I have always loved a good library. And some of my happiest days have been spent wandering the stacks of the Widener Library and Baker Library at Harvard, the University of Chicago Library and the University of California, Berkeley libraries. Indeed it was a visit to Lamont library which contained old volumes of the Monthly Weather Review with the great article on runs in sunny days that started me on my hopeful but sometimes fruitless quest to uncover regularities. I never know what I am going to discover in the stacks, and going through the books on a subject as opposed to looking through an index catalogue opens up new worlds, and horizons and puts me in touch with the greatest things that people have ever thought and written.

 On one of these forays, exactly 50 years ago I discovered the Fitch sheets that contained every transaction on the NYSE and ASE. I discovered evidence of microscopic reversal and macrospopic momentum and systematized it, and I believe this was the first of one of the first microstructure of markets studies.

Subsequently when I was still in the orbit of the palindrome, we would frequently meet a common friend as we entered the tennis courts or a gathering and they would out of a attempt to harmonize with the palindrome, "what are you doing these days. Same old thing?" and before I could say "yes" the palindrome would always say "yes, unfortunately".

I often think he's right and that over the last 50 years, I have not discovered much new. And yet, here are 10 things I have discovered since then that are simple but I believe have wings.

1. There are always interactions between markets but they are always changing. Witness the bond stock relation and our colored chart on the site.

2. After a regularity has been doing well, it tends to do badly and after it does badly, it does well. This is a variant of the principle of every changing cycles.

3. The interrelations are always different on different days of the week, weeks of the month, months of the year, hours of the day and minutes of the hour.

4. The market likes to force the flexions to take actions that will be in the interests of the top feeders and cronies in the market.

5. After pessimism is at a high level it is good to take out the canes.

6. Inactive markets like islands in the Ocean have a completely different microstructure than active markets. and as activity in a market change,the microstructure changes. Never try to make money in an inactive market or as I say, "never play poker with a man named Doc".

7. The markets have strong regularities but they have as much non-random tendency to do the unusual, so no matter how much a regularity appears, one must manage his money properly to take account of the unusual.

8. There is an upward drift to stock markets to compensate for the return that entrepreneurs need on their money. The higher the necessary compensation, the greater the return.

9. Most technical analysis which is based on shibboleths and seasonality is only good if you are going to reverse it and take account of the vagarious prices that emerge when transactions engendered by such pseudo things are filled by the strong.

10. A major purpose of markets is to transfer resources from the weak to the strong, so that the infrastructure can be augments and stabilized, and everything you read or hear about the market is designed by an invisible evil hand to put you on the wrong foot so that you will contribute and lose more than you have any civilized personage has any right to do.

I've got a few others up my sleeve but I'd like to hear your ideas on this.

Craig Mee writes:

 Regarding point # 6, I think, Victor, there may be a medium hand in this, and that markets under modest growth and less speculation may show greater structure relative to their more highly prized counterparts.

No doubt the role of harmony is present in all markets to varied agrees, and the players, although they may variate size from time to time in their chosen poisen, are fairly consistent throughout. 

Russ Sears writes: 

1. There is a rational often sophisticated explanation for every bubble or to paraphrase Proverbs, "there is a way that seem right unto the market, but the end thereof leads to death."

2. A corollary: to be really sophisticated you must accept some form of willful blindness. Most people will learn to ignore those blind spots. They are blinded by the light. Those that understand where the blind spots are will stuff all the risk into those spots. Then short those blinded.

Ken Drees:

In the stacks of a library one may come upon a book that one would never have thought to look for in the card catalog– like at a garage sale, how you never know what treasure you will find. Same thing with newspapers, when you open them and scan the ads and story headers, you may read something that you would never had googled. Really there is something to be said for this type of information interaction that will be lost for a time…until it becomes the new thing to do. 


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