Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Department of Trees and Markets One of the great evolutionary success stories, trees first appear in the fossil record about 400 million years ago. Today's forests cover 30% of the earth's surface. As a life form, they have survived ice ages, global warming periods and countless fires, droughts and floods. Some individuals live for more than 2,000 years. Daily Speculations and its contributors find trees of much interest in their never-ending search for new tradable ideas. Some of their approaches appear below.       (Left: Vic Niederhoffer with daughter Kira at Kew Gardens, London, 2003)\

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10/06/04
Victor Niederhoffer: Ancient Trees

The sense of awe experienced during and after a visit to the giant redwoods of Muir Woods and the adjacent coastal redwoods from Monterey to Crescent City makes one think of lessons for life and markets. The lessons would appear to be there because a good redwood weighs a million pounds, stands 350 feet high, and lives for 1,500 years. The trees' continuity emerges from the evolutionary record which shows the ancestors in the same form from 150 million years ago with nice petrified pictures. Michael Barbour, in "Coast Redwood: A Natural and Cultural History," notes that the trees face the ravages of fire, flood, drought, landslides, fungus, snow, lightning, insects, wind and competition from sun-loving deciduous trees. Immediately one realizes that perhaps these challenges are partly responsible for the trees' success, and that perhaps the pockets of enthusiasm in the market are not overly excessive and evidence of imminent death the way that people like the Abelsonprechtorosbuffets believe. (Add to that amalgam "The Economist," with its current lead article on coming world economic disasters.)

Without further ado, one can attribute the success of the redwoods to their ability to grow from burls (buds on the trunk) whenever disaster strikes. Also key to their success would be the phenols they produce and the heavy bark that protects against insects and fire. Also their ability to grow after fires and use parents to crowd out the shade-intolerant species.

Some work by Prof. Pennington shows that the high trees of the stock market have a reasonable return. The performance of the10 highest-priced common stocks in each of the last seven years is as follows:

One speculates that trees, as the dominant plant form on the planet, can offer lessons in other contexts and other markets.

10/06/04 Steve Ellison adds:

The size of the redwood allows it to get both more sunlight and more water than its competitors. In a habitat where there is little rainfall for six months each year, but the air is cool and moist year-round with frequent fog, a redwood can absorb moisture through its needles. By growing to a huge size, it can spread more needles and increase the likelihood of finding a more drizzly layer of air. Thus, height is twice as great an advantage as in most forests.