What are the chances by randomness that a market with 55% up days and 250 trading days will end at the high, and does that have any evolutionary significance e.g. the battle of males to be at a maximum relative to competitors in other fields?

Gary Phillips writes: 

The "unsinkable" S&P is reminiscent of Molly Brown. Her husband's fortune made in silver was lost, but resurrected in his discovery of gold. She even survived the sinking of the Titanic! If disaster were to befall the S&P, it would most certainly survive; and present one a buying opportunity, once again.

Ralph Vince writes: 

It will have 3 1/2 market days to recover what it will give up tomorrow in order to do that.

Alston Mabry writes: 

Just to see some stats on the SPY days YTD:

249 trading days
149 Up days, or 59.8%
mean Up day: +0.57%
mean Up day: 1.61 pts
sd: 1.32

mean Dwn day: -0.57%
mean Dwn day: -1.63 pts
sd: 1.83

Jared Albert writes:

Using  with gratitude Big Al's numbers:

up =np.random.normal(1.61, 1.32, 138)
down = np.random.normal(-1.63, 1.83, 112)
Total number of max high finishes divided by total runs:      0.1357 on 10,000 runs

from random import sample, seed
import numpy as np
seed = 10
#55% of 250 give 137.5, so to avoid half days went with 55.2% up days
'''249 trading days

149 Up days, or 59.8%
mean Up day: +0.57%
mean Up day: 1.61 pts
sd: 1.32
mean Dwn day: -0.57%
mean Dwn day: -1.63 pts

sd: 1.83'''
up =(np.random.normal(1.61, 1.32, 138))
down = np.random.normal(-1.63, 1.83, 112)
total_days = list(np.concatenate((up,down)))
win_count = 0
total_runs= 10000
for _ in range(total_runs):
    running_total = []
    test_population = sample(total_days, len(total_days))
    for i in test_population:
        m = m + i
    if max(running_total) == running_total[-1]:
        win_count += 1
        #print(f'win_count: {win_count}')
print(f'Total number of max high finishes divided by total runs: \



Along with all my other shortcomings, I have a very strong tendency to aggressively add and hold onto my winning positions for what I believe is "the really big move". Most traders exit their winning trades too early because they trade for average and lack the discipline to watch their profits erode. Markets usually do go further than one thinks, however these excesses can evaporate quickly also.

For me at least, managing a losing trade isn't fraught with much angst. I don't overstay my welcome. I just get out! Paradoxically managing a winning trade is much more emotionally demanding and realizing a large winning trade can be more emotionally destabilizing than a losing trade.



Here's a story I like almost as much as Stubby Pringle.



Given that the S&P is up big with approximately 7 days remaining and 2 that S&P has been up 10 of last 12 days, both events can be independently quantified with very positive expectations until end of year.

Gary Phillips writes: 

Difficult to argue against that kind of momentum. I would expect to see dealers come in buying tomorrow a.m., to hedge their deltas on options positions, rolled up-in-strike and out-in-time. But I also see a possible bearish divergence in Ralph's most-watched SVXY and an uptick in implied correlations.



1. My favorite articles on Daily Speculations are not about trading. They are the Chair's recollections of his father Artie.

2. New Jersey's only redeeming quality is the full service gas stations

3. Large families are more than worth the expense and attendant tribulations.

4. I miss the hackneyed, but fervent pitches, from the Long Island penny stock hustlers.

5. The shorter the time-frame (when trading), the more random the price action, the greater the capacity issues, and the greater the model risk.

6. Is there a way to keep the current generation from repeating "Sure" instead of "Yes, Please", and "No Problem" instead of "Your Welcome"?

7. "A happy wife IS a happy life". Place her on a pedestal and keep her there!

8. Sitting will kill you just as assuredly as cigarettes!

9. The attitudes of today's athletes have ruined my love of sports.

10. Try your best to avoid…getting stuck driving behind a Prius!



After a 4 year hiatus from trading, #7 is now four; and as Steven Tyler (and yes, Sleepy Joe), Gene Autry once sang, "I am back in the saddle again". Not much has changed. News and algos drive the market in the short term; and as a prominent spec-lister once stated, "momentum and sentiment" drive the market in the long term. Of course, so do stock buybacks and an acommodative Fed!

The current trend among marketnistas, academics, and dilettantes in social-media, appear to only "view the market through the lens of volatility". Short vol strategies are nothing new, but the obsession with dealers' counter-party options positions and their attendant gamma exposure, is herd like. But, nothing has really changed. It's still the drift driving price, albeit on steroids.

The transition back was nearly seamless. Trading is forever ingrained in my mind, my heart, and my soul; which is why I couldn't keep from returning to the screens. Unfortunately, all my bad habits appear to be ingrained in my psyche, also. Once again, nothing has really changed! Confirmation bias, and fomo/over-trading, systematically pervades my decision making.

Emotionally-neutral, logic based reasoning is the ideal we all seek. But, climbing out of that valley between perception and reality has always been a trek for me. Even after +45 years of trading, I am still fighting those cognitive demons.

Nevertheless "my get up and go hasn't got up and went"… quite yet. And trading is still my "Sweet Emotion".



Amazingly the probability of the Prez winning the election is still less than 50% according to betting markets. It's a bet of 100 that gives you 125 profit.



It often happens (although not tested) that a sports team (like the Knicks last night) makes a comeback only to lead to a heartbreaking loss. I tested this for S&P and found that moves from noon to 3:30 of 10 points or more, but still a deficit or small lead of 4 points or less, leads to victory in the market, i.e. continuation. Thus another seeming a dramatic comeback in the second half from a big deficit in the first half and moves out to close to a lead or a small lead. And then they lose. A comeback that leads to a loss just the same. I tested this for the market for comebacks of 10 or more points from noon leading to a small deficit of 4 or a small lead of 4. I found that in the market unlike my supposition of sports these comebacks lead to victories or continuations.



It's useful to think about things being more or less predictable, with mathematical chaos being an extreme limit and a Gaussian being relatively certain (and very smooth) about a particular point.



America sees the absurdities—she sees the kingdoms of Europe, disturbed by wrangling sectaries, or their commerce, population and improvements of every kind cramped and retarded, because the human mind like the body is fettered 'and bound fast by the chords of policy and superstition': She laughs at their folly and shuns their errors: She founds her empire upon the idea of universal toleration: She admits all religions into her bosom; She secures the sacred rights of every individual; and (astonishing absurdity to Europeans!) she sees a thousand discordant opinions live in the strictest harmony



 In Egypt, Tunisia and Morocco alike, they come to you with the most determination. As you wave, they go around and still come to you from other angles. On you, even when you shake, they don't fly away simply. It's very different from elsewhere.

Not getting it this time? — No problem, I will do it again!

What if not again next time? — No problem, I will do it again!

What if not getting it all the times? — I will get it eventually!

What if getting killed? — I will die anyway!

So they have in instinct what we humans learn about success?

How did they get that?

Well, maybe because they take you as a cow or a sheep who pose no danger to them.

Or maybe because there have simply been far more cows and sheep than humans in the region.

Or maybe because the people here have not been active in battling them.

Or because the people here are not as determined.

Or simply because they are enlightened.

On another perspective, look at the statuses of the flies around the globe, maybe we can learn something more. In developed world, flies are very much suppressed. In other somewhat less developed areas, Asia or East Europe for instance, flies are very wary. Is that an indication factor of human success? Can't we say on an evolutionary basis that the determinicity of the people vs that of the flies in the region reflects the success of the people (or of the the flies).



Firehouse Strategies has released a new poll for Michigan, Wisconsin and Pennsylvania. They are more than good news if you are a MAGA fan and very, very bad news if you are loyal to the party of the Great Society. Firehouse is a Republican-leaning consulting firm so their data deserves to be viewed with even more than the usual scepticism. On the other hand, they are far more forthcoming about their methodology than most of the "non-partisan" polls that get most of the media attention.



 Crew costs of $3,299 a day account for about 44 percent of total operating expenses for a large container ship, according to Moore Stephens LLP, an industry accountant and consultant.

Rolls-Royce's Blue Ocean development team has set up a virtual-reality prototype at its office in Alesund, Norway, that simulates 360-degree views from a vessel's bridge. Eventually, the London-based manufacturer of engines and turbines says, captains on dry land will use similar control centers to command hundreds of crewless ships.

Jeff Rollert writes: 

As a sailor, I highly doubt that in my lifetime at least for the 0.02% of the time a ship is in a storm.

There's enormous sensory information that come from standing on a ship and feeling how it takes a wave. You'd have to create something akin to a flight simulator which would be really expensive.

Plus, if your comment link goes down, you have an unguided missile. 

Peter Grieve writes: 

Plus, there will be less damage control ability and motivation on the crewless ship.

Maybe it's just an old man talking, but these newfangled AI contraptions seem crazy. The deployment predictions seem wildly optimistic. As you imply, things can get pretty routine when the sun is shining and traffic is light, but I can't believe that the AI will be as flexible as the human mind in dealing with emergencies. Not for 20 years, anyway.

I just attended a colloquium on neural shrubs, a modification of neural nets. The main point was that we won't know how neural nets make their decisions. It will practically take psychiatry rather than software engineering to understand the machine.

I'm worried that there will be disasters which will be covered up, to retain the cost savings. And who takes responsibility for machine decisions? Someone with no skin in the game, because they're not in the car or on the ship. Do failed captains have to drown themselves in a special room in the control center?

Peter St. Andre writes:

In his book The Glass Cage: Automation and Us, Nicholas Carr argues that if you don't stay engaged with the routine aspects of a task then you won't be able to handle an emergency.

For instance, perhaps you just sit back and watch your AI-powered car as it drives you around in clear weather on paved roads in a well-ordered city, but what happens if you end up on a narrow dirt road in a snow squall?

I suspect that, more and more, reality and the humans within it will need to conform to the expectations of the machines.

Zubin al Genubi writes: 

I’ve just experienced several VR experiences in LA. It is truly amazing. Very realistic.



 The Mexicali tunnels are the Grand Canyon of Human Underground Dwellers. They extend for miles beneath the city and under the border to the USA. The network makes the Manhattan subway tunnels and Michigan State Steam tunnels I have also visited diminutive in comparison. They support more HUD's than the San Francisco underground Chinatown and the Paris catacombs.

I entered with the wife of a building owner through a back room, and down steep steps to the first level. On the north side she pointed to a vertical slab of fresh concrete over an earlier entrance that coursed beneath the border to the U.S.

Our entrance, among dozens throughout the city, is unique in housing Central American immigrants who have arrived and are waiting for a coyote to sneak them into the Promised Land. They live beneath the streets and businesses cheaply and undiscovered for days or weeks in queue for their coyote. It costs about $5000 just to get to the other side, and up to $8000 for guaranteed delivery to the American cities of their choice.

The Central Americans I saw were on drugs, as seems anyone who enters the tunnels. Their tastes range from marijuana to a preponderance of methamphetamine slammers with a needle. Mattresses were strewn off the main tunnels in small cul-de-sacs while the occupants wandered zombie-like in the network. 

It is safe because they pay $.50 a day rent to the owner, my guide.

She speaks fair English in relating the history of the tunnels. ‘The Chinese immigrants from the 1920s into the 1970s built the tunnels to house the immigrants. Like now, they lived here safely waiting to escape into the USA. It was a subterranean town with homes, bars, and a casino with still roulette wheels and empty card tables. Now…’


She pulled aside a square of rotting plywood into a dark so black it was as though the little light around us was consumed. I whipped out my flashlight. Before me lay miles of passages piled with stinking garbage and hopping rats. I wanted to continue, but she demurred, ‘Not without someone with a gun.

‘Last year a man entered to scavenge the tunnels. He went in night after night for a month. Each time he brought out something or a story. Once it was human bones. Another time it was the report of a large room with dozens of concrete beds that used to house the Chinese refuges.  One night he didn’t exit and was found thrown on the streets from another entrance a half-mile south of here. He had wandered too far into La Chinesca. He was bound and had been hung by his feet and tortured.’

The Chinesca is a neighborhood located five blocks from here that is home to about 15,000 people of Chinese origin, historically the largest Chinese community in Mexico. Early in the 20thcentury Mexicali was numerically and culturally more Chinese than other immigrant groups. Even today, anyone on the streets above will tell you that China runs the town.

The Chinese arrived to the area as laborers and political refugees. They were hired to dig the Coachella Canal that feeds from the Colorado River past Slab City that is our Nile of the Sonora desert. With that thanks to China, we descended to another level in the network beneath Mexicali.

I don’t know how anyone’s eyes could adapt to that dark. A few people stumbled away when I shined the penlight. The lady said she was nervous, and I was glad to hear it. We ascended to the bright streets.


I’ve visited other entrances including one a mile to the south from a restaurant that led from the kitchen down steps into the network and to this place where the door to USA was cemented up two years ago after the Border Patrol discovered its exit a half-mile to the north in a Calexico sympathizer’s basement.

‘This is the northernmost entrance of the Chinesca complex,’ she said. ‘Since they cemented up the tunnel to the US the human trafficking has taken to the fences. It’s more expensive and riskier. The underground Chinesca has become a holding tank for the immigrants.’

As near as I can figure, the Chinese arrived to find a thriving downtown with basements beneath their hundreds of shops and restaurants. They dug and connected some forty basements that eventually led north to the border. As the settlement grew, the subterranean Chinatown extended. Some archivists have speculated that the tunnels were also used to supply alcohol to the U.S. during prohibition. It housed brothels and opium dens.

There was an earthquake a week ago beneath my feet where I type that sounded like a lightning crack through the concrete tunnels.

The pursuit of this Chinese puzzle led me above to Chinesca near the Chinese 8 restaurant. The food is authentic and cheap. I ate with a San Felipe fisherman who asked the waitress if they served Totaba. She replied with an inscrutable grimace. Totaba is endemic to the Sea of Cortez and is on the endangered species list. It grows to 7-feet and one pulled my tablemate out to sea after he had bear-hugged it and refused to let go. He nearly drown for the swim bladder that fetches $13,000 USD from Chinese smugglers who serve it as a delicacy. ‘It makes your dick four inches longer, for starters,’ he said. Five months ago, Chinese ‘tourists’ were caught on the U.S. side with $3.7 million of fish bladders from Mexicali.

I still had a yen for the HUDs but the waitress refused us entrance. There are about forty basements that make up La Chinesca and each of the buildings has a different owner. The Chinese underworld is still a doorway away.



 Each year Christmas trees arrive on our island in containers.

One year they ran out right after Thanksgiving and there was a scramble for trees.

The next year everyone brought in an extra supply of trees.

That year the lots were full of trees on Christmas.

And so it goes back and forth every year.

This year the prices shot up noticeably.

And so it goes with markets as well.



One of the great history 'what ifs' is what Reconstruction would have been like if Lincoln hadn't been assassinated.



I can understand why Austrian school economists love sociological explanations for the origins of money. If, as von Mises presumes, capitalism is the a priori wiring of our species (like a kind of Chomskian embedded grammar), then money had to evolve out of the rational need for a medium of exchange. The difficulty is that there is absolutely no historical evidence for the notion that "money emerges as a consequence of economic actors being better off using a medium of exchange than engaging in direct barter"; and there is a great deal of evidence for the fact that money develops as the unit of account for the people with edge weapons who collect bribes aka taxes from people who do not have them.

People in authority needed money to buy things that they could not extort and to bribe the supporters who might otherwise become rivals. The negotiations between authority and the people who could not be wholly intimidated, who had some degree of personal freedom, were the beginnings of trade and money. The promises to pay and to obey made by the parties were the beginnings of credit.

The struggles ever since have been about the quality and quantity of money and credit and the limits, if any, on the monopoly authority has over the question of what will be the unit of account for taxes.



"These Guys Just Drove an E63 AMG Across America in a Record 27 Hours 25 Minutes"

It's amazing the high tech that is used to smash the cross country speed record. This article provides a look at that most illegal race in the country and the massive preparation and planning it takes to break records.

Chris Cooper writes: 

I wonder…has anybody ever seen evidence that experts at video driving games are any better (or worse) drivers than their non-expert peers? For that matter, are race car drivers any safer on the roads than non-racers?



"Financial Transaction Taxes - the ghost in the machine"

Mr Hurd, who made markets in KOSPI options, knows a bit about US hft as well.

2 points:

+ the USA already has a financial transaction tax, SEC self-reg fees of $2000mmm last year.
+ Virtu's quarterly revenue is "only" $127mm. This puts a heavy limit on what an HFT tax could be estimated to raise. And, to Mr Williams' point, speed isn't everything. The total amount people make in the markets makes $half a billion usd of yearly revenue look small.

(sorry, I saw an estimate of the total size of the asset management industry on some slide somewhere not very long ago, but I'm too lazy to look it up.)



At the March '09 low, the S&P total market cap was about $5.3T (if I'm doing the math right).

Since then, according to Yardeni, the S&P has returned about >$4T to investors via buybacks and dividends.

Zubin al Genubi writes: 

Bonds moving with equity rather than opposite.



 The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution is a great book. 

In addition to this book, I'd recommend taking the time to watch the MIT fireside series feat James Simons.

The link is the 2nd in a three part series which cover the following:

Talk 1. His academic and personal history

Talk 2. Focuses on RenTec

Talk 3. Discusses his interests outside of finance.



I'm late on this, but Alexandre Laumonier's next book 4 has been out for practically a year.



A recent study receiving some attention on this Black Friday weekend looks to find the optimal parking strategy in a lot without full visibility. The paper in the Journal of Statistical Mechanics compares an optimistic strategy of driving past empty spots straight to the ideal entrance area to look. The pessimistic strategy parks in the first empty space spotted. The prudent strategy looks to pass an empty spot before taking a subsequent open one en route to the ideal entrance area spots. Hope some on the list intuited the solution and got to their prizes before the stores ran out.



 Training for the Uphill Athlete: A Manual for Mountain Runners and Ski Montaineers by Steve House and Killian Jornet is a great book which discusses the necessity of long low intensity training to build up increased metabolic function.

Highly recommended.





 A Go grandmaster has retired because he believes that computers can never be defeated. What does that portend for individual, human participation in the markets? Are humans who manually enter trades destined to go the way of open outcry? Can humans have an edge over algorithms?

Bill Rafter replies: 

The following is guesswork. Anyone with a different voice is welcome to comment. (i.e., no need to flame)

I believe that the AI trading of the markets to date has centered on trades that have an almost zero risk of failure. Thus they have mainly worked in the extreme short run, mostly by picking off the marketmakers or the spread. There are many trading shops who do not permit their traders to take a position overnight.

Therefore if you wish to beat the algorithms you must pick a different venue, specifically longer-term trading. Maybe that's 4 days, and maybe it's 400 days, but it must be different from what the AI shops use. That of course means greater risk, but specs are in the business of taking risks.

Sooner or later, some of the AI people will invade this longer-term space, and they will do so by picking portfolios rather than individual stocks. But they cannot eliminate risk, and as long as risk remains, profit opportunities remain for the individual.

Larry Williams writes:

The basis of all profits is trend.

Trend is a function of time.

The more time in a trade the more potential for profits.

As long as losing trades are stopped out so they are not turned to big ones by time/trend.

Zubin Al Genubi writes: 

I believe humans can still beat computers in trading. Maybe one human can't beat one computer, but the computers as a group will have a distinct behavior that can be regularized and gamed. Its the group dynamic, as even computers will tend to a group think. This is especially true if they are learning, and if they are reactive. The fixed systems are still pretty easy to beat because they are still beating the same old dead horses. I've found, as Larry mentioned, that a longer time horizon seems to work better now days. Hard to out speed the computers. Probably easier to out wait them. For example I seem to use 4 hour / day bars now rather than 5 min/30min bars in years past.

Laurence Glazier writes: 

Such factors lean me more seriously to composing music than playing chess. What defines us as human?

Ralph Vince writes: 

I posit that about 50% of all human action is a feint, a misdirection of the opponent, a lie. Camouflage is the dress code on the planet, and we have a several million year jump at the game of deception the machines must learn, must catch up on.

The machines are so-far, trusted–trusted not to lie or deceive. Once they do, how will they be able to compete with us i that higher arena?

Even in music, Laurence, a variation on them, a little bending around of a melody, is a feint, an indirect lie, as it were.

Laurence Glazier writes: 

I've found fractal mathematical techniques of structuring music that have a ring of truth, however writing from inspiration, like painting from nature, must be a battle and a humbling one, with no concession to vacuous prettiness - nature's colour schemes seem always to work in the visual world, and I posit also in music, though I try to figure out more accurate methods of transcription.



 Rich Wagner was one of the early racquetball pioneers to make his way from Anywhere, USA by thumb and bus to the San Diego racquetball mecca. The only private club in the USA at the turn into the 1970s was Mel Gorham's Sports Center on Turquoise Street … a forehand with the small racquet from the Pacific beach. Wagner, and dozen of others, gathered at the club in the morning, ran the beach at low tide, partied late into the night, and slept in their vehicles or crammed into beach flats.

Handball legend Paul Haber was the club manager. There were no money tournaments but hospitality provided girls in bikinis and banquets. The draw sheets reached out the club lobby into the street with up to a thousand entrants. This is called the Golden Era of Racquetball spawned by its three originators: Bud Muehleisen, Carl Loveday and Charles Brumfield, all San Diego world champions of various racquet sports.

I started an anonymous sponsorship for arriving players like Wagner and hooked the superior ones up with the two budding racquet manufacturers Leach and Ektelon. Bud Leach and Bud Held, respectively, were cranking a handful of racquets per week out of a garage and shed. Wagner signed with the Leach stable and ran 4th-8th nationally through the Golden Era 70s. His style was dive and shoot.

(From the upcoming book 'Racquetball Stars of the Golden Era'. Photo by Art Shay with permission.)



Usually around Christmas and New Years I like to count the private jets at our Kona airport on the theory that the captains of industry have a good read on the economy. Surprisingly, and not the norm, is the large number of private jets (over 50) currently parked at the FBO for Thanksgiving. I saw lots of overflow jets flying to Honolulu to park. Of course with all time highs in the market, their options are giving the rich the wealth effect. Charles Schwab, Roberts of KKR, Go Daddy guys, Bill Gate, Paul Allen, and many other of the richest have homes here. It is a nice place!

Kim Zussman replies:

Agree completely. The hungry contractors that gave good deals a few years ago don't return calls now. This week I delivered some gifts to a few referrals, and even the usually unpopular ones have full parking lots.

The man in the White House knows how to stay there.


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