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Jan. 29, 2006
Market Lessons from Verdi's "Rigoletto"

After attending a recent performance of "Rigoletto," conducted by Placido Domingo at the Met, I was charged up with such violent conflicting emotions from the great dramatic and lyrical work, so similar to what I feel after a great emotional roller-coaster of a market day, that I can refrain no longer from sharing some similarities and lessons with my colleagues.

As you recall, "Rigoletto" is the story of an evil Duke whose main passion is to sleep with the most beautiful girls in his domain. He is aided in this pursuit by his evil jester Rigoletto, who is tricked into helping courtiers abduct his daughter Gilda to become one of the Duke's conquests. He tries to show Gilda how unworthy the Duke is by taking her to view the Duke's attempted conquest of Maddalena, the beautiful sister of the assassin Sparafucile.

Maddalena is in business with her brother to lure men to their death.

There's a quartet in the third act where the Duke tries to convince Maddalena to sleep with him by vowing marriage while at the same time Rigoletto pleads with his daughter to leave the scene and renounce the Duke as her lover, that is generally considered to be musically and emotionally one of the great moments in opera, and it will immediately elicit thoughts in every market participant of the climactic battle that the bulls play with the bears near the end of every market day. The special effects of the opera machine are then brought out with storms, thunder, lightening, lighting, mistaken identities, deception leading to Gilda sacrificing herself for the duke, and Rigoletto slowly coming to the realization in three stages that the assassin he hired to kill the Duke has instead killed Gilda, Rigoletto's own daughter. At the conclusion, the daughter revives from her death throes to sing an apology to her father for deceiving him but says her love for the duke gave her no choice.

The opera is considered to be the one with the most vivid conflicts of any Verdi has written, animated by the evil role that Rigoletto played for his duke , the retribution that he receives for this, his disloyalty to the Duke when he tries to get him killed, and the tragedy of seeing the formerly innocent daughter sacrificed at the end for a thoroughly evil noblemen. The conflicts are carried forward in vivid sonata form with the Duke opening the opera with his evil chasing of women, and Rigoletto doting on his daughter who has never seen been allowed out of the house except to go to church, where she regrettably fell prey to the charming gaze of the Duke.

This same battle occurs at the opening of every day's session in the market. The overnight orders come in and a move ensues, setting up the main theme of the drama. Then comes the secondary theme: a move in the other direction. The middle of the day, like the middle of the opera, is given to development of both themes. Finally, amid climactic activity and singing of high notes, the conflict is joined and ends with great tragedy, as all with tragic weaknesses are punished.

(Before putting some statistics on the table I have to note that my favorite vignette in the opera aside from the quartet comes when Maddelena asks her brother, the assassin, if it wouldn't be cricket to kill Rigoletto instead of the Duke. The assassin is stunned that his sister would think him a common thief, the same way Willie Sutton was when he was casing out a bank disguised as a cop and a new mother asked him if she could double-park so she could feed the baby some formula.

We note that a regression equation of the move from 9:30 a.m. to 10:00 a.m. in the S&P from 1996 to 2006 as a predictor of the move from 10 a.m. to close gives the equation:

forecasted 10 a.m.-to-close move = -1/20 + 1/4 of the move from 9:30 a.m. to 10 a.m. 

The t statistic for the regression coefficient is 3.8 with an R-squared of 1/2 of 1%.

Note also that after an up move from 9:30 a.m. to 10 a.m., the expected move from 10 a.m. to the close is 1/5 of a point -- i.e., a move from 1001 to 1001.2 with 55% up compared to a norm of 53% for every day . (No wonder I was able to slip this past the Minister).

And yet, we point out that that we have shown a tendency in the market day to end on the same motif as the original tonic theme of the opening, as is the tradition in all opera, symphonies and dramas of the last 300 years.

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