolio. So we put it aside. And then as I tell in, "A Man for All Markets," somebody at Morgan Stanley (NYSE: MS) came across the same idea about two or three years later. And Morgan Stanley turned it into a very profitable product.

Then that person was disaffected by his treatment at Morgan Stanley, he happened to answer an ad that we had put in the newspaper looking for people with good quantitative ideas. I interviewed him. I saw that what he had done was very much like what we had done, only he had improved it a notch because he used groups of stocks in a single industry separately, to set up these long short hedges. So the upshot was we went into business with him, it worked very well. Through the crash of 1987, for example, it made money during that terrible down day. Then it began to lose some of its power as Morgan Stanley and others spread the idea and also put more money into it. So, we devised a new method that got rid of not only the market factor, but lots of other things, oil factor, interest rate factor, that sort of thing. And that ran just fine.

That's the root idea, and it had a huge impact on the markets, because it's a natural sequence into the idea of high frequency trading. The reason it's a natural sequence is because you have computer feeds of the stock ticker. So, prices are pouring into the computer continuously, all day long for statistical arbitrage. Then the machines are recalculating what to bet on, and how to modify the portfolio. So, once you have a high speed data feed that you're processing all day long, you begin to think, "Well, are there other ways to trade to this data feed, besides putting on trades that are on for an average of ten days or so?" And you begin to look for patterns that are shorter. So there's a natural segue then into high frequency trading, you've got all the equipment, all the background and so forth. And I think that's probably how people got into high frequency trading.

Melvin: As an individual trader, is it worth the extra effort to try to beat the market today?

Thorp: That depends on the person. I think to myself, "Gee, if I were 25 and I got interested in this, what would I do?" And I'm not sure, but for what I know now, I'd say the Warren Buffett way is a good way if you want to put your whole life into it. I'd probably decide not to want to put my whole life into it. So I would say if you wanted to get really rich and you wanted to trade your whole life for getting really rich, a trade I don't necessarily recommend, then I'd say that's the way to go. But if you just want to make lesser amounts of money, I don't know what to tell a person at this point because you can do so well knowing nothing in the market.

Melvin: In the book, you talk about a way to beat the market that you used at Princeton-Newport, buying deeply discounted closed-end funds and allowing the discount to narrow. Have you considered that much in recent years?

Thorp: I have thought about that. My experience was long ago when there weren't people tuned into this as much, but I think you could maybe make 15-20 percent a year pretty safely.

Melvin: In the early part of the book, it seems like you were such an intellectually, inquisitive child and pulled remarkable stunts. I love the one with the flare in the balloon, that just cracked me up. But as a parent and as an educator over the years, is there a way to bring out that natural intellectual curiosity in a child?

Thorp: Well, I can tell you what we did with our kids and it seemed to work. We made dinner time a special time, when everybody got together, nobody had any devices, or other activity or distractions. We all sat down, we talked about whatever was on anybody's mind. So the mean teacher at school, the bully, whether or not there's a God, whatever came up. The logic behind climate change, or the arguments against it, and so the kids learned to think for themselves. And this power of thinking for yourself is really formidable because it enables you to do many things. Whereas people who don't do their own thinking kind of have to key off other people to try to figure out what it is that they should be doing. They basically follow the crowd.

The second thing is that we try to give our kids opportunity, so they had choices, but we tried not to steer those choices. So just because I'm a science, math, gambling stock market type guy, doesn't mean that I try to steer my kids that way. So one kid became a hedge fund manager eventually, one kid became an architect, and one became a district attorney. They went their separate ways, they're all smart.

Melvin: You talked about that several times in the book. In fact, I have passages underlined. You attribute a lot of your success as an investor because you did it not just for the money, but for the love of the mathematics behind it. And at one point, you say that your discoveries fit in with your life path as a mathematician, leaving you largely free to enjoy your family and pursue a career in the academic world. So you weren't 18 hours a day bent over a screen. You were enjoying your life, because you enjoyed the work. Not because it was finance, because it was math.

Thorp: That's exactly right.

Melvin: Now 1948, you apparently spent the entire summer sitting on a beach reading 60 novels that you considered to be classics. Did that make a big impact on the way you thought, the way you approached the rest of your life?

Thorp: I would say yes. It gave me… I'd call it maybe more of a philosophical and humanitarian perspective on life. And it made me think about the big world of society, politics, history, geography and so on. And it gave me a framework for putting things in their place.

Melvin: You talk a lot also about the importance of education, and your concerns about the future of education. Can you talk about that a little bit?

Thorp: Yes. I think of education as a lot like the seed corn for society. And if people are willing to pay for it, if they're willing to be taxed and if they're willing to build a good educational system, then I see that the minds that are generated out of that will apply tremendous leverage to society, and society will grow and advance much more rapidly. And many good things will happen and get done. If you had a society that was devoid of education, it would just sit in place and do nothing. It would be the same thing decade after decade, perhaps century after century. It would be like the perhaps inaccurate image that we have of the dark ages where nothing much happens.

So in a place like California, for example, they made a terrible mistake back in 1978. They passed something called Proposition 13. What that did was bust the state budget. The biggest component of the state budget is education. And so education has gotten squeezed ever after in California, at both the elementary, the secondary, and the college level. And tuition has gone up enormously. When I went to the University of California, my tuition was $35 a semester. Of course, that was back in 1949, 1950 and you might say, "Well, inflation's changed the number quite a bit." It has maybe 10, 12 times, but just add a zero to $35, $350 a semester, but we're looking at instead of $700 a year. In today's dollars, we're looking at maybe $12,000 a year, or something like that for in-state, maybe $30,000 for out-of-state. So what happens is people can't afford to get as good an education.

They go to school and even if they can pay the tuition, they have to work in large part to supplement to get the money to pay it because it just isn't available in so many of the families. If you work while you're going to school, which I did, you don't do as well in school as you might. You don't learn as much. I can think back at the courses I took because I was working, I didn't learn the courses as well. And the rest of my life, I could feel the impact of that lack of knowledge, that I would have had if only I had been able to focus properly on the course I was taking.

So anyhow, to make a long story longer, I've seen charts of how much is invested in science, engineering, and education in a society, as a fraction of their GMP versus the rate of change of GMP. And it's quite dramatic. Societies that have a higher investment of education advance the growth in their GMP much more rapidly in societies that don't. And the obvious example is something like Silicon Valley. If we didn't have a Silicon Valley or the equivalent, or Redmond, Washington, or the equivalent, we wouldn't have all the computer advancement that we have. Apple would be a giant company in some other place, Japan, Russia, China, something of that sort as opposed to being a giant company in the United States. So anyhow to not spend money in education is a terrible mistake.

And another consequence of that mistake is gambling. There are lottery systems all over, and one of the ways of getting people to accept them is we're willing to fund education with lottery proceeds. But that's actually been in California bait and switch. What happens is they have signed a certain fraction of the lottery profits to education, but then they take away money from education with the other hand. So education doesn't end up getting any more money. California ends up getting more money in the general fund, and ends up with a major gambling problem on top of it.

Melvin: In the book, you think a flat tax might be the answer to solve some of the funding problems at all levels of government.

Yes, I do and there's an obstacle to getting it in, which is that the complicated tax system is one that's been made that way by politicians who are busy paying off special interests, who in return make campaign contributions to elect or re-elect the politicians. So that's why the tax code degenerates into horrible complexity over and over. Now flat tax would eliminate most of the power of the politicians to extract benefits from the tax code. So they would oppose it. But, you could probably get support from large parts of society if you made the flat, the change to a flat tax neutral.

So for instance, suppose you take away the carried interest benefit for hedge funds. Just to explain what that is, carried interest is a scheme which has been disguised by an obscure phrase, carried interest, a scheme to tax money made by hedge fund operators at the capital gains rate rather than at the ordinary income rate. And so they pay far less tax. They can also defer the payment of the tax for many years, 10 years or more. Let's say you took that away. You might get another $20 billion in tax collections that way. What to do with it? Well, go to the politically unconnected rich, the ones who don't have benefits built into the tax code from bribing politicians. Take the top tax rate down. Apply that $15 or $20 billion tax savings that you capture from the changing the carried interest toward their income, apply that to the top rate. So it comes down from 39.6% to maybe 39% or 38.5% or whatever that comes down to. My idea would be that you keep making changes that are revenue neutral, and if you brought a flat tax in all at once, that would be a massive change that if were done in a revenue neutral way, would have as many winners as losers, so you'd have a lot of people rooting for it.

Melvin: Yeah. I agree. I've always said to the first part of your statement, that taxes are not just about raising income. It's also a very complex reward and punishment system. And that's been the biggest reason it's developed into the nightmare that it is. I was surprised to see you comment on it in bringing it out in the book, happily so, but we're in complete agreement on that.

Thorp: Well, one of the reasons I have some, I'll call them public policy commentary in the book, is that if you have a math and science background like I do and you believe yourself to be a rational thinker, you end up applying it to as many things as you can. And with a large part of my life spent in finance and economics, I naturally ended up applying a lot of this thinking to public policy and other things that I see in society that have a broad impact. That's where a fair amount of this is coming from. I believe that if people just learned how to think instead of letting other people do the thinking for them, that we could work our way to a considerably better society.

I've got one last question for you, and this is the big one. It's one that I try to ask everybody I run across. What books are you reading now?

Thorp: Right now, I'm reading a book called "The Accidental Superpower" by a guy named Peter Zeihan. And the reason I'm reading it is because one of my friends who I mentioned in the book, Gary Basil, who was a professor of economics and finance over at UCI when I first met him, sent it to me thinking it was going to be interesting, good to read. We had been talking about the election of Donald Trump, what we thought that meant for the country. This book looks at things much differently than I do, and I find that if I read things that may not agree with the way I look at the world, than I'm more likely to learn something than if I just read things that keep telling me, "Yes, you're right" over and over and over.

This is a geopolitics type book, which basically thinks that geography in demographics are major determinants of how things evolve for societies. It's an interesting historical perspective, and it has predictions of how the future's going to go. I'm enjoying working my way through that and seeing where I agree and where I don't agree with it and what I've learned from it or haven't. That's one interesting book that I've been reading.



One of the truest axioms of trading is that the thing you worry about least is the thing that will bite you in the rear. As others have noted, expectations are extremely positive now and few are worried about the downside. But whose expectations?

Something we have written about previously is the length of historical data being watched closely by professional traders, particularly when juxtaposed with that being watched by those who sit in the bleachers. The best bull moves occur when the pros are looking long term and the amateurs are nervous nellies. Right now we have the opposite. With tonight's close we see the amateurs being complacent; they are looking back at what has happened since Election Day. The pros meanwhile are monitoring prices in a 4-day window, a most tenuous stance.

Stefan Jovanovich writes: 

One of my dubious theories is that the internal correlations that we all see in "the market" are largely a product of the development of the New York Banks becoming the clearing house for the nation and their converting that dominance into the "need" for official central banking. The data from the 19th century, which is limited enough to be within my meager mathematical capacity, suggests strongly that the business cycle was much more a matter of the fluctuations of particular businesses than one of the movement of the "economy" as a whole. Weyerhauser's fortunes and Swift's were not on the same cycle. The movements of "Timber" and "Pork" were largely independent.

I wonder if that is becoming the case once again. Optimism may be the general news, but the prices of retail companies, particularly those in the clothing business, very much fit the opposite of Bill's description of the general mood. The general assumption is that everyone will lose their business to Amazon.

Russ Sears writes: 

"One of the truest axioms of trading is that the thing you worry about least is the thing that will bite you in the rear."

I call this the fundamental law of risk management: What risk you ignore or discount incorrectly are the risk you over-load your portfolio with, thinking you have found the "key to Rebecca"/free lunch or at least you have optimized your risk metric such as sharpe ratio. This is what happened to the modeler of RMBS, unknowingly overloading on model risk.

Alston Mabry writes: 

I have often thought (but been unable to effectively implement) that if you could determine what factors the market is not paying attention to, you could place some profitable bets or at least put on some good hedges.

Which leads to a non-quantifiable definition of a bubble as a big move up that continues even after a critical mass of players have become aware of the fatal risks - everybody knows they're playing musical chairs, but it's too profitable to stop.



I was reading Goetzman et al paper "A New Historical Database for the NYSE 1815 to 1925: Performance and Predictability" where they try to gather historical data for the NYSE stocks for the period before CRSP started (1815-1925). There are many questions regarding their data quality and especially the dividends (there is no good source for dividends before 1880 when Cowles data starts) that I will not get into. Nevertheless, one graph/observation that stood out was the distribution of stock prices. There is a clustering around 100 (stocks used to trade at par) and a smaller clustering around 10. Apart from the round numbers, one is reminded also of Benford's Law.



There is a basketball movie that looks interesting: "Israeli filmmaker Dani Menkin's new documentary, "On The Map," recounts the tremendous achievements of a team nobody thought could win, and captures the unique charisma of the players who inspired a nation."



Sometimes you hit the wrong shot in a game and it goes in. That leaves your opponent completely demoralized and usually is good for a win. The people who thought that Hillary would win were wrong, but they bought stocks and sold bonds [as the election approached]. They made a fortune for the wrong reason. How often does this happen in markets and can it be quantified. Morgan Stanley made billions in their bond trading presumably through this error.



There is some merit for investors to approach the markets as a good collector approaches his collections. Start by building a good understanding of business and economics and then slowly start to accumulate the greatest pieces, be it the best stocks and/or bonds. As time goes on he continues patiently to accumulate the pieces he wants while re-investing his dividends/coupons especially during periods when others are looking to sell because they don't understand their value. Every 5-10 years he looks back at his collection with satisfaction knowing that he has a great collection that would pass to his kids.



Since Jan 1st 2000 to Dec 31st 2015

Total $SPY returns for all days 92.71 points

returns on 1dom + fed day (most important days) are 89.02 pts (about 97% returns captured by doing hard work on 322/4025 days (8%))

The year gone by 2016 is a different story.

Total $SPY returns are 23.95 pts and on most important days the returns are a mere 0.71 pts (20 of them out of 252 days)

So where did the returns shift to?

answer -> 11-15th trading day

2016 $SPY returns 23.95 pts

Returns on 11,12,13,14,15th trading days combined are 24.14 pts (60/252 = ~24 % days)

Conclusion, work load increased in 2016 from 8% to 24%, a 200 % rise in work hours. A 2017 wish is reduce in the lower working hours!

Kim Zussman writes: 

I also checked whether the past 16 years were trendy for stocks.

If today's close was above 100D moving average, return from today's close to tomorrow's close. ">100DMA" (mean)

If today's close was below 100D moving average, return from today's close to tomorrow's close. "<100DMA" (mean):

Two-sample T for >100DMA vs <100DMA

                   N     Mean    StDev  SE Mean
>100DMA  2766  0.00025  0.00824  0.00016 T=-0.06
<100DMA  1394   0.0003   0.0179  0.00048

>>almost the same.  However, as expected daily returns were less volatile when the market was going up:
Test for Equal Variances: >100DMA, <100DMA

95% Bonferroni confidence intervals for standard deviations

                   N       Lower      StDev      Upper
>100DMA  2766  0.0079943  0.0082355  0.0084912
<100DMA  1394  0.0171828  0.0179134  0.0187065

F-Test (normal distribution)
Test statistic = 0.21, p-value = 0.000

Levene's Test (any continuous distribution)
Test statistic = 540.84, p-value = 0.000



These photos of NYC brought back many nice memories. I was born (Feb 1941) and raised in Manhattan.

The missing dimension are the smells. New York burned its garbage. All apartment buildings were equipped with garbage chutes in each apartment. Scraps, paper, plastic, bottles all went went down. Every two or three days the superintendent would burn it all in the basement incinerators. Acrid odors and black greasy soot spewed out of the smoke stacks and spread onto every window sill. Along the lower west side there were slaughter houses daily supplied by train with carcasses. The rotting renderings added another lovely aroma. Everyone was used to it and didn't notice it until you went to the countryside. Upon returning you knew when you hit the outskirts of the city.



 And you plan, hell or high water, to go. Once-in-a-lifetime, Divine Intervention miracle result, TG not to see that woman lie for four more years. Etcetera. So: What to do. How much will it cost? Can you do what needs to be done to make it through the dollar blizzard?

There's the train, if you're coming from a distance. Major bucks more than the bus. You can take the Chinese buses, not guaranteed to arrive on time, but only $30 each way, and reasonable as these things go.

Or the military skirmish-level of flying, squished seating, also sold out, and inadequate luggage space. And the pat-downs and stink-eyes of the airport Homeland Security types. Plus the major layout for last-minute ticketing, unaccompanied by your loved ones, since you have to pay extra for a
1. choice seat on the aisle, and
2. Seat next to a friend or spouse.

Then , where to stay. Pretty much every hostel, now $100/night for the executive manger straw and bunk-bed starvation accommodation, is all sold out. Compare and contrast: Back in 2009, there were supposedly 1.8 million hysterically thrilled up their leg visitors to the Obama Inauguration. The estimate for this year, 20 January 2017, is a shaved 440.000, poor-man's carnival visit list. (That lowball is probably going to turn out wrong, like the mavens of missing who got the election results 98% wrong.)

But now, all the big-buck hotels are pretty much filled by one week prior. So scrambling for guesthouses, B & B's, people you know who have a cousin whose sister has a nephew with a house in the 'burbs with a spare bed.

That costs $175-295 for 3 or 4 sharing. They involve a 20-minute ride from the outskirtiest skirts to a mere 15-minute hike to the parade grounds. If it's the cheaper alternative, you'll need to rent a car, or hire an Uber, or (my humorous alternative, which I have done in the past) bring along a bike. Once in the heart oof Inaugural region, you'll need a trainride to the spot. This all assumes traffic is moving, and that your 'short hop' from outside DC will not become a grueling hur in stuck traffic lanes and fraying nerves.

You have to eat. So if you don't pack a cumbersome suitcase or backpack to haul food, on the astringent diet budget spectrum, then you have to rely on local fare, all genially jacked up for the occasion. At least two or three or four meals, tip and tax, and not looking chintzy with your companions or spice. Figure another $200 for those blue-plate specials.

Hey, restaurateurs gotta eat, too, right?

If you can't cope with these details, as they say, then for a mere $2200, even, you get viewing rights, a nice bed in a good place, and a few invites to galas where your fellow Republicans will be jolly with wassail and beers. Hoisting a tankard or two, you'll justify the extra piracy for the day or two of rejoicing. Then, if you nix the Gala Package for "00 (low end: High end—unknowable digits), you can shell out $300 per gala. So don't forget your gay apparel, in that suitcase you have stored somewhere a headache away when you go back home. You can't be expected to wear your fancy duds all that stand-up time as Donald J. takes the oath of office and you freeze your tootsies waiting for the festivities to begin. The duds are for the nighttime fiestas. So you have one or two changes of clothing to think about packing.

These galas will of course provide tranches of delicacies, tables groaning with terrific stuff. (Even the Dems, when they celebrated, forwent the PC tofu and alfalfa sprouts to knuckle under bevies of branded luxe seafood and tenderest of tenderloin. And so on. So you'll chow down to hold you all the way back to Keokuk or Wainscot or Albuquerque.

Then home, not forgetting to race back for your stored bags and accumulate. Even without the Special Package, you're still in for a couple of thou.

Worth it?

How delighted are you we have finally prevailed over the terror of seeing that pant-suited panther for four extended Obamayears?

Letya know. I'm on the list.



Here is a nice invidious reference to Galton on herd like behavior.  



This is rather amazing:

"Ultra-low-cost, hand-powered centrifuge is inspired by whirligig toy"

"A high-speed camera showed that the human-powered centrifuge could reach rotational speeds of 125,000 rpm, generating centrifugal forces of 30,000 g. This is faster than many commercial centrifuges, yet the device costs just a fraction of a dollar to make."



What were memorable round numbers breached during the week? Gold played footsie and breached 1200 the 30 year went above and below 3% yield with abandon. Dow made abortive runs toward 20,000 but didn't come that close. What else, what are the predictive properties? Nice move down in bonds on Thursday of 1 full point in afternoon after 30 year auction and then again in morning next day.

Anatloy Veltman writes: 

Well I didn't notice anyone contributing examples of footsies yet, so I'll pitch a humble question.

I just glanced at raw longer term price charts (just price history, no internal indicators or anything else), and this is what struck me: if (Ralph, for instance) says it's a great buy at this stage, then when is it EVER a sell?! It seems to follow that (likely) never… Somehow, I'm not convinced there is no alternate answer

Ralph Vince writes: 

When the back end of the yield curve, especially the 20 yr constant maturity is above the 30. That's a good time to sell…..and look to start slowly building the position back again as it drops, for the relentless, upward climb of man's resourcefulness, as expressed in the broad indexes themselves.

The yield curve gives a great picture of the health of the market If there is multiple inflection points (another one outside of that 20 year point) that's even more negative, and if the far left, the short durations, start flippering madly, quickly…..you definitely want to be out of. People look to see if it is flat or inverted, but there is much to be gleaned by the finer details of its personality.



Brett is always endlessly speaking of market cycles, I found this to be an interesting take and an analysis I had not thought about before:

"During the first quarter of 2000, the dotcom bubble famously peaked after setting a new record high for corporate equity valuations. Today, we haven't quite matched that record in terms of equities, though, by some measures, we are very close. And when you look at corporate valuations more comprehensively, including both debt and equity, we actually have now matched that prior period. The chart below shows the value of nonfinancial corporate debt and equity relative to nonfinancial gross value added (data provided by FRED), essentially a measure of enterprise value-to-sales. I'll let you come to your own conclusion about what this might mean going forward."

Dylan Distasio writes: 

This is interesting, thanks. However, shouldn't duration and average interest rates on the debt have some relevance to using it to calculate valuations? I'm asking the question, not necessarily drawing that conclusion. Just wondering if my betters have an opinion on the linked chart.

Larry Williams writes:

So what if we have matched the all-time high valuations of 2008? Provided that the all-time valuation high was in 1960 8C would've stopped investing in 1995?
I am convinced there is one and only one thing that really causes bear markets– recessions. That's the key, certainly not technical analysis.

Happy bullish trails to all.



"Sorry, the ‘January Barometer’ Is a Market Myth"

John Bollinger comments: 

I applaud the work of Messrs. Harvey and Hulbert and others of their ilk and I encourage them to be even more vociferous. Over the past several decades I have successfully used many of the tools and techniques that they denigrate. Investing/trading is a hard business and if they want to scare off the competition and help me maintain my edge I say "Go guys, go! Give it your best.".

As for Yale: It is true that Yale included the sample in the forecast in the early versions of his work, a forecasting no-no for which he has been tarred and feathered. I had the pleasure of meeting him on several occasions and my impression was that he was quite bright and capable, so I always wondered if he didn't do that on purpose, deliberately throwing a wrench into the works…

Good trading,




 In memory, Alba spoke French to her cats, Spanish to the dogs, and English to me. She spoke to me out at her remote property because I was educated and had seen a hundred dollar bill, unlike our desert rat peers.

Alba was born in Managua, Nicaragua tremendously premature. She was a cherub in dancing tights at age 7, pictures showing a resemblance and charm to Shirley Temple. Her father before she was ten took her frequently to the city skid row with coins, and later she went alone, to give them to the needy. Dad was a multi-millionaire hardware man with businesses around the world including Europe. Alba wanted to become a nun, but dad ordered her to University of Pennsylvania to study accounting in order to control the family business. She graduated with honors and, at 4' 11" in the college yearbook is the star of the basketball team. She then handled the hardware business records, got a CPA in Nicaragua, and I saw pictures of her in mink stoles in the Caribbean, Mediterranean, and other exotic places on business or pleasure. Then tragedy struck when her beloved father was murdered in Europe. Alba took over the business, but was actually freed to pursue the nunnery, if she could find one to accept her. She gave the business away, and moved to San Francisco, where she was a popular character on the wharf fishing for sailors. She was involved in a head-on collision and would let you stick your fingers in the in the depressions in her head, where she was laid up in bed, comatose for a while, then immobile, and then recovered to become the old Alba again. Raring to go at the nunnery, one after another turned her away, until she threw up her hands to one sister in the archway, and said, 'The hell with you!' She bought a battered blue Ford van and plied the back roads of southern California until she found remote Sand Valley in about 1995, at the age of about 60 - eight miles down the road from my Rancho Scorpion.

Alba was a good neighbor in that we visited bi-annually when we happened to bump into each other on supply runs to town. She fretted over me, often dowsing me with holy water from the Lourdes. She kept her toenails and teeth as they fell out in an accountant file, and a daily record of the temperature for years and years, as the 1' outdoor thermometer in her front yard spun an extra revolution in the summer to register 180F. She chased rattlesnakes with a broomstick, and used no solar, propane or firewood. Her cooking was setting a Cup-of-Soup or the like in the sun to warm. She had no bad habits, except an underground crypt filled with her deceased pets - hundreds of dogs and cats over the years - that were desiccated to remain as if petrified. It was like Twilight Zone going down there and petting them. Alba had a Dog Street of a dozen mongrels, and a 40' trailer full of cats. I would walk down the Street and practically get licked to death, but entering the Cat House was like going into the jungle. Feral cats perched on the cupboards, shelves, bookcases, and under the table and bed.

Once a month, Alba tied garlic around her ankles and walked eight miles through rattlesnake country to a county road to hitch to Blythe, CA for supplies. The snakes do not like garlic. One day Alba did not return, the dogs were set free, the cats escaped, I sealed up the crypt, emptied her toenails and teeth into my pocket, and as the wind now blows through her ramshackle camper I can still see her dancing and singing in the dirt track when the US Marines drove tanks past to practice war games, 'Thank you, Marines. Thank you for saving Managua!' 



 I asked Brett one more time to quantify some of his multiple classifications and descriptions of cycles and advance declines et al and he responded: "Very nice quanatification of cycles with admirable transparancy of track record fromm @stockspotter. Brett is a Dr of great respect and is adverse to mumbo in all forms. But someone should look at stockspotter to see if it passes the usual scientific standards.

Phil McDonnell writes:

I first came across John Ehlers in the early 1990s. He and I traded his MESA program for my Option Trader software. MESA stands for Maximum Entropy Spectral Analysis. I had earlier written a Fast Fourier Transform (FFT) program which is similar to MESA. FFT constructs a set of multiple cycles over 32, 64 or 128 days to 'fit' the recent history of the market. The problem is that cycles evolve with time. MESA attempts to fix that by taking a shorter term average cycle than FFT.

My experience then was that the software seemed to have some promise but it was not perfect. It offered a look-ahead graph of where the market would go and that was how you picked potential winners.

A quick look at the stockspotter.com site showed a track record of 'closed trades" for the last quarter of 2016. I glanced at the first 10 pages of trades. Out of this sub-sample of 140 trades very few were losers. On the face of it this seems to be a very successful system.

But there is a catch. The trade record shows only a few days (3-6) on the first page. But later pages show a clear trend of more days in a trade (~5-9) as it goes on. This may be evidence of some sort of 'first profitable close' exit strategy. Thus there may be a larger number of deferred losers hidden in the undisclosed current trades which were not revealed.

As it stands the data cannot really be analyzed scientifically. However that does not mean that there is not something interesting here.



 I note K-Mart closing stores. A lady I know recently lost her Manager job at Belks. Belks was bought out recently.

I have some empty rental units. I asked each person why they were moving. The common answer was they could not afford unit.

Also Peoples Bank in my area in March is closing 4 drive through free standing motor banks. Most at the 4 locations losing their jobs.



 Getting The Make on someone means to identify him, his job, or role in life. My expertise comes from ten straight years standing an hour a night in bars across the country, without drinking. In seeing tens of thousands of people, I tried to figure them out. The other place was as a veterinarian at examination tables and kennel gates of small and large animals, because animals don't tell you who they are.

My three best makes and how over the years are:

1. A few years ago in Costa Rica, I was on a tour bus with a tall gentleman who spoke a sentence to his wife seated next to him, and I asked, 'Are you a dentist from Los Angeles?' The give-away was a slight hunch, delicate, smooth hands of exacting movements, other physical factors, and his wife had answered with a 'Valleyspeak' twang. He had good teeth himself, and I had a toothache, which is why I had asked.

2. Ten years ago in Times Square, I got particularly efficient service at a dinner. I said, 'You must be an electrical engineer from Delhi.' His skin flushed red, and his quick tracking pupils dilated, as he confirmed. He was obviously Indian, and nearly all who make it to America are newspapermen or electrical engineer, for which India is famous.

3. Yesterday at Slab City, I bumped into a grizzled newcomer and looked down, remarking, 'You got your shoes at Big 5 Sporting Goods and were in Special Forces.' That fueled an hour of stories of Vietnam, the CIA, and later how he became a mercenary and came to Slab City to wind down. I had bought the same pair of sneakers a month ago, and the feet of a Special Forces can go all directions at once, as opposed to a Marine who is gung ho ahead, and retired Navy who push off the sides of their feet as if aboard a ship.

Learning to get a make on people opens doors, closes ones that should be, and is good for business and sport.



VIX opens Monday at new lows; but chart seems VERY BULLISH. What say you?

Ralph Vince responds: 

I'm looking at the yield curve in constant maturity treasuries, the 10 year duration on out, which tells the tale of the market's health — it's currently very bullish shape. When the 20 yr yield > 30 yr yield or a big concave point at about the 20 year duration, I'll get worried.

Volume hasn't given us a short term sell here yet….

Three week plurality of NYSE Most actives has still not gotten oversold………..since way before the election.

Quality spreads in the credit markets starting to give it up, very bullish for equities, and the shape the big indexes on the charts is verrrrrrrrrrry.

Vix may see little spikes here and there, but I think this [stock market]  is a runaway train, and I think it's going to blow everyone apart who gets in it's way for a while. This is the perfect backdrop, everyone trying to call a top, everyone THINKING sentiment is too bullish, people's thinking all occluded from politics and the dyspepsia therefrom.

This is a runaway train.



 Since the epic crash of 2008, many key relationships have changed and some have gone outright haywire.

Traditional meaning of money for students of demand and supply has been that value of assets and value of money do not move together and rather move in opposite directions. The USD and the S&P500 have been moving up together through a sustained eight years now. In satisfying the mind, which is nothing but a self organising pattern seeking system as per Edward de Bono, one places in the model of the new world the Euro as the new money of this new world.

If this is a perceptive transformation that is acceptable for logical minds, one places on the table a few questions that might deserve indulgence of the specs:

a. What do quants see in the relationship of Eur with other key assets, the extent of the idea that Euro is behaving as the money of the new world?

b. Given impermanence is the only permanence, to prepare better than the rest, in what good ways should one be studying the configuration and the factors working into the significance and role of the Euro in today's world such as when this meme / regime will be about to be ending, the list may be one of the earliest lighthouses to note the changing tide?

c. Will JPY be the next to take over the role of the , howsoever ephemerally in the infinitude of ever changing cycles, to mimic appearing to be the money of the world? There is another question hidden within this simple looking one, that is, will the super bull of equities continue for years further even if the eight year persistence of EurUSD gives in with similar behaviour of a sustained decline coming in the value of the JPY?



 Just in case we've forgotten what they look like, here is a terrific sculpture at Tsawwassen Mills in BC

(pix by Gemy Bom).





This is a masterful article about the importance of quiet study and good businesslike habits.

"The Godfather of handicappers: Pittsburg Phil changed the game forever"



 Le Carré is a wonderful author and I have repeatedly enjoyed his George Smiley books, especially the Karla Trilogy which begins with Tinker Tailor Soldier Spy, a fictional account of the operation to root out the Cambridge Five, including the Russian mole whose character is based on the traitor Kim Philby.

The second book, the Honourable Schoolboy, in which Smiley attempts to rebuild a devastated British Intelligence Service by gleaning information from those operations that the mole had actively suppressed, takes place in southeast Asia and gives a very realistic glimpse into the utter insanity of the conflicts raging there. (the wiki page on the Honourable Schoolboy has an interesting glossary of intelligence service jargon which le Carré employs profusely throughout the novels.)

The final and triumphant Smiley's People finds our hero called out of retirement, once again, to tidy up the murder of one of his former agents. His investigation puts him on the trail of his Soviet nemesis, Karla.

All three books are spellbinding page turners. But, but, but, my absolute favorite adaptation of them (with the exception of the Honourable Shcoolboy whose subject matter was extremely unpopular at the time), is a pair of BBC mini series (here, and here) starring Alec Guinness as Smiley. Guinness is riveting and the stories unfold like a blossoming flower. Simply fantastic, I can't recommend them enough. (they can also be found on youtube, here and here).



Hope spring eternal that the market will go down because the cattleist is not in power to increase service rates and other third term policies. But the article provides a good read on the kind of thinking that pervades the street that provides a cushion for the drift, especially with the rates back below 3% and 2.5 %.

"U.S. PREVIEW: Is Trump Rally Real? Jobs Report May Contain Clues"

By Carl Riccadonna and Yelena Shulyatyeva (Bloomberg Intelligence) 

There are three main focal points in the December jobs report: the potential for a post- election hiring acceleration, the durability of the recent drop in unemployment and clarity regarding wage pressures. Analysts will watch to see if the post-election surge in business confidence is translating into a more aggressive approach from hiring managers. If so, this could be a signal that improving sentiment is contributing to a virtuous economic feedback loop.

The drop in the unemployment rate, following an extended period of stability, is also garnering attention, including among Fed officials, as it could be a sign that labor shortages are intensifying. If this is true, then average hourly earnings should show a more pronounced bias to move higher as well. With the pace of economic output firming moderately in the second half of the year, there is little reason to expect a significant deviation from the recent hiring trend.

What to Expect:

• The consensus among economists polled by Bloomberg anticipates an increase in December nonfarm payrolls of 175k (170k private), modestly below the six- (205k) and 12-month (188k) moving averages. The payroll trend has decelerated over the past two years, but BI Economics expects the trend to at least stabilize, as economic conditions firm over the next few quarters. Improving economic sentiment could significantly impact hiring intentions, if elevated optimism endures. BI Economics projects a mildly above-consensus outcome, closer to 195k.

• Historically, December payrolls have shown little bias relative to the consensus forecast, thereby implying a modest upside risk relative to the result of the December ADP survey (153k).

• The seasonal adjustment of the payroll data turns negative in December, as recurring winter layoffs commence in a range of sectors. In recent years, the seasonal adjustment factor for December payrolls has averaged near -315k.

•Within the sub-industry details, analysts should be alert for an outlier result in the transportation/warehousing sector, or more specifically the even narrower category of couriers/messengers, which has benefited from seasonal shopping increasingly shifting online. The BLS has attempted to correct for this, but the structural trend is ongoing, so the series may yet be insufficiently adjusted. Retail and construction hiring are also prone to December irregularities.

• The median forecast for the unemployment rate projects a minor retracement in December (to 4.7% from 4.6% prior). The impressive descent from 10% to 5% unemployment from late 2009 through the end of 2015 gave way to an extended period of stability in the vicinity of 5%. The four-tenths decline over the past two months is less remarkable given that it coincided with a two-tenths drop in labor force participation. BI Economics also anticipates a one-tenth increase.

• Consensus projects no change in the length of the workweek, at 34.4 hours. An increase could help break the recent pattern of sluggish income growth by lifting aggregate hours worked, but this appears unlikely given that it has maintained the same level in nine of the last 10 reports.

• Average hourly earnings growth will provide important insight into whether the labor market is witnessing mounting wage pressures as the economy operates near full employment. The prior two months were whipsawed (-0.1% vs. 0.4% prior) by utility workers (-1.8% vs. 1.7%) being in high demand following Hurricane Matthew. As such, the December results may provide the first non-distorted reading for the quarter. Consensus anticipates a 0.3% increase in the month, which should enable the year-on-year growth rate to return to the post-recession high of 2.8%, logged in October. BI Economics estimates a more moderate 0.2% gain. Earnings averaged 2.1% in 2014 and 2.3% in 2015, so the recent acceleration poses a compelling signal that labor-cost pressures are finally intensifying.

• Annual revisions to household survey data: As per usual at the start of the year, the December jobs report will incorporate annual revisions into the household survey data. Seasonally adjusted data for the most recent 5 years are subject to revision.

Employment Scorecard

Wage Pressure Becomes Fed's Focal Point

The minutes of the December FOMC meeting indicated that policy makers were increasingly confident that labor market conditions had reached or were close to reaching the committee's maximum employment objective. "Most" participants shared this view, while "many" saw an increasing risk that an unemployment rate significantly undershooting the level consistent with full employment could compel the Fed to raise rates more quickly than currently anticipated. Furthermore, "several" noted that faster interest rate normalization could also impact the timeline for unwinding asset purchases conducted through QE.

Policy makers appear increasingly concerned that a potential overheating of the labor market could complicate their desire to normalize policy with gradual deliberation. As a result, the evolution of labor market conditions over the next few months will significantly influence officials' comfort-level regarding the current rate-hike schedule. The level of the unemployment rate and the wage pressure trend will be subject to particular scrutiny.

BI Economics is optimistic that firming growth prospects in 2017 will at least stabilize the pace of hiring near the average (188k per month) over the past year, which is well in excess of the natural growth rate of the labor force (roughly 100k per month). As a result, the unemployment rate is likely to remain subject to downward pressure, which will in turn magnify upward pressure on wages. BI Economics anticipates an acceleration in wage pressures in 2017, but given the lagged nature of inflation (including wage inflation), the pressure may take a bit longer to emerge.

The accompanying figure shows the recent pattern in average hourly earnings growth. Overall, average hourly earnings are up 2.5% over the past year, and the pace is poised to return to its cyclical high of 2.8% if the consensus forecast is correct. However, further acceleration may prove elusive in the near term, as the 3-month and 6-month annualized rates of change are running at similar paces (both at 2.4%). This suggests that there has been little acceleration-bias in recent months (despite the choppiness in October and November.)

The above figure further breaks out trends in the service- providing and goods-producing sectors, and the results show a similarly stable trend in the former and a marked deceleration for the latter. In fact, among the main underlying categories, of which there are 14, only seven are exhibiting an acceleration bias. These include non-durable goods manufacturing, retail, transportation, information services, professional/business services, education/healthcare and other services. The relevant conclusion is that while a select group of industries are witnessing accelerating labor costs, pressures are not yet widespread.

The diffusion of labor-cost pressures will be a critical trend to watch in the near term, particularly now that policy makers are increasingly confident that full employment has been achieved. Reading the trend has been complicated of late, in part due to temporary pay increases for utility workers following Hurricane Matthew. Unfortunately, the lack of clarity is likely to extend into early 2017, as minimum wage increases in 20 states take effect in January, likely resulting in further volatility in the average hourly earnings data.

To be sure, an increasing minimum wage does reflect rising labor costs — this will undoubtedly have a ripple effect into workers earning near the minimum wage — but the impact on the average hourly earnings data in the jobs report could temporarily exaggerate the trend. The risk is that this could lead casual observers to panic unnecessarily at the prospect of labor costs boiling over–just ahead of a subsequent moderation. Analysts and policy makers would be wise to remain patient during this short-term flare-up in 1Q.



MFM Osborne was a pioneer of modern finance, the first to have the idea of modeling stock prices with what we call today GBM. or Brownian motion in the log of stock prices, making possible all that followed in terms of Black-Scholes-Merton option theory and modern empirical work on stock prices. I have provided a brief summary of his life and work elsewhere in this web site.

His daughter Melita Osborne has prepared a biographical document that is available here [MS word .docx file, approx 300 Kb].



We examined the effect of the movement in Bond futures during January on
the movement during the rest of the year (Feb through Dec).

The following table shows the price moves for all years 1996 to 2016


After an up January the rest of the year is slightly more bullish (91.895 vs 64.97) but the difference is quite small and not significant.

A linear regression with the January price change as a predictor shows that this variable explains 1.46% of the variance of Feb-Dec returns.



We examined the effect of the movement in Bond futures during January on the movement during the rest of the year (Feb through Dec).

The following table shows the price moves for all years 1996 to 2016

If the size of the Jan move is used as the predictor in a linear regression the following results are obtained:

the predictive value is low.



These hand signals for brokerage firms really existed back in the day. One suspects that an HR department would be apoplectic if these were still in use.



 It's not particularly well understood that there were a lot of Jewish settlements in the West Bank prior to partition that were eliminated by the Jordanians.

It's not discussed much—the same way no one pays any attention to the Jews who were summarily kicked out of Arab countries post-partition (and all the way to 1967, when the Egyptian Jewish community was given 24 hours to leave the country before becoming enemies of the state.

As for the, "it's ours now," the Israelis tried that and it didn't get them very far. That was the Begin narrative. Guess what. The world didn't care. The Arabs had the oil, the Arabs had the money, and both were used to "convince" the rest of the world that Zionism was a form of racism and so on.

It's only been during the past 25 years, post-Oslo, that the Said story has taken hold, that Israel is a colony of Europe and that Europeans are responsible for all Israeli activities/actions and should be punished accordingly, absent some form of punishment of Israel.

The one thing that has been constant during the past two thousand years in Jewish history is that anti-semitism has been present, often government or religiously sponsored, and governing the circumstances in which Jewish communities lived. So I respectfully doubt that time will change much from the present—it hasn't up to now and there's no reason to believe (other than the tooth fairy concept) that it will change in the foreseeable future.

Israelis have a Masada complex because that's the situation Israel has been in almost since its founding.

And for those insisting that the US provides an umbrella of security for Israel, I cite the past 8 years, the 4 years of Bush 1, the 8 years of Nixon-Ford, the 8 years of Kennedy-Johnson, and the 8 years of Eisenhower. US policy was at best indifferent absent some overwhelming externality—like the cold war and Soviet intervention. In fact, twice before the US has insisted that Israel return captured territory—in 1956 and in 1973. In both instances, the US used pressures that the Israelis could not resist.

Unfortunately, time isn't on Israel's side. It hasn't been in the past, and there's little basis for thinking it will in the future.



 One cannot underestimate the contribution that drones can and will make to agriculture. Since last August when the regulations on the commercial use of drones were relaxed, agricultural drones have been in a bull market. From checking crop conditions, moisture levels, invasive species, estimating yields, to finding lost cattle and mapping cropland, drones allow the farmer to save valuable time and energy. Some estimate that agricultural drones will be a billion dollar market by 2024. Down the road, farmers and industry players are looking forward to the rules and regulations being relaxed even more, allowing for spraying crops by drone, which could increase the market by 40% according to the whispers on the street. Some of the key players in the industry at this time include Agribotix, DJI, 3D Robiotics, and Precision Drones.



 There are thousands of drones out there, and the newest technology makes them incredibly easy to fly. Most large drones now have the ability to remain a preset distance from the transmitter, so they won't collide with the operator. Most have a gps based one touch RTB (Return to Base) button that will bring the damned thing back if you lose sight of it. The little ones are an absolute kick in the pants to fly, and hexacopters even more so because they can spin with amazing rotation rates (quite a spectacle when they are lit up).

My son's latest has a radar altimeter and he can program a ceiling into it, so it won't go higher than the tallest doorway and get stuck to the ceiling. It does flips with a single touch to the controller (which is any smart phone - just an app) and attaches to a hydrofoil for fun in the pool.

The little ones are great indoors, but pet hair is anathema to them. Outdoors they will suffer in any sort of wind, and remember, if you go above the treetops, wind speed increases dramatically.

You can start small, really small for under $20: (we have four of these).

I highly recommend extra rotor blades and a cage, bundled here with spare motors for $5.

EDF (Electric Ducted Fan) quads are nice because the rotor blades can't hit anything. This is a fantastic beginners machine, if you want to buy ONE machine, this is probably it .

This one is slightly next level, requires some skill, ~$60

Serious fun is FPV racing (first person view), there are thousands or amazing videos, here's a quick one.

If you want to shoot semi pro or pro video, start with a DJI Phantom 3 or 4.

And for fun here is an absurd video of a human flying drone.



 An interesting point of hoboing is the ratio of hobos and their use of mobile devices such as Smartphones. When I rode quarterly from 1985-95 the mobile devices weren't around. However, many of the executives I took to the rails became hobo tech heads, bringing cell phones, GPS, scanners with preprogrammed RR yard frequencies, and night vision goggles. I was content with my working knowledge and the Rand McNally Handy RR Atlas, although at times the high tech proved valuable.

There were reportedly 4 million hobos during the Great Depression of the 1930s, and supposedly after that the hobo subculture became an intellectual property. It was revived in the Great Recession of 2008 that threw hundreds of thousands into homelessness. The worst of them became stew bums occupying your park benches, the more capable boxcar tourists and rubber tramps (in autos), and the most able became hobos riding the rails. I estimate these days that in good weather about one in every five trains you see west of the Mississippi River is carrying a hobo, and far fewer to the east.

Yesterday while hiking in the desert along a Union Pacific track between LA and Tucson, I watched one freight whiz past every 30 minutes for six hours, usually double stack container trains. I was too far from them to see hobos waving, but on returning to Slab city I noted about 200 new young arrivals with backpacks in the past month who will winter here, before moving on. Many talk of riding the rails. They are in their twenties, in dreadlocks, like drugs and the breeze in their hair, and often have female hoboettes in tow who are pretty as well as hard-bitten. They spend their free hours reading, playing guitars, and keying mobile devices.

One of them is named Hopper. He lost his right leg last year trying to catch a moving freight ladder outside of New Orleans. He is traveling with a parson who claims he has 'healed this cripple' by enabling his good leg to regenerate. They travel the nation three-legged, working the crowds, collecting food stamps, and panhandling in Walmart parking lots.

Of course, they have the latest Smartphones in this new hobo addition to the hobo subculture.



 I made the comparison of BitCoin and South Sea Company stock recently. I did so because both are pseudo-monies that began with the serious purpose of evading monopoly restrictions on the movement of official currencies. From the very beginning the usefulness of BitCoin as an alternate currency was unquestionable if you lived in China. It was and, so I am told, still is the easiest way to defeat the PBOC’s restrictions on swapping China’s currency for other national monies. (Again, from what I am told, people in China do not simply trade yuan for BitCoins and hold the BitCoins; they make a second trade and sell BitCoins for Euros et. al. and deposit those in online accounts with foreign securities brokers.)

I thought BitCoin would be a “failed currency swap” because there would come a time when a current Chinese Ministry would no longer allow even relatively small transactions in a pseudo-money to appear to undermine the PBOC’ s control of the conversion price of its IOUs - i.e the official price of foreign exchange. I am not saying that BitCoin would actually have much of an effect; I am saying that “cracking down” on BitCoin would be an easy rattle of the sabers for the people who govern China.

There is also, I am told, the appearance of a technical parallel between the behaviors of BitCoin’s dollar price and the history of the South Sea Company’s share price when it bubbled.

This link is to a chart of Isaac Newton’s speculations in the stock of the South Sea Company. I leave it to the traders to find out if there is any proper comparison; about matters of trading, technical and otherwise, I remain a perfect dunce.



 The December Jobs data is neither encouraging nor exciting. Admittedly there is considerable hope and some announcements of future hiring, but of course no change is yet visible. I will post a chart based on payroll taxes this week before Friday.

One particular concern for future jobs should be the minimum wage hikes. It is rational to expect that higher minimum wage rates in some locales will stifle employment increases in those locations while neighboring areas experience growth. The good side of these rules is that each changed location will in effect become an economic Petri dish, so we finally get to see unequivocal evidence on the matter. Local experiments that underperform are better than a failed national experiment.

It is also possible that reductions in regulations (among other changes) will create such a successful business climate that demand for workers will render minimum wage laws moot.



Today I attended a lunch presentation with pension funds as the target audience. They defined risk as volatility and wanted reduce risk while maintaining much of the return. It was said that buying puts reduced return too much for most fund managers. The strategy presented was to reduce equity exposure from 100% to 50% and invest 50% in a low risk asset (short term bonds), at the same time sell both OTM calls and puts. They presented a back test of 10 years where the strategy outperformed index slightly while having a lower volatility (they outperformed during the 2008 crash and vol looked to be lower all along). I'd think they expose themselves tail risk by selling OTM puts, so was surprised they outperformed during the GFC and that they came out ahead. I still think they make it 'look' good during 'normal' markets but will get killed performance wise during sufficiently high upside and downside volatility–so I really think it is somewhat of an intellectual fraud to call this a 'low risk equity exposure' for pension funds.

Alex Castaldo responds: 

I did not attend the presentation mentioned, but I am familiar with this kind of option selling strategy. One of the simplest is the PUTW (or PUTSM) strategy whose results are updated daily on the CBOE web site.

In the attached chart I compare it's total return since 1/2007 to the SPY total return (the S&P 500). Starting both strategies at an arbitrary level of 923, we see that PUTW falls to 690 in early 2009 (a 25% drop), while SPY falls much further to 503 (a 45% drop). What I find particularly interesting is how well PUTW holds up in the first half of 2008: while the stock market is going down PUTW manages to be steady or slightly up because it is selling puts at a high implied vol; only when the stock market begins to sell off very sharply after 9/30/2008 does PUTW also drop.

But even more interesting is what happens in March 2009 and after: the SPY begins to climb faster than the PUTW, slightly faster at first but markedly so after September 2012 and soon thereafter SPY passes PUTW. At the end of December 2016 SPY is at 1798 while PUTW is at 1668.

My conclusions are:

(1) The PUTW strategy has a lower volatility than SPY, both in terms of a lower drawdown in 2008 and a generally smoother path throughout the period (std dev of 11.5% per year versus 15.2% for SPY). The claims made during the presentation are believable. There is no intellectual fraud here.

(2) Everything has drawbacks as well as benefits. The drawback of PUTW is not that it will lose heavily in the future during periods of enormous volatility, but the opposite: that it will underperform during prolonged bullish periods for the market and probably over any sufficiently long period (long enough for the implied vol to adjust to whatever the situation might be and for the law of large numbers to take effect). So there is nothing magical here, as Dr. Zussman would say just the familiar tradeoff between volatility and return.

(3) The correlation between SPY and PUTW monthly returns is 0.85 (beta is 0.65) so PUTW is not all that different from SPY in terms of sources of risk (it is not a very good diversifier for stock market risk).

(4) The performance of PUTW is not theoretical or proprietary or reserved only for pension funds; it is explained on the CBOE web site (roughly speaking: sell 1 month ATM puts fully collateralized with cash) and since February 2016 there has been an ETF (also called PUTW) that implements it. So far it is small (30 million in assets). It has a 0.38% expense ratio, and so far has been tracking the CBOE version with accuracy that is quite respectable, and in line with expectations.

(5) Yes, you can reduce risk by selling Vega. Or increase risk by selling Vega, it is all in the proportions and how you do it.



With stocks and the US dollar rising, and US Treasury bonds falling (at least before the Fed actually raised), I had the idea for some time that the markets were doing the Fed's work for it.

I found 22 months in the past 18 years in which the S&P 500 was up while Treasury bonds, gold,and the euro were all down. In the following month, S&P 500 net changes were consistent with randomness.

To minimize problems with multiple comparisons, I did not test the other 15 possible combinations of monthly changes in stocks, bonds, gold, and the euro.

                     S&P 500 futures

Date                 Net change in next month
            3/31/1999                   3.3%
            6/30/1999                  -3.6%
           11/30/1999                   5.3%
           12/31/1999                  -5.6%
            1/31/2001                  -9.5%
           11/30/2001                   0.7%
            6/30/2003                   1.6%
           10/31/2003                   0.8%
           12/29/2006                   1.0%
            5/31/2007                  -2.1%
            4/30/2008                   1.1%
            4/30/2009                   5.5%
           12/31/2009                  -3.6%
            3/31/2010                   1.6%
            3/30/2012                  -0.7%
            5/31/2013                  -1.5%
           11/29/2013                   2.4%
            3/31/2014                   0.7%
            2/27/2015                  -1.6%
           11/30/2015                  -1.7%
            8/31/2016                  -0.1%
           11/30/2016                   1.9%

Average                                -0.2%

Standard deviation                      3.4%

N                                         22

t                                      -0.68

Average of all months                   0.3%


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