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8/30/2005
Converting Rotary Motion, by Victor Niederhoffer

An interesting museum near St. Mark's Square in Venice displays two models of machines designed by Leonardo Da Vinci's that convert rotary motion into vertical motion. In one particularly ingenious machine, a cam that is three-quarters of a circle is in continuous contact with another circle (two reduction gears) until the circle breaks and the smaller gear turns wildly by gravity, and a hammer falls. Are there markets that turn around and around a fixed point in revolution, such as soybeans and oil (note soybeans below $6 a few days ago, before oil topped $70), that lead to the vertical motion of a third market?  

               

Many machines convert rotational motion into linear motion, the most common being the rack and pinion gears used, for example, in the steering wheels of many automobiles. As the wheel rotates, it slides a rack to the right or left depending on which way the wheel rotates. My favorite orange juice squeezer from Italy uses a similar mechanism.

It occurred to me that if such mechanisms are so common in useful machines, they might be applicable to market situations. I asked the Professor to study this. While the results aren't that useful, or else they'd doubtless be censored ("Vic, the readers are going to think I'm an idiot because you keep publishing non-predictive findings and keep the predictive stuff up your sleeve"), I find methods and ideas much more important than immediate useful tips, which are always ephemeral anyway due to the law of everchanging cycles.

The whole subject of gearing, starting with spur gears, is a useful way to think about markets. Two gears engage and maintain a constant speed times force (a smaller gear going faster with a lower force drives a larger gear going slower with a greater force (or vice versa). How many times do we see one market rotating faster but with less magnitude than another? The relation today between oil and stocks is one such example. Every little move in oil up and down creates a magnified effect in stocks, similar to a bike going up a hill in first gear.

       A pair of spur gears

The gear ratios and the different types of circular and linear motion that can result, especially the delayed reactions, seem to me to contain many meals for a lifetime. I recommend that all speculators buy gear toys.

Kim Zussman adds

When I was 12-13 I had an 8" Newtonian reflecting telescope. It had a German equatorial mounting, which is a kind of stand with axles that permits easy rotation of the telescope to follow object-drift due to earth rotation.

Adjustment was done by hand, nudging the telescope around the axis aimed at the point in the sky where the earth's north pole points. However the gold standard was a "clock-drive" motor; an expensive motor and reduction gear set which slowly rotates the telescope to compensate for earth rotation (the full circle is about 1440 minutes). With a clock-drive, not only would the object stay in view, but it could be possible to take time-exposures of astronomical objects!

We didn't have money for such a device, so I built one from parts. Sky and Telescope had an article giving various combinations of spur-reduction gears, in combination with 1-RPM synchronous motor and worm/worm wheels, which would result in good tracking. I ordered catalogs from Dynaco and other gear-makers, and tried to find gears with correct diameters, bore-sizes, and pitch to match the worm and worm-wheel I had found.

There was an outfit downtown that stocked gears that looked right, and I called them several times with various questions. Finally one day my father drove me there to buy the parts. The guy I had spoken with was surprised to see that Kim was a boy because my voice had not changed yet and he thought I was a woman!

The clock-drive actually worked; well enough for extended high-power planet observation, but not enough for astrophotography. Only later as an adult I learned that imaging required extremely precise drive gears, often diamond lapped, to keep periodic error less than 10 arc-seconds on the sky.

Easan Katir adds:

Following up on the Chair's recommendation, here is a Java applet of a motorcycle transmission, animated, viewable from any angle, shift able, perhaps illustrative of a market's changing ratios. put bike in high gear and go fast so your girlfriend will hold tight. When Katrina arrives, certain stocks (ie SGR, GLBL etc) shift to high gear. It takes a few minutes to download. worth it.

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