Some recent tweets from @VicNiederhoffer on being "aggro":

Nobody asked me but you can learn a lot from "aggro". Steve Irwin, google, and doomsdayers come to mind. 

Steve Irwin's favorite croc was named "aggro". He liked him because he was the feistiest and cageyist in the zoo. Steve had caught him and "aggro" remembered this and as always ready to hide and spring at him. 

As is well known crocs have great memory and because of this no fisherman fishes in the same spot twice. The crocs remember where the anglers were the last time they ate (about a month ago) and they come back for the kill. 

Because of this no spec should try to make money the same way twice in a row. Humans and the collective zeitgeist have good memories also. 

In a recent article in "Wired": they refer to amazon as "aggro" in contrast to google which is benevolent in all ways as you see the founder of Google was an adviser to Hillary's campaign so he couldn't be "aggro". 

But all fellow travelers are "aggro" when the market goes down big the hope for renewed panic selling as this would reduce wealth for everyone and this would be good for the agrarian reformers who did so much more for Hillary than the Russians did for Trump. 

The downside is hoping for a decrease in everyone's wealth creates a horrific sense of life. It also prevents you from participating in the drift which I have been emphasizing for the last 150 pts in S&P and elsewhere in my books.



This fits with a study I did once showing significant correlation between distance from the equator and per capita income. (One notes there are other climatological-genetic factors that correlate with latitude)

"Latitudinal Psychology: An Ecological Perspective on Creativity, Aggression, Happiness, and Beyond"

Evert Van de Vliert, Paul A. M. Van Lange

First Published August 21, 2019


Are there systematic trends around the world in levels of creativity, aggressiveness, life satisfaction, individualism, trust, and suicidality? This article suggests a new field, latitudinal psychology, that delineates differences in such culturally shared features along northern and southern rather than eastern and western locations. In addition to geographical, ecological, and other explanations, we offer three metric foundations of latitudinal variations: replicability (latitudinal gradient repeatability across hemispheres), reversibility (north-south gradient reversal near the equator), and gradient strength (degree of replicability and reversibility). We show that aggressiveness decreases whereas creativity, life satisfaction, and individualism increase as one moves closer to either the North or South Pole. We also discuss the replicability, reversibility, and gradient strength of (a) temperatures and rainfall as remote predictors and (b) pathogen prevalence, national wealth, population density, and income inequality as more proximate predictors of latitudinal gradients in human functioning. Preliminary analyses suggest that cultural and psychological diversity often need to be partially understood in terms of latitudinal variations in integrated exposure to climate-induced demands and wealth-based resources. We conclude with broader implications, emphasizing the importance of north-south replications in samples that are not from Western, educated, industrialized, rich, and democratic (WEIRD) societies.



What does this signify in the context of markets as they are now?

How does one put this datum to the trading terminal?

Why does this work?

Jordan Neumann writes: 

TA-35 has to make up for Thursday too. Makes it closer. If you look at the index, it started down and stayed there. We are all looking for tea leaves. Just another 90 minutes.

Alexander Good writes: 

CnhJpy is a good gauge these days for early move.



Friday's price action reminded me of the mountains where when the Orange-u-tan man twittered the market slid off 3 percent, rapidly at first at a vertical slope, and then as the day wore on, settling in at the angle of repose where no more loose debris slid off and the top of the sell off might have been at a lower angle than earlier in the day. Years ago Chair discussed vectors and some algos based on vectors that was promising, and this is somewhat similar. Better to stand in a place where further secondary avalanches or what is known as Hangfire doesn't threaten your position.

As I say in the mountains, as in the markets, you never know til you go.

Zubin Al Genobi writes: 

A mountainside with steep cliffs and loose scree below or snow tends toward the angle of repose which is the angle after which the loose material will no longer slide down the face. A pile of sand will have a certain angle of repose where the sand castle stabilizes for a time. For snow, typically slopes angled over 50 degrees tend to slough off. 38 degrees is the optimum angle for avalanches. A steep cliff will often slide down to where debris has piled up, and stabilizes at the angle of repose. When setting up a camp one wants to be at a point far enough away from the slide path that the run out of a avalanche debris will not bury the camp. A rule of thumb is that if the top of the slope is 17 degrees up by line of sight from the spot one might be relatively safe.



One wonders if Mr Powell will get tired of the continuous criticism and resign. And if so, which direction the 5% move will be.



Our experience with the last two weeks of August has been that the period resembles the time between Christmas and New Years. That is, it's best not to get too excited about market action during this time. Of course the ennui is increased by the G7 meet and Jackson's Hole get togethers.

However the NFP to be released will profoundly disappoint with regard to job growth. We know this because the August NFP report is based on data thru August 16, which is already visible. Noting how all of the media is engaged in piling on this Presidency, those bearish numbers will be ballooned up quite a bit.

Kim Zussman writes:

A bad jobs report could be bullish for Fed watchers.



"Incomplete Information: A 'Gamey' Discussion" by Tim Su



Tests for Pareto II heavy tail extremes using R software tests Kendall, Pearson



Anne L. Murphy University of Exeter in Cornwall

SUMMARY This article uses data from the ledgers of the financial broker Charles Blunt to explore the market in equity options that emerged in London during the stock market boom of the early 1690s. Blunt's ledgers provide a unique opportunity to observe the workings of an early modern derivatives market. They reveal a broadly based and highly active trade in options. The market functioned well, determined value using agreed criteria, and was utilised by a diverse range of individuals to facilitate both risk-seeking and risk-averse investment strategies.


In June and July 1694 John Houghton's Collection for Improvement of Husbandry and Trade included a series of essays that sought to explain the workings of London's newly-emerged financial market. Houghton gave his readers a brief history of joint-stock companies, explained their purpose, and outlined how the capital was divided and how companies were managed. Further essays told investors where to go to buy and sell shares and detailed the cost of brokerage. Four of the seven essays were concerned either partly or wholly with explaining the trade in equity options.

Houghton also demonstrated a close understanding of the advantages and disadvantages of trading in options. He informed his readership that the purchaser of an option 'for a small hazard, can have his chance for a very great Gain, and he will certainly know the utmost his loss can be'. But he also warned those considering selling options that they ran a very great risk for only a small potential profit.



 One of the most popular pieces of #BullCrap is that when crude prices go down its good for economies like India that are dependent on large imports to fulfill majority of the crude consumption domestically.

Fundamentals are not funny'mentals, but the over-reach of intellect to fit things anyhow even if erring in fitting square pegs in round holes or putting the cart before the horse make it funny! The urge to find a reason for explaining a regularity in markets ends up reaching an extreme of imagination.

The popular opinion that crude down so India or similar economies will do well and our Sensex or Nifty Index should fly suffers from:

1.    Imagination that a critical commodity as energy is traded by Governments and large down stream marketing companies the same way as a trader in Chicago is trading futures.

2.    All expected demand for downstream products that forms the cracking hedge must be long for several months ahead to cause a zero disruption economy. So when a short term down move in crude futures at NYMEX happens actually these companies doing the cracking & marketing gig suffer that consumer is perceiving profiteering. Majority of oil products marketing companies are state owned and the Government comes under flak that Nymex Crude has come off 50% in 3 months and consumers on the street level gas stations are still buying at highest ever prices. So its neither good for the people on the street level gas stations, nor the people running the Oil Marketing companies, nor the people running the Government and the imaginary idea that significantly down crude prices are saving India money is a baloney of a high order.

3.    No one wants to talk about the oft present spurious correlation that prices of equities and prices of crude are both measured in Dollars and it is often the big moves in Dollar, as broadly reflected in the Dollar Index, or the selective beating down of emerging market currencies that are connected often to the downtrend in crude prices or uptrend in crude prices. An optical illusion in simpler words if the hoi polloi do not wish to encumber them to google up what the chair meant by spurious correlations.

4.    The bigger point most are missing is a conjecture I wish to place on the table before this august list of speculators. The futures price of crude is the speculatively contested price for delivery at Nymex. It doesn't reflect the real physical demand or supply worldwide on a day to day basis. So is a sustained down move (I didn't use the word trend!!) in crude a canary from the mines that risk-off bump is ahead on the road?



"Ricardo: China is Weak: Part 1"



1. A "billionaire" was accused of playing by different rules than the rest of us. Like Enron Worldcom and mortgage backed

2. I believe the junk market is bi modal When it's normal liquidity and abnormal or illiquid Last week JNK jumped into illiquid mode

3. The sector most under pressure I.e oil and gas had a price plunge. Like telcom, dot coms and housing

I will leave it to the reader to quantify into useful information.



 When the people, through the Constitutional Convention and the votes of the States, adopted Article I Section 8 of the Constitution, they gave Congress the power "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures". By its Currency Act Congress could define the country's money as specific weights and measures of particular metal and authorize the Mint to produce that currency in standard forms. Only Congress could do this. Section 10 of Article I removed from the States any power to "coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts". Only the Coins authorized by Congress would be legal tender.

Note what is omitted from Congress' limited powers and what is not prohibited to the States. The Congress is not given the power to create a central bank, like the Bank of England. The States are free to continue doing what they have been doing. They can authorize the formation of private banks and those banks can issue notes.

By establishing a gold currency standard and not putting it under the authority of a central bank, the Americans were, once again, violating the accepted rules of nations. They were explicitly prohibiting the establishment of any claims to aristocracy or state religion and rejecting the presumption of all governments that they had "sovereign" authority over property. Their idea of a mint coinage currency standard of precious metals was anything but simple. It was rejecting the notion that, like God, "the law" can be immutable and unchangeable. That, of course, was and is the plain meaning of the assertion that legal tender can be a "store of value". It cannot. Whether made of gold (or silver, nickel or copper or any other metal) or paper, money cannot avoid having its price fluctuate any more than anything else that is traded. What a gold standard can do is fix, with absolute certainty, what everyone, including the government itself, must recognize as the national unit of account.

And why was this necessary? Because, if you were going to embark upon the grand voyage towards the wealth of nations, you and foreigners had to be able to agree upon the terms of trade. That is why the Constitution was so specific about requiring Congress to "regulate the Value" of both U.S. and foreign Coin. Both Americans and foreigners had to share a common standard for their dealings with one another in money. Clearly, paper would not do. The colonists, the English and the French had all tried printing their currency. "The law" had done its best to make people accept paper as fully-valued money. But, whenever people were free to say "no", they did. But everyone would accept coin as a common unit of account. And, indeed, they did.

When Professor Cochrane writes: "The idea behind the gold standard is simple", he is ignoring all this history. I doubt he knows much of it. If he did, he could not write this about the 19th century: "If the value of gold rose relative to everything else (deflation), people gained an incentive to spend them, and thereby drive up the prices of everything else. If the value of gold fell (inflation), people needed more of it, so they spent less and drove down other prices. This crucial mechanism linked the price of gold to all other prices."

Nothing "linked" gold to all other prices. The common units of account for international trade - both gold and silver - were the prices. Whether people kept more or less money depended entirely on their expectations: (1) would their creditors pay? (2) would the harvest be "good" or "not so good" or "bad"? (3) would there be a war? (4) would lending at these rates be profitable?

All of the same questions that people now ask about finances were asked then.

There was only one difference: the government had to pay for its credit like everyone else. Now, governments have central banks that can literally make it profitable for governments to borrow money. Yet, at the same time, actual credit for people remains as rationed as ever. No bank anywhere is offering negative interest rates on credit cards.

In the 19th century this brave New World had yet to be invented. If governments wanted something and could not use force to steal it, they had to go to the market like everyone else. They could either offer money or make promises sufficiently sound that they could borrow money; but they had to follow the same rules.

No wonder reformers demanded that the United States have a central bank, like all the other countries. No wonder applying a gold standard to the country's money (and demanding that foreign countries do the same if they wanted us to accept their payments) now seems to every "educated" person a disastrously terrible idea. Professor Cochrane was not, but States were free to establish private banks and those banks could issue notes.

States could not themselves issue legal tender, but they could authorize the creation of banks Actually the idea behind the gold standard us anything but simple; it is so subtle that its defenders and critics alike cannot be bothered to learn its history or understand its function.



Wes Gray, who studied with Eugene Fama, runs a firm called Alpha Architect. In his most recent weekly newsletter, he mentioned a new academic paper that asks the question: Do Stocks Outperform Treasury Bills?

Here is the abstract summary of the paper and the link to SSRN's publication of the full paper:

Hendrik Bessembinder Fifty eight percent of CRSP common stocks have lifetime holding period returns less than those on one-month Treasuries. The modal lifetime return is -100%. When stated in terms of lifetime dollar wealth creation, the entire net gain in the U.S. stock market since 1926 is attributable to the best-performing four percent of listed stocks, as the other ninety six percent collectively matched one-month Treasury bills. These results highlight the important role of positive skewness in the cross-sectional distribution of stock returns. The skewness arises both because monthly returns are positively skewed and because compounding returns induces skewness. The results help to explain why active strategies, which tend to be poorly diversified, most often underperform.

John Netto writes:

I was fortunate enough to have Wes, a former Marine Corps Officer and Iraq war veteran, write the foreword to my book. He's an inspiration. 

Larry Williams writes:

I thought this was common knowledge. Goldman did a studies years ago with the same conclusion and as I recall so did Edgar Lawrence Smith in the 1930s.

Ralph Vince writes:

Just go look at what happens to stocks when earnings yield and/or dividend yields exceed a certain multiple on t bill returns.

I have grown generally very skeptical of anything that emanates from U of Chicago. There is a philosophical problem there I have discovered, incongruent with real-world markets, but that is a subject for a different, future thread possibly.

And fwiw, these multiples of t bill returns, as metrics of valuation, are quite opposed here to the seemingly pervasive meme of being at or in a bear market's doorstep.

Stefan Jovanovich writes: 

Like Pat McAfee, I am now (and have been for a while) a fan of players, not teams. (The baseball Giants remain an exception because the old franchise at the Polo Grounds was my childhood home. Even the Mobile Shippers (the Negro team in Mobile, Alabama that nurtured Henry Aaron and Willie McCovey) never quite made me a die-hard.) So, I can offer no opinions about the University of Chicago or any other academic team. I am a fan of Eugene Fama because he seems to have been remarkably generous to his graduate students in encouraging them and their work, even when he thought they were "wrong". I also admire him for being the only person I know of who has questioned the utility of the United States having a central bank when the dollar, as currency, has no independent monetary existence.

As LW notes, Edgar Lawrence Smith put the case that, over any two decade period that he studied, "a diversification of common stocks has …, in the end, shown better results, both as to income return and safety of principal, than a similar investment in bonds." Professor Bessembinder's paper does not contradict that conclusion. His argument is that most stocks do no better than Treasury bills; the out-performance of "the market" is dependent on a very few spectacular winners. I thought this actually reinforced the belief of the List members that the Jack Bogle's advice - "Buy Everything and Keep It Forever" - was all wet.

Ralph Vince writes: 

As an aside but related data point on this discussion, as of Friday's close, the geometric multiple on the 30 year constant is at 35. It has NEVER been this high above the S&P P/E Multiple.

I want to drink in the bigger picture.

Kim Zussman writes: 

The only free lunch is diversification (including temporally, which means B&H).

Ralph Vince writes: 

It is the ILLUSION of a free lunch. 

Diversification works over long periods of time for the average investor because it creates a slight return asymmetry that compounds over time.

True. However, asymptotically, it is gone with the wind.

By way of a simplistic analogy. Consider the single proposition of a coin toss, heads you double, tails you lose all. So you diversify among 4 coin where the pairwise correlation between any two is r=0 (much better than you can find in capital markets, esp under conditions of extreme moves). Let's say you decide to play 4 coins simultaneously. So rather than a .5 probability of losing it all, you have a .0625 probability.

Eventually, everyone gets pasted. for whatever they have exposed to risk.

It is how you handle that - that inevitable lightning strike if you stick around long enough (and as I always say, if you live long enough, you'll get to experience everything - twice! if you live long enough). That is the only thing that ultimately matters in this primal arena. All other "edges," and supposed free lunches are only temporal.

Jonathan Bower writes: 

Ralph, you will be able to out math me so take all of this with a grain of salt. Maybe I can set up a simulation at some point that will prove my point…

But I think your assumptions may be not realistic for the case at hand, the average investor not skilled traders. While the 0 correlation gives an edge to your example because as you rightly point out that's not the case for capital markets. N of 4 is also not sufficiently diversified. However the double or 0 is possibly a far more restrictive constraint. In reality owning a basket of stocks the outcomes are more like 0 and 10x +. And while it is possible to go bust, going to 0 (without leverage) is actually an unlikely outcome as the stock will be sold before it gets to that point in most cases. The difference is you can (theoretically) come back from a 99% loss, not 100%.

I'm going to stand by my original comment and say that diversification creates return asymmetry which leads to long run higher compound returns than something less diversified.

Ralph Vince replies:


I don't claim to be a mathematician, so to explain this sans math for both of our sakes……

The problem is that is that

For any portfolio, regardless of the number of components or the outcome parameters of those components sees a probability of drawdown of any specified magnitude approaches 1 as the number of holding periods gets ever-greater.

So yes, you can amend the parameters of outcomes, and you can increase the number of components (and clearly, doing so mitigates the effect on the portfolio from a disaster of any individual component, but the tenet above still holds, only the expected time until you can expect to see it grows longer. I would point out though, that we are dealing with components of perverse distribution and correlations among themselves that conspire against us when things go wrong; the time expected until we can expect disaster is much shorter than anyone realizes going in. Random events, even coin tosses of "double or nothing," are far more gentle and forgiving than the real world tends to bear out with regards to capital markets.

And none of this takes into account the effects of leverage, which is ubiquitous, and unavoidable — and misunderstood in that there is always leverage present.It may not be borrowing, but how much we do not borrow is also a matter of "leverage." To mt point in this regard, and again referring to the simple proposition of coin tosses, imagine the coin toss that pays 2:1. If we have a portfolio of one component, if we risk more than .5 of our stake, per play, we go broke with certainty as the number of compounding periods grows ever greater. Growth here is maximized at risking 25%.

If we have three coins paying 2:1 whose correlation between them is 0, we maximize our compound growth by wagering .21 on each coin, each component. However, if the correlations slip to +1, it is the same shape in leverage space as the individual component whose peak is at .25 (aggregate wagered among the three coins) not .63 (.21 x 3) which has us beyond the .5 point in the individual component portfolio, and insures are re going broke as we accumulate compounding periods.

It is quite insidious, and far more prone to danger than Markowitz ever envisioned I believe.

In fact, when one takes leverage into account, the surface of "leverage space" as I refer to it, presents potential danger from a single component (no matter how many components comprise the portfolio) that can wipe out the investor. In the following graph, figure 3 from the paper here you an see how, at a steep enough "leverage" (and these leverages are < 1) on any individual component (2 in this case, to demonstrate leverage space in 3 dimensions) any point along either of the two horizontal axes where the corresponding vertical axis is <1 is assured ruin as compounding periods accumulate (anything multiplied repeatedly by a number n, 0 >= n < 1 approaches zero with each successive multiplication).

Diversification tends to reduce period-on-period variance. Variance is not risk, but a diminution in returns.



 With little previous warning and without any notable event to bring about the crash, buying power suddenly disappeared from the market about the 13th of March and, after serious losses on that day, prices of leading stocks plunged downward many points on the 14th. Reading, which opened at 115, closed at 93; Amalgamated Copper fell from 98 to 80; American Smelting from 130 to no, and Union Pacific from 145 to 120. Losses in many other cases were 20 percent, and in some cases much more. Issues which were not of a first-class and well-known character became almost unsalable. Margins were wiped out, stocks were thrown over without regard to price, and heavy losses were suffered by wealthy men who had been induced to buy Union Pacific and other stocks in the expectation of an advance. Paper profits shriveled up more rapidly than in the great market breaks of "Black Friday" in 1869 or of the panic of 1873.

Charles Conant



There has recently been some gossip about treasury bills outperforming stocks. It is normal if you take the top x % of stocks away to come up with lack luster returns. It’s a property of random ensembles perhaps a pareto cross section. It is a worthless meaningful conjecture to take a 1% a year return and show how its higher than a 10% a year return compounded. Other worthless demonstrations for 1 being higher than 10 could be made.



Some years ago we discussed bridges and their structure. Chair recently tweeted about diabolical swings. I see N's. Big bars (4hr) connected by diagonal structure then big bar in opposite direction. Sometimes they are upside down N. Been seeing them recently. Not sure what the natural structure would be.



@Vicniederhoffer on twitter writes:

The apple doesn't fall far from the tree. At a time when socialism in America is finally aroused and at full attention: medicine is at the forefront and daring young people are diving into something foolish compared to agrarian reform or dentistry.



 We all know that Mr. Mill is a master of checkers, building, collecting and hum drum observations on the daily vicissitudes of life. I have been playing checkers to improve my humdrum activities in life which requires binary thinking like checkers in so many situations. I frequently use that thinking in @vicniederhoffer on twitter to predict the market. Recently I talked of all the games that have a man down but winning with a good foundation like the last week after Mon.

I would now request a favor which I don't ordinarily do. I used to be a benevolent man who had a uplifting effect on all who came into contact. But now I am just an ordinary man. (See My Fair Lady). The favor is this. Would Mr. Millhone kindly send my recent tweets about his sagacity to the ACF people. And ask them to favor me with a game from time to time even though they are much better than me. This will improve me and keep my stroke from deteriorating at an appreciated rate. Thanks.



 The ridiculous nature of the 7 occasions of yield curve inversion would be clear by reading David Hand's book The Improbability Principle.

Much more relevant is the level of interest rates with the short term rates declining not rising.

Also would Dr. Brett kindly reprieve the gist of his prize winning contest entry about the wild dancing in Ibiza.




Would someone perform either of these 2 tests:

1. The tendency for devastating moves in one direction to be required by mirror image moves in the opposite direction. I am offering a $1000 reward to this.

2. The tendency for S&P moves to be highly positively correlated with yearly home run totals.



 Just suffered an extreme event. One of the biggest ever. Canary? Peso/USD is .018! And you can charge on credit cards.

Argentina is great place to travel. Things are really cheap there, food is good. Airbnbs are $40!

Meanwhile, in US, the risk is the explosion to the upside like this morning if one was not positioned to collect after the shakeout. I learned a new acronym, FOMO, which means fear of missing out. I think it's a good motto for this market.

Jeff Hirsch writes: 

Thanks for the look on Argentina.

FOMO = Greed

Larry Williams writes: 

Double down on that Argentina is a great place—fish—hike—drink great wines and amazing food. Change your money in the blue market, or black. Lots of Casinos will also exchange at a 10% discount.

Mendoza is marvelous; eat at The Fort.



Watch "Bridgewater's Ray Dalio Discusses the Impact of China's Growth on the World Economy" on YouTube

Watch "Gordon Chang: On Hong Kong Protest, Chinese Economy, Trade War, & Trump's New Tariffs" on YouTube 

Very distinct views. What is yours? Btw, any news on Jim Chanos' latest China results? Seems like he backed out his short earlier?

Stefan Jovanovich writes: 

When Cantillon shorted "France" - i.e. John Law's system, he went to the Bourse in Amsterdam and bought gold with a promise to deliver assignats. The difficulty with shorting "China" is who are your buyers? Cantillon's counter-parties were not AIG fools; they needed Law's paper to pay their French taxes, which could only be done with Law's paper legal tender. But who outside the jurisdiction of the PRC has a need for the delivery of Yuan?

Mr. Chanos' shorts, to the extent he disclosed them publicly, were derivative bets against exporters to China that did not touch the currency at all. Kyle Bass' hints at his short position, which he has closed, involved the exchange between renminbi and the Hong Kong dollar. A question for the List: where, in fact, can a sizable bet be made right now that shorts Chinese legal tender? A bet against the dollar in BitCoin can be laid on in volume but not Yuan. The price CNBC puts on its screens is no more a market quote than the exchange rate for Venezuela's money. Or, have I answered my question already. A purchase of BitCoins in China with the domestic currency would seem to be, for now, as good as selling assignats for future delivery in Holland in 1719. 

Peter Ringel writes: 

Hi Leo, I don't see necessarily a contradiction between the two.

Dalio seems to highlight opportunities in the Chinese private sector. Chang points to the many issues and question marks, that arise from the behavior of the Chinese government.

Anecdotally, I only hear of foreigners exiting China's "physical" sector. I don't know what foreigners are doing in the financial sector in China.

Isn't Dalio concerned about the rule of law? Will he get his money out at some point? I believe Dalio talks a bit to his book and to ears in China. His historical analysis of past global powers, which was also posted on his blog a little back, is aimed in this direction. I do see contradictions mid and long term. With all due respect to China's culture and idiosyncrasies, how can an economic power house and a police state coexist? (Mainly corruption will rip any economy apart).

What do you think the prospects are (in case as an analogy)? The ear on the ground is always the best source.

anonymous writes: 

Hi Peter,

I have been quite negative since a few years ago, and so started long term traveling outside the country since 2015.

I feel quite the same that Dalio was talking to his book and the top ears in the country, and suspect that might be a precondition for him to take his money out now.

His data presentation looks convincing, but it seems dated without considering the country's abrupt shift to the far left in these few years. One may argue that he is looking at a trend on a century level and a few years time can thus be well neglected. Well, people in the West really lacks the experience of what "far left" means. That alone, not to mention about other big issues in the country, will cause a deep and likely long hiccup in the near term, which might well expire everything imagined for the long term.

Larry Williams writes: 


Never forget: the Long Term Trend Is Up…do not fear the future. Fear does not create death. Fear limits life.



 I follow the weather and was reading about climate predictions. They look at anomalies and extreme conditions. We are having record heat temps around the globe this summer, in Alaska, Hawaii, Europe and the East Coast.

Anomalies in the stock market should be indicative as well. An anomaly might be any reading that is 3 or 4 or more sigmas away from normal. I think that is about the 95 percent level. Things like 100 point moves or as Rocky counts it, 3 percent moves, low vol lasting three time usual length, or volume spikes, or maybe order size spikes, or speed of change spikes, a 9% drop in 5 days, or things like that. I read you can get 300 depth levels now, but that's another topic.



 I've been watching a little UFC fighting by Royce Gracie, of the Brazilian Jiu Jitsu school. It's a grappling form which include strikes. It's used in street fighting as well as in the cage. The main part is defensive. They grapple the opponent to the ground and wrap their legs or arms around the opponent's arms and neck to immobilize them, and prevent the opponent from defeating them, or striking them. When there is an opening due to a mistake by the opponent, then they go for a strangle or arm lock using leverage.

I couldn't help but think of the parallels to trading. In the long run, a defensive strategy is a must, and when there is an opening attack using leverage. Gracie says if you cannot be defeated, then you can win.

Another aspect was time. Rather than engage in exhaustive combat, striking, dancing around, the jiu jitsu guys would get the opponent where they could not hurt them, and not expend a lot of energy. They didn't even have to see where the opponent was. Time would go by in a match where virtually nothing was happening.

Time and and leverage are interrelated. Rather than use leverage, time can compound gains as well as or better than leverage. That's why patience is rewarded. But I can't wait to develop it.

Peter Pinkhasov writes:

What's true in almost all martial arts is that the techniques should be used as a means of last resort in any real combat situation. If you are always fighting exhibition matches in the same weight class, once confronted with a dangerous situation with new variables, vol, aggressors et al one might end up in the care of Rocky. 

Mr. Isomorphisms writes: 

David Mamet wrote an homage to BJJ (apparently he rolls with Ed O'Neill?!) called Red Belt. The hero is an honourable but poor dojo owner who refuses to fight in the ring under fake rules.

Roice Gracie beat significantly larger opponents in the original Ultimate Fighting league, so I think it's pretty clear that for 1-on-1, no friends helping, no weapons, BJJ is the most effective. A former employee who was in very good shape and knew some BJJ was assaulted in San Francisco and needed to cancel his flight and get hospital time. (He was also robbed.) The assailant had a gun (which he used to pistol-whip, not shoot, thankfully), my employee was walking home from a bar, the assailant attacked first, and he was angry.



 From Dan Rather:

"I can feel it. The exhaustion. The dread. The disbelief. The existential fear of what might come next, of wrongs that will likely never be righted…."






 I happen to be working in this area the last few years, and I am sold on the insights from current learning science.

Very useful and practical.

This book is an excellent summary by some of the leading researchers:

"Make it Stick: The Science of Successful Learning"

Leo Jia writes: 

Spaced repetition of concepts from both directions are the most efficient way to me for learning new things.

I wonder what more he offers with a full book.



We had extreme ranges and drops this week. A couple thoughts… Chair and Rocky argued about percent vs absolute points. Since each point is always $50, points matter most to the wallet. As the absolute value goes up, absolute ranges rise as well.

Questions arise about extreme events: clustering, duration, time between, distributions of returns. Pareto distributions are a key idea according to the book.

Peter Ringel writes: 

From a base of extremely less experience: I think in points. It is more intuitive. The market seems to move in chunks of points. E.g. NQ seems to like 30pts.



"Actor Bryan Cranston Reveals His Creepy Encounter with Charles Manson"



 1. The bookstores in major universities are bereft of books. At a recent visit to Duke book store in August I found just 1 test book for sale.

2. The American Tobacco Company has numerous buildings, warehouses, and apartments in Durham. At their entrance is a beautiful garden with the prominent sign: "no smoking". The downtown areas of big cities like Pittsburgh, Durham, and Buffalo featured expansive granite and stone office buildings in the 1920s. Every one of them is being torn down or renovated for startups and condos.

The drift in the S&P, i.e its expected rise is significantly better than 10% a year during periods when they are in a declining qualitative rate excursion like they are in early August, 2019.

4. The systems and wise maneuvers for making money in sports betting are much more sophisticated, clever, and better researched than those in markets. And the 5% vig in sports betting is much less than the vig in futures markets now that they are dominated by high frequency trading.

5. The key to success in trading is to not get in over your head and the best way to do this is to have a good credit line to draw on when the top feeders in the markets try to devour the bottom feeders by forcing them out of positions through exacerbated and temporary moves which the bigs are able to withstand.

6. The stock market tends to go up inordinately in times when the home runs in baseball are higher than average for a season and after a down previous year.

7. The main reason that stocks go up more than bonds is the higher return on capital than companies show growth. The differential after a reasonable period of years becomes considerable because of compounding. This is the main reason that the Fed Model shows sensational returns.

A trader should always prepare at least 1//2 hour in advance of his first trade of the day and never rush into a trade without preparation.

9. The main reason that NY basketball has been so bad is because of the higher service rates there and the pall left on the team by Ewing.

10. The fallacy of thinking that the odds of a rise or fall change after a long run is no fallacy. The principle of ever changing cycles makes the odds shift in to a reversal.

11. A good book on evolution and ecology is a great way to provide a foundation for market people.



I've learned a lot from the DailySpec. Larry's advice that the market rewards patience is good. Ralph's formula for leverage is good. I realize they go hand in hand (their advice). It's hard to have patience when over levered.

Larry Williams writes: 

Leverage is pressure. There is enough of that in this business as is. Why compound it?

Ralph Vince writes: 

This is life and death, and I have NO interest in comfort.

Steve Ellison writes: 

When the game is to shake out the weak, a game plan of being strong, which would preclude excessive leverage, just might work.

I thought the Chair summarized it perfectly in a tweet on Monday:

A typical fri-mon almost identical to the feb 2018 decline with down another 1.5% on Mon nite 1100 pm est and then ready to resume its inevitable bullish climb on tues. anything to force the weak to give their chips to the strong.

Peter Ringel writes:

This is a wonderful tendency. Worked like a charm.



 Shaun Tomson is a South African surfer who was the 1977 surfing world champion. Tomson absolutely ripped at Pipeline, giving Gerry Lopez and Rory Russell a run for their money. He is a very quiet, humble man who would charge the biggest, gnarliest waves and make it look easy. He helped make professional surfing a reality, whether that's a good thing or a bad thing is an exercise to the reader. Tomson assembled a code of collective wisdom to help surfers make it through the humdrum of life.

I will never turn my back on the ocean

I will paddle around the impact zone

I will take the drop with commitment

I will never fight a rip tide

I will watch out for other surfers

There will always be another wave

I will always ride into shore

I will honor the sport of kings

I will pass along my stroke

I will catch a wave every day

All surfers are connected by one ocean

Every one of Shaun's gems has a corollary that can be applied to speculators, or life in general.



“The Threat That Will Send Oil Down to $10″:

“We conclude that the economics of oil for gasoline and diesel vehicles versus wind- and solar-powered EVs are now in relentless and irreversible decline, with far-reaching implications for both policymakers and the oil majors,” Mark Lewis, the global head of sustainability research at BNP Paribas Asset Management.”



The Cornucopian history of the last two hundred years will continue into the future.

"Impending Defeat for the Four Horseman of the Apocalypse"

Stefan Jovanovich writes: 

With friends like Mr. Bailey the odds of a decent future for our species already has enough reasoned enemies. Who else could write this - "(M)an-made climate change arising largely from increasing atmospheric concentrations of carbon dioxide released from the burning of fossil fuels could become a significant problem for humanity during this century." - yet fail, in an article about the to mention either nuclear weapons or pandemics? We should all pray that crowds in their wisdom remain as sceptical as possible. When the future gets so bright you have to wear shades, someone has just delivered a bomb.



What has given me pause with this China kerfuffle is the behavior of the grain markets. Seriously, I thought all the grains would have locked limit down today, but nothing like that happened. Very odd situation, and I need to get back to the drawing board. Haven't ever seen this one pulled out of Ceres' bag of tricks. I'm seeing a lot of new things these days.



I once did a study of changes in direction, i.e the discount rate. I found that the average duration of such changes in direction was 10 years and 4 changes. It would be nice if someone updated that study. The deceptive call of "once is enough" is good for ageist people of humans but is ridiculous when compared to the record I think. But the Fed model becomes even more bullish as worked on by Doc, Mr. Downing and me and it would be nice to update that. In 2008 the bank earnings brought the actual earnings for the year down but it would be good to work with projections or directions of change in the quarterly earnings to make the study completely scientific.



 The question on Slabber lips after the smoke clears over daily events is, 'What happened to the body?'

In my case, an explanation is possible if you read about 'Prom Night 2019' where a man in a dress marched into my newlywed neighbor's camp, fired two shots, and the next morning there was one less neighbor, down to three. They could not call the cops having cursed and mooned them the previous night.

So, where is the body?

The following mourning the remaining neighbors built an extraordinary barricade across the entrance to my driveway. It was 30' wide, 4' high, and tiered with a layer of tires on rims across the bottom, a thick seam of their belongings including books, clothes and rubbish, and topped by a tucked-in tarp.

I let them build it out of fascination, as the camp bride broke for the Slab Trade Circle to sell the rest of their possessions for gas money, in anticipation…

A gray Ford Explorer drove up, and the silver Elder through the window told the remaining two, 'Get out!' and drove off. The pair tarried to put the finishing touches on the creation.

I arrived an hour later in a Slab Cab that nosed to the blockade. The Kentucky driver rolled down the window to demand, 'This man hired Slab Cab to take him home, and by god, Clear the drive!' The two males lobbed glass bottles into the air above the van breaking and raining hundreds of shards on the roof that wafted in the windows and made the cab smell like whiskey. The neighbor groom dropped his pants, mooned the Kentuckian, who, drunk in the vapor, pulled a pellet gun the size of a .45. The guy saw it between his legs and scampered with his pants around his ankles behind a bush.

We force drove around the barrier to my container and called 911. 'Yes, I recognize your voice,' droned the dispatcher. After an update, she replied, 'The same three deputies who were mooned there last Prom night are on the way.'

We pulled out to the Library and were intercepted on a hypotenuse by the two jogging men, one with a video camera, and the mooner who stepped in front of the van, dropped his pants again, and hissed, 'F___ me, like in Kentucky.' On not getting what he wanted, he rose and smashed the heel of his hand on the passenger mirror breaking it, as the camera rolled.

We shrugged, stepped out, and I stalked the cameraman, as my driver raised a sawed-off shovel handle to the mooner's head. They back-pedaled to an Ironwood and stood their ground. I still couldn't grab the camera as the holder interviewed us with entrapment questions. Instead, I latched the driver's great bicep to prevent the downswing of his old barroom bouncer move of hitting him on the head and stabbing him with the club as he fell. I dragged him foot by foot back to the Slab Cab, explaining to the camera, 'He wants to collect SSI for the rest of his life and moon you in prison.'

We drove a minute to the Library to wait for the police. Suddenly, the Kentuckian sniffed the air, glanced over his shoulder and yelled, 'I declare. The sky over your camp is full of black smoke.'

I redialed 911 but before I could open my mouth the dispatcher burst, 'Yes, it's been called in. the firetrucks are right behind the sheriffs!'

I walked and arrived as the firemen watered the dying embers. The chief told me, 'This was a planned hot fire. The bottom tier of tires ensured a high temperature. Is there anything else you want to tell me?'

'Nope,' I replied, walking twenty yards to my ash and glass coated camp. I had just completed a fire science class: A normal fire reaches about 1300F; a human body reduces to ashes at 1700F; and tire rims raise the temperature to 2400F.

The next morning, I sifted the ashes for two bullet heads and can't report that I found them. The black scar remains across the drive that visitors call a funeral tyre and toss on change. The newlyweds fled to Arizona where they broadcast Youtube live handcuffed in the holding tank of a jail in a fundraiser for bail.

The rest of the story is up in smoke.



 Today [July 30th] in 1609 Champlain introduced gun powdered weapons to New England by helping the Hurons attack the Iroquois.

The result was what the folks at StrategyPage rightly describe as the final phase of the largest of the original aboriginal wars in North America. For at least a hundred years before Europeans sailed up the St. Lawrence, the two nations had contested for control of Western New York. The pressure from the Huron in Ontario had helped form the Iroquois Confederacy among the Seneca, Onondaga, Mohawk, Cayuga, and Oneida.

"By 1627, the Huron, with French support and guns, had effectively driven the Iroquois out of the Valley of the St. Lawrence…The Iroquois sought support from the Dutch, then just settling in the Hudson Valley, and later the English, who seized New York from the Dutch in 1664. Termed by one historian "the only people north of the Rio Grande who consistently practiced every principle of war at all times," in 1648 the Iroquois, who could field some 16,000 warriors, began a devastating series of campaigns that in a generation saw them harry their foes relentlessly from New York across the Great Lakes and into Canada, until the Huron and anyone who offered them aid had been effectively exterminated."

George Zachar writes: 

Upstate New York has such an interesting history. I'm always saddened when I go up there now, and see its current status as a suppressed backwater.

Stefan Jovanovich writes: 

"Suppressed backwater" is, alas, a perfect description.

Peter St. Andre writes: 

One wonders how upstate NY would do on its own.

We need 250 states.



 Putative freedom marketed using socialist demands and blackmail: "Attention YouTube: The Clock is ticking!"

Peter Ringel writes: 

Oh god, that is painful!

You are describing it correctly.

I wonder how many in Germany will detect this sneak attack.

If he wouldn't be so imprisoned in his thought models of "job-security" and slave–employee vs greedy employer, he would realize that youtube content creators are little entrepreneurs and not worker-bees, that need rescue by a union.

I give them points for timing. The current wave of biased PC-censorship by youtube, twitter and Co gives them an opening.

Stalinism vs Trotskyism? (sorry getting hyperbolic)

The proposed solution: Lets throw another 1000 regulations on top of it to create "fairness".

The German mainstream media and public debate is full of nonsense of this nature.

I try to ignore it.

Otherwise I will get a heart attack. I simply feel too threatened by this nonsense.

Peter St. Andre writes: 

Hallo Peter,

Good idea to ignore the nonsense! I went on a low-information diet 5-6 years ago and I've been much happier ever since:

Peter Ringel replies:

Hi Peter, You are right of course. I read a little in your journal before, especially your etymological analysis of the "-Isms". Great insights! Getting emotional about Germany/Europe is a bit of a tradition, that is hart to shake:

"Denk' ich an Deutschland in der Nacht,

Dann bin ich um den Schlaf gebracht,…"

Heinrich Heine (English Translation)

(Heine escaped to France, I escape to America.)


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