January - 2022
 S&P +27.50
 USB -2.17
 S&P -1.75
 USB -1.03
 S&P -91.75
 USB -0.14
 S&P +1.00
 USB -0.09
 S&P -19.75
 USB -0.26
 S&P -5.50
 USB +0.07
 S&P +42.75
 USB +0.19
 S&P +11.25
 USB +0.03
 S&P -64.25
 USB +0.16
 S&P +12.25
 USB -1.17
 S&P -83.50
 USB -1.21
 S&P -45.50
 USB +0.11
 S&P -68.00
 USB +0.12
 S&P -84.75
 USB +1.15
 S&P +11.50
 USB -0.20
 S&P -87.75
 USB -0.17
 S&P -18.50
 USB -1.08
 S&P -18.50
 USB +1.00



1) Search results for "Grantham" on CNBC
2) of the 118 results , the below 7 more caught my attention
3) assuming a hypothetical 1k USD investment on those 7 occasions

Jeffrey Hirsch comments:

Nicely done Kora. Perhaps it’s just a marketing campaign. Fear sells you know.

Duncan Coker responds:

Consider the source. Grantham's contrarian flagship fund GBMFX total return since 2003 when it launched is 30.5% ( that's total not annual compounded) and that included 2 bear markets. SPY over the same period 488%.

Andy Aiken writes:

Back in the late 90s, I had a few $ in David Tice's Prudent Bear Fund, which was, essentially, short stocks and long PMs. Entered in 1999, got out in 2002 at a very small gain. Gold & silver dropped along with other risk assets during that time, killing returns. If I'm going to short, I'll do it myself now…



Stefan Jovanovich offers:

The mania for sudden fortunes made in cotton, raging in a vast population of Jews and Yankees scattered throughout this whole country, and in this town almost exceeding the numbers of the regular residents, has to an alarming extent corrupted and demoralized the army. Every colonel, captain, or quartermaster is in secret partnership with some operator in cotton; every soldier dreams of adding a bale of cotton to his monthly pay. I had no conception of the extent of this evil until I came and saw for myself. Besides, the resources of the rebels are inordinately increased from this source. Plenty of cotton is brought in from beyond our lines, especially by the agency of Jewish traders, who pay for it ostensibly in Treasury notes, but really in gold. What I would propose is that no private purchaser of cotton shall be allowed in any part of the occupied region. Let quartermasters buy the article at a fixed price, say twenty or twenty-five cents per pound, and forward it by army transportation to proper centers, say Helena, Memphis, or Cincinnati, to be sold at public auction on Government account. Let the sales take place on regular fixed days, so that all parties desirous of buying can be sure when to be present.

- Charles Dana's recommendation to the Secretary of War, 1863

Jeff Watson responds:

Sounds like sour grapes from Mr Dana, almost like he was having problems with his hidden cotton partner and since he didn’t find easy money, nobody else should either.

Stefan Jovanovich replies:

Score by WS. But, according to his memoir, Dana was no more secretive about his partnership with Conkling than anyone else in D.C. He asked Halleck for letters of introduction to the generals not named Grant. He omitted Grant because he already had the reputation of being incorruptible.

How the Story Ends:

On March 31, 1863, Mr. Lincoln issued a proclamation declaring unlawful all commercial intercourse with the States in insurrection, except when carried on according to the regulations prescribed by the Secretary of the Treasury. These regulations Mr. Chase prepared at once. At the same time that Mr. Lincoln issued his proclamation, Mr. Stanton issued an order forbidding officers and all members of the army to have anything to do with the trade.

Or does not end:

Diary of Gideon Welles: Saturday, May 21, 1864

Last night I was at a party at Mr. Chase's, or his daughter Mrs. Sprague’s, and late in the evening he spoke to me of the great abuses in cotton speculations. It was a new and singular theme for him, and I said it could not be otherwise than demoralizing. He said, “Yes, your whole fleet out West is infected; Porter devotes his attention to getting cotton and has a boat to himself, with a piano and his pipe, on these cotton raids.” I replied this could not be so. The naval men could capture and retain nothing, which the courts do not adjudge to be (a) good prize. We were interrupted at this point. I conclude the Committee on Commerce have notified Chase that they disapprove of his “Trade Regulations,” and this outburst on the Navy is to turn off attention from his officials. But we shall see.

Lieutenant-Commander S. L. Phelps has been with me this evening and given me many interesting details concerning the Red River expedition and the incompetency of General Banks. Among other matters he relates some facts in regard to cotton speculations by persons connected with General Banks — some of his staff — that are exceedingly discreditable. Among others whom he specially mentions is one Clark from Auburn, New York, who appears to be managing director of the cotton operations.



does anyone doubt that the camp kinderland people at the Fed and Treasury will help along the smiling capitalist before the midterm elections?

with all the talk about rising interest rates, the bonds ended up abut a point last week form 15500 to 15600. S&P was down on the week the second most since 1999 at 307 full points.

he doesn't know the territory. bonds going up while stocks at tremendous low on fears of interest rate increases. the woke fed due on wed to help smiling capitalist along. the treasury emphasizing how woe begone we are.

the camp kinderland head of the treasury "our economy has never worked fairly for anyone of color". race to the bottom.

Vic's twitter feed



i had the pleasure and education of reading Prof. John Hearn's site. i strongly recommend it.

Prof. Hearn on Twitter

Prof. Hearn on Youtube

Vic's twitter feed



I’ve reviewed elaborate videos and glossy books on shipping container homes at the high scale end. It’s far simpler for cheap. I’ve lived in two containers in different valleys and it’s as easy as going to the bread aisle at the grocery store.

You go to the vendor – around the Salton Sea it’s the Calpatria hay store or trucking companies near the border. You pick out a used one from the lot, fork over $1-2000 that includes transportation, and lead the flatbed with your new home out to your place. The driver slides it onto pre-laid RR ties, you put a lock on the door, and celebrate the new home.

The biggest advantages are it’s difficult to rob, arson, or blow over like in the Three Little Pigs, and without building codes since it’s on skids.

I had no idea on moving into my first container in 1999 on the Sonora that I was looking into the architectural future. I installed a loft with waterbed, office with a solar powered laptop, and garage beneath a trap door. Chilled air rose from the garage through stovepipes into the interior and vented hot air out the roof. A satellite dish pulled in the Nature and History channels on an upside-down B&W TV. A pet packrat was a muse and road partner in search of gold in abandoned mining camps that it had been trained to retrieve. We drove two hours to sub-teach when mining was poor.

Then, in 2013, I owned the first container home in Slab City and am as content as a clam. There are three more now, the nearest scavenged and dragged from a bombing range target and riddled with hundreds of high-caliber holes. The second was towed from the Mexican border and is hemmed with painted flowers. And, the third was trucked from Los Angeles and converted into a church.

I thought I was on the vanguard of a would craze that is verified.

In the South Africa capital of Johannesburg, thousands of brightly colored boxes piled on and around each other, are stacked and re-stacked, and hauled away on trucks and freight trains, as homeowners decide where they want to live or sell. In Sudan, a prison is built of old containers slammed together. That’s how secure they are. Now container architecture is a hip fad in European cities for offices and homes. London has one of the biggest housing projects in the world of containers, and Amsterdam has the largest student village with over 1000 containers.

In USSR, shipping containers are used for market stalls and warehouses. Southeast Asia bazars are typically double-stacked containers. New Zealand earthquake rocked malls were rebuilt of shipping containers in the business districts. A Tokyo company provides container modules for multi architectural use. Prefab container homes are bomb across China. Google barges ply the seven seas with superstructures of stacked containers.

Shipping containers were invented in the USA in 1953 when trucking businessman Malcolm McLean gave a lot of thought when, frustrated by the glacial pace of overnight freight transport on the American highway system, he fashioned a set of stackable aluminum boxes and outfitted a decommissioned tanker ship to shuttle boxes of cargo up-and-down the eastern seaboard. In the next two decades, it spread over the oceans to other continents to radically change the face of global shipping. No longer does cargo have to be loaded and unloaded by a cadre of dock workers. Suddenly, the major cost of getting consumer goods around the world efficiently dissolved, and with it, many millions of boxes have been built and shipped, trucked, and trained, and now lived in.

Today, at any given moment, there are about 20 million more bobbing across the ocean or sitting in ports around the world. Union Pacific trains slide them three miles from my Conex home, and hobos know that a ride on a container train is a cannonball to any destination.

The sky is the limit. I think shipping containers will advance to fill into our architectural dreams for city projects, apartments, condos, hotels, and single housing units. Shipping containers are legal homes in California and elsewhere. They are cheap, built like a tank, fit the Golden Ratio, fast to construct, without codes, with high resale value, and can be moved as your heart pleases.

Alex Castaldo comments:

I have never lived in a container, but I would not recommend it. They lack the natural insulation properties of a wood or brick home, so they are chilly in winter and hot in summer. There is also the problem of no windows….

Larry Williams responds:

They work well here in the usvi where folks put 2-3 together for L or U shaped home.

Henry Gifford expands:

A steel box leaks almost no air unless doors and windows are installed in a sloppy way.

In rare cases, a building's heating and cooling loads are actually calculated before equipment is chosen. The job involves lots of measuring, and some simple math in the case of heating, and some fancier calculations for cooling loads.

Having calculated the heating and cooling loads of each room in many buildings over the years, I have found that very roughly half the peak and annual heating loads for a building are attributable to cold outdoor air leaking through the building, about one fourth is heat transmitted (conducted and radiated) out the walls and roof, with the other one fourth going out the closed windows. This is a rough generalization, but about equally true for old, poorly insulated buildings and new, very well insulated and airtightened buildings.

So, the lack of air leaking through a shipping container goes a long way toward comfort - it eliminates maybe half the heating load. And without the usual chemical soup of construction materials (glues, sealants, caulk, paint) in a normal house, the need for ventilation for health is reduced to a smaller amount. As few houses, old or new, are ventilated (few people open windows, as they also admit cold air, hot air, humidity, insects, rain, snow, and criminals), reducing the need for ventilation is a nice thing.

One way to explain the leakiness of normal construction is to point out that a person can hold a concrete block to their mouth (or a piece of a block) and breath in and out at a rate sufficient to satisfy the needs of an adult. I don't recommend vigorous exercise while trying this, but the point is that normal, sturdy looking materials leak a surprisingly large amount of air. The leaking is worse at connections between materials, and even worse than that at connections between assemblies (walls to roof, etc.).

Cooling loads are much more complicated mathematically because of the effects of humidity on indoor comfort, and because a cooling load calculation has to account for solar gain into windows (usually the largest part of a cooling load for a house), internal gains of heat and humidity from cooking, lights, showering, breathing, etc. Numbers for heat and humidity output from a bowl of soup or a lab mouse can be looked up, and are useful for calculating the cooling load on a restaurant or a medical lab.

The total lack of windows, or lack of numerous large windows in a shipping container goes a long way to keeping a shipping container comfortable during the summer.

Bo Keely responds:

You make the mundane details of buildings interesting, and this more than usual. The only air leaks in my container are fork holes where they loaded it over the years. This brought the price down to my wallet. I choose to not plug them near the roof as they vent the air in the summer. Where there is air, there is sound. My almost hermetically sealed box is soundproof. Also, roaches and rats can't get in. These are things money can't buy in Manhattan. I've never been so content.



From Marketwatch.

As it turns out, during so-called rate-hike cycles, which we seem set to enter into as early as March, the market tends to perform strongly, not poorly.

In fact, during a Fed rate-hike cycle the average return for the Dow Jones Industrial Average DJIA is nearly 55%, that of the S&P 500 SPX is a gain of 62.9% and the Nasdaq Composite COMP has averaged a positive return of 102.7%, according to Dow Jones, using data going back to 1989 (see attached table). Fed interest rate cuts, perhaps unsurprisingly, also yield strong gains, with the Dow up 23%, the S&P 500 gaining 21% and the Nasdaq rising 32%, on average during a Fed rate hike cycle.

Penny Brown wonders:

Very surprising. I am wondering why there is a mantra: "don't fight the fed." And "three hikes and a stumble."

Vic adds:

not mentioned is that the average fed rate increase cycle lasts 5 years. there have only been 13 of them since the fed was founded in 1910. usually these is a run of 15 increases once they turn from red to black.

i believe that the fed will not raise until the S&P is much stronger. a very nice close today (18 Jan.)

Nils Poertner comments:

the more talk about rising rates (and neg impact on stocks) the better it is for stocks. to a point of course.

everything is taking to the extreme these days. said to my cousin "eating apples is good for health" - and he replied "eating 10 apples isn't." of course not, but for now it seems so wrt rates.

Paolo Pezzutti writes:

Over the next few days option expiration this month can be an issue for stocks in terms of volatility. Not rising rates in my humble view.

Jeffrey Hirsch agrees:

Performance during January’s option expiration week

Big Al writes:

The Fed has never been sitting on a balance sheet like this, along with the other major CB's. Plus, the aggregate amount of debt is quite high after all these years of ZIRP. This will not be a "normal" rate-hiking cycle.



a fairly unbiased and accurate review of a great book I read or listened to in my quest to duplicate Tyler Cowen's 2000 books in a year. bartelby the scrivener.

The Remains of the Day

Some of Tyler Cowen's book links:

Best non-fiction books of 2021

What I’ve been reading, December 28, 2021

What I’ve been reading, January 10, 2022

Vic's twitter feed



on occasion my opponent from the main stream or main line would try to kill me by hitting their shot with all their mite into the back of my head. this situation is comparable to the voting now.

it's time for my posterity to look back on my career. true, i had a glaring weakness or two, i sliced my backhand and i didn't volley enuf. however, i won 5 national singles and didn't play in 5 others when i would have won because of my ill-timed protest against prejudice.

however i won 3 nationals in a row in straight games holding my opponents to less than 10 pts a game and i was virtually undefeatable for 10 years from age 25 to 34 winning about 60 various major tournaments in a row. i wish i could do it over again but my problem was that i was so good that i didn't have to change and only beat Sharif 3 times out of 14 without adjusting or improving my game. in short, with all my defects, i was good.

the game is much better now than it was in my day. i was stiff after every tournament because i didn't train. i wish i had trained like Aubrey does for running. its amazing he's shooting for a 4 min. and 30 second mile. no one in my family can do under 8 minutes . my best is 8:30. i know.

yet these days the only way to get into an elite school with athletics if you're not diversity is to be a national jr. champ. you definitely have to be close to a 4 minute miler before they'll notice you especially if there's Asian pedigree somewhere.

Vic's twitter feed



like the stock market, the worse the news is, the better the stock market's future, especially relevant is the November 2022 elections. you don't have to be a savant to guess that all the powers of the fed along with the usual suspects will be attempting to build a higher S&P.

i once said that the army of fed people including the thousands they support with grants (used by 50% of all monetary economists) only worry about stock markets and now they leaven this with correct pronouns for which they get positive feedback from the universities. my point is that with all the bad news for Blues during past week, certainly a nadir, the chief capitalist Biden increases his odds of winning the presidency by 1%. imagine what he'll do coming around November with all the suspects from the masters 100 to the schools and swamp lined up.

as my learned brother says: "no way that interest rates will be against him come November." In my naive way, i agree with him that this is very bullish for crypto especially around the election.

[Admin: Learned brother Roy Niederhoffer interviewed about crypto and other issues.]

Steve Ellison responds:

Very insightful comments by the Chair's brother about how one might identify Fundamentals underlying cryptocurrency valuations.

Vic's twitter feed



Laurel Kenner on Substack: Nobody Asked Me, But…



nobody asked me but supreme court chief John Roberts always seems to compromise in decisions to keep face with the popular man and always votes in a way that furthers the Court. (I don't know anything about the law except that it doesn't function well)

nobody asked me but the nite moves in markets are ideally suited to prevent a person who needs sleep 4 hours a day to extricate good profitable positions that should be held with impunity.

nobody asked me but the new appointees of the new administration make me think of a G&S or Moliere play . Stay close to your desk and never go to sea and you may wind up a head of the Queen's navy, especially the DA's who refuse to arrest anyone.

Vic's twitter feed



Received a nice intro note from new spec Mr Ani Sachdev, and it elicits important advice I have for all specs. its not advanced calculus or Bayesian stats or higher. the most important is Finite Mathematics and Differential Equations.

my differential equations book is Differential Equations by Shepley Ross and my discrete math book is Discrete Mathematics with Combinatorics. both are highly recommend but they're both 20 years old. amazing how they've both held up.

Vic's twitter feed



Your vehicle sooner-or-later will get stuck in the sand. It happens to everyone who drives far enough off-pavement. There are many solutions. This best technique is from three decades of driving off-road in sedans and having unstuck them or others at least a hundred times.

I call it the LONG COME-ALONG. The only equipment you always carry is a $35 lightweight come-along and 70’ of strong rope. The beauty of this method is that washes of sand that you cross are lined with anchors of trees or creosotes no more than 70’ apart.

It goes like this. Your vehicle is stuck in the sand up to its hubs. You attach the rope to an anchor which is a tree or around the base of a creosote. You hook the come-along to the rope free end and its cable to the car. Now you rachet the car out without a sweat. I repeat, without the sweat of all other methods. Note that the come-along cable around its spindle is about 8’, so for every 8’ the car moves you must shorten the anchor rope and rewind the cable to inch the car out.

All other systems require a high jack, shovel, traction pads, water to wet the sand, air compressor, winch, or a helper vehicle.

A nifty option can inch you across the Sahara like an Egyptian. Carry your own pipe anchor and come-along. You will also need a heavy hammer to drive the 4’-pipe into the ground, plus a high-jack to jack it out and relocate it.

If you travel a regular route that has a sandy stretch, pound in a permanent deadman anchor at either side of the sand. 6’ fence posts 4’ into the ground work fine. This is how I used to go to and from town for many years on the other side of the Chocolate Mountains.

All the other methods I’ve heard of or tried are toilsome and may give you a heart attack in the summer. Of course, instead, you may pay a standard $750 for an off-road tow.

With the LONG COME-ALONG you may quickly extract others who will tip to cover your original cost of equipment. As usual, the less technical the environment the less technical the solutions to getting around.



a good elementary lesson on combining forecasts as we had. the norm seems to be to average them with equal weights:

Combining forecasts
J. Scott Armstrong
University of Pennsylvania, armstrong@wharton.upenn.edu

Vic's twitter feed



Nils Poertner recommends:

Amazing Grace: Autobiography of a Survivor, written by Grace Halloran

Inspirational book - and it is based on a true story - about a mother who managed to heal her child's eye condition (retina pigmentosa) - and her own one via the use of light (therapy). And this was against all odds.

We live in a world where medical doctor (also financial analysts btw) have all figured it out - it seems - yet life is more surprising at times. The incredible thing with miracles is that they happen….



Kora Reddy points us to courses offered by Aswath Damodaran:

My regular Stern classes start in a couple of weeks, with links below. You are welcome to follow along, for free and no credit:

Corp Finance

Valuation (MBA)

Valuation (UG)



More books

January 3, 2022 | Leave a Comment

books i have been reading or listening to that i recommend highly:

1. The Princeton Guide to Ecology

2. The Princeton Guide to Evolution

3. The Life And Time of Giuseppe Vedi

4. The Life and Time of Gilbert and Sullivan

5. The Life and Time of Johannes Brahms

6. Branch Rickey

7. 100 Statistical Tests

8. An Illlustrated Guide to Theoretical Ecology

9. Mathematics in Action

10. Master and Commander

11. The Life and Operas of Verdi

12. The Long Ships

13. Americana

14. The Hunt for Red October

15. How Inovation Works

16. Life and Works of Mozart

17. every nite i listen again to The Time It Never Rained and Good Old Boys by Elmer Kelton (these keep me from brooding on all the mistakes I've made and put me to sleep)

Vic's twitter feed



A reader writes:

Time's Arrow by Martin Amis, is a novel which plays on topsy turvyness - everything being upside down, time is moving backwards, what is good is bad and vice versa. E.g, the pimp dishing out cash to the prostitute, doctors killing patients, and garbage men adding more trash into the bin.

In our hyper-rationale world- of cartesian thinking - those novels tease the reader and stretch imagination. Saw pics of overflowing trash bins in NYC - so at least one of the examples could be true today?

Laurence Glazier writes:

Thanks for the reference, I didn't know of this book. I have read some of his earlier, more frivolous books, and also some of his father's, Kingsley Amis. I love time-bending themes, but might find this one harrowing.

A reader adds:

inversion theme - also a link to mkts? novice trader: fundamentals first, then price action, whereas more seasoned trader can see the implicit -and more nuances, eg. house price stocks moved up in 2009, then housing boom in the US etc for yrs to come etc. or spiritually - one can find a few other things ….Castaneda /Gurdjieff - on topsy turvy ness of human perception.

Andrew Aiken writes:

Philip K.Dick’s novel, Counter-Clock World, was published in 1967. By a quirk of physics, time in this future is running backward. In this world, people disgorge whole food, greet with “Good-bye” and part with “Hello”, pregnancy ends with copulation, libraries busily eradicate books, and the dead come back to life in the world’s cemeteries. Because libraries control the availability of knowledge, they have absolute power. Even militaries and police are terrified of the libraries. A departed cult leader, whose following has continued to flourish after his death, comes back to life, with devastating implications.

Nils Poertner responds:

yeah, a number of authors of the previous centuries probably could not take it anymore with society's linear attending to the world and wrote books like these. Lewis Carroll's Through the Looking Glass is another one. some are more light hearted and fun to read than others. good for stimulation of novice traders.

Laurence Glazier comments:

Music is interesting here, as whatever I write is heard linearly, even though I sometimes create it as a non-linear fractal structure. It nonetheless works.

Wondering where the Gurdjieff Work comes in re Time’s Arrow? Phillip K Dick was certainly an extraordinary individual.

A reader responds:

Music is about vibration and energy - and more harmonious energy is good for us and vice versa. We constantly rec and send energy even if we don't think so. I'm not huge into Gurdjieff or Castaneda - only know a few bits about this topsy turvyness in perceptions and tend to concur. Would not interest others here perhaps anyway. Will have a look at Philip K Dick.

Penny Brown writes:

I loved Martin Amis's last "novel" - put it in quotes because it's more of a memoir - Inside Story which chronicles some of his early relationships and the death of his closest friend, Christopher Hitchens, and his literary father, Saul Bellow.

Laurel Kenner enthuses:

Androids DO Dream of Electric Sheep! Reading ALL Dick’s books.

Zubin Al Genubi writes:

I've read pretty much every Michael Connelly book.

Laurel Kenner adds:

I have read all of Michael Connelly, William Gibson, Alexander McCall Smith, John Grisham, John D. MacDonald, Walter Mosley, Eric Ambler, Martha Wells, Earl Derr Biggers, Robert Graves, Gene Wolfe, T.S. Eliot, George MacDonald, and Phillip K. Dick. I recommend Epictetus, Publius, Shelley, Keats, James Burnham, and Curtis Yarvin on Substack. Merry Christmas to all Specs.

Ashton Tate writes:

P.D. Ouspensky, a student of Gurdjieff wrote the novel, Strange Life of Ivan Osokin. It can relate to markets as the story tells of a man who meets a genie who is willing to grant him any wish. The man (Ivan Osokin) wishes to be able to go back in time and replay certain pivotal moments in his life with the caveat that when replaying these events he is aware of the things he did the first time in these instances so that he doesn't mess up again. The genie grants him his wish but assures him that even though he may know what not to do in replaying these scenarios, he will still make the same faulty decision anyways, to which he does, again and again. There is a rumor that this book was used as inspiration for the movie Groundhog Day.

Jeffery Rollert responds:

That idea came from Sartre, in Les Jeux Sont Fait (The Die/Dice Are Cast), and should be required reading by all.

Laurence Glazier adds:

Keith Pearson has written several light-hearted, but well-constructed novels on this theme.

Ouspensky believed in a theory of recurrence, in which lifetimes could be repeated. I don’t think that was connected to Gurdjieff’s teaching, though in Beelzebub’s Tales he suggests that themes in history repeat.

Penny Brown offers:

My greatest literary experience this year was listening to the 1862 classic, Oblomov, which came as a free addition in the Plus Catalogue (Audible). The narrator, Stephen Rudnicki, has a beautiful resonant voice and adds just the right amount of ironic inflection.

"Oblomovism" or "Oblomovshchina" is a term has made it into the vernacular as representing all the negative qualities of romantic inaction.

Kim Zussman replies:

Do you mean the qualities of an inactive lazy indolent being? The sentient women I have known would not consider such inambition very romantic.

Larry Williams adds:

Laurel did you read this one: A Friendship: The Letters of Dan Rowan and John D. MacDonald 1967-1974. Like you I read every novel he wrote.

Laurel Kenner replies:

Thanks for the tip, Larry. If you believe, as I do, that politics are not on a right-left spectrum but are more like an elliptical orbit with totalitarianism at the nadir and freedom at the apex, read Thomas Pynchon, With a salt shaker handy.

One additional recommendation: Louis-Vincent Gave published Avoiding the Punch in August, and I think it's the best book of the year. Chair and I had the pleasure of dining with him and his brilliant father, Charles, at the lamented Four Seasons restaurant and found them kindred spirits.

Some chapter titles:
The Asch experiment we inhabit
CYA, the guiding principle of our time
Fighting for relevance [central banks]
Who will survive the unfolding Marxist clash?
Are US treasuries set to fall from heaven?



thank you to all my correspondents, happy new year. let us hope that the same regularities, drift greet us next year. there seems to be no negative correlation between the S&P moves in one year and the next. in other words the 27% gain this year is not abnormally bearish.

on the two occasions that the S&P dropped a little on dec 31 during the last 10 years, it was bullish for all the relevant subsequent periods. however, on the 6 occasions where the S&P was up big over the preceding 5 months, it was bullish for Jan but there was one big decline that occurred around May that brought the expectation down big.

Vic's twitter feed



For those who haven't read it, here’s a pdf of Robert L. Bacon’s book, Secrets of Professional Turf Betting. The book provides a banquet for a lifetime.

But first, it must be understood that while it is possible for ANY man or woman to get started with a lonely deuce or sawbuck and run it up to a handsome amount, it is at the same time impossible for EVERY man or woman to make a living at the races.

The careless, the inconsistent, the people who must be "in action" every minute, the stabbers at the moon, the followers of free public selectors, the people who go to the races "just for fun", the players who are ignorant of the principle of winning, the people who do not keep up to date with all the new ideas and trends — all such people must lose. That is true because every cent of the purse money, the jockey fees, the track upkeep and amortization, the trainer's living, the plater owner's living — and the profits of the consistent bet winners — all must come out of the money lost by the careless and uninformed public.



Many of the richest in the country have 2nd homes here in Hawaii. Each year I count how many private jets come in as a gauge of the economy. The place is packed to overflow full of big new G5's with custom paint jobs. All is good as might be expected at new ATH's. No DC8's with restrictions on Saudi's with Covid.

The place is crawling with tourists and not just the usual grossly obese. This year the crowd is younger and more stylin' with the nice braids and cool leisure suits and headphones and thong bikinis.

SP 5000 next year?

Allen Gillespie writes:

The most applicable economic question for private jets and politics right now are the "Green New Deal" policies. Wall Street loves a free money subsidy. Fundamentally, the Greens seek to raise the price of energy to encourage substitution and conservation while subsidizing their donors. If you disagree you get locked up so you are forced to conserve. Obviously, this creates the paradox of Progressives following regressive economic policies and fascist political policies with a little mix of Cultural Revolution.

It has been well established that oil price "shocks" as defined by a 10% move above 3-year average have preceded 11 of 12 US Recessions by an average of about 5 months. This Bernanke paper suggests if the Fed reacts to the shock, then their actions will account for 2/3 of the damage - Powell indicated in Nov the central bank will be reacting.

In 2018, we had such a breakout and the yield curve later inverted by May with a curve shape indicating that Nov 2019 would be the peak, and the curve straightened out late April 2020.

We had another such energy breakout this October. The yield curve has not inverted this time but it has flattened but I think people are now substituting MEGA cap stocks for bonds which is why the largest of the large outperformed despite the dismal long-term track record of buying the largest companies.

Mid and Small Cap stocks made 60 day lows in December, which would be the minimum objective necessary to discount a recession. If a recession is defined as two consecutive quarters of negative GDP, and stocks lead by 3-6 months, then a 60 day low would represent the potential mid-point. I think the trade in 2022 would be long small and mid-cap name and short MEGA caps if they have been used as bond proxies once the recession is discounted. That trade may have started on The Almanac's January effect by date of the Dec options expiration.

Nature of recession - I believe 2022 will bring a inflationary growth recession. We are at the low point on the demographic U (peak Baby Boom 1957/1958 - low Gen-X birth year 1972/1973) (life cycle spending peak Age 50) - and millennials well into workforce. The exist of the Boomers and China production unreliability are driving up labor costs and goods costs likely in a structural way.

The Fed is reacting to the inflation data, but the 10-year realized inflation rate is 1.82% and the short-term numbers are much higher, so while they will move in the direction of tightening, at the end, we will likely still be left in a negative real interest rate environment. Once they blink, probably in late 2022 because of politics, crypto might have the biggest move yet unless Americans are able to completely roll the fascists.



From Human Error, by James Reason:

People often have an overwhelming tendency to verify generalisations rather than falsify them: this is a fundamental attribution error.

Whatever governs general proneness to everyday slips and lapses also appears to contribute to stress because certain styles of cognitive management can lead to both absent-mindedness and to the inappropriate matching of coping strategies to stressful situations.

Predictable potential for error is the inappropriate acceptance of readily available but irrelevant patterns.

Humans, if given a choice, would prefer to act as context-specific pattern recognizers rather than attempting to calculate or optimize.

Nils Poertner agrees:

so true. chess for kids = excellent - they learn to falsify a "winning path" by looking at all possible defenses of opponents. so many good projects now everywhere -eg St Louis Chess club for kids etc - also see Ben Finegold.

Duncan Coker offers:

Read an interesting book called Scatterbrain by Henning Beck. Humans makes tons of mistakes especially in repetitive, mundane tasks or difficult calculations. Computers do that way better. What the brain is quite good at is forming ideas based on connections, patterns, correlations, and intuition. We are also very good at adaptation and learning from mistakes. AI will be much better and grinding through terabytes of data. But human brains better at separating the wheat from the chaff and making sense of it all.



America is not what it used to be, it’s people are easily manipulated and weak. They do everything the government says without a 2nd thought. It’s sad.

from a chap on Twitter - his name is irrelevant. too many ppl go on about that easy to be bullish about many things in particular in the US of A in my humble view.

Stefan Jovanovich comments:

If that statement were made about any other country of any size from Denmark to China, it would not be taken seriously. What literally unites "informed" and "educated" people worldwide is the hope and belief that this country full of fat people who don't learn foreign languages and do not surrender to the metric system can somehow be brought to heal. What they cannot accept is the fact that the country is so large and various and so maddeningly Democratic that "policy" only gets decided for good after, as Van Buren said, Americans have taken the time to have "sober second thoughts". So, after nearly two years of stupidity, we are to the point where the rules for Covid will, as Biden just said, have to be made by the states. Just in time to disappoint all those "responsible" conservatives there is a majority who want to joinThe Anti-Federalist Society.

Nils Poertner adds:

each country, continent, etc faces its own unique challenges now - eg Germany (and the rest of EU - also UK) sitting on the tracks and the train is coming in form of an energy crisis, among others. and one can say to ppl 3 times that the train is coming :) but better to walk away or profit from it. i don't live in the US. am sure you guys will manage - defeatism was never an American thing anyway.

James Lackey responds:

Hubbert Peak was 1957 and my dad god rest his soul made fun of that til the end of his times. There will never be an energy crisis. It goes against physics. Like jobs and government they can not be created nor destroyed just the way we pay or play is different.

What we fail to realize as American men is the women and children adapt quickly like a finger tap snap! They bitch moan complain and then say ok cool let’s do it differently
Just don’t ask first lol.

What’s remarkable about consulting for me is this general quote: "Everyone wants to know why why why!" I say yes sir so what? I get a death stare then quote von Steuben then shake my head Yes! As I state good enough for General Washington should be ok cool with us.

Nils Poertner replies:

Adapting to a new econ landscape, creating new jobs, finding new mkts, trading etc… and so on - is one thing and Americans are indeed quite good at this. that said…if you step back for a moment and look at the status of human beings around you with some compassion and benevolence - from the heart level - and at what level they are /we are - or society in general - then you surely see or sense that there is a lot of upside potential to say the least….



Sexual selection

December 28, 2021 | Leave a Comment

whenever you see the latest self-serving item (invariably bear) from such luminaries as the sage, the palindrome, or the upside-down man, I think we are seeing male-versus-male competition and the bighorn sheep.

Vic's twitter feed



Test, test, test…

December 27, 2021 | Leave a Comment

after 3 straight years of above 10% rise, what are chances of rise next year? big article in wsj says that banks are skeptical. is this bull or bear? how can this be tested? after a big rise in last 3 months the S&P is neutral to bear 30 days later from 1996 to present.

Vic's twitter feed



Beating the Stock Market, by R. W. McNeel (1926), could have been written by Graham in 1950 and contains the worst advice for customers that could have been given 1000 years ago and is still being given today: "Stocks are to be bought at low price - and only by so doing can one make money." the idea is that when stocks are low, people get frightened and at these times they would not think of taking money out of their banks and buying stocks. the idea is to sell when stocks are high, get out of the market, wait for the inevitable decline and then get back in. This is almost like it was written by Alan Abelson and his current day followers except that even after the 1987 fall where stocks fell 30% to Dow 400 the former was still bearish and called the decline a start.

What are the problems with this approach? (1) the market is more bullish at a new high than at a new low. (2) the stocks that go up the most have a higher expectation than the stocks that are down the most. (3) the market has a 10,000 fold a century drift upwards and thus you can never never be successful if you get out and wait for the "inevitable drop". (4) growth stocks perform much better than value stocks.

Other bad advice in the book which reads like it was written today is never buy new flotations as Rockefeller and Morgan lost money. Rock and Morgan lost money when they didn't stick to their list and invested in railroads. New Haven and Colorado Fuel and Iron were their downfall.

all these counter to the terrible and destructive advice in the book and other uttered today in the media must be tested. I will endeavor to provide such tests here in the near future.

here's a more current version of McNeel but the original book that Alan Millhone gave me as present was written in 1926.

Vic's twitter feed

James Lackey writes:

My immediate question is why are these books sellable? We realized they get published because as Pam might say that’s what book sellers do. She’s one of the many book published experts on this list.

Perhaps Vic's advice which is granite rock solid is that it seems too easy! To be honest I thought that as a young spec. Now I realize this:

It’s hard to be bullish all the time.
Everyone calls us fools.
Then they point out our faults.

If we dare share logic and my goodness statistical data to prove why we are bullish all the time they weaponize our insecurities. The bears are smart and have very good arguments. They can be spiteful mean men. I’d be an old mean SOB too if I was wrong on average about everything.

Alex Castaldo adds:

It has been more than 25 years since I read this book in the reading room of the New York Public Library and I don't have a full recollection of it. I went to read it because it was mentioned in another book (or article) by Dean LeBaron and the library seemed to be the only place to find it. At the time I was reading as much as I could about investing, both recent works and what others considered "classics".

The main point of the book I thought was the importance of independent thinking in investment. The author points out that most people are like sheep and follow what they hear from others. A good investor should guard against this and try to come up with his own judgements. If I recall correctly the author coined the term "contrarian investing" to describe this. He explained that "contrarian investing" does not mean believing or doing the opposite of what everyone else does or believes. Rather it means doubting what others believe and being willing at times (but not all the time) to take a different position.

I did not dislike the book. I did think it perhaps a bit too obvious. If you are going to "outperform the market" almost by definition you have to do something different than what everyone else is doing. Also, it may be easier said than done. Some people, such as the Chair, seem to be good at coming up with their own opinions, but most people are somewhat conventional and it is not clear what they could do to change. Would just being aware of the need to think independently be enough?

I also thought the term contrarian does not seem the best choice for what McNeel is trying to describe. (It sounds like mulish opposition to what everyone believes). "Independent thinking" or the term coined by Michael Steinhardt "variant perception" seem more appropriate to me. But still it was interesting to see what the originator of the term thought it should mean.



 This is one of my favorite stories. I hope you enjoy it, and I wish you a Merry Christmas. — Victor Niederhoffer

High on the mountainside by the little line cabin in the crisp clean dusk of evening Stubby Pringle swings into saddle. He has shape of bear in the dimness, bundled thick against cold. Double stocks crowd scarred boots. Leather chaps with hair out cover patched corduroy pants. Fleece-lined jacket with wear of winters on it bulges body and heavy gloves blunt fingers. Two gay red bandannas folded together fatten throat under chin. Battered hat is pulled down to sit on ears and in side pocket of jacket are rabbit-skin earmuffs he can put to use if he needs them.

Stubby Pringle swings up into saddle. He looks out and down over worlds of snow and ice and tree and rock. He spreads arms wide and they embrace whole ranges of hills. He stretches tall and hat brushes stars in sky. He is Stubby Pringle, cowhand of the Triple X, and this is his night to howl. He is Stubby Pringle, son of the wild jackass, and he is heading for the Christmas dance at the schoolhouse in the valley.

[For the entire text of the story, please follow this link].



Most farmers plant a seed but don't constantly check every 5 minutes whether the seed has grown. They can live with some basic uncertainty called faith in the process. (may be changing now with new farming methods…)

Compare that with modern human behaviour of constantly checking a phone or a stock price or social media - that is not natural behaviour - it is normal though.

If enough behave unnaturally, perhaps we adversely effect the outcome? Too much attention then..? Am wondering whether constantly looking at a topic, or talking about something may adversely affect the outcome, e.g., way too many ppl talk about some strange health issue that started early in 2020.

Stefan Jovanovich comments

Farmers do, in fact, check their field crops regularly using GPS, moisture monitors and cross-checks against the prices of corn, beans and natural gas (used for drying). We humans with our opposable thumbs are permanently addicted to the use of tools. That is the one consistent behavior that has identified our species since we became one. Why? For the same reason sea otters play with rocks and then use them to break abalone shells - making things is fun and profitable.

Nils Poertner responds:

yes, I know modern farmers using more high-tech equipment to survey and manage their crops etc - not all bad - there must be some happy medium though? too much control or trying hard is a sign of deep rooted anxiety and lack of trusting the process. we may see that playing out in many ways now in politics etc.

James Lackey writes:

My brother created a work game. He hired our X bmx team kids that are now young men. He turned work into a game. The pay rate is a days labor. There is no time kept. Play all we want and there is 9 innings. Rain outs only happen in a hurricane. We play a full game. The slaughter rule is if we are up by 10 in the bottom of the 6th we pack up for tomorrow. 70% of the games are slaughtered. He never changes the rules of the game.



Nhlanhla Mhlanga is a bright man. He will soon graduate from Swaziland's only university, speaks fluent English, and has taken many advanced courses in math and statistics. Unfortunately , he still has to work for less than $1/hr.

My son and I are looking to find him work online, his only hope to earn a living wage. If you are interested in his extremely affordable services, part or full time, please contact him. See his skills and contact info.

He is currently reteaching me some concepts in statistics for $10/hr. It is incredible how much money he saves me compared to if I'd hired a similarly qualified tutor in the US. The free market is beautiful.

Vic's twitter feed



The Power of the Dog - typical of the denial of the adventurous spirit, the pathbreaking spirit that made the west a vibrant place. proves the point that any western that's made these days has to show the cowboys as weak and vile, drunk and taking advantage of the minorities. Any westerns these days have to be anti-westerns, showing cowboys and ranchers to be evil. perhaps transgender, mercenary, unfair wasting their life away. this one has the cowboy and dr. as the murderer. so woke. never waste your time.

power of dog– saw two good reviews in woke newspapers, was recommended to me. wasn't completely borrowed form 1902 trail drives like Larry McMurtry. Bronco Henry so contrived. to find out good Westerns of heroic nature, listen on Audible to Elmer Kelton - tells the truth.

NYT has acclaim for it because it dispels and shows the lie of america's foundational myths. that's a real review typical of our times.



Poker, Sex & Dying

December 18, 2021 | Leave a Comment

Kora Reddy recommends:

Poker, Sex & Dying: Inside the Mind of a Gambler

The classic guide for winning at poker is back in print - and better than ever! Praised by poker experts and aficionados for years, Poker, Sex & Dying trained scores of high-stakes champions to play poker better - by learning to 'play" people. The pros swear by Anderson's poker 'Bible." From page one, you'll recognize the character types Anderson identifies - because you've sat across the poker table from them before! Now - face them with confidence, as you use the tips, strategies and player profiles Anderson highlights to beat them in the mind game of poker - time after time.



the bonds were up as usual on the inflation number, -10 today but up 48 ticks yesterday. but stocks went down on the ppi number which presumably has wholesale prices of 1 month ago. as always the market goes where it wants regardless of the news.

James Lackey writes:

Mr Vic Wrote: "calumniate, traduce - wrongfully accuse." the 6.8% inflation rate announced on the cpi for friday was good enough to raise the S&P futures to an ATH on a 1% rise. as mentioned repeatedly the inflation is not a problem. bonds and mortgages predict a 5 year rate of 1.5%.

what's worse is that the current administration is being wrongfully accused of driving inflation up by miles to this rate. when it comes down as will be seen on all future cpi's and eci, one should not credit with the great miracle of driving it down. its was front page news about the horrible spike. its not the fault of bbb so much, what's wrong with all these programs is the opposite of capitalism (i dare not use the word for fear of total cancelation). in any case a great opportunity to go long sp on future releases like last friday.

There is something I need to say. This statement took 20 years to pass. Guys I have never agreed with Victor Neiderhoffer publicly because I had to or for any other reasons than this one: He’s correct.

If we need a reason inflation isn’t ever a problem outside of the printing press or the rigged short term rates set by the central’s for their 12 and only 12 clients, when businesses are left alone to do their thing it is this one which probably comes from Vics books but the gist is: Business men drive profit to Zero!

If you can’t wrap your head around that one think of Trucks in transportation services. There are times in history where Trucks have lost money. It’s not that truck drivers cost too much or fuel or repairs. It’s the business. A truck will take a lower load vs no load at all dead head.

That’s easy to understand. What is driving me more insane, more crazy or best stated by my bmx racing kids is your crazier than usual Mr Lack. Why do industries as a whole seemingly lose on purpose? An example is BBBY or cars in general like Autonation, Sonic et al? Why would any business not.

Text book "pure competition" was described as agriculture in my old books. Why? How why what in the world are they doing driving profit to zero? Please help with anecdotal evidence and stats if we get them.

Here is why: Covid rigged shortage some of these old line businesses like food service Carz and others are running 10% non levered margin profit or triple of what was stasis and as usual driven to zero.

My hypothesis is men never learn as a people. A person is smart but people can be toxic as hades and let’s not forget Every day is better than the years 1942 to 45 at least for Americans.

Duncan Coker observes:

5-year TIPS yield -1.6%, with 5-year Treasuries yield 1.2%, implies a 2.8% inflation rate over the period. Wake me up when it hits 5%.



some themes of the fray. where there is an absence of congealment, the situation is classified as an open game. where there is a binding element, the hudooing of certain pieces (chart patterns) in close proximity to the middle price, the situation is classified as an open position.

as a general rule the fundamental strategy in handling an open game is to make waiting moves taking care not to advance any piece to any square that mite be a liability. on the other hand in the closed game denoted by structural solidity of material, every move made by both withholding or waiting moves are not to be found. therefore it is much easier to lose a game of markets or checkers involving a solid formation through faulty structural developments than it is to lose an open game where it is so much easier to anticipate the results of moves. Champion players seldom lose an open game but they frequently err in the closed game.

if you want to stay out of trouble, keep away from complex arrangements of the market (your pieces with those of your opponent). when you have the choice, play the open and flexibly situated.

Willie Ryan, Championship Checkers Simplified (1951)

Read A Psychiatrist Looks at Checkers from The American Checkerist (1950). Scroll down about half way and click on the scanned pages from the magazine.

Vic's twitter feed



El-Erian Says Transitory Inflation Call Likely Fed’s Worst Ever

There seems to be much agreement on my post about the former partner of the Upside down man. Who are the other useful idiots and why are they predominantly wrong?

why is the big data provider and their major expert writers so wrong all the time? (1) they are always bearish. in line with their former hatred of 45 and now the institutions like the fed that are hold overs. (2) they don't realize that there is a drift in the stock market. (3) which ever market is down the most they come up with reasons to be woeful about it. (4) they have a political agenda that is very negative and very political for what's happening in the US. what other reasons can you think of? can the idea be generalized to the big options firm?

(5) most of their columnists like Mike Lewis and the useful ever wrong former partner of the upside man are highly progressive and tend to be distrustful and angry with what's happening. they fail to take into account regulatory capture and the return on capital investment.

the fed will do its thing and show its relevance. the hatred and shame for the US will be dissipated tomorrow perhaps.

at least the buttoned down pseudo academic former partner of upside down man gave a tell by telling us the low interest rates were much too low on a day when interest rates had one of the biggest declines.

Vic's twitter feed



calumniate, traduce - wrongfully accuse. the 6.8% inflation rate announced on the cpi for friday was good enough to raise the S&P futures to an ATH on a 1% rise. as mentioned repeatedly the inflation is not a problem. bonds and mortgages predict a 5 year rate of 1.5%.

what's worse is that the current administration is being wrongfully accused of driving inflation up by miles to this rate. when it comes down as will be seen on all future cpi's and eci, one should not credit with the great miracle of driving it down. its was front page news about the horrible spike. its not the fault of bbb so much, what's wrong with all these programs is the opposite of capitalism (i dare not use the word for fear of total cancelation). in any case a great opportunity to go long sp on future releases like last friday.

Vic's twitter feed



A music piece by Händel - the Arrival of the Queen of Sheba. One could tell that the organ player is enjoying himself.

So many of us finance do terribly well - financially speaking. But then we see it as toil. Some go to the theater or listen to concert in the eve- but perhaps we got it all backward then?

Laurence Glazier writes:

Let’s remember that Handel was enjoying himself too.

Nils Poertner replies:

Wasn't he a pretty good investor as well?

Most (good) musicians experience life in greater fullness than ordinary folks (like us) and express it via their music, eg, the late US singer Johnny Cash…same thing with him. also good lyric with toil and feeling depressed and the sun comforting him etc. some of my more narrow minded friends are like: "I am rich, I can buy happiness." No, you can't. It is an illusion.

Vic adds:

i listen to verdi whenever i need cheer. every one of his arias and chorus pieces is bite sized to enjoy. verdi was a genius in all things like mozart and brahms. a great investor also was about the richest man in Italy when he passed. maintained amazing secrecy about his mistresses also.

Jeff Watson offers:

Whenever I need cheering up, I listen to Steve Fromholz sing his epic Texas Trilogy, and his Man With a Big Hat. (If that one doesn’t bring a tear to your eye, have someone check you for a pulse.)Beautiful music that celebrates real men, freedom, and the open range.

Adam Grimes writes:

Thank you for the share, Nils. This is a fun piece… I've played arrangements of it literally hundreds of times in church services and weddings, etc.

By the way, if any of you play piano, Handel's keyboard music is vastly underrated. Almost all of it is super accessible and a real joy to play. Worth checking out!

I've been more successful in the past few years finding a balance between my artistic, creative life as a musician and the markets. It's a terribly hard balance to maintain and I haven't quite got it right yet.

James Lackey writes:

The Blues Travelers Run Around, the blues brothers and the prison movies Shawshank Redemption, Clint Eastwood Alcatraz always cheer me.

Verdi is fantastic for its simple yet full and rich chord structure and the similar movie sound tracks. Or how about that chord and crescendo on the TDX patented movie surround sound vrrrrmph there is nothing like the sounds of a properly tuned full blown racing engine at idle then a single thump of the throttle and shut it down to silence.

Simon and Garfunkel the sound of silence is wonderful with the remakes of recent rockers.

The sound of silence trading is one thing, like sunshine itself that is either one of the most beautiful things a day or annoying. The sounds of a single fan on in a room across the hall, a car door, mumbled sounds of laughter on the next block. In a panic as your fingers cut plastic keyboard buttons and you search for an honorable retreat. A big rally, the escape with a proper reduction, back to even you laugh as your holding what you’ve got for the duration as we mumble we should have had the balls to hold all to close.

Then like the sun rising over a few covered manicured field of dreams. You whisper, Put some music on brother…Why is it so quiet in here?

Life without music is death.

Laurence Glazier responds:

Nicely put, Lack, with a great rhythm and turn of phrase. Music is a force of nature we cannot tame, but we can be its instrument.

A quote from the painter David Hockney's latest book, Spring Cannot Be Cancelled:

I intend to carry on with my work, which I now see as very important. We have lost touch with nature, rather foolishly as are a part of it, not outside it. This will in time be over and then what? What have we learned? I am almost 83 years old, I will die. The cause of death is birth. The only real things in life are food and love, in that order, just like our little dog Ruby, I really believe this and the source of art is love. I love life.

Larry Williams suggests:

Food and love?? How about air? How about something to be passionate about—like trading or whatever turns you on.

James Lackey :

Larry as you know "trading for a living" opens up self - I we me - to the world in a very simple output PnL and you can not fake it for long. To complete on the worlds stage full time is to immerse yourself. If you give the market 80% effort perhaps you’ll end up with a 20% loss. Give it 98% maybe you’ll get a 2% profit after expenses and paying yourself a working wage. Go all in and it’s literally limitless. All the money fame fortune a many can ever want.

Take back 2% of your time? The mistress of the market is a very jealous person. If she doesn’t kill you your cohorts running at 100% will.

Trading is one of the best things that has ever consumed me and mine. Yet it consumes me.

Laurence Glazier comments:

Better the passion is in the art than the artist.

Nils Poertner writes:

well said. there is nothing wrong with some healthy ego. but the ego that modern man (modern woman) has formed is perhaps way too narcissistic. We are co-creators in fife and that spirit is encapsulated in many religious books- even by Ralph Walter Emerson. one has to feel it - it has nothing to do with IQ.

In The Gospel of Emerson, Ralph Waldo Emerson is quoted as saying:

"There is a principle which is the basis of things . . . a simple, quiet, undescribed, indescribable presence, dwelling very peacefully in us . . . we are not to do, but to let do; not to work, but to be worked upon."

James Lackey adds:

The gist of whatever m saying comes from my dad and army guys and y’all:
Give a smart man time he finds problems.
Give a real smart guy time he finds solutions.
Give a genius time they find the right questions.

With leadership all 3!work together and create the undiscovered unlimited human potential. Alone without leadership and a dose of pain you get what my dad called "lost souls". Time is the 21st century issue most have too much time to think of problems. Those with solutions have no voice as they live in fear. The genius sit alone talking to the connections.

The genius around the globe never before without a middle man or government wishing some one would take charge and get it done. What is it? That list is now so long it’s an infinity symbol. No begging. No end.

Alston Mabry suggest:

Speaking of music, the Fresh Air podcast has a 3-part Sondheim
retrospective. It's really interesting to hear somebody at that level
talk about his work.

Part 1

Part 2

Part 3




December 10, 2021 | Leave a Comment

Nils Poertner offers:

“There is nothing that man fears more than the touch of the unknown. He wants to see what is reaching towards him, and to be able to recognize or at least classify it. Man always tends to avoid physical contact with anything strange. In the dark, the fear of an unexpected touch can mount to panic. Even clothes give insufficient security: it is easy to tear them and pierce through to the naked, smooth, defenseless flesh of the victim.”

- Elias Canetti, Crowds and Power

Larry Williams admits:

I fear margin calls a lot more than the unknown.

Zubin Al Genubi writes:

I don't fear margin calls due to careful use of risk management techniques as outlined in books by former list member Ralph Vince and Phil McDonnell. Together with diversification its one of the free cards in finance.

Larry Williams concurs:

Me too! My fear of margin calls is what forces RV’s money management rule upon me.

Give Bones asks:

You size your trades using optimal F?

Larry Williams answers:

Yes, a form of it I have adapted it to my trading style.



Bond gyrations

December 9, 2021 | Leave a Comment

bonds gyrating madly to maximize vig and stop out - up 5 full pts last week, down 4 full pts this week. using friday closes. hats off

what is difference between an open position and a closed position in markets and board games and how should you adjust your play accordingly? how to define?

and with all the gyrations bonds have moved from (say) a 1.4% a year inflation forecast to a 1.5 % a year forecast. if these forecasts are too low, which probably they are quite accurate, then purchasers of bonds would be going into probable losses in real money terms.

Vic's twitter feed



three cheers for Lubabalo Kondlo from a shanty town in South Africa who just won (tied) for the world championships of checkers. he is a programmer but is very poor and is suppressed by the South Africa sports authority which is the old English in form. Alan Millhone is the pres of USA Checkers.

World champion checkers player visits Belpre

Lubabalo Kondlo came all the way from South Africa to meet with Alan Millhone, Belpre resident and president of the American Checkers Federation

just some facts: (1) checkers is at least as difficult as chess. it requires precise thinking often 50 moves ahead. with its binary aspect it is the closest game to computer logic. (2) Luba lives in a shanty town and often can't afford a computer or its connection.

(3) While Nelson Mandela was in Robben Island Prison his favorite game which he played often was checkers. there are an amazing number of top checker players living in shanty towns like Luba. (4) Luba is a fine gentleman with exemplary character who is a credit to humanity.

(5) Luba always carried a Wiswell book with him for study. (6) Luba can play 15 checker games blind folded. if i've made any errors in this Alan Millhone will gently correct me.

Arthur Niederhoffer (father of Victor and Roy and Diane) loved checkers. when we visited the first thing we did was to play a game. I never beat him until the day before he passed away. He purposely let me win by a block. he said it was like his body. the incident led to my book Edspec. He said to me at the time (you have a good move) and then i could give him 2 for none and he couldn't move (in checkers when you can't move you lose) the incident I wrote up, sent to my friends. they all said I should expand it. and thus, Education of a Speculator.



with bonds near a 6 month high, forecasting a very low future inflation rate, and oil in the 60s down 25% from recent levels — with gas soon going at $3.00 a gallon compared to $5.00 recently and grains down 25% from highs

the problem with bbb and the others is not inflation, it's pork and socialism, and ruining the capacity of the economy to create jobs

the idea that inflation is a killer falls into the hands of the adversary. r's and libertarians and those on the rite have been sounding the alarm bells about the deficit for 5 years. when will they stop the false alarms?

Vic's twitter feed



anomalous move fri with crude down second most ever down 800 and sp down 130, sixth worst ever. shows danger of politicians tampering with prices ( "baker did it"), a smiling capitalist move that will be blip on momentum of rising constructals.

idea that we will have inflation should be dead with bonds 1 big pt away from 6 month high. danger of tampering with new scare from virus before nov 2022 is rampant.

if only politicians would stop declaring that we have to stop handout and entitlements and pork because of inflation, and would concentrate on incentives and private property and takings and what causes prosperity - everything would be much better.

Vic's twitter feed



Elmer Kelton at 75 retired from writing and 50 years of newspaper work said he often wished to go back to newspaper work because he'd have some time to rest compared to current. His time was filled up with lectures to librarians and elder hostels.

at a school lecture one 12 yr boy was very shy, kept trying to wave his hand and then put it down. finally Elmer called on him: "Mr. Kelton, when you were my age, were you good with the girls?" — he had to think and then said, "No. Why I became a writer I guess."

Branch Rickey, like Stephen Sondheim, insisted on a strenuous journey to give a lecture honoring George Sisler. he said "I'd rather die two years early and have a good life then retire." he died at that speech and 100 tall men came to his funeral in Ohio. The Harlem Globetrotters.

Vic's twitter feed



after a day that went awry from my thinking and some of my followers, perhaps some retrospection. black friday is generally a bullish day with 8 of the last 10 up. bonds were up 200 at 1am with stocks up [Ed: actually down - see below]. that's happened 3 times in last 20 years. 1 of 3 up in stocks.

the european markets were at a low relative to us as of thur close. that's very bearish. the sp went from a 20 day on thur to 20day low on friday. that's never happened before. the big decline on friday the third biggest in last 20 years is very bull for mon. the decline in crude as of 1 am with a big rise of 2 pts in bonds has only happened once every 8 years so not predictive. in general were there any signals? the break of 2700 was the third constructal number in a row without a break. that's very rare and slitely bear.

in retro, there were signs but very rare similar so not overly predictive. the fact that it happened after holiday and it was apparently coordinated sticks out. gold was up before with bonds up 2 pts rite away, with crypto down about 10%. in retro signs but not predictive.

correction - stocks were way down at 1 am with bonds way up, that's bear for stocks but too rare for prediction. the central banks may have wanted to make the camp kindergard progressive and the pres look good — why? nothing stands out as predictive. sp broke a round.

sp broke constructal from above - that's bullish. in short there were too few similarities with enuf bull as bear to make a quant prediction. perhaps the progressive wanted to make the smiling capitalist look good. and the european markets had the thing in advance. that key another correction. the sp on friday went from a 20-day high on thur to a 20-day low on friday. that's never happened before. The robberies of home depot was somewhat telling if not predictive.

that the bird man's favorite store was robbed of hammers telling but not predictive. perhaps that's why p wasn't on duty. telling of thinking of bad country, taking from bad, undeserving people, had red friday instead of black. thanksgiving as day to disparage abundance.

the palindrome must have been happy. he likes a bear raid on vulnerable fridays and he's always bearish, yes for the record i'll answer many readers' query as to why palindrome severed relations with me 20 years ago. i wrote him and asked him and he said he couldnt answer.

4 reasons. i was insufficiently appreciative of his 70th birthday party which was very thoughtful and lavish with ship from cal brought in for after dinner cruise. 2. he knew in advance about vulnerability of the fab nobel trio who were short otm puts, and i was also.

he told me at his house "you're going to go bust but turn over position to me." 3. we disagreed on everything in politics especially government control of capital versus private. and the freedom philosophy. 4 i was poor dancer and was sat next to his Susan at dinner. 5. I am bad chess player and bad tennis player so he found much better than me to recreate wtih him. i gave bak money to his friends but not enuf to keep them happy. we were always opposite on market. he always bear, i always bull. he liked to go for big swings, i had to go for slite swings, since i handled part of his holdings and i had to be fast. i can't think of any more reasons. the aftermath. i met him at tennis tourn shortly thereafter and he wouldnt shake my hand. my family was invited to his home for 12th consec year, and his sec called 1 day before to cancel.

Vic's twitter feed



Markets, markets

November 26, 2021 | Leave a Comment

query: do turning pts in crypto lead and create an inordinate tendency for turning pts in gold? crypto had a turning point with etherium up 7%. gold straight down 60 bucks in 4 days before Thanksgiving.

there is a positive monthly correlation between consecutive months. when prev month is up, the next month is up 70 % of time versus 50% up when the previous month is down. the magnitudes are about 1/2% in the positive case and about 0 for next month when prev month down.

the force of destiny and the 12 inevitable forces. the 13th force is a rising stock market, say 10,000 sp in 2 years and 30000 nikkei very soon. the reasons are regulatory capture, power of compound interest, a 15% hurdle rate for invested capital versus a 2% bond rate, et al.

the triumphal trio - the greatest scholars providing periodic table of markets. i was first person to lionize their work - and hopefully they will abrogate their English Disease in future and will not be predicting a Galtonian regression as in past. [See also: GFD Guide to Global Stock Markets]

Vic's twitter feed



 Thanksgiving is about sharing prosperity, and it's a good time to think about where prosperity comes from. The Pilgrims figured it out in 1623. We'll retell that story as we celebrate the way it lives on in countless U.S. families and companies today. And in particular at one company, McDonald's (MCD, news, msgs), that in its humdrum way beautifully demonstrates the source of prosperity and the American way of life.

The Pilgrims started with so little. They had to hide in England because the authorities considered them dangerous. They fled to Holland but found themselves compelled to take menial jobs. On the way to America, many of the company died. They lost their way to Virginia and landed in Massachusetts just as winter set in. The Virginia Co., their backers in London, went bankrupt and couldn't send relief supplies.

To cope with want, the Pilgrims made the same mistake that so many countries do even today: They divided all their land, efforts, supplies and produce in common, to each according to his need.

As always in such systems, need surpassed supply.

The Pilgrims spent their first three years in America suffering from hunger, illness, cold and infighting. People stole from the common stores "despite being well whipped," according to William Bradford's "Of Plymouth Plantation."

Bradford, governor of Plymouth Colony, records what happened next: "They began to think how they might raise as much corn as they could, that they might not continue to languish in misery. After much debate, the Governor decided that each settler should plant corn for themselves."

Under the Land Division of 1623, each family received one acre per family member to farm. That year, three times as many acres were planted as the year before. Prosperity was not long in coming.

The Pilgrims turned from their Old World system of common ownership to incentives. They didn't go that way out of ideological conviction, but because they didn't have the luxury of waiting for support to come to them.

How many families in America tell the same tale? "When we came here, we worked hard and our lives were better."

But that wasn't the end of the story. Before the switch to incentives, the hungry settlers were at each other's throats. Hard workers resented receiving the same portions of food as those who were not able to do even a quarter of the work they did. Young men resented having to work without compensation to feed other men's wives and children. Mature men resented receiving the same allotments as did the younger and meaner sort. Women resented being forced to do laundry and other chores for men other than their husbands. Many people felt too sick to work.

But when they were allowed to farm their own plots, the most amazing thing happened. Everybody — the sick, the women and even the children — went out willingly into the fields to work. People started to respect and like one another again. It wasn't that they were bad people, Bradford explained; it's just human nature. Adam Smith came to the same conclusion later, and Friedrich Hayek updated Smith's ideas for the 20th century. But we don't need to go back to New England for understanding. Similar outcomes can be seen at McDonald's every day.

For centuries, people on the lower rungs of the social ladder weren't able to eat meat. They ate grains and beans. But people like beef. And chicken.

When McDonald's started popping up in every neighborhood, all of a sudden there was an affordable place for families to eat. Previously, one of the main differences between the upper and lower classes was that the rich could eat out. Even if the poor could afford the tab, they couldn't hire baby sitters, and they couldn't bring their kids to the elegant establishments designed for the rich because they would have disturbed the other diners.

Most kids don't like fancy restaurants anyway. They want fries, not polenta with wild mushrooms. They want fried codfish, not turbot. They want burgers, not lamb chops.

How many people has McDonald's made happy? How many families has it brought together? How many Happy Meals have been eaten there? How many kids have enjoyed the playgrounds? How many tired workers have been able to catch a quick meal? How many women are able to pursue careers and other productive activities and dreams because McDonald's has freed them from the task of having to cook every night?

The Pilgrims might have served 200 or 300 American Indians at their Thanksgiving feast. McDonald's serves 26 million customers a day at 13,700 U.S. restaurants.

For the traveler, McDonald's is a home away from home, offering so much for so little. The restrooms are clean. And McDonald's serves hot strong organic coffee in smooth cups of some wonderful material that keeps liquids hot without burning the hand, shaped to fit into the cup holders that just happen to be in your car, with carefully designed tops that permit just the right amount to be sipped.

No regulator, no fascist dictator, no socialist planner decreed sip tops or cup holders. But how many late-night drivers have died for the lack of a good cup of coffee? What could be more munificent than saving lives?

And the story doesn't end there. Consider the employees of McDonald's. How many people have worked there and learned the most important lesson in America: The customer is always right?

The anti-this-and-that people who demonstrate against profit incentives and free markets like to single out McDonald's as a symbol of modern capitalism. (They don't mean that in a nice way.) As the McLibel Support Campaign puts it: "(McDonald's) has pioneered many business practices that have been taken up by others, and have come to represent a symbol of the way that society is going –'McDonaldization.'" But when have you ever seen an unhappy customer at McDonald's? There couldn't be too many of them, because about 10% of America eats there each day. Given the choice of cooking at home or going to other restaurants — and competition ensures that there are other restaurants — people go to McDonald's because they trust they'll find good food, quick service and value for money. What could be more munificent, more representative of sharing the fruits of hard work than McDonald's?

McDonald's and the Pilgrims are the essence of America. The people work hard, motivated by the chance for profits. They provide a welcome to others, whether to Indians joining in harvest celebrations, or to customers looking to satisfy their hunger. Their work results in high quality, low costs and family togetherness.

Those humdrum, everyday attributes are what makes America great. That's what we should be celebrating. It's the source of all our munificence, from the first Thanksgiving to today.



RR track robberies are a sign of the times. The Michigan Supreme Court judge Mike Cavanagh, whom i played softball with, once told my hobo sociology class that RR property is a prime investment for hoboes because the police have no jurisdiction. The bridges, tunnels, and rights-of-way along the tracks belong to the companies, so It takes a long time for the RR bull to arrive as tramps thumb their noses at the sheriffs.

Now the homeless are encamped along the track stretch from Los Angeles to the Long Beach international yard. This was one of my first rides, in the caboose days, where I walked out the Long Beach container yard and caught a local bus to the downtown Midnight Mission. With a hundred other men, I was subject to a pelvic UV light examination for gray soldiers (body lice) before they let us eat supper. Hobos carry urinal soap in their pockets to thwart the lice so they may sit and eat in peace.

That's the sort of people who are robbing the containers including oriental shipments and FedEx with their doors ripped and hanging open. I predict more of this in the future as homelessness and general national disgruntlement rise. It's a reason to sell short on containers, and with the price driven down you may live cheaply in one like me.

There is no such thing as a secure container. An outlaw who calls himself the Google thief drove up yesterday sunrise on a 350cc Yamaha dirt bike. He rides with a diamond blade saw to remote containers throughout the Sonora, in an expanding radius, and cuts open a door. He had just led a posse of sheriffs and Border Patrol on a merry chase through the desert before laying down the stolen bike under the skirt of a Palo Verde, covering it with branches, and walking on hardpack to a nearby Ironwood. There he watched the authorities drive 10 yards past him. He told me, "I plunder for fame."

Here’s the link to the shipping container heists by homeless at the Long Beach Port of Los Angeles where Louis L’mour worked in this wild, wild west.



The technical book Robustness and Evolvability in Living Systems summarizes research on how living things have managed to thrive and grow, especially by warding off harmful influences of mutation and genetic change.

Central to the solution is that most living things live in a vast neutral space where there are many separate solutions to ward off problems. Central to the solution is the concept of robustness. robustness comes from two mechanisms — redundancy and distributed ways of solving survivability.

the organisms have multiple parts, each with a different role in compensating for mutations and invasions of genetic material. the book is about dna and proteins and how they evolve to create sustainability and preclude fragility.

how does something like the stock market maintain its growth while being buffeted by mutations of economic and political systems and problems such as wars and inflations. how does it cope? the book contains many technical examples at the bio level.

I would opine that the key is the competition between interest rates and regulatory capture of the dominant players. no matter what happens when you can get a return of 15% on invested capital versus 2% on interest rates, the neutral space has a million ways of warding off mutations, invasions and threats. What other mechanism do you see?

Vic's twitter feed



The Speculator: 3 lessons from ace investor George Soros

Kim Zussman comments:

I don't think there is such a thing as an unconditional friend. Everyone wants something - what is friendship if you get nothing out of it?

The same with 'unconditional love'. I had a conditional friend who was a feminist, and she said that her cat loved her unconditionally. I told her to do this experiment: Every day when you come home, find the cat and kick it (obviously just a thought experiment because never be cruel to any animal). After a month tell me about your cat's unconditional love for you.

Stefan Jovanovich adds:

Friendship and love are exchanges, contracts of shared interest and sentiment. Those of us who have endured bad partnerships and been sustained by good ones know that the people who sink the ship are those who are incapable of sharing good sense because they want people to promise to sacrifice "everything" in the name of the perfect union.



Alston Mabry notes:

Some TLDR:
- The US will lead the post-covid recovery, not EM.
- Goods-producing jobs are back which will have a multiplier effect.
- Capex will lead in the US, and total capex is 4x stock buybacks.
- China unlikely ever to exceed US economy. China much more like
Japan since the 90s.
- She likes innovation and recommends ARKK.

November 12, 2021

Be prepared to question many of the negative assumptions you have been hearing and listen to some other data that shines a different light on the outlook. Our guest is a highly respected economist who is no pollyanna. She is just a top economist who looks at data many others miss.

Nancy Lazar is Partner and Chief Economist of Cornerstone Macro. Lazar and her team are challenging the assumptions that higher inflation is here to stay, that interest rates have to go higher and that emerging markets will be the driver of global growth post-pandemic.

K. K. Law comments:

China could be much worse than Japan in the '90s.

Sarah comments:

Is she assuming all manufacturers/categories operate the same way? As much as I would love for this to be the case, there appears to be an oversimplified view of manufacturing that stems from the en vogue ecommerce B2C who typically have less operational personnel, strategic planning, etc. Sales and marketing teams are out in full force to convince manufacturers to buy their products, but many B2B who are currently better positioned and quieter could be the slowest to change.



The Fed talks of the transitory nature of inflation and not raising rates, meanwhile Treasury is offering I bonds at 7% yield to small investors. Seems
to be a disconnect.

Peter Penha responds:

I Bonds Purchases are limited to US$10k a person, the extra coupon is indexed to the Urban CPI (why higher - nothing funny or contradictory it is formulaic)…this was all seen in advance by I series holders who track the urban CPI (which if you believe the rent increase stories - should remain high).

The FAQ is here: Series I Savings Bonds FAQs

Separately I do believe everyone should have a treasury direct account (was made a little more difficult to open one during the GFC) but no fees of any kind and you can leave your money as a certificate of indebtedness (C of I) of the US treasury with 24 hour withdrawal/ credit to any banking institution & you jump the queue among indirect/direct bidders on any US treasury auctions and I believe I read years ago that the original legislation (Ron Paul was part of it) guarantees you cannot be issued at a negative interest rate even if rates are negative for financial repression purposes.

Was about putting the little guy/gal first.



Kora Reddy writes:

triumphal trio's year book copy cat

GFD Guide to Global Stock Markets
197 Pages Posted: 18 Nov 2021
Bryan Taylor
Global Financial Data
Date Written: October 18, 2021

The paper provides comprehensive coverage of the performance of financial markets in 25 countries and 3 global markets. Topics include nominal and real returns to stocks, bonds and bills, the equity risk premium, bull and bear markets, stock and bond yields, stock market capitalization, government debt as a share of GDP, the exchange rate and an overall analysis of returns to financial markets in each country with information on the sources used.




November 20, 2021 | Leave a Comment

With crude down 10% in a week, at the lowest level at $75.00 a barrel and bonds within one or two points of all time high, the idea that inflation is the big problem, and thanksgiving prices and black monday are going to cause great distress and inflation related things

inflation is going to be very mild and this should be good for the recent diagnosed president and his agenda

all around enterprises ane front running black friday by starting their bargains a week or two in advance. it should provide a lesson to traders as to how regularities get telescoped and dissipated well in advance of expected date

Vic's twitter feed



New card game by an entrepreneur who is a former web-mistress's fiancé. Any assistance you give him would be appreciated and I believe helpful to you and any kids you know.

Kickstarter: Call of the Wild



Stein’s Law

November 16, 2021 | Leave a Comment

p taking cold bath and doing stretching exercises

Rocky Humbert writes:

countless macro parallels - fiscal, monetary and social - to the 1960's. few of us remember that period, fewer of us were market participants during that period, and none of us kept our punched cards. rocky says good time to review Stein's Law.

Vic replies:

very nice to hear from rocky. a man of wisdom and poignancy and profits. p's law may augment.

i still have my punch cards and cassettes from the 60's. now i will look up steins law. from 25 years ago, whenever i heard from rocky who was named by a white shoe flexion many years ago, it was to point out how trend following was about to or had recently buried me.

stein's law appears to be that a big trend will stop because it can't go on forever. however, there is a law of consilience and beauty i will quote from p shortly and until the nikkei hits 30,000 there is no beauty.

thus i think that rocky's message to me form 25 years ago is resonant but different. i believe he warns me and my meager followers not to be overly bullish.

a quote from P's forthcoming book Time and Beauty. "the connection between beautiful images and ease of grasping and understanding serves as basis for the brain design known as cognition. this is why art occurred in cavemen."

It was robert rubin who gave rocky his name because he was part of the rocket scientists at that white shoe firm and even then the treasury secretary was flexionically in the clouds.

the boys on investicon have a system. buy to sell higher and sell to buy lower. one could wait a long time like 50 years for the latter to work. reminds me of the only time Lorie sold futures some time in 1986. he had a 200 point loss and bailed out on oct 19 1987. never sold short again.

the amazing thing was that the palindrome during the 12 years of our association was bearish on stocks 90% of the time. yet he made money. perhaps the two tennis cans and the back ache were the key.

Vic's twitter feed



Trading lessons

November 15, 2021 | Leave a Comment

thanks for the comment about being one of best traders of all time. many people including my wife and black swan acolytes think i am one of the worst. the idea is fanned by the new yorker article calling me the blow up artist. upon reflection, i couldn't defend myself during the new yorker article because i couldn't give my position away. as to why i lost so much from selling out-of-the-money puts, i now conclude that because of the small number of market makers who had positions against me, and who made the rules and margins, that left me vulnerable to "concerted" action from those with opposite positions to me. i did not have the wherewithal to withstand the moves that were dissipated as soon as margin forced me out, and prices started rising again. i should be tarred because i put myself into this position where i could be broken so easily by my adversaries. other than my forays into selling puts, i have done fine mainly because i have always been bullish following lorie and dimson and now p.

gave all the gross proceeds to my customers. one other thing i learned from the debacle was never to bring a legal action as the cost of pursuing it is always greater than the expected recovery. i wish i had followed this in my merger business where i stupidly insisted on full payment of my fees and brought action to recover the last 10% or so that my customers wished to chisel me on. as I am 80 yrs old, i am tired of being tarred and feathered for my lapses in 60 years of trading. thank goodness, i was able to recoup for my 7 kids and 13 grand children and they are free to pursue whatever career and education they wish because of the good trading i made to offset my lapses in selling otm puts. btw i've learned my lesson, and haven't sold any puts for 15 years and don't advise others to do so even though with point and click trading there are more than 2 market makers on other side these days.

Vic's twitter feed



why would someone buy a bond paying 2% interest for 30 years if the expected inflation was 5% or more a year? There is a growing fallacy among R's that inflation is going to ruin us. but the bond rate shows that expected and actual inflation is going way down.

This should provide a big boost to d's before the nov 2022 election. and a tremendous disconnect in the way the public is contemplating one of the hypothetical but transitory and ephemeral problems that they attribute to bbb and other boondoggles.

much more salient is the diversity, equity, inclusion tests that are explicit or implicit in all government and masters 100 regulatory capture firms.

it is distressing to see someone like victor hanson and so many other clear thinkers so wrong-headed about the problem of inflation. long term bonds are up in price about 4 pts since sep month end.

the problem with bbb is not increased inflation or deficits but replacement of private control of capital with government, socialism and pork.

Vic's twitter feed

Theodosis Athanasiadis comments:

I believe it is prudent to separate expected inflation and expected real rates when one looks at nominal rates. You can look at the tips and get those numbers. Right now expected inflation that the bond market is pricing is the highest it has been which means that rates have stayed low because of zeroish expected real rates. In other words the bond market is pricing a sort of stagflationary environment for the next 10-30yrs. How likely that is is an open question.

Some other things to keep in mind:
- 30 year rates are weighted averages of future expected inflation. At some point the fed will tighten and this will stabilize inflation creating a mean reversion. This is what drives the yield curve flattening
- bonds historically have offered a crisis protection which in theory means one can hold them even if he expects negative return as a cheaper alternative ie to buying puts



There's a great deal of money to be made being bearish…as an investment advisor or publisher.

There is a great deal of money to be made being bullish as a real investor.

Nils Poertner comments:

generally true agree. easier to sound scepitcal in life - no academic person normally wants to sound like a constant cheerleader

that said, maybe next 2 yrs different than last 2 yrs - and lots of refinement, creativity, imagination needed as in right hemisphere type of job

James Lackey writes:

Of course there is a lot of money made by doing nothing as well. Sell premium but the argument is not how to make money the argument was: What’s the cost? Time and price are currently market marked and what’s the mystery? The future time and prices. What’s the cost of carry the opportunity cost how many calories are being expended by being long short flat

Thermodynamics of the entire system comes to mind:
The market eco system
The firms eco system
Your inner voice peace or
In my case: Brain damage from Cognitive Dissonance

Nils Poertner expands:

Health (incl mental health) is already a huge topic not just for ppl on this list. coz our lifestyle is often normal these days but still unnatural. And we have lost touch with what is natural a bit..

Eg. light. we need light - daylight eg. the amount of time we spend indoor is like 3pc on average in the US (compared to 10 many decades ago)- am speaking about kids - it is probably the same for adults or worse.. Also ppl chroincally jetlagged without ever having taken a flight as they use too much artificial light /don't get enough darkness /sleep at nite. (eg I used to trade Asian fx during European hours …. - you can imagine how my body clock got out of whack etc etc etc)

see Jacob Libermangood intro on light, vision and health

James Lackey responds:

This is fantastic! The Huberman Lab agrees a… The brain is the eyes and the eyes literally pop out of the skull during development. Light is s key to good mental health!

Andrew advises to watch the sunrise and sunset daily. My Lack Hack to reset or to maintain the body clock meme is Planet Fitness. My hypothesis is if we watch the fireball in the sky dip from horizon it’s about 2 minutes from bottom to top if your on a British Navy ship a few hundred years ago it was a simple task and all hands on deck. If we are on the equator this is 12 hour days.

Shakelton in his arctic voyages had a big problem. In Alaska Army guys have a point in the year of incredibly low sunlight or 24 hours of dark like an eclipse day and 24 hours of blue skies at night. The Army and the British navy always find life hacks to be fit for duty

Ok so you want to fall asleep by let’s say 9 pm tonight? Get up 3 am and blast yourself in stand up tan room at planet fitness! It’s close then a few minutes before dawn get outside and literally stare at the color change of the shy at nautical sunrise which is before the fireball

The Huberman lab falsified my hypothesis that’s it’s the 2 minutes it take for fireball to go from top to bottom. That doesn’t work. What does work is the change and range of colors of the sky the light refraction. Then why the lack hack do planet fitness 18 hours before exact bed night go to sleep in a cool dark silence room?

Because like trader it’s the duration and the magnitude of the sunlight daily! Ya see in S Florida a very light skinned person has to be careful due to the magnitude of the sun on skin cancer spectrum. Therefore the duration and Magnitude is imperative for physical and mental health. When I realize that I shut all lights off in my house when my daily sun limit was maxed out IR too much sun at beach and bmx track I said omg!

So the falsified hypothesis led to another it’s not only the eyes signal the brain chemistry the sun rise plus 16/18 hours you see sunset and boom you can sleep. You need f(X) amount of physical sunlight and duration and magnitude must be maximum for your body skin etc/brain chemistry and dna what ever the hades all that must mean.

I’m genetic white Nordic and I’m tricking my eyes to signal it’s brain to think it’s Summer Solatice in Fall or best Winter

PS trade the Dax vs SPU for a bit and live dad bmx dad life it was too hard until we used science!

Larry Williams adds:

Increase telomere length

[For example: Lifestyle Changes May Lengthen Telomeres, A Measure of Cell Aging]



H.L. Mencken Quotes for the Cynical Soul



A Chinese company that read this post contributes their writeup on wind power:

Interesting Facts You Should Know About Wind Energy



several inquiries have asked me about the University of Austin. if you've ever tried to advise a very sick person to travel away from home and other who takes care of them, you know that they won't go from home. same is true for profs. they like it if their univ provided freedom but they have too much invested in tiaa and home and faculty club to and accoutrements to and stasis to move.

one notes that the pres of st. johns annapolis is heading the new univ of austin. i've seen many colleges that my family and numerous grandchildren have gone to. st. johns provided the best education of all. that a pres of this quality is willing to start over is amazing.

Vic's twitter feed



Bonds and stocks

November 9, 2021 | Leave a Comment

after being away from markets with my duke medical school daughter and husband for a few days, I come back and note for sure that bonds are at 163.10 and this has to be very good for inflation down the road or else all the trillions of sagacious bonds investors will lose.

what is impact of this rise in bonds on stocks? out of 17 most similar since 2017, one notes that 16 of 17 are up big 10 days later. i don't calcualte in percentages but the algebraic changes are up 60 big points starting with todays 2pm.

Vic's twitter feed



I discovered a unique feather in my cap today. I have become the first consultant to three garage industries that have become #1 in the world of sports. In Racquetball, I helped Leach Industries design their first fiberglass racquet in the 1970s. In Paddleball, I did the same with wood paddles for Marcraft tin the 1980s. And, in Pickleball, today Randy Stafford credited me with his move to China to become the top seller. Each manufacturer started piecemeal in a garage. I was living in a garage at the time, and have moved to a shipping container and invent hiking boots.



back from a trip seeing P. he believes that one of the reasons for consructal numbers is the ease of remembering and the beauty of the least effort in achieving a goal. 4700 very soon and then 5000.

p is the tony hawks of thermodynamics - not by chance the champion of predicting markets. while he is the most cited of all the professors in the engineering department of duke, he is treated like a pariah. not one of his 25 proposals for funding has been approved in last 5 yrs. is it sad to see him suppressed by the climate change boys at his school and the fed science institutes that provide all the funding for the school at the height of his powers, while 99% of universities are virtue signaling in order to regulatory capture. his univ is one of worst. one presumes that he would be anticipating a 100 on crude and a 100k on bitcoin.

a quote from P's forthcoming book "time and beauty" physics of why we are attracted to images that we grasp and understand easily and fast, we tend to remember these as beautiful. a beautiful body is said to be well-proportioned. proportioned are all the preferred objects presumably the round numbers fit in as beauty and fast

Vic's twitter feed



JS Bach was once asked why he wrote so much music.

His answer:
1. "To the glory of God" (not sure whether he meant it, nevermind)
2. To amuse himself.

Maybe some like this piece here as well:

Bach - Concerto in D minor BWV 596 - Van Doeselaar | Netherlands Bach Society

In the first notes of the Concerto in D minor, performed by Leo van Doeselaar for All of Bach, it is immediately clear that this is not the usual Bach. This piece is an organ version of a concerto for two violins and orchestra from Antonio Vivaldi’s L’Estro Armonico. Vivaldi’s music was popular throughout Europe and Germany was no exception. During his years at the court in Weimar, Bach made a series of arrangements of Italian concerto music for organ and harpsichord, including six concertos by Vivaldi.

Gyve Bones adds:

From 20 arguments for the existence of God, from Prof. Peter Kreeft, Department of Philosophy, Boston College:

17. The Argument from Aesthetic Experience

There is the music of Johann Sebastian Bach.
Therefore there must be a God.

You either see this one or you don't.

Alston Mabry writes:

There is a scene in Professor T (Antwerp version) where T is talking to his cellmate and says very sadly something like, "Is there a God?". And his cellmate says something like, "There is Bach. Bach is God." And T smiles and says "Yes, Bach is God."

Peter Saint-Andre offers:

A quote from Pablo Casals:

For the past eighty years I have started each day in the same manner. It is not a mechanical routine but something essential to my daily life. I go to the piano, and I play two preludes and fugues of Bach. I cannot think of doing otherwise. It is a sort of benediction on the house. But that is not its only meaning for me. It is a rediscovery of the world of which I have the joy of being a part. It fills me with awareness of the wonder of life, with a feeling of the incredible marvel of being a human being. The music is never the same for me, never. Each day it is something new, fantastic and unbelievable. That is Bach, like nature, a miracle!

Nils Poertner responds:

that's great. I always try to listen in the moment - whatever works for ppl - life works a bit by invitation anyway. one can't force stuff. a basic sense of joy and harmony is certainly missing in our era (the media, the drama etc outside).

Jeffrey Hirsch recalls:

An English professor whose class I was in asked the question why people write poetry. Answer: Because they have to. Similar reason why Bach wrote so much music. Because he had to.

Richard Owen wonders:

Does Bach have an Onlyfans? I can't see it in the search.

Laurence Glazier suggests:

There are free versions of Sibelius. May I recommend the pleasures of composing now available to all?

Richard Owen admits:

Thank you Laurence, an answer from a real musician of note I think? I should therefore disclose, because you are a decent and proper individual of good character and standing… my question was touched with satire. Google Onlyfans via google news, and you might learn something about the debasement of our culture.

Nils Poertner makes a connection:

btw…I always wondered whether one could re-train a musician becoming good trader? Why? Coz good musicians (of any style) tend to enjoy the process of learning - and are the complete opposite of end-gainers. perhaps they are not interested in financial markets enough- otherwise it would be an interesting project. any idea?

Duncan Coker writes:

I am not in the class or universe of LG in terms of composing, but I do write country songs as a hobby. One thing I have found useful is, often I have to throw something away that I thought was good, a melody, a lyric and start from scratch. The more easily and quickly I scrap an idea, the easier it is to start over. You can't force it. This is true for trading.

James Lackey expands:

Dunc is not gonna get mad at me because we never argue. However sure we can force it and to add to the comment of "those people". As if a career makes a man!?)@“”

Anyways path dependence omg I sound like the geek I am. Ok in a sport or music the pleasure has to be the process of practicing or doing it every damn day. As parents we teach this as in brush your hair teeth good girl boy kiddo! The pleasure of rewriting written words must be higher than start from scratch or least effort kicks in no?

I do not care if she likes my poems. I love them. I’m not sure if it’s a coin toss but I can’t fathom whether I like the poems I wrote in one blast or over 6 hours weeks days or? Good is good and great is better than 6 years ago and awesome is when she says so.

I wrote an awful poem once. Many bad but awful because you can hear the blood hit the floor. I gave it to a song writer buddy and he said damn that’s awesome. I said write a song. He said no man you never write over another mans blood sweat or tears.

In trading the get the joke one liners or 5 lots are cute and won’t hurt anyone much can’t kill you but will never inspire romance. The all in big line can and will get you the one, the forever girl or death one way or the other every 7 years death to the marriage of business and of the romantic life.

They say you’ll get what you need out of trading the market. I think perhaps that’s what separates us from the other guys. We need we want we just can’t help ourselves, we need everything. We want it all!

Adams Grimes writes:

I do think there are some fairly intense connections between music and successful trading/investing. There are the obvious issues of "sticktuitiveness" and grit… I'm currently working my way through one of the Bach Partitas and spent about 4 hours yesterday on 2 measures of music. (For reference that's probably 4-6 seconds, when performed). That degree of focus on detail is absolutely normal for musicians, but is not normal for most peoples' experience, at least in the modern world.

In markets, we get kicked in the head (if we're lucky) or the balls (or, more likely, both) on a regular basis. Some degree of stubbornness and a willingness to just not give up.

I think there are also some profound tie-ins in terms of pattern recognition. For me, I think this worked both ways… after taking a decade away from music I discovered my "musical brain" and compositional skills were probably better than they were, in some ways, when I was focusing my life around music. (My keyboard technique emphatically DID NOT improve, as that's something that does take a fair amount of maintenance.)

Serious, important, and maybe even interesting epistemological questions lurk here.

It's hard to have a favorite Bach piece… his works are surprisingly even in quality across his output, but let me share one that is at the top of my list. This has always been one of my favorites:

Bach: Trio Sonata in G major BWV 530 - I. Vivace - Koopman
(And, for sounding so simple and transparent, it's a nasty little nightmare to perform!)

Gyve Bones harmonizes:

I first heard this performed in the 1970s by Walter/Wendy Carlos on the “Switched-On Bach” on Moog synthesizer, and it has remained a favorite piece of music since then. There are various settings of the piece for guitar and piano as well. Here is a full symphony rendition… It is a song of gratitude to God for his many blessings.

Bach - Sinfonia from Cantata BWV 29 | Netherlands Bach Society

Peter Saint-Andre responds:

I had a similar experience with one of the Bach Cello Suites last night. There is much effort (both time and concentration) involved in learning these pieces. And he probably just dashed them off!

BTW, many years ago there was a software company that specifically recruited music majors because they were highly trainable for programming. And music majors also scored quite high on the even older IBM Programmer's Aptitude Test.

Adam Grimes comments:

And he probably just dashed them off!

This, for me, is one of the biggest and probably eternally unanswerable questions in music history. I suspect our performance standards today are probably far higher than they were historically. It's possible we have an army of at least highly technically competent instrumentalists who've devoted more time to, say, the Chopin scherzi than he ever did himself. We know that Beethoven's playing of his own pieces was, according to contemporary accounts, thrilling but filled with mistakes. When Czerny (a student of Beethoven) proposed playing Beethoven's pieces from memory, Beethoven replied that it was impossible to get all the details without looking at the score… and then admitted he was incorrect on that assumption.

Reading between the lines of what CPE Bach wrote (the Essay on the True Art… is a must-read) I suspect contemporary performance practice was much more improvisatory and perhaps less detail-oriented than we'd expect. We know many of these Bach cantatas were written, rehearsed, and performed in a week. These performers were not super human… the only thing that makes sense to me is that our performance standards and expectations (which approach technical perfection, due to the advent and growth of recording) might be much higher than in past ages.

But perhaps I'm wrong on that.

Interesting on the programming front. I would think those are two quite different modes of thinking (and knowing the expertise is domain-specific in many cases), but I'm a far better programmer than I should be given my level of actual training in the discipline. Maybe there's something to that.

Peter Saint-Andre writes:

In his book "Baroque Music Today", Nikolaus Harnoncourt notes that before music was recorded, people most likely heard any given piece of music only once and didn't want to keep listening to the same music over and over as we do but instead continually sought out whatever was new. Perhaps there was a sense of discovery as composers explored the potentials of the tonal system; once those potentials were exhausted and composers started to produce extremely chromatic or even atonal music in the 20th century, listeners were turned off by the new and sought refuge in the old (thus Western art music ceased to be a living tradition for most listeners). Thankfully composers like Adam Grimes and Laurence Glazier are bucking that trend!

Laurence Glazier writes:

One would expect coding and music skills to be correlated. A symphony is partly an encoded instruction set, whether performed by a computer or an orchestra. The conductor is the "crystal", the timer that pumps the flow. But oh, so much more, than that.

It would be very hard to combine the music and trading fields. To be attentive to the Muse and the S&P at the same time? Surely both are all-consuming. But trading, with its psychological dimension, of self-awareness and development, is a fine path. Alexander Borodin managed to combine composing with a distinguished career in science, as did Charles Ives in insurance.



Jeff Watson writes:

Proposition bets have been around since the beginning of time. They capture the greed of the victim and put money in the pocket of the prop hustler. Proposition bets rely on the greed of the victim combined with the ignorance of the real probability of what they are betting on. Most good proposition bets are of the sort that will give the victim at least a small chance of winning, the bets that allow the victim no chance to win aren't really bets, but swindles. Although I'm not a fan of swindles, there are some very elegant swindles out there. The book only mentions a couple of them.

Owen O'Shea has presented 50 different proposition bets, mostly in the card, dice, or numbers categories. The real beauty of his short book is that the author kindly explains the math behind each of the prop bets in easy to follow detail. The math is very friendly to those math challenged individuals who might read the book.. The description of each wager and the subsequent true odds of the outcomes allows the reader to "see" what's under the hood for each bet.

The bets described in the book could be easily modified for different situations. For example, he describes the birthday problem wager, but also describes a wager that is a kissing cousin to the birthday problem. I could think of 15 different scenarios that one could apply the same principles of the birthday problem.. All of the other wagers mentioned the book could be expanded upon in this manner.

O'Shea's book is brand new, July 2021, and I highly recommend it. It is an easy read, which is surprising, considering the level of explanation for each bet. This book should be included on the shelf of every library of those interested in gambling, probabilities, math, cards, dice….and for those with a touch of larceny in their hearts. For the beginning proposition hustler, this book could be a bible.

When I was a young man about to go out into the world, my father says to me a very valuable thing. He says to me like this… "Son," the old guy says, "I am sorry that I am not able to bank roll you to a very large start, but not having any potatoes which to give you, I am now going to stake you to some very valuable advice. One of these days in your travels, a guy is going to come to you and show you a nice, brand new deck of cards on which (Sky snaps fingers) the seal has not yet been broken. This man is going to offer to bet you that he can make the jack of spades jump out of that deck and squirt cider in your ear. Now son, you do not take this bet, for as sure as you stand there, you are going to wind up with an earful of cider."

- Sky Masterson "Guys and Dolls"

Stefan Jovanovich adds:

The prop bet was whether Mindy's (actually, Lindy's) sold more strudel or cheesecake.

Vic comments:

all prop bets on S&P from short side are losers. in sports betting you can win if 52% against the line. is that better or worse than markets? how can you beat the 52%?

Henry Gifford writes:

After hearing about the book on the list, I bought a copy. Thanks for the tip. I particularly looked forward to having the examples explained.

I started reading the introduction, which starts with an explanation of the Monty Hall paradox.

Now let’s get something straight – the problem described in the book is described as being a description of the game that was played on TV. All such explanations I have ever heard also say they describe the game that was played on TV.

A hustler offers a mark the option of choosing which one of three doors (cards in the book) is a winner, with the mark betting $10 for a chance to win $10 for choosing the winning door. The three choices are designated A, B, and C.

In the example given, the mark chooses A, then the hustler reveals that C is a losing option, then the hustler gives the mark the option of switching to choice B. The book then explains the mark’s situation as follows:

Here’s the thing. If you do not switch, your choice of picking the [winner] is 1/3, so think of the other unturned card as the “winning card” with probability of 2/3. Therefore, if you switch 2/3 of the time, you switch to the [closed winning door]. Consequently, by switching you double your chances from 1/3 to 2/3 of picking the [winner].

Suppose a con artist is offering this bet to various marks at various locations. At a bet of say, $10 a round, where the mark wins, they win $10. About 1/3 of the time the mark will choose the wrong card. If the mark decides not to switch from their original choice, they lose. This will occur about 1/3 of the time. But the hustler wins about 2/3 of the time and therefore for every $10 the mark wins, the hustler wins $20. Therefore, the con artist is winning this bet 2/3 of the time and in so doing, is making a tidy profit.

Then the book names a famous mathematician who was fooled by this bet, then changes the subject.

I don’t see any explanation of the paradox, and a lot of other things are not explained in any way I can understand.

For example, if switching improves the odds from 1/3 to 2/3, why would switching 2/3 of the time improve the odds to only 2/3? And what is the assumption of the mark switching 2/3 of the time based on?

And “If the mark decides not to switch from their original choice, they lose.” Huh? They lose all the time by not switching? But the previous sentence says the mark wins 1/3 of the time if not switching.

Another gem is “About 1/3 of the time the mark will choose the wrong card.” Really? I thought that with one choice out of three cards the mark will choose the wrong card 2/3 of the time.

And, at the core of the issue, the claim that switching improves the odds to 2/3 is not explained.

Of course the greatest paradox is that the book is about proposition bets that appear to be better bets than they really are, meanwhile the bet described says the mark is betting $10 to win $10 on a choice of one out of three options – a bet which does not appear to me to be a winning bet, as the hustler has a 2/3 chance of winning. Then, after the “paradox” is allegedly explained, the book explains that the hustler enjoys odds of winning of 2/3 because of the paradox. So, the hustler’s odds of winning improve from 2/3 to 2/3. Just how much did the hustler gain by improving his odds of winning from 2/3 to 2/3? This is another thing I don’t understand, and don’t see any explanation of.

This leaves me with zero faith in the accuracy of anything else in the book, and zero faith that anything else in the book will be adequately described. Or, at least, explained in a way I can understand it. My copy is in my garbage can, but I can retrieve it and mail it to any list member who asks for it.



this, versus never

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an excellent read showing that motivations especially jealousies have not changed in 10,000 years

Troy: The Greek Myths Reimagined

[The first two in the series are also excellent. -Ed.]


Heroes: The Greek Myths Reimagined

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…in the U.S. stock market

WSJ: U.S. Stock Market Faces Risk of Bumpy Autumn, Wall Street Analysts Warn
Investors have pushed the S&P 500 to 54 record closes in 2021, making some observers wary

After a record-breaking bull run for the U.S. stock market this year, many Wall Street analysts are starting to warn that investors could be in for a bumpy ride in the coming weeks and months.

Analysts at firms including Morgan Stanley, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. published notes this month cautioning about current risks in the U.S. equity market. With the S&P 500 already hitting 54 records this year through Thursday—the most during that period since 1995—several analysts said that they believe there is a growing possibility of a pullback or, at the least, flatter returns.

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those ETF's (about 240 that i track) which at least have 15 or more years of trading history, with 1/p-value > 20, sorted by Sharpe, returns details since Y2K:

November statistically significant seasonal bets

Nils Poertner suggests:

seasonality = some relevance - but perhaps other mkts than equity deserve some attention?



Ground Zero of Woke

Unless the university itself is rebooted, its rejection of meritocracy, its partisan venom, its tribalism, its war with free speech and due process, and its inability to provide indebted students with competitive educations will all ensure that that it is not just disliked and disreputable but ultimately irrelevant and replaceable.



how much of masters 1000 and airline regulation and coke and walmart and sports leagues and the stock market in general can be explained by this:

George J. Stigler, "The Theory of Economic Regulation"

In the field of regulatory policy, few articles have achieved the impact of George Stigler’s "The Theory of Economic Regulation," published in 1971. Stigler punctured the idea that regulation arises solely to advance the overall public interest by correcting market failures. He forcefully argued that instead “regulation is acquired by the industry and is designed and operated primarily for its benefit” (p. 3). Although Stigler never used the phrase “regulatory capture” in “The Theory of Economic Regulation,” his article has nevertheless come to be so identified with the idea that regulation serves private interests that it is hard to find any serious discussion of regulatory capture in the last 40 years that does not at least cite Stigler’s work.

From WSJ, 2014:
Regulatory Capture 101
Impressionable journalists finally meet George Stigler.

The financial scandal du jour involves leaked audio recordings that purport to show that regulators at the Federal Reserve Bank of New York were soft on Goldman Sachs. Say it ain’t so.

The news is being treated as shocking by journalists who claim to be hard-headed students of financial markets. One especially impressionable columnist calls it “a jaw-dropping story about Wall Street regulation.” The real scandal here is the excessive faith that liberal journalists and politicians continue to put in financial regulation. The media pack is discovering regulatory capture—a mere 43 years after George Stigler published his landmark paper on the concept.

Willem H. Buiter and cognitive regulatory capture:
Lessons from the North Atlantic financial crisis

lets take the big Pharma that held back its announcement that it had a vaccine and it was effective for covid—-held back announcement for day after election. then received 100s of millions of orders and reg approval after election - as well as airlines receiving millions if they ageed to body tape all those that mite vote against who didnt maintain the semblance that masks worked. what other examples can you give besides big P and airlines?

For more examples:
Regulatory capture

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Yes, it is a different mind set and self fulfilling. I am thinking about replacing some wood flooring and got a quote and now makes me think better do it now before the wood becomes less available and/or more expensive. Meanwhile cash is losing 5% this year. Multiply this mindset x 100m people and you get some inflation. Fed won't raise rates, wages won't keep up, but assets should do well until the yield curve is so steep that rates have to go up, which is the big unknown. Who will be our Volcker of 2020s? Does this not make the case for all the supply-siders. You can demand all you want, but someone has to make the stuff.

Steve Ellison adds:

I worked in technology supply chain management in a previous career and have been thinking about a scenario called the "dreaded diamond".

Technology part shortages occurred with some frequency as the transition from designing a next-generation product to ramping up production did not always go smoothly. And even before covid, accidents happened; some years ago, a factory in Japan caught fire. Many specialized components have only one supplier.

What typically happened in shortage situations was that the supplier would allocate the limited supply among the buyers. The buyers would try to game the system by placing 3x to 5x their normal orders, hoping that would increase their share of the allocation. Meanwhile, executives would want daily updates on the situation: how many units were delivered, and what the likely delivery schedule was.

This situation might continue for some months, with buyers continuing to place inflated orders, and the apparent shortage stretching out longer into the future with the higher orders.

As actual deliveries increased, one day, all of a sudden, the buyer would cancel all the excess orders. As other buyers did the same, the demand on the supplier would crash to near zero. This phenomenon of illusory orders that would vanish later was called the "dreaded diamond". A few quarters later, there would be big inventory write-downs because technology products lose value fast as they age.

Maybe some variation of this scenario could occur in the general economy as some of the shortages are alleviated in the course of time. We might find out the shortages have been exaggerated by purchasers trying to maximize their own supply.

Alston Mabry offers:

The Odd Lots podcast (BBG) had a recent episode about the chip shortage, and the guest described this exact scenario, where a customer orders 10x chips and is told by the supplier, "We can deliver 1x chips now, and the rest within 50 weeks." So the customer then orders 100x chips, hoping to get a 10x allotment, after which they cancel the rest of the order. But suppliers must be catching on.

A reader comments:

Sounds like how the Street allocates hot deals. The “pad-my-order-by-a-factor-of-10” move can’t help but to attract attention on the syndicate desk… and the result rarely benefits the customer.

A reader adds:

This has been my base case for some time. Interestingly, I get the sense that complacency is increasing lately, which us odd.

I expect a deflationary shock from overproduction within 24 months, globally synchronized. The delay us from supply chain snafu’s continuing for about another 18 months.

The difference between this and the diamond is deliveries being made and a simultaneous demand drop (ie they get their increased orders).

Hybrid system in time models are rolling out still.

Pamela Van Giessen writes:

This is not rocket science or even dismal science.

Quit testing healthy people for covid so companies that engage in non-Zoom activities can work at capacity and people aren’t "scared" to be around other people. We are still testing well over 1M and sometimes 2M people daily. ~2.5M people were unable to work between June-Sept because of covid. Since there weren’t that many sick people the bulk of them were out of work due to covid related quarantines. And I can promise you they weren’t the zoom class. Supply issues and inflation last as long as covid is a 24/7 threat that "must be conquered."

Our World in Data: Daily COVID-19 tests: USA

Yes, hoarding makes the problem worse but that will evaporate in 2 seconds once we have reliable supply.

Last week I saw a man on a bike wearing a mask in Park County MT where we have nearly 3000 sq mi and a population of ~16k. No helmet but he had a mask on. I should have snapped a pic as it was a perfect illustration of the brainwashing insanity that plagues our economy and health right now. The vaccines may prevent serious illness/death from covid but they don’t seem to be good for much else be it the supply of canola oil, engines, or other health conditions/injuries, etc.

Duncan Coker writes:

The reformers always make the assumption that supply will just naturally bubble forth like a spring constant and unaffected by the world around, be it for labor, capital, services, products. It is assumed no incentives apply and the curve is a vertical line stretching to the the outer limits of the universe. However, this assumption is always wrong and being tested right now.



A pullback before the rally into the year end for S&P 500 and crypto? 2021/10/22

Yelena Sennett and Andy Aiken: Bitcoin and Ethereum sell off after the ETFs launch, is the top in? Can S&P 500 trade 1000 points lower next year? Tesla is on the way to a trillion dollar company…



Ideas That Changed the World, by Felipe Fernandez-Armesto, contains the idea of universal force. is there a universal force in the stock market? how does it relate to constructal force?

the idea of the Mana, the universal force - is there a Mana in the stock market that causes it to go up 100,000 fold a century?

the book's idea that there is a purposeful universal force should be augmented to apply to the stock market. the studies of Jim Lorie, and Elroy Dimson et al, show the inevitable rise of the stock markets. how does it apply now?

i see about 30% of all days since the end of 2020 have been all-time highs. rite now we are 14 away from another all-time high and 29 days away from the last one of sep 06. how does it happen? one way now is for all the companies to submerse themselves in the current political system (ie, rumpelstiltskin) and realize the favoritism and emoluments of being with the force. how can the stock market go up 10% a year when profits don't grow that much? being with the force. what do you think?

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It’s never easy

October 20, 2021 | Leave a Comment

it's never easy, clear sailing in markets. and with bonds at or near the 9-month low at 157 60 versus 157 50 month low on mon oct 11. it doesnt seem like very good for sp. however, the numbers say that it doesnt get bearish until thur oct 21 or at the close on oct 20. histeresis.

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