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The Chairman
Victor Niederhoffer

10/09/04
Magic Squares

Our colleague Saurabh Singal is about to publish a book on magic squares, following up on his eminent father's work on this in India. The square is constructed so that the numbers in each row, column, and diagonal add up to the same number. For example:

2 9 4
7 5 3
6 1 8

Our cofounder wrote in a 1750 letter, " I confessed to him that in my younger days having once some leisure (which I still think I might have employed more usefully), I had amused myself in making these kind of magic squares and at length had acquired such a knack at it, that I could fill the cells of any magic square of reasonable size with a series of numbers as fast as I could write them, so well that I had imposed on myself more difficult tasks and succeeded in making other magic squares with a variety of properties, and much more curious." His friend complimented him extravagantly on his astonishing and stupendous accomplishment, and Franklin did not wish to repeat it.

Inspired by our cofounder, I immediately asked if Mr. Saurabh had investigated the market applications of magic squares and he confessed to me that as of yet, his fancies had not taken him in that direction as he wished to separate the joys of study from the rigors of trade. Not being of an age where such a separation is entirely necessary, I suggested to Mr. S that for his sake as well as my own, he should consider five markets -- e.g., stocks, bonds, gold, oil and oats -- during a week -- such as Sept. 13-17 -- and array and total the percentage changes in each market so that uncommon and curious and predictive properties might clearly emerge.

  Stocks Bonds Gold Oil Oats Total
Monday            
Tuesday            
Wednesday            
Thursday            
Friday            
Total 1% 1% 1% 10% 1%  

As an illustration, I started at the beginning with the total of 1, and I found without too much work among my old papers the movements of these markets during the week of Sept. 13, each such market summing during the week to the aforementioned 1 (crude being of necessity scaled down by a factor of 10) . However, I shall not trouble you with the obvious tendency of market changes to be opposite among the consecutive rows and columns, so that neither the bulls nor the bear might gain an excess over their brothers in battle, and the ingenious properties of the total market sector might continue with the public playing its wonderful contributing role.

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