Jun

28

If you missed Newton Linchen's Zoom talk on AI this morning, here is a link to the recording, passcode: &6yLyn*F.

He included a demo, explained the different types of machine learning, suggested books, and related the colorful story of how a powerful reinforcement learning algo of the sort used for self-driving cars and rocket landings took five days to run and nearly melted his computer. (That's not an algo he uses in his trading for clients.)

If you wish to download the recording you can, but be aware that you will be downloading an untrimmed version as Zoom preserves the original. The talk starts at around 30:15.

Laurence Glazier comments:

This is brilliant. It is so nice that nowadays mathematicians have an alternative to aerospace pursuits. I would like to see AI applied to classical music, so I could have an engine at my side as I tried to figure out the complexities of a piece, much as a grandmaster may be assisted by an AI chess engine like AlphaZero. I am also looking at altering the design of the theramin to interpret conductor gestures, and ultimately AI may have a role here too.

Paolo Pezzutti writes:

Excellent presentation. As you highlighted it is all about features. Models are open source therefore you can only work to tune parameters. The choice of features is fundamental. Either as a continuous series or conditional (1 vs 0). It is is also important how you select training data taking into account the current regime. An interesting approach to study in addition to price relationships is introducing alt data such as payrolls or yields spreads, or intermarket relationships. I guess that brilliant minds with powerful computers are continuosly processing huge amounts of data pursuing an edge that is a moving target due to everchanging cycles.

Jordan Low asks:

Thank you for your talk. One of the problems I had with classifying up or down days is that the ML model tends to find "buy-the-dip" opportunities to pick pennies, but might get wiped out on a larger volatility event such as a pandemic. Is this a problem you face as well, and what are the strategies to mitigate this?

Jun

27

Financial Time Series Analysis and Prediction With Feature Engineering and Support Vector Machines

Jun

27

Topic: Newton Linchen; AI in Finance
Time: Jun 27, 2022 11:00 AM Eastern Time (US and Canada)

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Jun

27

It’s been said that machine learning algorithms have no particular prediction power for the stock market, due to it’s intrinsic randomness and the all pervasive opportunity for curve fitting. (My very first inquiry here on the List, back in 2009, was about how one could avoid overfitting.)

Specially when dealing with short-term trading (day trading), it’s considered that nothing can really beat the random nature of the market. And I agree, to a certain point.

But my experience in recent years, particularly applying machine learning for the day trading of stock index futures, would suggest otherwise. There’s a frontier between stock market analysis and data science that can lead to predictive power using machine learning algorithms.

Perhaps the best advise is to use them for classification, not regression. And here we are in pattern analysis, so to speak. Classification algorithms can identify feature characteristics and recurrent patterns in an nonlinear dimensional space. So, with enough work on the subject, it’s possible to identify tradable patterns, (which in fact remain uncertain, as per the black box characteristic of certain algorithms), and to build a trading strategy around them.

My best experience so far has been with a QDA (Quadratic Discriminant Analysis) algorithm, with real trades for the past 15 months. Here’s the documentation link for the QDA algorithm, which is public knowledge as part of the Scikit-learn python library:

QDA algorithm

Laurel Kenner asks:

Newton, what role does human inspiration play in revising hypotheses in the scientific method that AI seeks to automate? Can an AI replicate out-of-line ideas, lucky errors, the contrarian stubbornness of human thought? Can it know what it is to add value?

Newton Linchen responds:

After 15+ years in the stock market, I went to grad school in computer science, to learn such algorithms. Before that, I had no idea how they worked, and as a trading strategies developer, my main concern was always to avoid curve fitting at all costs.

I’m not the best student, but from what I’ve learned, and applied in my work as an analyst, it became clear that we, who are foreign to this area, have much misconceptions about the nature and the role of AI. In fact, I think AI is a very bad name, as, most of the time, we are dealing just with approximation functions.

What machine learning algorithms excel, is to perceive relationships between the features, mapping those features in a hyperplane, (which is a confusing name to express that each feature is understood as a dimension itself in the dataset). The quest is not for to suppress human insight, knowledge and creativity, au contraire: is to use it in an orderly fashion as features for the algorithms to learn from. I believe Marcos Lopez de Prado has a body of work in this field, and clearly it is him who should be bringing this topic, not me.

In my experience, the algorithms learn patterns (that perhaps we couldn’t identify), and generate predictions. A whole other work begins when we decide what to do with those predictions (as in terms of time length of the trade, profit target, stop loss, stop-the-algorithm policy, etc). So, AI won’t substitute human knowledge and insight in the markets, but I believe it’s a precious tool for research.

Nils Poertner adds:

human intuition is underrated, isn't it - to make sense of the world sometimes? we are all geniuses in a way but don't see it that way.

The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honours the servant and has forgotten the gift.
- Albert Einstein

Paolo Pezzutti comments:

I have not worked with Qda. I am convinced that classifiers are more interesting from the trader's perspective than regressors. I have coded things using xgboost which is also quite popular just to understand the approach and the potential. There is a huge effort to do in order to identify and select features. Overfitting is an easy trap.

Leo Jia writes:

I prefer seeking entry-exit pairs to only predictive conditions. Overfiting is unavoidable. But there are techniques to largely eliminate them. Also, it's not enough to only seek the best performing (however one defines it) conditions based on the given data as paradigm is surely changing, so it's important to find lukewarm or even losing conditions that are to well perform sometimes in the future. In any regard, expecting machine learning to do a great job on timeseries financial data as it can do with, say, image detection is unrealistic due to many factors, notably the lack of training data and the paradigm changes. So other assisting techniques (which turn out essential) have to be used ulteriorly.

Jun

26

Excellent book written by a geneticist, entomologist, and economist with applications to every aspect of markets.

The Trees in My Forest

Boulders now protrude all over my hill. As I lingered under the red spruces on the sun-dappled ground I heard soft breeze through the branches above me, and I marveled at how the glaciers, lichens encrusted the rocks. Vines of crowberries, blueberries, cranberries and sedges grew on gravelly soil. They held moisture. Mosses took hold, retaining even more moisture. A layer of brown humus accumulated through the ages. Spruce, fir and birch seedlings sprouted. Vines and roots, building soil and supporting moss, crept over the rocks, building yet more soil.

a boulder:
El-Erian: ‘It’s uncomfortably possible’ that the Fed will push the economy into a recession

it is instructive to look at a long-term chart of S&P. it was 1000 in 1996, 2000 in 2007, 2600 in 2016, 4000 these days.

dividing the period up into 4 non-overlapping periods, one finds that in none of them have gone more than 109 days without an 80-day high. in each period, the longer we went without an 80-day high, the more bullish it became. we last hit an 80 day high on 3-18. that's 70 days ago.

it is not often that we go 100 days without an 80 day high. indeed since 1996 it has only happened 9 times. when we go 70 days or more without an 80-day high, it is very bullish. indeed the expectation to the next-80 day high has a t of 16. if you haven't had a recurrence of cancer within 70 months, your survival expectation and probabilities are very high. this is useful and regular use of survival statistics.

despite the backlash, the youthful, biking 80-yr-old, 14.1%, is still only behind the Florida Man by about 6 percentage pts. what can we make of it? The regulatory capture looks bad for Nov. 2022 but we still went up 5% last week. a new meme seems to be taking hold. Perhaps Heinrich on mosses is relevant.

Vic's twitter feed

Jun

26

History Lessons for Investors, By gene epstein

Steve Ellison comments:

The most valuable things I learned from Livermore were:

1) Do your own work in the market; never seek out or act on tips
2) Old Man Partridge's admonition, "But it's a bull market", lest I ever contemplate selling or going short

Vic's twitter feed

Jun

26

Metals Haven’t Crashed This Hard Since the Great Recession
Prices for copper, tin and other metals plummeted last week as recession fears grow.

Vic's twitter feed

Jun

26

A Century of Stock Market Liquidity and Trading Costs
Charles M. Jones, Graduate School of Business, Columbia University
First version: May 1, 2000
This version: May 22, 2002

I assemble an annual time series of bid-ask spreads on Dow Jones stocks from 1900-2000, along with an annual estimate of the weighted-average commission rate for trading NYSE stocks since 1925. Spreads are cyclical, especially during periods of market turmoil. The sum of halfspreads and one-way commissions, multiplied by annual turnover, is an estimate of the annual proportional cost of aggregate equity trading. This cost drives a wedge between aggregate gross equity returns and net equity returns. This wedge can account for only a small part of the observed equity premium, but all else equal the gross equity premium is perhaps 1% lower today than it was early in the 1900’s. Finally, I present evidence that the transaction cost measures that also proxy for liquidity – spreads and turnover – predict stock returns one year or more ahead. High spreads predict high stock returns; high turnover predicts low stock returns. These liquidity variables dominate traditional predictor variables, such as the dividend yield. The evidence suggests that time-series variation in aggregate liquidity is an important determinant of conditional expected stock market returns.

Vic's twitter feed

Jun

24

news that will not be highlighted. market no longer in a bear. down 19% from beginning of year at 3854 versus 4750.

highly relevant quote of day from Beating the Market, 1926, R. McNeil: "It is only by buying when surface conditions to the market show stocks to be unattractive - that one may graduate from the ranks of the lambs."

Vic's twitter feed

Jun

23

another shibboleth beats the bush:

Huge Global Studies Find Low-Carb or Keto Diets Could Lead to Shorter Lifespan

i use know everything about racket sports. hobo keeley dubbed me the greatest all round racket player of all time (i beat Marty Hogan in a showdown when I was limping from an injury) but now i don't know anything about racket sports either. the games and strikes have changed.

in the supreme insult, my son aubrey won't listen to me about tennis. he says his high school coach disagrees with me about belting every shot. She says it's good even though he misses 99% of first serves.

tremendous deflation in last hew days. its good for whispering guy with a temper. regulatory capture will be greater. and his betting odds increased by 4% to 14.4% versus field for big position.

Vic's twitter feed

Jun

22

Virginia Postrel has it right as always, and this calls for a proper scientific study of how the extent of shareholder values that a company strives for versus stakeholder values effects shareholder return. somehow this study will not be undertaken at Harvard.

Stakeholder Capitalism Isn’t Working as Planned

It’s a prescription for culture wars, political backlash, managerial paralysis and human-resources nightmares. And it’s anything but nice.

Vic's twitter feed

Jun

22

There are many cautionary tales and market lessons in the first minute or so of this video.

Freak Wave Steamrolls Lineup (Opening Scene) – Uluwatu

Jun

20

There is a doubting Thomas in everyone's heart, since no one ever has taken any trades without some risk. It is this risk that always creates doubts in all minds. In day to day flow of the markets the doubts do not get much chance to surface up. But whenever there is an unusual holiday gap, i.e. a longer than normal weekend, a significantly large enough number of minds get the chance to live up to their subdued doubts. Irrespective of whether one is long or one is short, the extra holiday provides the opportunity for one to think enough to choose to act differently than one had been. So long holiday gaps tend to create reversals. Someone might choose to test this. Perhaps a good way to do this might be to create filters such as If prior 5 day returns before a long weekend were <0, then 5 day returns after the long weekend are >0 or vice versa.

Vic responds:

Sushil Kedia elicits an ingenious theory that before holidays humans tend to change their minds. I tested the theory as it mite be highly relevant today. fortunately the multivariate thing i discovered and used for forty years is perfect for testing the theory.

From 2011 to current there were 43 occasions when S&P was up big in 10 days before holiday, and on average 20 days later the market was down 6 points. there were 21 occasions where S&P was down big in 10 days before holiday. after big down, the average 10 days later was up 2% and up 3% 20 days later, with probabilities of 80%.

Vic's twitter feed

Jun

20

Henri Poincaré (1854-1912) made diversified contributions in many fields of resonance and relevance today including chaos theory, graphical solutions of differential equations, special relativity, topology, astronomy, probability theory. He made discoveries by ignoring detail and pretending that he was mountaineering, going form one peak to another. "logic limits ideas": he believed in the subconscious solving problems. he worked 2 hours in the morning and 2 hours in late afternoon every day. he went from onw peak to another and while mountaineering, the facts he discovered clustering around the center of the mountains were instantly and automatically pigeonholed in his memory. he visualized everything and his creative habits were similar to the great 19th century musicians like Beethoven, Brahms.

Vic's twitter feed

Jun

15

nobody asked me, but: (1) the Fed and the boy who cried wolf bark bigger than bite. (2) so typical of an agrarian admin to go for price controls. see The speculator as hero and why Antwerp fell when specs stopped "drilling" and citizens stopped economizing consumption with high prices.

the 'chairman' back from Kinderland but still ignorant of economics says that "core inflation is a much better prediction of future inflation than headline inflation." what evidence is there that is true? why are energy and food transitory? are they more effected by policies? when were the studies updated? and what is the confidence that commodity and energy regress?

half of the monetary economists in the world are on the Fed's payroll, but I would be willing to provide an objective evaluation of the fed's view about core inflation being a better predictor.

S&P is a long way from 3801 yesterday at 3pm est. perhaps there was a leak of positive info that caused the 140-pt rise. that's 4% - are we not still in a bear market? perhaps suppress that.

Vic's twitter feed

Jun

14

there's a bit of deflation in grains and oil and crypto.

the ppi gang got the message to tweak the comparisons favorable to the Big One after the cpi gang forgot. too bad the cpi announcement came before the ppi announcement. the importance of the path.

with a major pharma self reporting that one of their major treatments for Covid doesn't work, the time has come for an outside, unbiased statistician to perform an unbiased estimate of the costs and benefits of the panoply given the number of boosters and original dose. a study that will not be covered.

ok we're in a definition of a bear market. but what is the expectation going forward? i don't use % so i will rely on the wsj report that it's up an average of 3% with a 70% prob one month later and even more bullish for 2 months and end of year.

Vic's twitter feed

Jun

14

For SPY since inception (1993):

observations: 127
positive: 79
% positive: 62.2%
mean move: 0.37%
sd: 1.61%
z vs all SPY days: 3.19

Jeffrey Hirsch comments:

Filtering for magnitude might be instructive.

Michael Brush suggests:

Would it need to be Thurs Fri Mon down ahead of a Wed Fed meeting? That seems to be the salient factor. For months markets have been weak in the days leading up to a Fed meeting, and then…

Kim Zussman adds:

There may also be a size effect, i.e., not just down, but down small vs big %.

Jun

12

It now attracts tourists posing for photographs and investors superstitiously rubbing its horns for good luck. The bull is now seen as a symbolic mascot for New Yorkers and for world.
Originally published on TheWelcomeBlog, 03/19/2020.

much touching of bull this weekend and myself at near 100 for good luck

Vic's twitter feed

Jun

11

Ask me anything on Trading Psychology with Dr. Brett Steenbarger

Jun

10

one is almost speechless. with 3 big down days in a row. only happened 3 times since 2011: 8-24-2015, 3-9-2020, 1-21-2022. all three up big on next day. I have an unusual, unique take on why it happened. has to do with the Jan 6 Hearings. Not good enough to to sink the opposition, violence engendered by those incentivized to teach Kavanaugh a lesson, too close to home. So only thing that will save the fair party is a desperate remedy. Not a smiling performance with friend on TV.

Vic's twitter feed

Jun

9

looks like all the kings horses provided input to tweaking the cpi number, especially with the recall it becomes triply important to unravel the decline in it.

the 3 musketeers championing the Idea that has world in its grip are as concerned about Inflation as they have traditionally been about equality, diversification, and climate. with their laser-like attention on inflation, and the track record of helping their mentors along, one looks for some finagling on the cpi on Friday. It would be bad indeed to start another weekend off with the weather gage with the quarry.

one finds that since 2011 there have been 11 occasions when there has been no 50-day max within 110 days. as for the forecast going forward on those occasions, we'll leave that up to ags and other bears when they wish to kibitz with a foundation.

Vic's twitter feed

Jun

8

Sneak peek: The new CBOE open outcry trading floor opening in June

A reader asks:

What % of the floor space is the SPX pit?

Jeff Watson replies:

No clue. The CME is moving what’s left of their trading floor back to the old South Room, where the CBOT bond pit was 40 years ago before the new floor opened in 1982.

[A related link. -Ed.]
FLOORED The Complete Documentary Film

A world that's more riot than profession, the trading floors of Chicago are a place where gambling your family's mortgage is all in a day's work. FLOORED offers a unique window to this lesser-known world of finance. Traders may not have degrees, but they've got guts, and penchant for excess. But like many aspects of our economy, technology is changing their business, and these eccentric pit denizens aren't the type to take kindly to new tricks. Computerized trading may take the emotion out of the job, but it may also take these old-timers out- they are dinosaurs in a young man's game. FLOORED is a gripping, honest look behind the curtain of the trading floor that few have ever seen.

Jeff Watson adds:

A new trading floor in 2022 and I’m stoked.

Stefan Jovanovich offers some history:

Chicago Stock Exchange Trading Room: Reconstruction at the Art Institute of Chicago

Jun

7

SEC Weighs Sending Retail Stock Orders to Auctions for Execution
• Plan under consideration could impact major trading firms
• Agency has been reviewing rules underpinning stock market

that's not cricket. the major purpose of markets is for the infrastructure to prosper at the expense of the public.

Vic's twitter feed

Jun

5

How are they going to paint this as a strong economy?

[Data source. -Ed.]

Andy Aiken responds:

It's not, but it gives the Fed a pretext to hold off on rate increases in an election year.

Vic adds:

46 leaked the numbers in his speech on Powell. they get the numbers several days in advance.

A reader asks:

Bill, how have ten year yields reacted in the past when the number is both negative year over and continuing to accelerate down trend? It seems this could be the catalyst that causes the long end to flatten out/rally as the Fed continues to raise the short? Does that hypothesis bear out in testing?

Bill Rafter replies:

Thanks for the question. I will not know until I test.

George Zachar asks:

oddly, the y/y% change in private eci wages has roughly doubled since late 2020, now at 5%. can you square the circle?

Bill Rafter replies again:

I will have to look at it. The payroll taxes are most the macro I can tap, so I tend to put their veracity on top.

Paolo Pezzutti comments:

I was hoping an Api could download the file from the treasury website. There are a number of Api's in Python or R to download datasets in json, csv, xml from FRED and other websites as alternative data to find relationships and regularities with stock index prices. Some of these keys are premium. I wonder if this approach provides real added value with respect to counting based on the idea that prices represent the synthesis of all market players actions and views.

Jun

5

Monty Python's Life of Brian 1979 Alright I am the Messiah

deep seated desire by humans to find a guru in life, in trading, in spirituality, whatever - consciously or not (have the same really, I suppose). eg, friend followed Demark (cult) and his indicators religiously and only later realized he had to tweak it and adjust it and figure things out for himself.

Larry Williams disagrees:

Dead wrong on DeMark.

Nils Poertner responds:

experienced traders like yourself figured out how to use Demark i'm sure. was just trying to say that for most there is a tendency of humans (incl traders) to lean on somebody else but the journey is always a personal one. maybe the obvious.

Larry Williams writes:

Agree we all want someone else to make it easy for us!

How to use DeMark? Tom and I created it together. I was there at day one—we developed it pre computers, talking on the phone every night. He was in Racine Wisconsin, I was in Kalispell Montana—we poured over charts every night making notes, etc. Since then Tom has taken over and thanks to his mind and computers it has gotten even better—-original model gave a buy at the recent low.

Jun

5

It Actually Happened… || Gary Martin Breaks LEGENDARY Record Of Jim Ryun

Larry Williams clarifies:

He’s really not faster than Ryan—look at the cinder track Ryun ran on vs the new, and much faster one, where the new record was set.

Stefan Jovanovich allows:

LW knows track.

Larry Williams adds:

If I could only run fast. Dyrol Burleson, college roommate—first American to break 4 minutes in the USA—ran, as a college senior, against Ryan, beat him, but told the reporters he was not the story, Ryan was. What he did on those old track and old shoes was amazing.

Speaking of shoes, the new carbon plate ones (Nike Alphafly) are a real game changer - more records to be shattered. Thet are so much easier on your legs.

Jun

4

it seems that even more than usual, bears permeates the firmament. the three times that employment has been bad for S&P since 2011 (after thur up), the market has gone up abut 4% the next 4 days. Please tell me why bonds were way down and why they are not bullish.

nobody asked me but… (1) The Yankees are much overrated and ultimately their holes in the lineup with gallo, chapman, and Hicks will cause losses. (2) Having read Joseph Campbell who was fastest half miler in US in 1925, I don't understand the relevance of his main themes to actual myths. plse help. (3) Suzyn Waldman 76 and John Sterling 85 are very good to me as a calming influence while trading in the nite. Their relation is like that of a caretaker (Suzyn) taking care of parent (John) in an old age home. and he is very appreciative and can still keep score.

Vic's twitter feed

Jun

3

my daughter Kate just asked me if the first strike is significant. the team that scores the first basket in basketball wins something like 60% of time. i tested it for the first tick in the S&P, i.e., 930 to 931. if up, quite bullish for the rest of the day. if down, quite bearish. the difference in means is 3. can you think of any others?

the first strike is half the battle. now that i think of it, i always tried to get the first point in squash. then i'd continue and try to get up 5-zip. was very successful that way forcing myself to try hard at the beginning.

Vic's twitter feed

Jun

2

The Best Bull Rider of All Time: J.B. Mauney

He’s changing the game. He does things no one else does. There’s not a title in the world that he can’t win. The best bull rider in the world, J.B. Mauney is a throwback cowboy from Moorseville, North Carolina. VICE Sports traveled with J.B. to check out his atypical workouts, his superior technique and unrivaled work ethic that has taken him to unprecedented ground in the bull riding community.

Stefan Jovanovich checks his vitals:

5 ft 10 in (1.78 m) and 140 pounds (64 kg).

Peter DeBaz adds:

The one-way ticket to his first PBA remind me of the burning ships of Cortes.

Jun

2

I keep a tennis racket and ball in my desk so I can entertain my 13 grand kids. today I got some extra use out of the racket as the lawn mower people come on tues at the close and the only way I was able to stop them was to alert them to stop with a backhand lob.

of all the schools that my family has matriculated in I have often believed that Williams was the one that gave them the best ed and happiness. The reason to me is the policy of making everyone there participate in at least one sport. if secondary schools insisted that all students joined at least one sport I predict that there would be 99% drop in violence.

Vic's twitter feed

Jun

1

Something Deeply Hidden, by Sean Carroll has changed my understanding of reality more than any book I've ever read. Its the latest explanation of Quantum Fields and wave theory for laymen. For probabilistic thinkers like Spec Listers, it should be readily accessible as probability is the basis of quantum field theory.

The whole world is one quantum wave which evolves according to Schrödinger's formula solves the probability of a reality is the square of the energy wave. Relativities distinctions between matter/energy are gone. Time and space are emergent phenomena of the quantum wave not real things.

Its mind blowing stuff and so different than everything I learned my whole entire life. Highly recommended.

Also interesting are Erwin Schrödinger's lectures, What is Life, describing life, dna, evolution, sentience and consciousness from a quantum physics perspective.

Stefan Jovanovich links to an alternate view:

Q&A: Gerard ’t Hooft on the future of quantum mechanics

The laws of quantum mechanics seem to tell us that there is a fundamental random component to the universe. But Gerard ’t Hooft, who received the Nobel Prize in 1999 for his work on gauge theories in particle physics, is not convinced that physicists have to abandon determinism.

In his new book, The Cellular Automaton Interpretation of Quantum Mechanics (Springer, 2016), ’t Hooft suggests that we may simply be lacking the data that would turn quantum probability distributions into specific predictions.

Nils Poertner adds:

Trading in the Zone, by Mark Douglas, touches on this as well. nice chapter on "Belief vs Truth" in context of possibilities and probabilities. good to be surrounded by folks who stimulate oneself in that direction, too, friends, colleagues, this group here, etc.

May

30

Tipsters

May 30, 2022 | Leave a Comment

Wall Street Stories, by Edwin Lefevre, 1901. the book tells stories of personages very similar to today. the tipster and Pikes Peak or Bust are quite resonant of the useful idiots who proliferate today. In those day, the tipster and the plunger ended up at Trinity Church.

Tipsters in those days ended up in a graveyard, or walking aimlessly from New Street where the bucket shops were to the Brooklyn Bridge. Today they wear suits and are respected columnists and heads of research in big financial firms.

As the result of much thought about his losses Gilmartin became a professional tipster. To let others speculate for him seemed the only sure way of winning. He began by advising ten victims—he learned in time to call them clients—to sell Steel Rod preferred, each man 100 shares; and to a second ten he urged the purchase of the same quantity of the same stock. To all he advised taking four points’ profit. Not all followed his advice, but the seven clients who sold it made between them nearly $3,000 over night. His percentage amounted to $287.50. Six bought and when they lost he told them confidentially how the treachery of a leading member of the pool had obliged the pool managers to withdraw their support from the stock temporarily; whence the decline. They grumbled; but he assured them that he himself had lost nearly $1,600 of his own on account of the traitor.

For some months Gilmartin made a fair living but business became very dull. People learned to fight shy of his tips. The persuasiveness was gone from his inside news and from his confidential advice from Sharpe and from his beholding with his own eyes the signing of epoch-making documents. Had he been able to make his customers alternate their winnings and losses he might have kept his trade. But for example, “Dave” Rossiter, in Stuart & Stern’s office, stupidly received the wrong tip six times in succession. It wasn’t Gilmartin’s fault but Rossiter’s bad luck.

At length failing to get enough clients in the ticker-district itself Gilmartin was forced to advertise in an afternoon paper, six times a week, and in the Sunday edition of one of the leading morning dailies. They ran like this:

WE MAKE MONEY
for our investors by the best system ever devised. Deal with genuine experts. Two methods of operating; one speculative, the other insures absolute safety.

[ … ]

Little by little his savings grew; and with them grew his desire to speculate on his own account. It made him irritable, not to gamble.

He met Freeman one day in one of his dissatisfied moods. Out of politeness he asked the young cynic the universal query of the Street:

“What do you think of ‘em?” He meant stocks.

“What difference does it make what I think?” sneered Freeman, with proud humility. “I’m nobody.” But he looked as if he did not agree with himself.

“What do you know?” pursued Gilmartin, mollifyingly.

“I know enough to be long of Gotham Gas. I just bought a thousand shares at 180.” He really had bought a hundred only.

“What on?”

“On information. I got it straight from a director of the company. Look here, Gilmartin, I’m pledged to secrecy. But, for your own benefit, I’ll just tell you to buy all the Gas you possibly can carry. The deal is on. I know that certain papers were signed last night, and they are almost ready to spring it on the public. They haven’t got all the stock they want. When they get it, look out for fireworks.”

Gilmartin did not perceive any resemblance between Freeman’s tips and his own. He said, hesitatingly, as though ashamed of his timidity:

“The stock seems pretty high at 180.”

“You won’t think so when it sells at 250. Gilmartin, I don’t hear this; I don’t think it; I know it!”

“All right; I’m in,” quoth Gilmartin, jovially. He felt a sense of emancipation now that he had made up his mind to resume his speculating. He took every cent of the nine hundred dollars he had made from telling people the same things that Freeman told him now, and bought a hundred Gotham Gas at $185 a share. Also he telegraphed to all his clients to plunge in the stock.

It fluctuated between 184 and 186 for a fortnight. Freeman daily asseverated that “they” were accumulating the stock. But, one fine day, the directors met, agreed that business was bad and having sold out most of their own holdings, decided to reduce the dividend rate from 8 to 6 per cent. Gotham Gas broke seventeen points in ten short minutes. Gilmartin lost all he had. He found it impossible to pay for his advertisements. The telegraph companies refused to accept any more “collect” messages. This deprived Gilmartin of his income as a tipster.

Vic's twitter feed

May

29

Financial Analyst Journal, Vol. 26 No.2, pages 111-113:

The above Tables I and II […] show that the traditional Wall Street belief concerning the market's preference for Republicans is in accord with observed market movements surrounding Election Day.

If this Republican bias were justified, one would expect the market to perform significantly better during a Republican administration than during a Democratic one. To test this hypothesis, we looked at every year since 1897 and classified it by party in power and by its yearly position in the administration. The following table summarizes the results:

Year Republican Democratic
1    6.88%   10.35%
2   10.18%   -1.21%
3   -6.84%   20.76%
4    7.15%    3.50%

There appear to be no systematic differences in the performance of the market during Republican and Democratic administrations, except that during the third year of Democratic administrations the market performs significantly better than during the third year of Republican administrations. Thus, there appears to be no long term pattern in market movements which would justify Wall Street's Republican bias.

For those who would like to know: This article was written by Victor Niederhoffer, Steven Gibbs and Jim Bullock. It was published in the March-April 1970 issue of FAJ.

Zubin Al Genubi comments:

This year is on track with regularity. Will next year be up big contrary to all the bearish pundits?

May

29

you wouldn't know it from the chronic bears and pessimists but the S&P is at a 17-day high and bonds at a 30-day high up for the month.

nobody asked me but…if there is one player in the major leagues who has lost his temper and disgraced baseball more than Josh Anderson, I missed it. and the universal reaction to the latest is indicative of the idea that has world in its grip and other recent events.

terrible news for those who support the idea that has world in its grip this week. we got back 6% this week and end with S&P up on the month and bonds and crude at a high. we finally got a week up and 1600 S&P left for a new high.

chickens come home to roost. all the masters 100 support of taking away parents rites at schools leads to tragedy . and I still say with Donaldson-Anderson, universal condemnation of the former was a key.

to make matters worst for supporters of the idea, the betting odds are now 4 to 1 that one or the other of the top two against the incumbent will win.

Nobody asked me but…the increasing trend of equality and diversity in professional sports makes the average athlete feel anomie as to sports and loses all sense of healthy competition and makes him or her a leaf floating in the wind.

it's hard to feel anything but contempt for your team when your role model athletes are billionaires complaining about the National Anthem and Americanism. That's why I say Donaldson-Anderson had much wider repercussions. query: did recent fatherless give up sports?

Vic's twitter feed

May

29

i will give a cash prize and a signed book to the best answer to the question: Now that the coaches, announcers, and tv and radio stations have joined the masters 100, the disneys, and now the insurance companies, how does this influence the game?

Reply to: Vic's twitter feed

john G
@dukeofoakes
Less opportunity for the white or non-woke as they add no value for the 100. Level of play decreases as the talent/deserving get replaced by those that serve the 100s interests.

Konrad Kuciej - Value Masochist
@KonradKuciej
Over the last several decades, with the advent of cable tv, internet and all of its applications the amount of advertising revenues for sports has skyrocketed, ticket sales and merchandise sales have taken the back seat. Because of the amount of money being generated all sports outcomes have become more and more clustered around a mostly “known” or at least “presumed” outcomes that drive the most “interest/viewers” and that allow the audience to feel they are part of the spectacle…games have become less “random” and more “staged”, all participants know.

Leet1337
@clozzi_24
The suppression of players expression of free views…. Anti secular & anti political except for those that are pro “wokeness”…… Still basketball except for no meaning behind the game that don’t serve corporate media.

packmansam
@PackManSamm
chasing advertising dollars by subscribing to the current thing amidst a decades long decline in viewership adds to the urgency for the league and refs to make sure the large market teams make the playoffs and ultimately the finals.

DarkWeb Trader
@Darkweb_Trader
Wokeness is for winners. A strength that creates competitive advantage. And a prerequisite for winning the right way and future political candidates. The only game in town.

Rodrigo Sotomayor
@Soto888
Favorite teams tend to generate higher commercial and marketing revenues, putting natural pressure on the refs calls even if unintended./p>

Ox
@OxEquities
Please the advertisers.

john G
@dukeofoakes
The 100 would favor most any team playing against the outspoken vaccine critic Aaron Rodgers.

the winner of the contest is John G. He will receive cash prize of $1000 and signed book. All the other contestants were very good also. They will all get signed books. send me address so I can send it.

May

27

i haven't seen an update on this in 20 years. i believe its relevant.

The World in the Grip of an Idea Revisited
Socialism Destroys Institutions, Societies, and Individuals

chalk up the losses of the yankees to the unholy assuaging of the idea that has the world in its grip. its shameful that a manager can't support his players, but this is part of the idea that certain personages are entitled because of the masters 100 and disney syndrome.

Vic's twitter feed

Laurel Kenner writes:

I have long wanted to do a study of Sweden, the darling of US socialists.

Peter Saint-Andre adds:

I read an article in the last ~2 years about Sweden (perhaps in Reason magazine?) which argued that these days the country is not nearly so socialistic as "progressives" think.

Jeff Watson comments:

I like Sweden’s system of private roads, and the fact that everyone, rich and poor, has to pay the same rate of taxes.

Andre Wallin writes:

my parents immigrated to the US when Olof Palme was prime minister. they claimed they moved in large part because of his socialistic policies. he was assassinated in 1986 by "Skandia Man" who they only figured out who it was in 2020 posthumously. my uncles do pretty well in sweden as small business owners these days, but nothing compared to what is possible for so many in the US.

Henry Gifford responds:

Some years ago I attended a lecture by two people from Sweden, who argued that Sweden has high taxes, but it is worth it for all the services the government provides. But they did not convince me that they paid lower taxes than we pay in the US – sounds like we pay higher taxes here. They were shocked to hear about paying high real estate taxes with money that has already been taxed.

Yes, Sweden is the darling of socialists in the US. But most articles I’ve read say that Sweden is an example of socialism that works, then include nothing to back up that claim, and don’t even reference it later. I’ve heard that Sweden toys with socialism every 20 or 30 years, finds it is a disaster, and gets as free of socialism as fast as possible. If this is true, it wouldn’t discourage a socialist from claiming that Sweden is socialist.

One time I was talking about “government” schools in the US. Politically incorrect to call them what they are. I might have quoted Cato’s finding that government schools cost twice as much as private schools. A guy was talking about a wonderful “public” school, and I asked if it was a government school. He said he didn’t know. I asked if it was on land or floating around on a boat. He said it was on land. I asked him who owned the land. He said he didn’t know. I assured him that his level of dishonesty qualified him for being a very good comrade. He didn’t object. Some level of dishonesty seems a prerequisite for people who claim to believe that socialism is a good idea.

Bo Keely comments:

After traveling the world to 105 countries, I've concluded it's not a matter of Socialism vs Capitalism. It's a matter of people. Some peoples can make a socialism work and do it. Other peoples at their best cannot make capitalism work nor desire it. So, one should look at squares and circles before deciding which hole they should fit into. I personally prefer the lone wolf life.

May

26

Symmetry is a characteristic property of the universe. The 24 May dip and bounce was good as it reflected a similar move 19 May. Question is will the big bar move of 18 May get reflected back up soon? Bears seem tired. Plus the news is all bearish and my brother is law wants to sell.

Getting the start today of completion of symmetry big bar.

Doug Martin suggests:

Maybe the folks at Davos gave the all clear signal, last friday's low was a nice looking pattern.

Michael Brush is bullish:

Let's get ready to rumble. This is from noon yesterday:

Strong insider buying suggests a 15% rally in the S&P 500 from here

One of the troubling things about this market downturn is that as brutal as it got, corporate insiders never showed much interest in their discounted stocks. That’s changed in a big way. They’re bullish now — signaling the stock market is oversold and due for at least a short-term bounce if not more. Using history as a guide, the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite stand to advance 15%-20% over the next three months.

May

26

‘Atomic Annie’ Was the World’s First and Only Nuclear Gun
Twenty were made, but only one fired a nuclear shot.

May

26

a representative bearish story from the bearish data provided:

The Tech Rout Isn’t Just Cyclical—It’s Well-Earned, and Overdue

30-year shows amazing strength given strength in crude and stocks. only down 1 tick on a day at 20-day high.

in retrospect the bell weather for crypto was when it didn't soar in the face of big Florida convention and Rumpelstiltskin saying that crypto was his major bull thing. and laudatory article saying Rumpelstiltskin is always rite on the future memes.

Vic's twitter feed

May

25

last minutes were down 16 on day and -60 on 2 days. serial corr is -0.52 on one day and -0.44 on 2 day basis.

nobody asked but trash talk in other major sports like basketball and football is infinitely worse and more prevalent than baseball.

minutes apparently revised to help masters 1000 and professional sports and alphabet agencies and regulatory capture boys along—- but nice deception at 3915.

in old days a company currently an acquisition candidate reported earnings without deducting expenses for salaries. one notes that there is a negative provision for Service expense and negative operating revenues. query: are they still able to report with this largesse?

many lobogola:

i didn't know how to read that cryptic chart myself. like most brokerage houses i have been unable to speak to a human there. but their margins of 5% of the big options house is alluring.

so much disappointment that we will not have a seventh down week in row for sp. all because of backlash against donovan. everyone who plays a team sport is kidded with a nickname highlighting an exuberant or weak moment.

nobody — the mad dog sports announcer is about as useful as El Erian — and both are very knowledgeable and predictably with the idea that has world in grip. makes professor particularly useful tomorrow.

Vic's twitter feed

May

23

“You are a ‘Specialist in Panics,’ which means you buy in panics and at no other time. Whenever you are tempted to go in, ask yourself whether a panic exists. If the answer is Yes, then buy; if No, don’t buy.” – from the Magazine of Wall Street, circa 1908.

“Bull markets start in panics and end in booms.” [From the same source. -Ed.]

May

22

a page from past:

Fishing in Troubled Waters: What is a Selling Climax?

make mine an old fashioned…

how common are selling climaxes? I looked at it in multifarious ways. (1) it never happened on a non-quarterly expiration. (2) if one defines it as down 50 big S&P points from close to 1 pm, and up 50 big S&P points from 1 pm to close, it happened 5 times since 1996.

(3) you mite think I should use % rather than algebraic but I don't think so. You lose and make the same amount relative to margin and capital regardless of the % move. (4) what was particularly nefarious about this one was that it was down 120 big S&P points from open before closing up.

(5) Nasdaq closed down 1% on the day after being down 3% as of 1:30, and bonds closed at a 20-day high moving up continuously thru the day. (6) The S&P was down 7 weeks in a row. never before. (8) Putting it all together and looking at expectations going forward, what does one see and why?

many things that never happened before make predictions difficult. especially never before 7 weeks in a row down, and big reversal during afternoon during non-quarterly expiration. the one thing that trumps everything is stocks going down big because bonds going down big. but bonds way up.

the one constant is bonds are at a 20-day high in reality. that's extremely bullish for stocks. happened 29 times since 2019 and 81 times since 2011. S&P up 3/4 of time one week later. about 1-2% in magnitude.

you can almost feel the unholy desire of the establishment to see a close at a 20% low bringing us to an "official bear".

After Meltdown, Tech-Bottom Signals Have Yet to Scream ‘Buy Now’

the betting odds remain at more than 2 to 1 in favor of 45 versus 46. (39% versus 15%) and the one constant is no matter what a company does they are urged to unionize above all.

Vic's twitter feed

May

18

it was a time when the best brokerage houses of the 19th century hastened to get prices to their customers:

There were no tickers in those days. The quotations were circulated by men who got them from the brokers, wrote them down on pads and then went from office to office or from man to man with them. These men, who had the latest prices, were called pad shovers. They came up to you and shoved the pad with the quotations on it right under your nose, hence the appellative. They were the walking tickers. Rushing the pad, they used to call the process. It was not so quick as the ticker, but the brokers who furnished the quotations to the pad shovers were conscientious and careful, and nobody could or ever did question their honesty. The pad shovers were paid for their services by a commission on whatever business they took to the two-dollar brokers, from the offices of other brokers. They received one dollar per hundred shares; hence the term, split-commission broker. The Stock Exchange ruled against this kind of business eventually, and with the advent of the ticker the pad shover went the way of the fluid lamp and the stagecoach.

(from Edwin Lefevre)

The worst brokerage house today won't let you get current prices unless you pay $1000+ a year to the Exchange no matter how many times you're already paying for it. there were panic sin those days as in current. The best brokerage houses would carry their customers and allow them to be way below required margins on grounds that their customers were friends and would rise again. Some panics were the Northern Pacific where the stock rose from 40 to 2000 in one day, the start of the first world war and the 1907 "silent panic". The worst brokerage houses today will not give you the sweat off their testicles if you are under margin for a second.

Vic's twitter feed

May

17

It was the best of brokerage houses. It was the worst of brokerage houses. It was the age of brokers refusing to let their customers panic. It was the age of giving customers 1 second to meet their 10-times-as-high margins. it was the season of raising money for the great coming industries: the railroads, the autos, the chain stores. It was the age of assuring customers that there was nothing before us but inevitable declines. It was the time when brokers would fight for the best executions for their customers. It was the time when it was impossible to speak to a human.

one brokerage house was memorialized by Edwin Lefevre in The Making of a Stock Broker, written in 1909, and is apparently the forerunner of Merrill Lynch. The other is the notorious present day options leader.

Lefevre tells the story of a dentist. he was long steel at 40. it reached 39 7/8. the dentist did a 4-inute mile to the broker's office. "sell everything!" he shouted. he was still studying the quotation and smiling, not because he had lost but because everything had gone still lower. Next to making money is the pleasure of watching others lose much more. "what did you do with your patient? leave him in the chair?" "Like hell! He heard you say 39. He was long one thousand steel. He beat me to the building by 20 yards."

A lot of the business of the Street in my youth was done in the open air, particularly in Broad Street, where we had the original and real curb market. Business there began right after the close of the Exchange at three, and lasted about an hour and a half. It was a sort of postscript market and at times the volume of business was quite large, almost as much as we did on the floor. In a way it was like a big fair, where everybody was acquainted. The small fry may have admired the big fish, but they usually called them by their first names. Most of the habitués were members of the I-Knew-Him-When Club. The ticker did a lot of social leveling in those days. I might be walking down Wall Street and I’d hear somebody yell ‘J.G.! J.G!’ Looking up, I’d see one of the alert split-commission brokers hurrying after a dark little man with very bright eyes and a black beard - the great Jay Gould, one of the greatest geniuses that ever operated in Wall Street, the sinister figure of whom old Daniel Drew in a moment of financial agony said, ‘His touch is death!’ A very rich and very powerful person, and yet all a man had to do if he wished to speak to him was to yell ‘Jay Gould!’ and the great Jay Gould would wait for him there in the Street.

Vic's twitter feed

May

15

Friday close happened 8 times since 2015. bullish for monday.

it was unique week for markets: bonds up 2 1/2 big points, S&P down 100, crude up all-time hi at 110 a barrel. S&P down 6 weeks in a row as of friday. never happened before. much bear commentary. putting it all together, very bullish. especially 5 weeks in row down-very bullish, only 5 times since 2011.

The Winds of War, by Herman Wouk - very good audible - shows FDR to be completely duplicitous: "i will say again and again, your boys will not go to Europe." against certain faiths. Like 43. very shrewd, only 300000 lost very similar to current. highly recommended.

nobody asked me but there is a terrible flaw in analytics that suggests closers like Chapman for Yankees rather than letting the pitcher from the eighth inning pitch one more good inning. same is true for markets. stay with it. (recency bias for Yankees re Riviera.)

Vic's twitter feed

May

12

does anyone share my belief that the camp kindergard people at the Fed and Treasury will do everything in their power to help the november along? and that they have plenty? in the old days they asked all the dealers what they wished for.

a real behavioral bias, not the contrived ones that Kahneman and colleagues validate by giving college students self-validating questionnaires, is the envy phenomenon. much more than the endowment effect but related to it is unholy wish to see others who once were rich fall and fail.

Vic's twitter feed

May

10

…also get sold: spring 2001 and fall 2007.

Zubin Al Genubi responds:

The great bull market ran from 82-2000, but during the mid 80's Volker ran rates up to 17% T Bonds. Lots of pain in real estate but the stock market stayed strong.

Laurel Kenner comments:

I still remember the free toasters banks gave out in 1979 and the 13% money market rates. My dad lost his job and pension for refusing to give inflated commercial RE appraisals for his REIT. The California government, perhaps greedy to participate in the housing bubble, raised property taxes so high that it led to the Prop 13 revolt in 1978, helping set off the Reagan revolution. Oh how the bureaucrats cried over that. By 1984 the Fed had to turn the money back on.

Inflation can result from a complex of factors. Supply issues, government spending, demand for the nation’s products (as in WWI & II, though the latter was temporarily suppressed by price controls). John Steele Gordon did a nice summary of US inflation this month for Hillsdale College’s Imprimus.

Steve Ellison provides the link:

Inflation in the United States, by John Steele Gordon

May

9

nobody asked me but…many of the great composers - brahms, beethoven - say the way to write great music is to spend hours in the woods.

Nobody asked me but same true of trading on day like this. it was what i like to call a healthy day. all inflation things were down highlighted by 8% down in crude and 2% in all the grains. S&P tucked in slightly below the round one monday min - very bullish.

nobody asked me but at least there's one federal agency that's apparently very competent. the Federal Marshalls service always gets their quarry. crude goes from 20 day high to 8 day lo in one day. bonds up 2 1/2 from Monday low of 13500 to close 137 1/2.

Vic's twitter feed

May

7

it was most unusual of times on Friday. S&P closed basically unchanged for the week, while bonds were down 3 big pts on week, 7 big on 2-week basis. S&P is down a bit over 10% and the bonds down 25 big pts since the beginning of the year. calls out for systematic quantification of the regularities.

Here are regularities: S&P down a little on Friday but at 20-day low - bearish for Monday until 1 pm, but then bullish for next days. S&P down 10% in last 90 days and bonds down 20 pts - bearish for next 90 days. One cautions against selling short as that loses 10,000-fold a century.

Vic's twitter feed

May

4

Baron Coleman:

Served as a teacher to the illiterate. CEO of family business, Tennessee Building Products, Inc. with subsidiaries Tennessee Glass Co., Better-Bilt Aluminum and Kabinart Corp. One of the Founders and Chairman of Hospital Affiliates Int'l. One of the Founders of Health America. Involved in numerous organizations and charities: Board Member of The Temple for many years; Board Member of The Jewish Federation of Nashville & Boca Raton, Florida; Board Member of the Jewish Community Center; President of the Woodmont Country Club; Chairman of the Israel Bond Drive for many years; Life Director Emeritus of the Florida Philharmonic Orchestra; Honorary Benefactor of Lynn University Conservatory of Music.

one of great unsung heroes of america. started out as a peddler and became multi-billionaire. no mention of him on Wikipedia. He had a great sense of humor. when you asked him how he was, he'd say "everything's up except my widdler." i wish I had revered him more when i sold one of his businesses but didn't realized his greatness. It was a Barron Coleman day. My perfect wife is still sexy to me after 50 years. but my stroke makes it a Barron Coleman day all around.

Vic's twitter feed

May

4

This is the most positive and heart warming thing I’ve seen in months. This guy’s spirit is noteworthy.

100-year-old NJ native and WWII veteran runs in Penn Relays

Jeffrey Hirsch responds:

Amazing!

Paul O'Leary concurs:

Indeed. Looking forward to Larry’s victory in the early 2040’s!

May

3

Supreme Court chief justice directs marshal to investigate leak, calls out 'egregious breach of…trust'
Chief Justice John Roberts called the leak a 'betrayal of the confidences of the Court'

The Marshall of the supreme court strikes me as likely to come up with deleterious info on the colleagues as the Inspector General of the Fed or comparable self-policing people as the alphabet agencies. The one we could trust is the Handicapper General of Kurt Vonnegut.

Vic's twitter feed

May

3

all across the spectrum from Tudor Jones to art Laffer (as well as all the useful idiots and chronic bears, all bearish). I only lathered half of my face and didn't shave when I noted 4129. bullish.

Big Stock Bears Say S&P 500 Bottom Still Another 700 Points Away
It’s a fact of life in struggling markets: someone is always saying things will get worse. According to a number of prominent equity strategists, they’re about to get a lot worse.

The final plank:
El-Erian: Fed Has No Choice But to Raise by Half-Point
Mohamed El-Erian, a Bloomberg Opinion columnist, says the Federal Reserve's long-term policy decisions will get harder.

looks like camp kinderland meeting decided to help usual suspects along mainly by bonds.

Vic's twitter feed

May

3

Max Brand

May 3, 2022 | Leave a Comment

Max Brand was a giant who wrote 5 million words at 5 cents a word about mythic cowboy heroes who grow from ordinary people into Homeric heroes in the course of his 250 novels. Faust (one of his 15 pseudonyms) was in writing what Babe Ruth, Red Grange were in sport.

max brand wrote 75 novels, many of them westerns The Untamed and The Black Muldoon, Dr. Kildare. "a good tennis and squash player, he lived in a Olympian villa in Florence, could write a novel in a week, a short story in an hour, i rec." (The Life and Times of Fred Faust)

None of his novels have a locus of place or nature in them like Kelton or Schaefer (or even Lamour) but they are always pure adventure of a Greek-like hero.

Vic's twitter feed

May

3

i am an active trader but get live prices from my two brokers. this is a symptom of Bacon's rule that the public has no right to lose this much. somehow my prices are sticky and all sorts of firewalls exist to prevent live prices. No wonder the big social info company was bought into the Exchange. As mentioned all the rules that are designed to put the public at a disadvantage will ultimately backfire.

the way required margins are implemented is particularly reprehensible for the public.

Vic's twitter feed

May

3

The sage says crypto investing is stupid and evil— why? it doesn't give tangible wealth like a factory or railroad or ice cream slurry. some one is going to explain to the two old timers that liquidity and accessibility and hedging against disaster is valuable. the two centenarians are likely to join the big guy in a cry of "get off my grass". Didn't hear the almost centenarian bemoan that his secretary pays higher service rate than him — and promote an increase in service rates as a panacea. meeting at camp Kindergard right now to see how they can help big guy along.

"a gambling problem," that's the diagnosis of the two centenarians. but the real cause is not greed. It's a symptom of the market infrastructure, the strong being set up to take from the public.

Vic's twitter feed

May

1

Bob Mitchell chasing PBR rookie honors

"I try not to think about much at all, just staying on," Mitchell told The Billings Gazette and about the moments before he climbs on a bull.

"I just stay focused and always say a prayer before I get on. When you start thinking, it never turns out very good at all."

May

1

Letters From A Self-Made Merchant To His Son (also online here): This is a wise book which every father should share with his children when they reach teen age. Many of the kids won't appreciate it until they are fathers and they have suffered the slings and arrows of business. It was written by George Lorimer who brought the Saturday Evening Post from a 1000 subscribers when he took over in 1902 to more than a million when he passed away in 1938. Lorimer must have been a friend of the Head of Armour or Swift and learned a lot from the road to success these meat packing and processing giants. As a side I note that many of the fortunes on the Chicago commodity exchanges started out in these packing plants. By following the advice of the self-made merchant, no wonder they were so successful.

Having been in business and visited many of the principles that Lorimer teaches, I can attest to their wisdom. The book consists of a series of 20 letters to his son which starts out with his son telling his dad about a business idea, his father warning him against pitfalls, then telling a story with metaphors that illustrates his point.

I will concentrate on his advice about Change, the commodity pits, and Wall Street.

What every man does need once a year is a change of work—that is, if he has been curved up over a desk for fifty weeks and subsisting on birds and burgundy, he ought to take to fishing for a living and try bacon and eggs, with a little spring water, for dinner.

He relates stories about gambling systems, gold brick speculation, and short squeezes engineered by his son and himself. His son asks for advice on a system his friend had figured out by logs and trigs and calculus that he learned at Harvard but he just didn't have enough money to carry it to its inevitable profitable conclusion. Graham tells the kids that the only thing the system provides is losses: "All the men who come to me with systems can only tell me about the losing end. The race horse, the faro tiger, and the poker kitty have bigger appetites than any critter has a right to have. Following these systems is apt to lead to the poor house or the Jail House." He gave hs son $1,000 to lose at 5% interest which he took out of his salary.

There is further advice about never selling short and never investing in a mining business you don't know about. Highly recommended.

Vic's twitter feed

May

1

For a finite-size system to persist in time (to live), it must evolve in such a way that it provides easier access to the imposed (global) currents that flow through it.

- Adrian Bejan

At Chair's suggestion I am enjoying some of Prof Bejan's books:

Time And Beauty: Why Time Flies And Beauty Never Dies

Design in Nature: How the Constructal Law Governs Evolution in Biology, Physics, Technology, and Social Organizations

As applied to current markets it had some trouble breaking the 4500 big round last few times and that is a big constructal round.

The "Professor" defines the Constructal law: Every system flows in a design that evolves to improve flow. Examples of flow systems are river deltas, blood circulation, heat transfer, economic systems, and the stock market. The "flow" of the stock market is to provide capital transfer from investors to companies to run business. Chair says that the flow has evolved to transfer wealth from the public and to cause them to do the wrong thing.

The standard time price tape bar chart might not be the best visual to track the increase in capital flow. A good type of chart would be in money flow defined as dollars flowing to companies ie total net stock sales less vig which would measure the increase and decrease of capital flows in and around the system. The underlying principle is based on simple economics. Growth leads to higher profits and prices.

The variations in price are needed to maximize the flow so participants can put money (energy) into the flow at a price they like. Sometimes buying the bottom isn't best if one needs a lot of money. Stated another way there may not be sufficient liquidity at bottom tick. Our new chart should show available and new liquidity or loss. Analysis should find areas/times/ prices of liquidity and when that leads to higher prices and profits. I'm not sure if the standard money flow charts do this.

Flow systems often look like trees or rivers. Binomial statistics would be a useful tool. Ralph Vince used binomial statistics and branch analysis for his risk analysis. I don't fully understand the derivations but appreciate the outcomes. A branch chart would show points of high and low money flow and branch to profit or loss outcome at each branch. Binomial analysis would show direction for profit higher price path.

In markets infrastructure is to flow commissions to brokers. Maximum flow will occur in a range. That is why ranges around 50's are so common. Its in the middle. Its a time of uncertainty.

Jeff Watson adds:

Which segues nicely with what my mentor told me in the 70’s that markets will move in the direction that will maximize the number of trades in that period. If there is more stuff to be traded at .6, the market will not be moving away from .6 to trade at .2, it’s going to clear out the .6 trades before it moves away, either way, from the price. This supports the maximization of commission for the brokers.

May

1

Moral certainty is always a sign of cultural inferiority. The more uncivilized the man, the surer he is that he knows precisely what is right and what is wrong. All human progress, even in morals, has been the work of men who have doubted the current moral values, not of men who have whooped them up and tried to enforce them. The truly civilized man is always skeptical and tolerant, in this field as in all others. His culture is based on “I am not too sure.” - H. L. Mencken

(Quoted in Bejan, Time And Beauty: Why Time Flies And Beauty Never Dies)

Duncan Coker writes:

I recently spent time at a conference on a college campus that included input from many grad and undergrads. I was expecting intolerance towards any but the most agrarian of ideas. I was pleasantly surprised to find more openness, nuance, and free speech that I had anticipated, leading me to change a few my own preconceptions. Point is, it's good to get out in the wild and test long-held beliefs, empirically. The virtual world can become a confirmation bias factory.

Nils Poertner comments:

quite often we just learn things from our ancestors (societal beliefs) which we take for granted - but by closer inspection, they aren't necessarily true and are far more fluid. it seems as if society is run by the lowest common denominator at any point if time (as if we are afraid of ourselves or the greatness of the other human fellow). but perhaps one needs to see "through" this and try solve some of our own little paradoxes and take it easy. see also the early Carlos Castaneda on that - before he experimented with drugs.

Apr

28

Dear Victor: "i got stopped out of long position in S&P on Tues when the market dropped 67 points from 3pm to 4:15pm and another 15 pts from 4:15pm to 5pm. my margin was raised to $22,000 a contract at 4:15; by the start of night trading after 15 minutes market was back". an example of why the public always loses to the infrastructure. the strong take from the weak. but things like this eventually will decimate trading by the public. the most the S&P has ever fallen in a day is 150 big points or $7500 a contract.

Vic's twitter feed

Apr

27

Laurel Kenner on Substack: Nobody Asked Me, But…

Apr

27

as bacon would say "the public has no rite to lose this much". as I would say, the vig is key. the infrastructure must take money from the public. note the costs of 5 billion compared to 1 billion from timing. this in a bull market.

Retail Trading in Options and the Rise of the Big Three Wholesalers
Svetlana Bryzgalova, London Business School - Department of Finance
Anna Pavlova, London Business School; Centre for Economic Policy Research (CEPR)
Taisiya Sikorskaya, London Business School
Date Written: April 12, 2022

Abstract
This paper documents rapid increases in (i) retail investor trading in options and in (ii) payment for order flow (PFOF) for options transactions received by the U.S. retail brokerages. PFOF comes from so-called wholesalers/internalizers — market makers who execute order flow for a retail brokerage. Exploiting new reporting requirements and transaction-level data, we isolate wholesaler trades and propose a novel measure of retail investor trading in options. We find that retail traders prefer cheaper, weekly options, the average quoted bid-ask spread for which is a whopping 12.3%, and lose money on aggregate. The inflow of retail investors also coincides with an increase in call options left suboptimally unexercised. Market makers (and other arbitrageurs) exploit these mistakes via the so-called `dividend play' trades, producing (virtually) riskless arbitrage profits. Puzzlingly, they forgo 50% of these profits, leaving money on the table for option writers. Our findings suggest that the arbitrageurs behave non-competitively and that the Big Three wholesalers, whose share in PFOF for options surpassed 85%, seem to benefit disproportionately from the growth in retail trading.

Vic's twitter feed

Apr

25

Lucky call

April 25, 2022 | Leave a Comment

the compliments about my lucky call for a rally today reminds me of the good old days when i was a big operator and had a big staff and when I could visit somewhere and have a good chance of beating anyone in tennis without nowadays likelihood of having an ambulance sent.

in the good old days, I received 6 calls in one day from brokers. 3 told me that they were monitoring my trades so they could follow me. and 3 brokers called to warn me that they were monitoring all my trades on the floor so that they could copper me.

i receive a heads up from a most astute relative that says that if twitter now would stop censoring trades, i would be a miracle and great. i have to hand it to them the way they subtly censor me and presumably countless others. If the tweet is not 100% for the masters 100 and the business roundtable and the alphabet agencies et al, my tweet doesn't get circulated to any but my current followers.

isn't this the aim of the infrastructure also in the market — to scare the public out of positions though volatility that the public can't stand (and possible margin calls) and to create fear galore with the pantheon of bears previously lampooned.

a typical Mencken and Nock quote: "The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."

Mr Parisian: in your mentorship of the People did you learn from the People's boat building-skills and do you apply it to markets? I learn much from Jack Aubrey's tactics. he was always ready to change tactic when victory was in jeopardy. and he always had an escape route.

However in all deference to my sagacious relative, I refer him to Mencken and Nock and Jefferson. The powers that be aren't corrupt when they join the agrarian societies. they become corrupt when they become part of the buying of votes in exchange for providing alms.

"Like all predatory or parasitic institutions, the state's first instinct is that of self-preservation. All its enterprises are directed first toward preserving its own life, and, second, towards increasing its own power and enlarging the scope of its own activity." a typical Mencken and Nock quote. "The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."

isn't this the aim of the infrastructure also in the market — to scare the public out of positions though volatility that the public can't stand (and possible margin calls) and to create fear galore with the pantheon of bears previousoly lampooned?

Vic's twitter feed

Apr

25

nobody asked me but… (1) no better indication of ever changing-cycles is the performance of companies in the pandemic and after. the ones up the most in the pandemic are down the most in last 6 months. (2) Rumpelstiltskin and his followers have renewed their habit of very subtly creating canceling of info by not sending any info to new followers. my followers has been steady within 1 for last 2 weeks.

Vic's twitter feed

Apr

22

Tremendous decline in chance of the big guy's presidency from 15% to 10% in one day. No wonder the market was down big - regulatory capture less likely. 16 million bet so far from combined sources.

Vic's twitter feed

Apr

22

the problem with robots is they don't take into account ever-changing cycles. true in markets and why I've challenged any robot to a single combat with real money in markets.

in baseball, Yankees are robot-like in decision making: they didn't pitch to Cabrere and LA took Kershaw out in seventh while pitching a perfect game. have the robots no appreciation for fans cming back to the game and hating Yankees for denying them the oportunity to see the 3000th hit? no wonder baseball interest is declining 20% a year. same would be true if infrastructure lets hfq and infinite captalized banks have open sesame with public. all the big exchanges efforts to prevent public from getting timely prices (except with fee) a horse from same garage.

Vic's twitter feed

Apr

21

Trading Strategy Rules: Bill Ackman Strong Risk Management skills triggers and he exits the stock from his portfolio. We buy the stock & hold for one year. Below are the prior 4 instances, when the trading system got a buy signal, and a comparison with SPY:

One notes Bill Ackman exited Netflix , with the following note on risk management practices of Pershing Square:

One of our learnings from past mistakes is to act promptly when we discover new information about an investment that is inconsistent with our original thesis. That is why we did so here.

[Note: We are not able to get the details on Borders Group.]

Apr

19

books read on a weekend trip to see grand child #13 and Professor, all are highly recommended for markets and life:

The Hidden Life of Trees

The Forest Unseen: A Year's Watch in Nature

The Tree: A Natural History of What Trees Are, How They Live, and Why They Matter

Discrete Mathematics

Infrastructure: A Guide to the Industrial Landscape

Professor's 31st book, Time And Beauty: Why Time Flies And Beauty Never Dies, explains why even ratios and round numbers are attractors.

Vic's twitter feed

Apr

14

is occurs to me that the growth of talent in the NBA is a manifestation of professor Bejan's constructal law.

Aubrey (my son) has been insistent that NBA players are better these day. and it brings up what Uncle Howie always told me "i agree with you that you don't know anything about basketball." i used to think that shooting 3 pt shots was a losing strategy. I didn't appreciate Curry at all because he seemed to shoot wristy shots which are very bad in racquets. At least I was right about saying that the two Knicks of 10 years ago who shot inordinate 3's were losers - Porzingis and Gallinari. the latter always high fived himself after a make. seed of destruction.

the one thing I said about basketball that Uncle Howie agreed with me on was that D'Antoni was the world's worst coach. I gave him a pass when he followed me like I am now giving the upside down man. after I played a conga in his honor I agreed not to ridicule his bear any further.

Vic's twitter feed

Apr

13

Carlsen has a great poker face:

World Number One Magnus Carlsen Stuns Everyone With His Poker Skills

Every time you watch the world chess champion, Magnus Carlsen, he never fails to amaze. It’s like he is the best in everything he touches. His brilliant skills are not just limited to the world of chess. But the Norwegian Grand Master can easily adapt to other games as well. While Carlsen’s stats in the Fantasy Premier League can give you chills, his poker skills are even better.

WATCH: Magnus Carlsen, Best Chess Player In History, Turns Pocket Aces Into A Bluff

A reader writes:

i have noticed that ambitious chess players, by and large, seem to be pretty straightforward type guys….not saying they never lie - they are humans but it made me think about certain disciplines in life requiring a sense of honesty to improve - also honesty for oneself - cuz the game itself is not about gaming others but by using memory, logic etc. and lying itself puts extra mental strain on the brain, and they need to concentrate for hours and hours. whereas say ppl who manage OPM…well, a lot are good in marketing etc. no prob with that, just saying.

Zubin Al Genubi adds:

The joke about lying in our family comes from when our kids were little.

We asked,"Who did this?"

Big sis says,"Kenny did it."

Little Kenny says,"Kitty did it!"

J.T. asks:

So poker is the antithesis of chess?

Big Al responds:

From what I've read, von Neumann didn't consider chess to really be a "game" because of complete information. On the other hand, he loved poker because of incomplete information and the possibility of bluffing. He felt poker was, therefore, a true "game".

Andy Aiken comments:

Sprague-Grundy Theorem states that all impartial games are equivalent to Nim. Since a chess game starts impartially, and there is a process of removing pieces (and therefore at each turn, a chess game has a nim-state equivalent), it is a game in the classic sense. But the randomness of play is due to human error, not chance.

The current chess programs can beat international grandmasters and eventually they'll be insurmountable by humans. The final stage of programs playing one another (if anyone cases to watch such games) will probably consist of elaborate opening traps and gambits, with volatile position scores until midgame, at which point the winner will be obvious.

Poker has a large element of chance that can be increased without any change to game rules (adding decks to the shuffle, table bet limits, etc). And there's the additional issue of money/bankroll management that adds further uncertainty. In contrast to poker, in which everyone plays for money, I only know one person who plays chess for money, and he's a 2600+ rated player.

J.T. writes:

Don’t forget the use of bluffing in poker whereas chess doesn’t have such.

Stefan Jovanovich disagrees:

"Bluffing" is the essence of chess - and warfare. Both players see the board - as opposing armies see each other's deployments. What each player cannot see is where their opponent intends to attack and where they plan to defend and how much those plans will change as the game continues.

The biggest part of the blitzkrieg lie is that the French and British did not see the Germans coming through the Ardennes. They did; they did not think it was going to be the main axis of attack. And, until the Germans had the good fortune to have their opponents recover a copy of their tasking orders from a general staff officer, the plans did not have the Ardennes being the center of focus.

I am, as in most things, barely mediocre at chess; but I am unembarrassed by my lifelong habit of asking dumb and then dumber questions. The one person I know who is capable and who studies the game like a real-life Philip Marlowe tells me that deception is the key and the great challenge is not to fall victim to your own certainties about what is going to happen next on the battlefield.

List of chess openings

Big Al responds:

You've using a very soft/fuzzy definition of information and bluffing. In game theory, chess is a game of *complete information*, i.e., all the information about the game is visible on the board to both players at any given time. Poker is a game of *incomplete information*, e.g., in Texas Holdem you don't know what your opponents hole cards are and you don't know what cards will be dealt on the flop, turn, and river. Also, in poker you can truly "bluff", i.e., pretend, through betting, that you have cards you don't have. In chess you can't pretend to have more pieces than you do or that they are in positions on the board other than the ones they actually occupy.

War is definitely a "game" of incomplete information.

Stefan Jovanovich contends:

No. Militaries know what each other side has - in terms of resources - and unlike poker the game is continuous. There are no hands, bets and then the winner takes all; and then new hands are dealt. I can understand how JHH and others see Ukraine as winning; judging each day's events as a single operation or poker hand shows a picture of success for Ukraine. Yet here we are in a war that continues with no end in sight even as Ukraine gets more advice based on the presumption that Russians cannot think more than one move ahead.

Apr

13

I've uploaded the Autobiography of Charles Darwin to my website of public-domain books, optimized for reading on phone or tablet. Enjoy!

Laurel Kenner applauds:

Thank you, Peter, and thanks for letting us know about the site. It's a treasure, full of interesting books.

Peter Saint-Andre responds:

Thanks, Laurel. I'm always adding more books and suggestions are welcome.

Bo Keely comments:

I'll read it again because it's worthwhile.

Peter Saint-Andre adds:

Oh, and I've discovered that Francis Galton wrote an autobiography, too. I'll add that to my publication roadmap.

J.T. approves:

Most definitely

Apr

13

I recall a study we did years ago on April 15 effect of everyone cashing in to pay the tax bill.

Jeffrey Hirsch responds:

No effect anymore from our studies.

"The first half of April used to outperform the second half, but since 1994 that has no longer been the case. The effect of April 15 Tax Deadline (April 18 for 2022) appears to be diminished with numerous bullish days present on either side of the day. Traders and investors are clearly focused on first quarter earnings and guidance during April. With conflict in eastern Europe and the Fed raising rates, companies may lean conservative with guidance during this upcoming earnings season."

From my blog and newsletter.

Apr

13

inflation numbers being leaked like a sinkhole before release these days. do insiders know that first reaction can be wrong? hypothetical conversation at house of rep: "the ppi was way above expectations why isn't everything cratering? i now have a low on my bond short. there ought to be a law."

"this isn't cricket" - hypothetical exclamation from those who had leaked ppi numbers at 8 am. only honest market that doesn't get leaks ahead of time is the crypto.

if instead of climate change and racial equality and universal education, the fed and Treasury would concentrate on keeping the monetary foundations in order, the world would be a better place.

why does every news source have bearish bias. the big financial one reads like racial equality and climate change are the keys to markets. "jumbo hikes" galore.

Nobody asked me but: (1) one of most dangerous things iv'e seen in making public lose more than they have any rite to lose is the "reverse" button on my broker's trading platform. (2) i gave up on the big option makers platform that gives you 10 seconds at 11 pm to meet their required margin of 10 times what competitors charge. but worse than that is their prices seem to be 10 minutes late. are things that bad that you are supposed to trade with lagged prices?

Vic's twitter feed

Apr

12

Good to have assets and debt. Assets go up, pay back deflated dollars. Advice from 1970's. Leverage real estate comes to mind. Malls did well back then. Maybe REITs now? Offices not so much. Residential already had quite a run.

J.T. writes:

Malls are going for pennies on the dollar. Lots of very interesting repurposing going on around Virginia with Malls. My local mall that’s been empty for years just turned the old JC Penny’s into a Children’s Hospital. The empty Applebees turned into a Chicken Salad Chicks. BTW, if you’ve never been to a CSC’s before then it is a must go! It’s also a great libertarian story of its foundation in Alabama.

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