October - 2019
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
1
 S&P -38.50
 USB +0.17
2
 S&P -57.25
 USB +0.20
3
 S&P +31.50
 USB +1.02
4
 S&P +39.25
 USB +0.10
5
6
7
 S&P +14.25
 USB -0.26
8
 S&P -45.25
 USB +0.08
9
 S&P +26.50
 USB -1.00
10
 S&P +23.75
 USB -1.16
11
 S&P +29.50
 USB -1.26
12
13
14
 S&P -5.25
 USB +0.22
15
 S&P +32.25
 USB -1.06
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31

Oct

16

Where is John McCain when we need him to play "your own man says you were out" and be the moral conscience that the agrarians haul out to show the wealth tax is good. The sage is losing his credibility on that front as he's on the other team.

Oct

16

I also have a son. He doesn't listen to me about anything including squash as he says I'm like the buffalo. Extinct. And I don't know anything about the modern game. I think the racketball strokes have more to teach squash than the usual coaches. My son's recent distinction is he started an affinity group that he moderates that has one poster from every country. He is like the baseball savant I met at Cooperstown that knows the batting averages of every player who played the game. He likes to ask anyone to name any country and he will tell you 3 facts about the country most likely their GNP and their demography.

Oct

16

The Dow rose from the lows in December well over 20.8% in less than two months.

Such a move from the low of this month puts the Dow at 31,112 by year's end.

I prefer the more conservative count of 30,800 by the end of January.

Oct

11

 I took off my hat when Tuesdays market decline surprised me taking a page out of Tom Wiswell's epitaph: "I've lived my life, I've done my work, now I'll take off my hat and go". The time has come to develop 50 more uses for a hat

I've found wearing a hat prevents head injuries, is good for carrying things, great for having people remember you, ideal for tipping in respect for a woman, good for covering the dead, great for shielding from dust and rain, excellent for keeping warm, great for hustling

I used the hat to hustle Bobby Riggs to a match, my hat against his sneaker with a pink ball, excellent for hailing taxis, good for letting kids and family know where you are, great for preventing injuries especially assaults on the head, fine for holding bets, showing you're in, great for fashion, showing you non-conform, excellent for meeting people (I like your hat), excellent for horseshoes, and pitch the penny. What other can you come up with?

The one downside. My grandfather Martin once traded with Jesse Livermore (who went bankrupt 4 times and who I hate to have my book EdSpec compared to Reminiscences since he was a born loser because of vig and big asked.)

After he served as bookkeeper for Irving Berlin's firm, he applied some of the Boy Wonder's techniques to trading and lost everything in the Oct 1929 crash. But he started me out in trading and bought me my first stock (it helped me get into Harvard as they mistakenly thought I would be a big contributor.)

In any case the first stock he bought for me was "Hat Corp of America". This was in 1950 and hat was about 30, "it's a staple and a necessity." Look at any crowd from the turn of century to now. It has so many uses it will always grow and hold its own.

Further, it has the unique equipment to give it comparative advantage in manufacture. It's integrated also with its own retail stores. From that time on, Hat slowly descended into 1 in price, and bankruptcy. No one wears a hat anymore outside of horse and rodeo riders and ropers from the West.

When I go into a restaurant chances are they'll ask me to remove it. I leave out of deference to Martin and Riggs and the 50 uses I still have for it. I hope to be buried with it at Mt. Auburn Cemetery. That's another use. My enemies will say "hurry up " and use the hat there.

Messrs. R Walton and Coconut Trader respectfully disagree that Livermore's book is a disaster and he was womanizing and drinking his life away and that the lessons from his book will ensure you go bankrupt if you follow them. The venerable Jon Markman wrote a great book on him

Let us ask Markman if it's true he left 5 million to his kids. Last I heard he violated the term of his trust with his fifth wife and bankrupted her also. Please someone contact Markman to settle the divergence.

I came across my review of Reminiscences including his suicide at the Sherry Netherland (I always cross the street to the park when passing it) and his debts of many millions when he died. (I sold my copy of his last unsuccessful book to Mr. Tudor Jones)

But there is a fourth part of the story, which happened after Lefevre wrote Reminiscences of a Stock Operator. Markman fills in the details. Livermore went bankrupt for at least the fourth time in 1934. His excess liabilities of $2 million included promised payments to the dancer

Mr. Walton and I rarely disagree and I admit his insights but on this we disagree. He committed suicide because there was nothing left and he owed money to one of his floozies Ms. Ballantine.

What I found particularly reprehensible was his womanizing and sailing while losing his fortune for the umpteenth time and that of others. To say nothing of his suicide in the men's room of Sherry Netherlands which I visited several times not without a ghostly feeling.

Follow @VicNiederhoffer on twitter for more

Oct

11

 Nobody asked me but the hat is the cowboy's best friend besides the
horse. And it has 100 uses for me. It protects from dust, rain and sun

Here's my fav 10 uses. You give me 100 more.

1. Protects from rain,
dust, sun.

2. signals cabs.

3. covers up old age.

4. protects from head
injuries.

5. allows friends, family to find you.

6. good for drink of
water.

7. carries things.

8. gallantry

Thank you to those who submitted additional uses of a hat on twitter. Your suggestions are compiled below:

9. Fan the flames

10. distract a bear

11. hold a drawing

12. collect donations

13. emergency pillow.

14. Surf in Texas.

15. Doff it when passing by some honeys

16. Fly Swatter

17. Can feed my horse out of it

18. Fan a bucking horse

19. Put on a stick and wave it to attract an antelope

20. The brim keeps bugs out of my eyes when riding a bike/motorcycle

21. Allows me to "read" the water better when sailing

22. Signal the dogs it’s time to walk (they know before you do, but hey, icing on the cake)

23. A good one will give you everything expressed in this fine song that all should take a a few minutes to listen to from one of the best

24. Keeps your head warm. Covers your eyes so you can sleep day or night. Keeps your sleeping bag and hood clean.

25. hair loss fake job.

Follow @VicNiederhoffer on twitter for more

Oct

11

 We are all waiting for the Chinese Army to display their superiority by imitating the Soviets' occupation of Prague. Prague's occupation occurred on August 20, 1968 and helped Richard Nixon defeat Hubert Humphrey in the Presidential election. Sending tanks into Hong Kong will undoubtedly help Donald Trump win a second term. There are very few direct parallels between the two events. Czechoslovakia was a nation-state with its own language and government; Hong Kong is neither. But, the events of 1968 are worth remembering for what they say about the presumptions of Proletariat Dictators who have large armies.

Kim Zussman writes: 

Which means they will wait for Ms Warren

Oct

11

Between notes are important in music. It's not only rests but also the density of instruments and the bandwidth each note is taking up in the mix. In modern hip hop the number of notes and instruments is low, but the bass can take up the entire bandwidth. In markets it's useful to count the time between events rather than just the magnitude of changes of the events themselves.

Laurence Glazier writes: 

You don't want too many gaps between notes as that can undermine the effect of a later cadence. I like to run motifs together, sometimes overlapping, unless there is a functional pause coming up.

Oct

10

Abstract:

How do we combine others' probability forecasts? Prior research has shown that when advisors provide numeric probability forecasts, people typically average them (i.e., they move closer to the average advisor's forecast). However, what if the advisors say that an event is "likely" or "probable?" In 7 studies (N = 6,732), we find that people "count" verbal probabilities (i.e., they move closer to certainty than any individual advisor's forecast). For example, when the advisors both say an event is "likely," participants will say that it is "very likely." This effect occurs for both probabilities above and below 50%, for hypothetical scenarios and real events, and when presenting the others' forecasts simultaneously or sequentially. We also show that this combination strategy carries over to subsequent consumer decisions that rely on advisors' likelihood judgments. We find inconsistent evidence on whether people are using a counting strategy because they believe that a verbal forecast from an additional advisor provides more new information than a numerical forecast from an additional advisor. We also discuss and rule out several other candidate mechanisms for our effect.

Oct

7

Picture of 3 great board players: T. Wiswell, J. Leopold and A. Bisguier

Nobody asked me but the proverbs of Tom Wiswell reminds one of Beethoven or Jefferson

Nobody— here are four proverbs of Tom Wiswell that seem particularly relevant today

1. When your opponent offers you a free piece, it might be wise to "just say no"

2. Smart gamblers never gamble and when a master sacrifices a piece, you can prepare to resign

3. When your opponent (the market) allows you to make an inviting move, remember the story of the spider and the fly

4. Learning how to refuse proffered material is an art, cultivate it

I have posted a picture of Jules Leopold. He was a great man, a genius, and an inspiration to all games. One of his businesses was solving puzzles in newspapers. He'd go to the location of the paper, and then solve the problem and sell the answer to the subscribers.

In my day, these contests were very common. And I often bought what turned out to be Jules's solutions with an expectation similar to day trading against the hfq traders. He often played Tom Wiswell at my establishment. With very good results. He often played me also. 

Tom would hover over the board and after 40 moves or so. He would say to Leopold "give him a draw" but Leopold never yielded and if the game took an hour, he would refuse to give alms to a poor player like me. Jules was also an expert in electronics and ran a successful business

At the age of 80 Jules liked to race walk and while the traders jogged and raced for exercise after the market closed Jules would keep up with us. He was very generous to checker players and sponsored Derek Oldbury to take a tour of the US among other bequests

Here's one of Jules's books. Even non-checker players will see his genius in it. One of his favorites was a position he'd put on the board. It's your move, "I bet you you cant win or lose with it"

Tim wrote about 15,000 proverbs about checkers, markets and life. for our traders. He liked to say "I've written 22 books and this will be my best and last" "I've lived my life, I've done my work, now I'll take off my hat and go"

But before he'd go, he'd look at Susan hovering over the trading floor with a kid in tow. And he'd say "the one thing I'm most sorry about my life is that I didn't marry a girl like Susan." Strangely, many of the bachelor visitors to my house, often when they left said the same

but as Elmer Kelton said "sometimes I wish I didn't have a perfect wife, especially who always knew what I thinking or hoped"

but Tom as you'll see from the pic didn't take off his hat. He liked to wear a dodger hat. And he'd say "but then again if I married a girl like Susan, i wouldn't have written 22 books." He kept at it until 85 when he came up to our office the 2,000th time, and he said "Victor"

"I couldn't remember what floor you were on. I keep going back and forth." That was the beginning of the end as he liked to say

Follow @VicNiederhoffer on Twitter for more

Oct

6

 I wonder how wealth will end up being sheltered if/when our betters on the Dem side implement their wealth taxes.

In particular:

1. Would wealth taxes be imposed upon funds in currently tax sheltered retirement plans–IRAs, 401Ks?

2. What about cash values inside life insurance policies?

3. What about an income-paying annuity that has no official cash value?

Conceivably life insurers and sellers of annuities could be big beneficiaries of the Warren trade.

Whenever elimination of the death tax is proposed, the life insurers reliably roll out arguments against rocking the boat.

James Goldcamp writes:

I recently had similar thoughts.

It's seems if the wealth tax reached low enough those historically rather poor vehicles, income paying annuities, would have a proper place in financial planning. It could be that moves to protect the "net present value" of a future fixed pension (which they would never attack due to union support) would be analogous to protecting such annuity vehicles. Re 401K I think the cynical calculus will be how many voters will be ensnared in the scheme. It's relatively rare for an employee to have say over 10M in a 401K due to contribution limitations (and limitations on the rate of compounding) so they don't risk alienating many voters with a high limit. Drop that down to 1 or 2 M and I suspect you would risk a rebellion among many middle/upper class constituents. Interestingly uncle Joe's stepped up cost basis on estates proposal probably casts a wider net than the Native American candidates "2 penny tax" since it's not uncommon for middle class people to inherit long held stocks from parents.

Oct

6

 It has been awhile since I have engaged with the list. Alas, the job left little bandwidth for email lists. The good new is that I currently have some free time on my hands in advance of relocating to Montana.

With this once in a lifetime sabbatical I am pursuing a side project: market-based solutions to wilderness protection. I am currently in the research phase of the idea and could use specs' assistance in locating good reading materials (journal articles, white papers, books, etc.) on extractive commodity-based economies. I have a theory that no society (maybe ever) has a strong economy where that economy is based on extractive commodities (eg., mining, drilling). Rather, these societies suffer terrible booms and busts and all eventually go bust. I would like to know if my theory can be supported or refuted, and the data that can be used in storytelling (if my theory is correct)–the time between booms and busts, how long it takes to go permanently bust, what happens to the land when miners leave, what happens to the people and their lives?

Specifically, I am looking for material that will provide data, facts, figures, and not "policy" which tends to be partisan in nature.

Does Triumph of the Optimists show historical returns for commodities?

Stefan Jovanovich writes: 

If you include livestock herding, fishing and logging as "extractive" industries, all civilizations have depended on robbing "nature" of the energy humans need to live. When no more net calories can be extracted, people either move on or die out. The resources last longer where they owned by people who want them to be productive for their ancestors and their ownership rights are secure enough for them to believe that they can, in fact, be passed on. The terrible fallacy of the non-profit world view is that it presumes that humans will be less wasteful if selfish individual and small interest group ownership disappears and the unselfish collective takes title. The opposite is always the case as the environmental record of all believers in central authority continue to prove each day. 

Oct

6

Pseudoscience in Annals of Internal Medicine article debunking association between red meat and reduced longevity. Attitudes are taken into account. More important is report by Elmer Kelton that ranch men prefer goat meat to beef and mutton because it lies in the stomach easier and tastes better.

Oct

6

I prefer After Action Report or AAR to "Post Mortem". Less ominous connotations. Lol.

Oct

4

 Of all people those on spec list should be against the crazy idea that a double blind study is appropriate and necessary for decision making. That seems to be the long and short of the annals study. They throw out millions of observations that show tremendous differences of 20% in the hazard rate for all studies because they're not double blind. And the idea of forming 8 groups to debunk supposedly neutral in their conclusions is ridiculous. It's obviously a planned hatchet job on vegans and that's why the annals published it. The study reminds me of those who would throw out the studies of the triumphal trio and Lorie Fisher because of current turbulence in the market which leads them to the bear view. Like that crazy Doyne Farmer who's now publicizing himself at Oxford.

Oct

2

SEATTLE PUBLIC SCHOOLS K-12

Math Ethnic Studies Framework (20.08.2019)

Can you suggest resolutions to oppressive mathematical practices? How can we change mathematics from individualistic to collectivist thinking?

Russ Sears writes: 

I shared responsibility of teaching Algebra 2 with a lady that let the kids do homework in groups of 3 Of course only 1/3 the kids in her class passed the final and 30% of her kids passed the state test. She got the smartest kids too. As she had an honors class which was about 30% of her students. One of her regular classes only had one student pass.

Oct

2

What is the significance if any of recent money market stress and Fed actions?

Larry Williams writes: 

If it is a mini QE-4, as I suspect, bullish.

Peter Ringel writes: 

I had decreasing excess commercial bank reserves as bullish factor for equities, because it is an indicator of optimism.

People are less in cash and invest more and more in other assets.

Pete Earle writes: 

A colleague and I wrote an article about this two days back. "This is Not QE4, Yet"

Mr. Isomorphisms writes: 

If it's due to quarterly tax payments, why doesn't this happen every quarter?

Pete Earle replies:

It's not just because of taxes. Read the article.

Sep

30

3 minute read and many market and trading parallels, particularly interesting for those who have lived in or traveled to Japan: "The Amazing Psychology of Japanese Train Stations"

Sep

27

Little slice of my life for you

1.

Student 1 is very typical. He tells me he is an engineer, working at his company for the past ten years. 

Me: Do you like your job?

Him: No! I hate. I’m boring. Almost I talk with no humans every day. Just only me, computer, and messages. No humans. So hard, so boring.

Me: Ah, that’s tough. That’s why I like teaching. You talk to many people every day…Have you ever thought of teaching? Like, teaching engineering?

Him: Eh…Actually, I want to do something different. Not related to engineering at all.

Me: Oh. Like what?

Him: I don’t know.

Me: Do you have any hobbies?

Him: That’s my problem. I haven’t found a hobby yet. Only gambling. I like sports gambling.

Me: Hm, I see.

Him: …

Me: …

Me: …Anyway, this lesson is called “Have you ever lived in another country?” So, by the way, have you?

Him: Yes, I lived in Australia for a year when I was 25. “Working Holiday Visa.” 

Me: Oh, great!

Him: I was still in university and I wanted to discover myself.

Me: Oh nice! How did you like it?

Him: Horrible!

Me: Oh no!

Him: There were no convenience stores anywhere.

Me: Wow.

Him: Yes. They had only orange trees.

Me: Really! Orange trees? 

Him: Imagine a place the size of Atsugi City, and only orange trees.

Me: Wow. What was your job there?

Him: I was picking oranges on an orange farm. 

Me: Ahhh.

Him: As I told you, I wanted to discover myself. 

Me: Right…did you?

Him: Oh yes. I discovered I should return to Japan and work in an office.


2.

Next I had my student from the Portland Movement (PM) fame. As I mentioned, he is obsessed with the American-Portland/Brooklyn aesthetic and is renovating his office (a printing company that his father founded) slowly in a Portland style. The first project was installing beams and a garage style door on the office front. Now he is redoing the bathroom. He explains to me that he doesn’t do the plumbing himself. He’s just the designer.

PM: I have a question for you. What do you think of the bathrooms in Japan?

Me: Um…right. Well they’re very different, aren’t they?

PM: Right. Very different from bathrooms in the US. So what do you think? Have you used a toilet like this? 

(He draws the toilet that’s just a hole in the ground)

Me: Ah, yes, hehe, yes I have.

PM: And like this? (He draws the more tricked out toilets that are typical)

Me: Oh yes. They’re very nice.

Him: But what do you think of the materials. What were your first impressions?

Me: Well, at first they reminded me of airplane bathrooms. (The walls, flooring, and hardware in Japanese bathrooms, for some reason, are fully plastic—even in a nice hotel). It’s very sanitary though, so I like that.

Him: I see. What do you think of tile?

Me: I love tile. 

Him: Me too. Is hexagonal tile typical in New York?

Me: I’m not sure. There’s something called ‘subway tile’ that I know is popular, and it’s based on what they use in the subway, but I think that’s rectangles. 

Him: Subway tile! I’m using that for the walls. The floors will be hexagonal tile.

Me: Wow! Sounds amazing. (I am being totally sincere. As nice as the bidet, the bird song sound effects, and the ‘powerful deodorizer’ functions are on the toilets, I would literally kill to step into a tile and porcelain bathroom again. It feels so luxurious.)

Him: And let me ask you something else. What do you think of bathtubs that look like this?

(He sketches the shape of a claw-foot tub)

Me: Oooo, I love them.

Him: Is this typical in America?

Me: Not typical, no. It’s kind of special. But I always wanted one.

Him: I really like this tub. But there’s something I can’t understand about it.

Me: What’s that?

(He points with his pen to the space under the tub, between the floor and the basin that is elevated by the claw feet.)

Him: When the bath is over, and you want the water to go out. How? How does it get out?

Me: Wow. (I’m picturing like a claw foot tub on pinterest that’s in the middle of a room. And I’m like… …) That’s a really good question. Oh my god. I have no idea. What? (I’m turning the picture he drew around and around) You know, I’ve literally never thought about that before. Maybe it goes through the foot. (WTF am I saying????) I’m sorry. I have to look this up for you after class.

Now that the tough questions are over for a minute, we start talking about his strategies for learning English. He wants to know if when I listen to American music, I can understand the words.

Me: Well not always, of course. Sometimes I don’t really listen to the words. But if it’s my favorite artist, I like to know, so I’ll look the lyrics up online if I can’t hear them.

Him: I see. Ok, so it’s the same for Japanese music.

Me: Yes…I imagine it’s not too different.

Him: I listen to American music sometimes.

Me: Oh, great! So you can look the lyrics up online, like on Genius or something if you can’t catch them. Sometimes I do that.

Him: I have one more question. What does ‘alternative’ mean?

Me: Oh, it means ‘different.’

Him: But it’s a music genre, isn’t it?

Me: Oh yes, that’s right. ‘Alternative rock’ is a music genre.

Him: What is it?

Me: Oh Jesus. Oh God. Um, you know, I think it’s from the Nineties. Um. Let’s see. I need to ask my husband this for you. I’m not, like, an expert. But, I think it means it sounds a little lo-fi.

Him: What does lo-fi mean?

Me: Oh no. (why did I say that?). Like, low quality, maybe? 

Him: Low quality??

Me: No no, sorry, no, not low quality. Maybe it’s not made by a corporate record label. No wait, that’s Indie Rock…what am I saying.. Ok, alternative rock is maybe just a type of radio station…? (Oh my god!!!! Now I’m just sweating and praying we run out the clock, and finally the little song plays, which means we have).

Me: Ohp! Well, would you look at that, that’s all for today. Great job with using the pronouns today. Thank you very much for the hard work.


3.

He is out the door before I can google any of his questions, and anyway I have five minutes to prepare for my next class. It is a kinder-class of six 3-5 year-old babies. I brace myself for sheer chaos. There are a couple of flash cards with different phrases they are supposed to be able to say by the end of the class, but how I get them into their little baby minds, that can hardly speak Japanese yet, is up to me. Typically when I seat them at the table, they like to climb on top of it, hang off the chairs, or roll around under it. So today I have pushed the table aside to sit with them on the floor. We get through the ‘hello song’ and the ABCs, (I don’t sing the company version, I do the one I know). Then we do ‘head-shoulders, knees, and toes,’ and ‘the hokey-pokey.’ ‘The Itsy-Bitsy Spider.’ Those are all the songs I know, and there’s only so long I can put the flash cards off. So I pull them out. One of them grabs them from my hands. Today we are learning “dishes” “plates” “cups” and “forks.” 

“Ciricle!  Square!”

“Good! But no! That was LAST week. Now I have NEW cards!” 

They don’t know wtf I’m saying. One of them has crawled on top of me and is stroking my face. Another is hugging my leg with their head in my lap. In a way it’s a dream scenario, as whenever I see kids this age riding the subway (ALONE, as is typical in Japan), hurrying to make their transfers with their shoulder bags the size of their little bodies, and holding onto their straw hats (!) that they have to wear to school, I have dreamed of kidnapping one and doing just this. But now as one of them is clinging to my legs, a few of the others have taken the chance run to where I pushed the table and are getting ready to climb it, so I have to pry the tiny arms off of me and yell,

“Come back! KATSUMA! YUMEHA! WE NEED YOU!” I start playing ‘head shoulders knees and toes’ again to lure them back, but they are wrestling with each other and not interested.

Finally I get their attention with a game where I hide the flashcard behind my head and show it to them for a split second so they have to watch closely or they miss it. I have to do it differently each time, like by putting it under my leg, or doing a funny spin, (once I seriously injured my shoulder trying to impress them this way), until they get interested and come toddling over from under the table. Yumeha is just barely 3 and can hardly form words. Her big sister is in the class and likes to grab her by the mouth and cheeks and ‘help’ her say them, then sometimes the younger one will start smacking her when she gets tired of this. One little girl, who is Chinese, can’t speak Japanese yet, so English is like a first language for her, and she saves the day by repeating each word perfectly. The others kind of follow her lead and miraculously they start saying the damn words in no time.

When it’s time for their ‘quiz’ they all get very serious. They take their pencils out of their little pencil cases with great pride and if they make a single mistake they are all erasing the whole entire page while I am like “stop! stop! What are you doing!! It was just one tiny part that was wrong!” They don’t know what I’m saying, so now we have to start the whole quiz over. Finally the quiz is complete and they all shout at me ‘Sensei!! Sensei!” so I can come check their ‘work’ (usually coloring) and give them a sticker from a pack I got to bribe them with, and draw over the whole page this special flower, a huge red swirl called ‘the hanamaku,’ that is the symbol in Japanese schools for completed work (correct work? I’m not sure, but I know they all need to see it scrawled over their page to feel they’ve accomplished anything). Outside I have to greet their parents (the ones that came. Some literally walk home by themselves at this age), and get them to say the words one more time in front of them. Usually the little ‘angels’ come through for me. Thank god that class is only once a week.

This has been only 3 of the 8 or sometimes 9 classes I teach every day. But I hope you get the idea.

(below, some much older children than the ones in this class)

Follow the author on Twitter: @rtneeder

Sep

27

Intro to a great book: Dan Schneider on The Time It Never Rained by Elmer Kelton

Sep

27

 The movie Hustlers shows white men and wall street men as crooks and ridiculous innocents.

The women strippers are depicted as sisters and justified in stealing and humiliating their poor victims.

There were 5 coming attractions shown with this picture.

All depicted a woman of color justified in violence against people of no color.

Sep

25

Thought through some E. Warren trades. Wrote it up here. I think there is market downside due to unpriced tax hikes and buyback cancellations but upside for a select number of stocks including CGC, T, and alt energy plays.

Charles Pennington comments: 

That is a nice article, Alexander. "+1". I probably won't partake in the bearish trades or the 420 trades, but there is a lot to think about there.

Alexander Good replies: 

Thanks, Charles.

Glad you enjoyed.

I think it'll take a couple days for the narrative to shift firmly into "Warren on / Warren off" vs "Impeach/not impeach" but odds markets seemingly responding now, Biden dropping to 14% with Warren rising to 35%.

Sep

25

David Hogg, etc. "The children who suffer immoral hands of their parents shall rise up and lead".

Sep

23

 Legendary oilman and all around BSD, T Boone Pickens left a final letter for posterity.

His well thought out letter is frosting on the cake of a well lived life.

One thing that's apparent is his optimism, generosity, and commitment to diligence.

One common thread among people of his ilk is a sense of optimism and respect for honor and hard work.

His letter exudes that optimism and provides many lessons for getting ahead in life and doing the right thing.

Requiescat in pace

Sep

23

"The World is Getting Better"

Sep

23

 Some of us continue to waste our time on bulletin boards about baseball and military history. This question and the answers are directed to those "groups":

Q: How many people does it take to change a light bulb in a group?

1 to change the light bulb and to post that the light bulb has been changed.

14 to share similar experiences of changing light bulbs and how the light bulb could have been changed differently.

7 to caution about the dangers of changing light bulbs.

17 purists who use candles and are offended by light bulb discussions.

6 to argue over whether it's 'lightbulb' or 'light bulb'.

Another 6 to condemn those 6 as stupid.

22 to tell THOSE 6 to stop being jackasses.

2 industry professionals to inform the group that the proper term is 'lamp'.

15 know-it-alls who claim they were in the industry, and that 'light bulb' is perfectly correct.

249 to post meme's and gifs (several are of someone eating popcorn with the words added, "I'm just here for the comments.")

19 to post that this page is not about light bulbs and to please take this discussion to a light bulb page.

11 to defend the posting to this page saying that we all use light bulbs and therefore the posts are relevant here.

12 to post F.

8 to ask what F means.

16 to post 'Following' but there's 3 dots at the top right that means you don't have to.

3 to say "can't share"

2 to reply "can't share from a closed group"

36 People to post pics of their own light bulbs.

15 People to post "I can't see S$%^!" and use their own light bulbs.

6 to report the post or PM an admin because someone said "f÷×$"

4 to say "Didn't we go through this already a short time ago?".

13 to say "Do a search on light bulbs before posting questions about light bulbs".

1 to bring politics into the discussion by adding that (insert politician of choice) isn't the brightest bulb. This usually takes place within the first three comments.

50 more to get into personal attacks over their political views.

5 admins to ban the light bulb posters who took it all too seriously.

1 late arrival to comment on the original post 6 months later and start it all over again.

Larry Williams writes: 

How many divorced men does it take to change a light bulb?

No one knows. They never get the house.

Sep

22

This Sunday, the 22nd September, Prime Minister Modi is doing a public event in Houston. President Trump would be joining him in there, as well. Some are suspecting strongly by now in Dalal Street that while the Nifty / Sensex indices have been in a sustained decline this event can be a turning point with some massive announcements from both leaders that would combine the spirit of Make America Great Again from Trump & Make in India from Modi. Speculation is with the China USA Trade war in a waiting move status right now, the US Prez may announce with PM Modi a facilitation for American corporations to shift their manufacturing from China to India.

What do the spec-listers think are the prospects of such an occurrence (say what probability you place for such utterances) and what are the prospects (probability) of such really materializing from laboratory of good intentions out into reality?

Larry Williams writes: 

India stocks rally until 11/8 or so.

Sushil Kedia writes: 

Larry, some of your charts do amazingly well in foretelling the seasonal and related things. India rally into 8 Nov is so precise a point of time you are hitting at. Wondering what pattern/model/study you are hitting this with. Perhaps you will share.

Larry Williams writes: 

Cycle projection.

Sushil Kedia replies: 

Hon'ble Senator!

Which book of yours explains your cycle projection method. I bought all your books and you had autographed them. They have become more of a collector's item. Please do help which one to dig up and imbibe from. 

Larry Williams writes: 

No books on it still learning myself.

Sep

22

 A query to Elmer Kelton at 80 by a kindergarten class he lectured at to make ends meet. A six yer old asked him, "when you were my age were you good with the girls?"

He was sheep and goat reporter and his said sheep were much more profitable for ranchers than cattle. He won the spur award from 1852 to 2007 as best western novelist. He admired Louis L'Amour who sold more westerns than all the western writers combined from beginning of time.

Highly recommend any of his 50 novels which he wrote in evenings and weekends. He liked to write about subjects where there was change in the air and the heroes and badmen had there were neither black or white.

Victor adds: 

If Elmer Kelton wrote easterns not westerns he would be lionized as one of our greatest writers. As it was he never made more money from his books than his sheep and goat reporting for a local news weekly. [Here is a New Yorker article on him].

Laurence Glazier writes: 

…but the world would have been the poorer.

Sep

18

Spiders are quite deceptive (the 8 legged arthropods) and the kind that track the S&P. Jim Lorie always said that if you try to time them you miss the drift which is now 50,000 fold a century but was not quite that much in his noble days. I owe everything to Jim and I grieve for him every day.

Sep

17

Ryan Saavedra, who writes for the Daily Wire, has posted his calculations for the causes of mortality in an "average" American day.

Abortion: 2,408

Heart disease: 1,773

Cancer: 1,641

Medical error: 685

Accidents: 401

Stroke: 401

Alzheimer's: 332

Diabetes: 228

Flu: 150

Suicide: 128

Opioids: 115

Drunk driving: 28

Underage drinking: 11

Teen texting-and-driving: 8

All Rifles: 1

I have verified the last statistic using the FBI's report for 2017.

Here are the links Mr. Saavedra posted for his other data:

Abortion

Heart disease / cancer / accidents / stroke / alzheimers / flu / suicide

Medical error

Opioids

Drunk driving 

Underage drinking

teen texting-while-driving

Sep

17

 These are the words Yamashita dictated to his Buddhist priest immediately before he was hanged.

Due to my carelessness and personal crassness, I committed an inexcusable blunder as the commander of the entire [14th Area] Army and consequently caused the deaths of your precious sons and dearest husbands. I am really sorry and cannot find appropriate words for sincere apologies as I am really confused because of my excruciating agony. As the commander of your beloved men, I am soon to receive the death penalty, having been judged by rigorous but impartial law. It is a strange coincidence that the execution is to be carried out on the birthday of the first U.S. president, George Washington.

I do not know how to express my apology, but the time has come to atone for my guilt with my death. However, I do not think that all the crimes for which I am responsible can easily be liquidated simply by my death. Various indelible stains that I left on the history of mankind cannot be offset by the mechanical termination of my life.

For a person like me who constantly faced death, to die is not at all difficult. Of course I should have committed suicide when I surrendered, as ordered by the emperor in accordance with the Japanese code of the samurai. In fact, I once decided to do so when I attended the surrender ceremonies at Kiangan and Baguio, at which General Percival, whom I had defeated [in Singapore], was also present. What prevented me from committing such an egocentric act was the presence of my soldiers, who did not yet know that the war was over at that time. By refusing to take my own life, I was able to set my men free from meaningless deaths, as those stationed around Kiangan were ready to commit suicide. I really felt pain from the shame of remaining alive, in violation of the samurai's code of "dying at the appropriate time in an appropriate place." I therefore can imagine how much more difficult it is for people like you to remain alive and re-build Japan rather than being executed as a war criminal. If I were not a war criminal, I would still have chosen a difficult path, bearing shame to stay alive and atone for my sins until natural death comes, no matter how you all might despise me.

Sun Tzu said 'The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.' From these words, we learn that our military forces were lethal weapons and their very existence was a crime. I tried my best to prevent the war. I am really ashamed of having been unable to do so because of my weakness. You may think that I am a born aggressor and a typical militarist, because my campaign in Malaya and the fall of Singapore excited the entire Japanese nation. I understand that this is quite natural. I do not excuse myself, as I was a professional soldier and dedicated myself to the military. But even while being a military man, I also have a relatively strong sense as a Japanese citizen. There is no resurrection any longer for the ruined nation and the dead. From ancient times, war has always been a matter for exceptional prudence by wise rulers and sensible soldiers. It was entirely due to our military authorities' arbitrary decisions, which were made by just a handful of people, that a large number of our people died and the rest of the nation was dragged into its present unbearable suffering. I feel as if my heart will break when I think that we professional soldiers will become the object of your bitter resentment. I believe that the Potsdam Declaration will wipe out the leaders of military cliques who led the nation to its downfall, and Japan will start rebuilding as a peaceful nation under new leaders elected by the popular will. However, the path of rebuilding the nation will not be easy in the face of many obstacles.

The experience that you went through, enduring various difficulties and poverty in the last ten years of war, will inevitably give you some strength, even though it was as an unwelcome result of pressure from the military authorities. To construct a new Japan, you really must not include militarists who are the relics of the past or opportunistic unprincipled politicians, or scholars patronized by the government who try to rationalize an aggressive war.

Probably some appropriate policies will be adopted by the Allied Occupation Forces. But I would like to say something on this point, as I am just about to die and thus have great concern about Japan's future. Weeds have a strong life force, and grow again when spring comes, no matter how hard they are trodden underfoot. I am confident that, with strong determination for development, you will rebuild our nation now completely destroyed, and make it a highly cultured one like Denmark. Denmark lost its fertile land in Schleswig-Holstein as the result of the German-Denmark War in 1863, but gave up rearming themselves and made their infertile areas into one of the most cultured of European nations. As a ruined people, we repent having done wrong. I will pray for Japan's restoration from a grave in a foreign country.

Japanese people, you have expelled the militarists and will gain your own independence. Please stand up firmly after the ravages of war. That is my wish. I am a simple soldier. Faced with execution in a very short time, a thousand emotions overwhelm me. But in addition to apologizing, I want to express my views on certain matters. I feel sorry that I cannot express myself very well, because I am a man of action, reticent and with a limited vocabulary. The time of my execution is drawing near. I have only one hour and forty minutes left. Probably only convicts on death row are capable of comprehending the value of one hour and forty minutes. I asked Mr. Morita, a prison chaplain, to record these words and I hope he will pass my ideas on to you some day.

Facing death, I have four things to say to you, the people of the nation of Japan as it resurrects.

First, is about carrying out one's duty. From ancient times, this topic has repeatedly been discussed by scholars, yet it remains most difficult to achieve. Without a sense of duty, a democratic and cooperative society cannot exist. Duty has to be fulfilled as a result of self-regulating and naturally motivated action. I feel some misgivings in thinking about this, considering that you are suddenly to be liberated from the social restraints under which you have long lived.

I often discussed this with my junior officers. The moral decay of our military was so grave that the Imperial Code of Military Conduct as well as the Field Service Code were simply dead letters. Therefore, we had to remind people of this all the time, even in the military where obedience was strongly demanded and defying orders was not allowed at all. In this war, it was far from true that officers under my command carried out their duties satisfactorily.

They were unable to fulfill even the duties that were imposed upon them. Therefore I have some concern over your ability to fulfill your duty voluntarily and independently, after being released from long-standing social restraints. I wonder if you'll be dazzled by suddenly bestowed freedom, and whether some may fail to carry out your duty as required in relations with others, as you've received basically the same education as military men. In a free society, you should nurture your own ability to make moral judgments in order to carry out your duties. Duties can only be carried out correctly by a socially mature person with an independent mind and with culture and dignity.

The fundamental reason why the world has lost confidence in our nation, and why we have so many war-crime suspects who left ugly scars on our history, was this lack of morals. I would like you to cultivate and accept the common moral judgment of the world, and become a people who fulfill duties on your own responsibility. You are expected to be independent and carve out your own future. No one can avoid this responsibility and choose an easy way. Only through that path can eternal peace be attained in the world.

Second, I would like you to promote education in science. No one can deny that the level of Japan's modern science, apart from certain minor areas, is well below world standards. If you travel outside Japan, the first thing you notice is the unscientific way of life of the Japanese. To search for truth with Japan's irrational and cliquish mentality is like searching for fish among the trees.

We soldiers had great difficulties in securing the necessary materials to fight and to make up for the lack of scientific knowledge. We tried to fight against the superior forces of the United States and to win the war by throwing away the priceless lives of our nation as substitutes for bullets and bombs. Various methods of horrendous suicide attack were invented. We exposed our pilots to danger by stripping vital equipment from the planes in order to just slightly improve their mobility. This shows how little knowledge we had for conducting war. We made the greatest mistake — unprecedented in world history — by trying to make up for the lack of materials and scientific knowledge with human bodies.

My present state of mind is quite different from that at the time of surrender. In the car on the way to Baguio from Kiangan, Mr. Robert MacMillan, a journalist of the magazine Youth asked, what I thought was the fundamental reason for Japan's defeat. Something suppressed for a long time in my sub-consciousness suddenly burst out and I instantly responded "science," before referring to other important issues. This was because my long-lasting frustration and intense anger were loosened all at once when the war was over.

I am not saying that this is the only reason, but it was clearly one important reason for Japan's defeat. If there will be another war somewhere in the world (although I hope there won't be), it is expected end in a short time through the use of horrific scientific weapons. The foolish methods of war that Japan adopted will be regarded as the illusions of an idiot. Human beings throughout the world, I presume, will make efforts to prevent such a terrible war — not just the Japanese who thoroughly endured the horror of this war. This is the task that is given to humanity.

The atomic bombs dropped on Hiroshima and Nagasaki were horrendous weapons. Never before have so many people been killed instantly in the long history of slaughtering human beings. As I have been in prison, I have not had enough time to study the A-bomb, but I think that no weapon will be invented to defend against atomic weapons. It used to be said that it would always be possible to fight against a new method of attack. This is still true. If there is any method to defend against atomic bombs — the weapon that has made obsolete all past warfare — it would simply be to create nations all over the world that would never contemplate the use of such weapons.

A defeated officer like me reflects sadly that if we had had superior scientific knowledge and sufficient scientific weapons, we would not have killed so many of our own men. Instead we could have sent them back home to use the knowledge as the foundation to rebuild a glorious and peaceful country. However, the science that I mean is not science that leads mankind to destruction. It is science that will develop natural resources still to be tapped, that will make human life rich, and will be used for peaceful purposes to free human beings from misery and poverty.

Third, I want to mention the education of women. I have heard that Japanese women have been liberated from the feudal state authorities and been given the privilege of suffrage. From my experience of living in foreign countries for a long time, I can say that the position of modern Japanese women is inferior to that of women in the west.

I am slightly apprehensive about the fact that freedom for Japanese women is a generous gift from the Occupation Forces, not one that they struggled to acquire themselves. A gift is often enjoyed as an object of appreciation and not actually put to direct use. The highest virtues for Japanese women used to be "obedience" and "fidelity." That was no different from "obedient allegiance" in the military. A person who respects such castrated and slave-like virtues has been called a "chaste woman" or praised as a "loyal and brave soldier." In such values, there is no freedom of action or freedom of thought, and they are not the virtues by which one can self-examine autonomously. My hope is that you will break out of your old shell, enrich your education, and become new active Japanese women, while maintaining only the good elements of existing values. The driving force for peace is the heart of women. Please utilize your newly gained freedom effectively and appropriately. Your freedom should not be violated or taken away by anyone. As free women, you should be united with women throughout the world and give full play to your unique abilities as women. If not, you will be squandering all the privileges that you have been given.

Finally, there is one more thing that I would like to tell women — you are either already a mother or will become a mother in future. You should clearly realize that one of a mother's responsibilities is a very important role in the "human education" of the next generation.

I have always been unhappy about the idea that modern education begins at school. The home is the most appropriate place for educating infants and the most appropriate teacher is the mother. You alone can lay the foundation for education in its true meaning. If you do not want to be criticized as worthless women, please do your best in educating your own children. Education does not begin at kindergarten or on entry to elementary school. It should begin when you breastfeed a newborn baby. It is a mother's privilege to have a special feeling that no one else can have when she cuddles and breastfeeds her baby. Mothers should give their love to their baby both physically and mentally, as they are the baby's source of life. Breastfeeding can be done by another, and nourishment can be provided by other animals, or can be substituted for by a bottle. Yet nothing else can substitute for mother's love.

It is not enough for a mother to think only about how to keep her children alive. She should raise them to be able to live independently, cope with various circumstances, love peace, appreciate cooperation with others and have a strong desire to contribute to humanity when they grow up.

You should raise the joyful feeling of breastfeeding to the level of intellectual emotion and refined love. Mother's love will constantly flow into her baby's body through breastfeeding. The fundamental elements of future education must exist in embryo in mother's milk. Attention to the baby's needs can be the basis for education. Untiring mothering skills should naturally develop into a higher level of educational skill. I am not a specialist on education and therefore I am not sure how appropriate it is, but I would like to call this kind of education "breastfeeding education." Please bear this simple and ordinary phrase in your mind. These are the last words of the person who took your children's lives away from you.

Gordon Haave writes:

Yamashita got a bad deal (comparatively speaking). The whole reason he ended up in the Manchuria theatre was because he was actually lenient and kind to the conquered peoples of the pacific, so he was transferred because his superiors didn't like that.

Much worse people than him avoided execution.

Stefan Jovanovich adds: 

Yamashita committed the terrible sin of addressing the people in Singapore as "citizens of the Empire of Japan". That was precisely what Tojo and the racist idiots of the General Staff did not want to consider the people of Southeast Asia so, as GH notes, he was shipped off to Manchuokuo.

There was no actual evidence that Yamashita had ever ordered any subordinate to commit what we would recognize as a war crime. That he recognized his own responsibility as commander and accepted his punishment has nothing to do with "the law". What Yamashita was actually guilty of were two terrible sins:

(1) his 25th Army's conquest of Malaysia and Singapore was the most brilliantly successful campaign since Grant's capture of Vicksburg. Churchill considered Percival's surrender the single event that ended the British Empire.

(2) his defense of the Philippines against MacArthur and Halsey's greatly superior forces ruined both men's reputations as invincible warriors. Yamashita forces skillful resistance so delayed the timetable for MacArthur's half of the joint American offensive that it allowed Nimitz's "island hopping" to get far ahead. That, in turn, made Hiroshima and Nagasaki possible and defeated all chance of MacArthur's being the Caesar who conquered Japan. That cost MacArthur all hope of being the Republican Presidential nominee in 1948. 

Sep

17

The wikipedia article is worth reading: Wall Street Bombing.

The day was chosen because Constitution Day, which is today, was, at the time, as important and serious a holiday as Thanksgiving is now.

Sep

15

 The 2 elections in North Carolina give us some actual data–at last–that can be compared against the polls' predictions; but they only offer a vague sketch of where we are heading in 2020. As anyone who has ever tried to use a sextant knows, there was a very good reason that Nelson's Navy had every midshipman on board do a noon sighting. A single set of readings is not nearly enough information by itself. But, with the polling data as charts, you can finally get a decent confirmation of roughly where we are.

Amy Walter of the Cook Report has a new piece that is a very good description of the present location.

The piece has the unavoidable bias of the Cook Political Report; since Mr. Cook's subscribers and consultancy customers lean Left, Ms. Walter gives the Democrats the place above the fold. (For the younger List members this metaphor is a reference to the time when the NY Times, Washington Post and other "serious" newspapers were large enough that they had to be folded in half. The part with the masthead and the column headlines was placed facing up on the newsstand piles - hence "above the fold".) But, Ms. Walter is a journalist first and a partisan second.

If you read to the end of the piece you come to this startling conclusion by David Hopkins, a Boston College political science academic: "Democrats can't make up for losses in rural areas by winning 'the suburbs'." Democrats can win the large metropolitan area suburbs because those districts are now as much majority "minority" jurisdictions as the major central cities themselves. As Ms. Walter notes, "There are now almost as many Democratic-held suburban seats that are majority-minority (49) as there are Democratic-held urban seats that are majority-minority (54)."

Rather than being a major shift, 2018 was, in fact, a continuation of 2016. The Democrats ran up large vote totals in the districts that they never lose; but in the swing districts the vote was split right down the middle.

If I were a Democrat, I would demand that the Electoral College be abolished. That mechanism succeeds exactly as it was designed to do: the smaller, more rural jurisdictions cannot be overwhelmed by the sheer numbers of the urban demos. In writing this I am not trying to excuse away my utter failure to predict the 2018 results; but I am explaining why what appeared to be a landslide was, in fact, another narrow election, just like 2016. Give Mrs. Clinton the right to take 2/10ths of 1% of the national popular vote - 257,677 - and take them from California and put them in the states of her choosing, and she would be President. Give the Republicans the same fraction (.00216 to be precise) of the 2018 total vote and let them put them in the 18% of the House districts that were "swing" seats and the Republicans not only retain control but add seats.

What Trump has achieved is the restoration of the Republican brand with the white-skinned majority of the electorate. Democrats have been out of favor with Whites for a decade and that negative opinion has been consistent: in 2010 Whites' feelings towards the party of slavery, segregation and affirmative action were -18, and this year they are -17. But, as recently as 2014, the Republicans were no better: in that year they were -11 and the Democrats -16, a spread of only 5 points. This year the spread is 21 points, and the Republicans have a positive rating of +4. That "reboot" of the GOP as the party of white-skinned privilege is the best single explanation for what happened on Tuesday here among the pine trees and live oaks.

What is most likely to explain next year's election is the decision of Trump's campaign to use "Socialism" as the nasty label for the Democrat nominee. For the Democrats' strongest voting segments - single women, urban and large city suburban residents, the young with college diplomas and student loans, and African - that label is an endorsement. But, for the less-than-college educated white and brown-skinned voters and the people with savings counted in the thousands, not millions, "Socialism" means more money for the schoolies and more taxes for them. It is a devastating message, especially for the suburbs in the swing states.

For those who want more poll data, I recommend this.

Sep

13

Bachelier's thesis from 1900 on Theory of Speculation!

Sep

13

If today closes up for DJI [Thursday, September 12th], it will mark 16 of the last 20 DJI closes to the upside. The last time this happened was March, 2017, and before that, Dec, 2016.

Examining the daily Dow back to 1896, this is often indicative of the early stages of a runaway bull market.

Sep

13

Tennis is so interesting. One player can be so good on one surface that the best players in the world can't even take him to five sets.

"Rafael Nadal Takes Another Step Towards Tennis History"

By winning the final grand-slam tournament of the season, Nadal brought himself within one title of Roger Federer's record for the most slams ever won by a male player. Barring a catastrophic injury along the lines of a ruptured Achilles tendon or torn ACL, Nadal seems more likely to surpass his great rival in that category. He's almost five years younger, and while Federer's longevity in tennis is approximate to Tom Brady's in football, Federer will likely retire before Nadal, meaning that Nadal will have more opportunities to collect grand-slam hardware. Just as important, Nadal is still the best clay-court player in the world by an almost unfathomable margin. He has won the past three French Opens without once being pushed to five sets. He will remain the prohibitive favorite at that tournament until another player proves a worthy adversary.

Sep

12

Admiral Conolly is another person who deserves being remembered.  If Kelton had written American naval yarns, Conolly would have been a model for one of his brave characters.

The subject line refers to how the Admiral and his wife died.
The 737 Max and its difficulties have their predecessors.

Sep

10

Brittany Runs a Marathon is right out of The Fountainhead. It’s the kind of movie that Dominique would have taken Gail Wynand to instead of no skin off my nose. The Asian girl is the only person of color not shown in a heroic light. The squad could use it as their theme song.

Sep

10

Here's a great interview with an ex floor trader answering questions about the floor.

Sep

10

 Dune by Frank Herbert, a classic

Children of Dune

Dune Messiah is a bit slow but you have to read it as part of the series

the Jon Reznick series, free on Kindle unlimited. He is a spy former Delta. Audio is free too.

the Scot Harvath series. Same spy military thriller suspense theme. Kick ass.

The Improbability Principle by Hand. Why do improbable events seem to happen so often. Large numbers, close enough, survivorship bias…

How to Take a Chance, Huff

Brief Answers to Big Questions by Hawking. I disagree with his Black Hole theory. I think they just infinitely compress space time and to a traveler into a Black Hole everything would seem exactly the same around him.

Sep

10

 The three nemeses of large trees:

1. lightning

2. drought (causing bubble formation in plant vascular tissues) and

3. invasive pests.

In Palm Beach County you can readily see the evidence of lightning strikes on trees in areas such as the J.W. Corbett preserve and the Jonathan Dickinson State Park. It is never fun to be caught out in those locations in a thunderstorm.

In Dickinson salt water intrusion actually has impacted quite a few trees of all sizes along the Loxahatchee River. And Lygodium (once a nice Japanese ornamental) is the new kudzu–an invasive, climbing vine that spreads easily and wipes out native plants and trees with spores that easily attach and cause Lygodium's rapid and persistent spread.

Sep

6

I relate a checker story with market implications on vicniederhoffer@twitter.com. The story is from Sea Biscuit by Laura Hillenbrand, a very excellent book. Pollard the jockey saw a kid lose a checker game and the older jockey flipped over the board and started pummeling the kid. Pollard was also a boxer and made the offensive jockey promise never to do it again to a kid or opposing jockey.

Sep

6

You can learn many lessons from losing trades: "What I Learned From Losing 200 Million Dollars"

Sep

6

Thomas Edison once described Charles M. Schwab as "the master hustler". He meant it as a compliment.

For one brief moment in 1916 Schwab had an offer in hand that would have made him the richest man in the world. At the close of the first year of the Great War the German ambassador to the United States offered Schwab $100 million for his controlling interest in Bethlehem Steel. The British armaments industry was almost completely dependent on Bethlehem to produce the high carbon steel essential for manufacturing cannon barrels and submarine hulls. When the British learned of Count von Bernstorff's offer, they were scrambled to make a counter-offer. The British ambassador Cecil Rice and the President of Chase National Bank, Barton Hepburn, approached Schwab and proposed to buy him out for $150M. Schwab said no.

Reading the numbers for Amazon today [September 2cnd] made me think of what Mr. Bezos could realize if he sold out. The likelihood is that he would say "no".

The numbers: Amazon's common stock sells for 58 times next year's predicted earnings and 36 times the total earnings for the company in its 22 years of public trading.

Sep

6

 An interesting article with a hint (energy/nutrient flow) of the Dailyspec's recommended book, "The Way Life Works" (Hoagland and Dodson) is this: "Soil's Microbial Market SHows the Ruthless Side of Forests".

It should be noted, however, that interactions seen in a petri dish are not always representative of what happens in a living system– in fact, there are antibiotics that are being revisited because they are much more effective in the complexities of the human body than once thought based on petri dish performance.

The cooperative vs. " cutthroat" views of nature are being tested.

Some quotes follow:

"Toby Kiers, an evolutionary biologist at VU University Amsterdam, finds that the interactions among plants and their fungal symbiotes resemble a cutthroat marketplace in which the species negotiate their exchanges of nutrients ruthlessly."

And

"Based on observations of the free-market system, Kiers suspects that what has stabilized plant-fungal mutualisms for at least 470 million years is not that individual organisms are committed to the good of the community, but rather that, in most cases, both plants and fungi benefit more from trading with each other than from keeping resources to themselves."

Alston Mabry writes: 

One thing I notice is people talking about competition and cooperation as if they are equal concepts on the same level biologically, rather than seeing cooperation as one strategy inside a framework of competition.

Sep

6

"Guy Gabaldon: an Interview and Discussion"

Sep

6

Here is a great article talking about how to model of extreme insurance claims with a much clearer explanation by using. QQ plot or frequency/magnitude plot to estimate thresholds. Market thresholds are easier to determine. What's your pain tolerance?

Sep

6

Brexit is, for our time, what the "free trade" movement actually was.

It was the rejection of Left-Right as the model of the public mind.

The man who has begun that transformation and who knows more about the mathematics of turnout and persuasion than anyone is Dominic Cummings.

Sep

6

Armstrong Economics on "Private vs. Public Rate".

Sep

6

If you waste your time as I do, reading through academic journals on JSTOR, you already know that Great Britain had a "Great Depression" between 1873 and 1896.

Musson, A. E. "The Great Depression in Britain, 1873-1896: A Reappraisal." The Journal of Economic History, vol. 19, no. 2, 1959, pp. 199–228. JSTOR.

If, as I hope, you have more interesting and profitable things to do, this information will come as a complete surprise. How can Britain have had a two decade long depression at the same time it was the greatest financial power in the world, with the largest empire and a navy that literally ruled the seas?

The answer is that "Britain" did not have a depression; its owners of capital did. During the period "the standard of living improved. Prices certainly fell, but almost every other index of economic activity-output of coal and pig iron, tonnage of ships built, consumption of raw wool and cotton, import and export figures, shipping entries and clearances, railway freight and passenger traffic, bank deposits and clearances, joint-stock company formations, trading profits, consumption per head of wheat, meat, tea, beer, and tobacco - all these showed an upward trend." "(T)he wail of distress did not come from the mass of the people, who were for the most part better off, but mainly from industrialists, merchants, and financiers, who felt the pinch of falling prices, profits, or interest rates."

It could be that the developed world - the part of the planet that now has half of its outstanding bonds quoting negative rates of return to holders and prospective buyers - has just embarked on a similar historical journey. The parallel appeals to me because of all our past political figures Benjamin Disraeli seems the one closest in temperament and style and interest to Donald Trump. Disraeli's greatest tenure as Prime Minister was from February 1874 to April 1880 - the dates during which this Great Depression got underway.

Sep

6

The negotiating tactics of a negotiator can be known from prior experience. A typical tactic is where the opening salvo is wild threats of nuclear options or ridiculous demands and threats with short time deadlines. Inexperienced negotiators get nervous, and sometimes it works when weak hands give up and collapse immediately. Once this style is known to be a bluff from bluffer, a harder line may be taken as the ridiculous demands soon collapse and a real negotiation begins.

Sep

2

What do you think are the events or situations that may cause a hoisting upwards of the US Bond Yields curve?

The deceptive veils that Ms Market must always wear to find the easy suitors to give up their fortunes is one of the bases on which my mumbo jumbo reading of visual data propels me to frame this conjecture.

A) Whats the probability of this happening, soon? A rough number so to say to elicit your vote on this conjecture! B) If this happens, will the S&P500 yield not spike up?

Larry Williams writes: 

We are in a bull flattener now—critical that is understood.

Sep

1

Isn't it odd that the world's "second biggest economy" won't allow its currency to be used anywhere but on the mainland? Isn't it strange that every one of their financial statements and NBS releases have glaring, ludicrous, laughable misrepresentations in them? Isn't it incredible that they've achieved a $25 Trillion (plus) cumulative trade/investment surplus and no economist or Central Banker has ever asked why there's only $3 Trillion of FOREX on the PBOC balance sheet? As one vulgar observer of the events on Hong Kong is alleged to have shouted: "Hey, Xi….where's all the f&%$ing Western Money we made?"

anonymous writes: 

China's economy is interesting. I've been thinking a lot about it and trying to decide if I want to spend more time researching and analyzing their stocks. Spec listers pointed me to some useful resources last time I posted about this. The need to diversify internationally has increased lately given the trade war and many of the companies appear quite compelling from a valuation and growth perspective.

It's hard to say that China is entirely fake when you live in Vancouver and then feel like you're going to a 3rd world country when you go back to the US (largely due to the lack of Chinese wealth) — which also answers where all the USD went hah. I personally really enjoy the BP energy report which showed that Chinese electricity consumption in 2018 grew about 3.8%, which is closely tied to GDP growth.

At the same time, one notes that the economy has more than quadrupled while FXI (the China large cap ETF) is well below its 2007 peak and headed the wrong direction. FXI is composed of classic companies like Tencent and China Telecom–so hard to argue that it's a 'composition issue'. The bear would argue that all of China's numbers are fake and thus the GDP growth is likely the one that's wrong.

Some interesting statistics on valuation–China Telecom has 147m 4g mobile subs, more than 1.5x as many as T Mobile's entire base, and 220m subs overall. China Tel is worth $36b while T Mobile is worth $65b. It's very unlikely that China Tel is lying about its subscriber count based on network data / just observation around how many people are using data walking around Chinese cities / the ubiquity of mobile payment services there. Sure the Sprint merger is a (likely) catalyst for pricing power but when you add up TMUS and S fcf generation even after the deal it's not amazing. Which just puts into context the potential upside to brave investors (100%+)

The venture capitalists I know investing in Shenzhen which now has as much flow as San Francisco (and btw is a way, way nicer place to live) have seen obscene financial returns (60%+ CAGR) and have had real USD exits. The sentiment is that founders there work 2x as hard, don't virtue signal, and have better technical teams. Notably, they also are focused on making money instead of the bizarre 'mission' fetish used in Silicon Valley to beat down people's demand for compensation ("we are here for the mission not the pay!")

The other point in favor of China is that military research done by independent think tanks suggests that increased naval and air power is very real. This is relevant insofar as markets ultimately reflect ability to secure assets and thus military power.

The rise of SOEs as a percent of GDP and the weakening of the RMB feels like a step in the wrong direction… but lately, I've been increasingly thinking Chinese longs are more interesting than most US consumer companies which were premised on the ability to sell into China

Charles Pennington writes: 

Thank you for that post Alexander — those are really interesting insights and datapoints on Chinese stocks and the Chinese economy. The stocks do seem cheap!

Many of us are always worried that somehow all the money in Chinese companies is going to get embezzled by somebody, and in a way it's a miracle that doesn't happen to US stocks as well. An argument against that fear is dividends–China Telecom (according to Morningstar) has boosted its dividend pretty steadily form $1.10 to $1.60 over the past 5 years. So that proves they're not stealing everything!

A few years ago I was wondering how could BIDU not be a good stock. It's the Chinese Google, and Google itself is locked out of the action, so how could it go wrong? I bought it and ended up selling at a loss for some reason, which turned out to be lucky because it's fallen more than 50% during just the past year. I don't follow it closely. How did they screw up when they're the Chinese Google? And is it a bargain now, or did the business get permanently harmed?

Aug

26

 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.

Aug

26

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

Abstract:

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.

Aug

26

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.

Aug

24

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.

Aug

24

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

Aug

24

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.

Aug

23

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

Aug

23

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

Aug

23

Anne L. Murphy University of Exeter in Cornwall

a.l.murphy@exeter.ac.uk

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.

Aug

23

 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?

Aug

23

"Ricardo: China is Weak: Part 1"

Aug

23

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.

Aug

23

 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.

Aug

19

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:

Jonathan,

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.

Aug

19

 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

Aug

17

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.

Aug

17

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.

Aug

16

@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.

Aug

16

 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.

Aug

16

 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.

.

Aug

16

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.

Aug

16

 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.

Aug

15

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: 

LTTIU

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


Archives

Resources & Links

Search