Aug

28

below from my favorite and most highly recommended Western book, The Time It Never Rained, by Elmer Kelton:

He had often thought that if man were to disappear, the domesticated livestock would not long survive. Fences would sag and rust away. The artificial watering places would go to dust, forcing livestock to the natural creeks and rivers.

There, in time, the sheep and goats would fall to the bobcats and coyotes. Perhaps even the lean gray wolf- so long gone from here- would return to hunt and howl at the moon. The land would go back to those creatures which impartial Nature had found fittest by ruthless selection.

Vic's X/twitter feed

Aug

27

The opportunity lies with the supplier, not the providers of AI.

Larry Williams asks:

Who are the suppliers?

Stefan Jovanovich answers:

Nvidia. My 19th century brain thinks of NVDA as a supplier of the stuff the people selling information tickets will use to build their 21st century railroads.

Easan Katir writes:

Agree. Those creating the AI platforms won't generally be good investments, imho. Why? They lack one thing needed: scarcity. Any intelligent person can feed his/her data into an LLM and create their own AI for $20 / month or less. China's DeepSeek is free, I've read. Hard to make a profit when competing with free.

Last month I had lunch with an author cousin who lives in Tehama Carmel Valley. She uploaded all her books into an LLM, cloned her voice with another AI service, connected that to her voicemail. Now her clients can call her number and her cloned voice answers all their questions based on the knowledge in her books. All while she's having lunch.

AI + robotics will be a theme, such as Elon's Optimus and robo-taxis, yes? Investing in the suppliers is mostly done, isn't it? NVDA being the most obvious. Along with LW, other inquiring minds wonder which companies you have in mind.

William Huggins responds:

don't forget the coal and iron mines, those essential input assets that 19th century railroad magnates knew could be pilfered via land "grants". i think the equivalent is looking at the companies involved in the chip etching (who makes the lasers, etc).

Henry Gifford comments:

FRED says that Railroad stock prices weighted by number of shares went up x7 over 70 years [to 1929]. Nice, but not fantastic, but weighing by number of shares could be misleading because of reverse splits, shares of a new company replacing a larger number of shares of the old company in a buyout, survivorship bias when a company goes bankrupt, etc.

% of market cap can I think also be misleading because of people pouring huge amounts of money into companies with no revenue in the hope of future returns, adding to market cap.

Stefan Jovanovich responds:

In the last third of the 19th century, the money made in railroad investing was in the bonds, not the stocks. That was the recital of the FRED data that some found so surprising. For this 19th century mind those results are not surprising because the one President in the century who could do the math killed the speculation in international money.

Aug

26

The abysmal Volatility last Monday, 18 August, and the dead stop last Tuesday, EOD, were attributed by some to 0DTE. A little back on Spec List, papers were posted, showing this Volatility suppression effect by 0DTE options and their market makers.

I know it is just the latest holy grail traders flog to. Quite a few websites are offering subscriptions for the data. So, I was surprised to find it for free on Barcharts – the EOD version:

Steve Ellison adds:

Important information, thanks. Jeff Clark said on a podcast that 68% of all S&P 500 option contracts are 0DTE.

Aug

25

Friend of the Chair, Robert Z Aliber, a professor of International Economics and Finance at the University of Chicago, died in June 2025, I recently found out.

Just before the Financial Crisis (I don't remember the exact date) he sent a prescient Email to the Chair, arguing that problems caused by carelessly underwritten mortgages would soon cause a recession in the US. At the time I was not really aware of what was going in in the field of mortgage securitization, so I found the information surprising and was impressed later when it was confirmed by subsequent events.

Big Al adds:

Robert Z. Aliber on "The Next Financial Crisis?"
The University of Chicago
Apr 24, 2013

In 1982, 1997, 2003, and 2008, Asia and the world were rocked by major financial crises. Robert Z. Aliber discusses past crises and the possible trajectory of the next one. Where is the next major crisis likely to begin? How will its impact compare to previous crises? Aliber, a regular speaker for Chicago Booth, co-authored Manias, Panics, and Crashes: A History of Financial Crises.

Aug

24

This research implies less-than-ethical behavior by some analysts!

What moves stock prices around credit rating changes?
Omri Even-Tov, Haas School of Business, University of California, Berkeley
Naim Bugra Ozel, N. Jindal School of Management, University of Texas at Dallas, The Wharton School, University of Pennsylvania (Visiting)
Published: 07 January 2021

Using monthly and multi-day return windows, research shows that credit rating downgrades often reveal new information and lead to significant stock price reactions but that upgrades do not. Using intraday data, we revisit these findings and extend them by examining the possibility of informed trading ahead of the announcement of credit rating changes. Credit rating agencies delay public announcements of rating changes to provide issuers with time to review and respond to rating reports, which opens the door for informed trading in advance of credit rating changes. Using data on rating changes from S&P, Moody’s, and Fitch, we find a more modest price reaction to rating downgrades than documented elsewhere and show that stock prices respond to changes in long-term issuer ratings but not to changes in ratings of a single instrument or a subset of instruments. Most interestingly, we find that prices start moving before a downgrade announcement, controlling for other news and investor anticipation. These pre-announcement movements are concentrated among observations where credit analysts are motivated to disclose private information to advance their careers. The beneficiaries of these disclosures appear to be institutional investors.

Aug

23

In July 1944, McNair was in France to observe troops in action during Operation Cobra, and add to the FUSAG deception by making the Germans believe he was in France to exercise command. He was killed near Saint-Lô on 25 July when errant bombs of the Eighth Air Force fell on the positions of 2nd Battalion, 120th Infantry, where McNair was observing the fighting. In one of the first Allied efforts to use heavy bombers in support of ground combat troops, several planes dropped their bombs short of their targets. Over 100 U.S. soldiers were killed, and nearly 500 wounded.

Stefan Jovanovich recalls:

My favorite Audie Murphy bit of history (which can be verified by recollections but not by any published anecdotes) is that Murphy met Omar Bradley in Hollywood in July 1951 when Bradley was Chairman of the Joint Chiefs of Staff. The Red Badge of Courage had been released and Murphy was a "star"; Bradley was on his way to and from Japan and South Korea to talk to Matthew Ridgway (MacArthur's successor) about how the war was going. Someone had the bright idea to bring favorable publicity to the war effort that was so unpopular that it would elect a Republican as President for the first time in a quarter century by having a photo shoot of Bradley, a 5-star general, and Murphy, the most decorated "common" American soldier. The story is that they met with Bradley in his full dress uniform and Murphy in a suit and tie and, with the cameras rolling, everyone got ready for Murphy to come to attention and salute. He just stood there opposite Bradley and his entourage. Finally, with teeth clenched and skin reddening, Bradley raised his right hand and placed it diagonally across his right cheek. The rule was and still is that everyone in uniform regardless of rank salutes the holder of the Medal of Honor first.

I like to think that Murphy enjoyed the moment as a tiny bit of revenge for the stupidities of Bradley, who, along with Carl Spaatz, made Murphy's and his fellow soldiers lives much, much harder with their belief in bombing from 20,000 feet. The carpet bombing tactic was still very much the Air Force catechism when I was in the Navy on the Mekong River in 1967 and 1968. I was told by the writer who put down the words of Schwarzkopf's memoir that Stormin Normin's happiest fit of temper came in the meeting when he asked the senior boy in blue how much longer the Army would have to watch and wait from a safe distance so the Air Force could continue to bounce the rubble.

Aug

22

Boy Rasmussen

August 22, 2025 | Leave a Comment

Top economist says two contenders to replace Fed Chair Powell stand out

Mohamed A. El-Erian says both candidates have strong market experience and would do 'great job' leading central bank

El-Erian appeared on FOX Business Network's "The Claman Countdown" on Wednesday and said that BlackRock CIO of global fixed income Rick Rieder and former Fed Governor Kevin Warsh are his preferred picks to replace Powell, whose term as chair expires in May 2026.

Vic's X/twitter feed

Aug

22

How to Be a Good Intelligence Analyst
“The first to get thrown under the bus is the intelligence community”

Which blog recommends this book:

Analytic Culture in the U.S. Intelligence Community: An Ethnographic Study, by Dr. Rob Johnston.

[Dr. Johnston] reaches those conclusions through the careful procedures of an anthropologist — conducting literally hundreds of interviews and observing and participating in dozens of work groups in intelligence analysis — and so they cannot easily be dismissed as mere opinion, still less as the bitter mutterings of those who have lost out in the bureaucratic wars. His findings constitute not just a strong indictment of the way American intelligence performs analysis, but also, and happily, a guide for how to do better. Johnston finds no baseline standard analytic method. Instead, the most common practice is to conduct limited brainstorming on the basis of previous analysis, thus producing a bias toward confirming earlier views. The validating of data is questionable — for instance, the Directorate of Operation’s (DO) “cleaning” of spy reports doesn’t permit testing of their validity — reinforcing the tendency to look for data that confirms, not refutes, prevailing hypotheses. The process is risk averse, with considerable managerial conservatism. There is much more emphasis on avoiding error than on imagining surprises.

Stefan Jovanovich comments:

Actual military intelligence is never even allowed to be on the bus. The CIA's human analysts had an infallible record of guessing wrong about war that was matched only by Congress and the Pentagon. The odds are that Putin and Trump spent the time discussing what the Russian Army's actual capabilities are and what the Russians know about NATO's present inventory. The absence of any U.S. generals and intelligence professionals from "the meeting" is a pure tell.

Vic's X/twitter feed

Aug

20

I was looking at this page of Spec List reader reviews of research literature and thinking that research reviews might add to the List currently. [Here on the DailySpec site, please add your own reviews to the comments. - Ed.]

I also saw this interesting paper:

The Long-Run Stock Returns Following Bond Ratings Changes
Ilia D. Dichev, Emory University - Department of Accounting
Joseph D. Piotroski, Stanford Graduate School of Business
Date Written: October 1998

We use a comprehensive sample that comprises essentially all Moody's bond rating changes between 1970 and 1997 to examine the long-run stock returns following the changes. Our main finding is that stocks with upgrades outperform stocks with downgrades for up to one year following the announcement but we find little or no reliable difference in returns thereafter. The return differential between stocks with upgrades and downgrades is on the magnitude of 10 to 14 percent in the year following the announcement, and is mostly due to the poor performance of stocks with downgrades. Additional tests reveal that the underperformance of downgrades is primarily due to the poor returns of small and low credit quality firms, which are likely the firms with the largest information problems. Probing into the causes for this phenomenon, we find that current ratings changes predict changes in future ratings and future profitability. More importantly, we find some evidence of significant differences in returns at subsequent earnings announcements of stocks with upgrades and downgrades, which suggests that the market does not fully anticipate the predictable future changes in earnings. We also find strong evidence that the magnitude of the post-announcement returns is increasing in the magnitude of the pre-announcement returns, consistent with a delayed and gradual adjustment to the announcement information. Thus, the limited duration of abnormal returns, the pattern of predictable reactions at subsequent earnings announcements, and the strong relation between pre and post-announcement returns suggest that the abnormal post-announcement returns are at least partly due to incomplete adjustment to information.

Aug

19

"My habit of not dating letters, never balancing my checkbook and never putting dates on my paintings is not carelessness: it is a deep personal superstition that ignoring time itself might be a secret technique to delay aging." Eric Sloane, painter, author.

After 100 days in a very range between 6400 and 6500 it might be good to follow Eric Sloane's advice.

Vic's X/twitter feed

Aug

17

Concerning the transitions of colour, on the daily spec website. The chair recommended The Punnett square as a research topic. This was the best video I could find. It's amazing how he broke down the essentials in just 6 minutes:

Genotype, Phenotype and Punnet Squares Made EASY!

Big Al offers:

Great vid on Markov, and Markov chains leading to LLMs:

The Strange Math That Predicts (Almost) Anything - Markov Chains

Aug

16

Nine Years Among The Indians, 1870-1879: The Story Of The Captivity And Life Of A Texan Among The Indians, by Herman Lehmann

One day, in the month of May, 1870, I, with my brother, Willie Lehmann, and my two sisters, Caroline and Gusta, were sent out into the wheat field to scare the birds away. Gusta was just a baby at the time, probably two years old, and was being cared for by Caroline. I was about eleven years old, Willie was past eight years old, and Caroline was just a little girl. We sat down in the field to play, and the first thing we knew we were surrounded by Indians. When we saw their hideously painted faces we were terribly frightened, and some of us pulled for the house. Willie was caught right where he was sitting. Caroline ran toward the house, leaving the baby, and the Indians shot at her several times, and she fell, fainted from fright. The Indians had no time to dally with her, so they passed on thinking she was dead, and they often told me she was killed, and I believed it until I came home several years later.

They chased me for a distance and caught me. I yelled and fought manfully, when the chief, Carnoviste, laid hold upon me, and a real scrap was pulled off right there. The Indian slapped me, choked me, beat me, tore my clothes off, threw away my hat—the last one I had for more than eight years—and I thought he was going to kill me. I locked my fingers in his long black hair, and pulled as hard as I could; I kicked him in the stomach; I bit him with my teeth, and I had almost succeeded in besting him and getting loose when another Indian, Chiwat, came up. Then Carnoviste caught me by the head and the other Indian took hold of my feet and they conveyed me to a rock fence nearby, where they gave me a sling and my face and breast plowed up the rocks and sand on the other side. I was so completely stunned by the jolt that I could not scramble to my feet before the two Indians had cleared the fence and were upon me. They soon had me securely bound upon the back of a bucking bronco, stark naked.

Aug

15

Having tortured you all with the statistics for the stock and bond prices for the railroads, it seems only appropriate to add to the data the calculations of the changes in physical freight itself. The average freight car in 1860 could handle 5-10 tons; by 1890 the figure was 20-30 tons thanks to Mr. Carnegie's rails that replaced iron with steel.

This is Grok's and my best estimates of the annual tonnage between New York and Chicago over the decades between the end of the Civil War and the beginning of U.S. participation in the Great War.

For Russia the primary corridor is between Moscow and the Urals. They have finished building the M12 3-lane dual carriageway (the equivalent for motor freight of the double tracking between NY and Chicago). A trip that took 30 hours now takes 16.

Aug

14

The Laws of Trading: A Trader's Guide to Better Decision-Making for Everyone

This is a book about decision-making through the lens of a professional prop trader. For years, behavioral and cognitive scientists have shown us how human decision-making is flawed and biased. But how do you learn to avoid these problems in day-to-day decisions where you have to react in real-time? What are the important things to think about and to act on?

Aug

12

Positive Economic News: Full-Time vs Part-Time Employment Growth
Over the past year the pace of full-time hiring has outstripped that of part-time positions. Both categories are growing, but full-time roles have seen a steeper upward trajectory once we normalize for scale. This signals that employers are increasingly confident in committing to long-term payrolls.

To compare growth on equal footing, we fit simple linear regressions to each series (full-time employment level and part-time employment level) over the same interval. We used monthly seasonally adjusted data from the Bureau of Labor Statistics. For each series, we calculated the slope (employees per month) of the best-fit line. Those slopes became our normalized growth measures, avoiding raw-level distortions.

Empirical Results

Full-Time Employees +2150.00
Part-Time Employees +950.44
The full-time slope of +215 K/month means that on average, net full-time headcount has risen by 215,000 each month. Part-time roles have climbed as well, but at roughly 44 percent of the full-time rate.

A faster acceleration in full-time positions suggests businesses are shifting from flexible or contingent staffing toward more stable, long-term commitments. This pattern often accompanies stronger consumer confidence and investment plans.

Hiring more full-time workers typically entails higher benefits, training, and overhead, so firms generally only follow through when they foresee sustained demand. The fact that part-time growth remains positive underscores broad underlying strength in the labor market.

Consumer spending power will likely rise as more workers move into full-time, benefit-eligible roles. Wage growth pressures may pick up if the pool of available long-term hires tightens further.
Capital expenditure plans may accelerate as firms brace for continued demand and aim to boost productivity.

Aug

11

Disappointing AI

August 11, 2025 | Leave a Comment

AI found rules of Wiswell:

1. Patience precedes power.

2. The middle game is where we live.

3. Sometimes the best move is to wait.

4. Mistakes are not shameful - they're illuminating.

5. You play against yourself, not just your opponent.

6. Simplicity is the highest form elegance.

7. You never stop learning.

Everything considered the AI search came up with a disappointing melange of generic rules that do Tom a great injustice.

J.T. adds:

I plugged it in to check and got a couple of Wiswell proverbs as well. Here are three:

• The winner of a match is not always determined by who is right, but in the end, who is left.

• We can play today’s draws and anticipate tomorrow’s wins, but we shouldn’t forget yesterday’s losses.

• The losing player who says: 'I’ll look it up tomorrow,' very seldom does look it up.

Vic continues:

i have the complete set. Tom would create 20 proverbs a week and then give the boys at ncz a lesson in checkers for 12 years from 1988 to 2000. he would say with a whistwell air, "I wish I had married a girl life Susan. but then I wouldn't have written 22 books."

Vic's X/twitter feed

Aug

9

The Speculator's Edge: A Life in Markets, Mistakes, and Mastery
By Bo Keely with ChatGPT

Chapter One: The Hungarian Gambler and the Boy from Brighton Beach

I was born into odds. Not just long shots or probabilities scribbled in a ledger—but the kind of odds that start at birth and ripple outward through ancestry and ambition. My father, Artie Niederhoffer, was the first speculator I knew. Not on Wall Street—but in the back rooms of Brooklyn where chess games turned into hustles and a nickel bet was sacred currency. His friends called him "The General," and while he never served in uniform, he commanded a battalion of books, bets, and bluffs. He was Hungarian, proud, loud, and certain about everything.

We lived in Brighton Beach, downwind of Coney Island's chaotic joy, but miles away from any kind of financial privilege. Yet my childhood was filled with markets of a different sort. Card games in the basement. Side bets at the chess park. My father's upholstery shop doubling as a clubhouse for thinkers, schemers, and strivers.

It was there, sweeping sawdust off the floor or sitting quietly in the corner listening to men argue over Lasker’s endgame or the Yankees’ spread, that I learned my first truth: everyone speculates. Some do it with stocks. Others with reputations. But every soul is placing a wager, every day.

Download the full bio (.docx file).

Aug

8

a new way of looking at markets and real life:

In 1953, a top-secret manual teaching agents sleight-of-hand and other deception techniques was written for the CIA by America’s then most famous magician. All copies were believed destroyed by the CIA’s purge of the infamous MKULTRA documents in 1973, and there was no proof of the manual’s existence . . . until a copy was discovered among the CIA’s recently declassified archives.

Big Al responds:

Speaking of the CIA, one is reminded of this manual:

Psychology of Intelligence Analysis, by Richards J. Heuer, Jr.

And something from it (p. 108):

Analysis of competing hypotheses involves seeking evidence to refute hypotheses. The most probable hypothesis is usually the one with the least evidence against it, not the one with the most evidence for it. Conventional analysis generally entails looking for evidence to confirm a favored hypothesis.

Vic's X/twitter feed

Aug

7

The best data science course I have ever watched. In fact, probably the best data science course ever made is Prof. Yaser Abu-Mostafa's "Learning from Data" at Caltech. I am not exaggerating, and if you think I am, just read the comments section from the first video of the course The Learning Problem — its almost exclusively high praise.

This course is really old, as its from 2012. I watched it probably in 2017 or 2018. But its still very relevant today. Why its relevant today? Most courses focused on describing techniques that were popular then, but later became irrelevant. For example, GANs were replaced by Diffusion Models and core ML Architectures have shifted to Transformers.

Prof. Yaser's course is different because he covers Theory, Techniques and Concepts (most books/courses only describe ML algorithms/Techniques or how to use features in python libraries).

- Theory, refers to mathematical descriptions of ideas like "Is learning feasible" for your problem or dataset?, "Training vs Testing", "The theory of generalization" and the "Bias-Variance trade off".

- Techniques, refers to actual ML algorithms like Neural Networks, SVMs.

- Concepts, describes auxiliary things that are not really Machines Learning but useful to understand well. Like how to interpret/deal with Error & Noise, Sampling of data.

The full course is free.

I also recently came across a comment about a book he wrote to accompany the course which made me remember him: Learning From Data.

Aug

6

biological invasions - take the invasion of bitcoin to sp.

Biological Invasions: Theory and Practice, by Nanako Shigesada and Kohkichi Kawasaki.

Using the large amount of data from studies in pest control and epidemiology, it is possible to construct mathematical models that can predict which species will become invaders, which habitats are susceptible to invasion, and the biological impact. This book presents a clear and accessible introduction to the modeling of biological invasions. It demonstrates the latest theories and models, and includes data and examples from various case studies showing how these models can be applied to problems from deadly human diseases to the spread of weeds.

Vic's X/twitter feed

Aug

4

Tech Stress: How Technology is Hijacking Our Lives, Strategies for Coping, and Pragmatic Ergonomics

Valuable book on how to use technology and tech devices in a healthy manner, eg, author talks about the importance of having desk screens high enough, so we don't point our head downward too much (which is unnatural). Most visual "issues" could perhaps be avoided with proper habits. (I suppose in a good high school, pupils ought to be made aware of those things but then the teachers themselves aren't educated here…)

Video: Erik Peper, PhD—TechStress: Reclaim Health and Sanity in a Plugged-In World

Dr. Peper is a professor of Holistic Health Studies at San Francisco State, and is an internationally known expert on biofeedback (applied psychophysiology), holistic health, technostress and stress management.

Aug

3

The Right Moves: My Life in Chess
By Art Bisguier (with Bo and Chatty)

Chapter One: Pawn to King Four – The Bronx Beginnings

I was born on October 8, 1929, in the Bronx, the same month the stock market crashed. Maybe that’s why I always grew up careful with my pawns—early sacrifices never came easy to me. My father, a mathematician by training, worked as an actuary. My mother kept the home steady, and neither of them played chess. But one day, around the age of four or five, I watched my older brother play with a friend on a folding board in the kitchen. I didn’t understand the moves, but I was hooked by the shape of the pieces. The knight looked like it had something to say.

Like a lot of kids in those days, we didn’t have much. The Bronx was tough but tight-knit. You had to earn your place in any group—be it stickball or chess—and respect wasn’t handed out like candy. I didn’t talk much, but when I had something to say, I made sure it was worth hearing. That trait worked well in chess too. No wasted moves. No bragging. Just precision.

Download the full bio (.docx file).

Aug

1

I interpret the "Vig" as the collective term for:

1) bid-ask spread (difference in prices between buying & selling) due to market makers
2) transaction fees (for limit & market orders) charged by the exchange
3) slippage (an instrument is more expensive the deeper in the order book you go) due to how liquid an asset is.

Possible solutions for each?
1) Can be fought with the exclusive use of limit orders instead of market orders.
"Be patient and you will have the edge", The Chair in, Practical Speculation — The fine art of bargaining for an edge
2) I noticed (at least in crypto markets) that the more volume you trade, the less fees you pay (on a percentage basis)
3) Restrict yourself to deep and very liquid markets.

Also, one technique is to trade as less often as you can (buy & hold). That way you will automatically pay less of all the three sources of Vig. I think this is so important as I often found many "edges", then accounted for the vig and they often became loosing strategies.

Big Al writes:

I would also add "opportunity cost" as part of the "Meta Vig" (MV), i.e., the total costs associated with trying to trade the markets. The MV would also include the negative effects of cortisol on the human body.

Henry Gifford suggests:

I think two good steps are to ask others what the big is, and to try to calculate it yourself. Both exercises will no doubt be educational. A few times over the years I have asked horse bettors what the big is, but none seemed to know. As for calculating yourself, one hopefully will learn how much it varies by, and maybe also gain insight into hidden vig.

Steve Ellison responds:

There is no free lunch with limit orders because of adverse selection. Sooner or later, you will place a limit order on a security that simply moves up and never looks back. It would have been your best trade ever, had you actually been filled. In the opposite scenario, for example when I bought Coca-Cola in 1998, and it was already down 25 percent by the T + 3 settlement date, you will of course be filled.

Studies of retail investing accounts have shown a negative correlation between number of transactions and investment returns. In one study, accounts that had been inactive for 18 months because their owners had died, and their estates had not been settled, outperformed the vast majority of their retail account peers.

Peter Ringel writes:

Generally, the lower you go ( smaller time frame - smaller scope of the trade ) the larger the relative Vig costs. a subclass of opportunity costs is spent time of (daily) preparation. my required prep is nearly the same over many time-frames - but the scope of a trade is way lower for lower time-frames. in cash equities, the resale of your order-flow by your broker to some HF shop can be counted as Vig too. is this a common practice in option markets too? Yes, the Vig greases the fin-industry, but it is mostly unavoidable paying / avoiding the Vig does not lead to success or failure in mkts IMHO.

Vic simplifies:

just trade once a quarterfrom long side

Zubin Al Genubi comments:

The biggest vig is capital gain taxes. The richest people in the world hold their single company stock 10000x and realize no gain. Its very hard to beat a long term hold.

Jul

31

Art Shay: Through the Lens and On the Page: The Autobiography of an American Eye
by Art Shay with Bo ‘Grandpa AI’ and ChatGPT

Chapter 1: The Negative That Developed Me

I was born in the Bronx in 1922, the son of Jewish immigrants who wanted me to become a doctor, or a lawyer—anything but a guy with a camera in his hand and his head in the clouds. But it was the darkroom, not the courtroom, that called me. I can still smell the developer and fixer the first time I saw a photo appear like a ghost in the chemical tray. It felt like conjuring, like magic. Hell, maybe it was.

I didn’t start out with a Leica in my pocket. I started out with nothing. Nothing but a war, a nose for stories, and a restless need to see. After flying fifty-something bomber missions in WWII, you get used to looking down at the world. But it was only when I got back on foot, on the streets, that I really started seeing it.

Download the full bio (.docx file).

Jul

30

Why Do I Go On Tilt?

The problem with tilt is not an excess of emotion. The problem is a lack of brain fitness: poor cognitive endurance and poor capacity for recovery. This is a game changer for trading psychology.

Jul

29

Wiswell’s Way: A Life on the Squares and Between the Lines
By Tom Wiswell (with a little help from Bo Keely and AI)

Chapter One: Brooklyn Beginnings

It all began at the corner of Atlantic and Nostrand, Brooklyn, 1917. A working-class neighborhood, a Jewish family, and a boy who would grow up to be, among other odd things, a world checker champion. Yes—checkers, the game you played at your grandfather’s kitchen table, which I turned into a lifelong study, an art form, and eventually, a philosophy.

I wasn’t born into greatness or madness. Just into a world that still had trolleys clanking down the street and fathers who worked with their hands. Mine owned a small shop and taught me the first lessons of trade, thrift, and tact. My mother taught me patience. The combination, it turned out, is what you need to master any board game—and life itself.

Download the full bio (.docx file)

Jul

28

Specs have been posting about copper, and I happened across this act of chartcrime.

Steve Ellison comments:

Wow, I don't think the software I used to generate Sankey charts in a previous career analyzing a petabyte-sized data lake to surface key insights for one of the big 3 personal computer companies would have allowed me to just start a new stream in the middle ("Imports of Refined Copper"). Anyway wouldn't it make more sense to join "Concentrate Net Exports" and "Scrap Net Exports" on the right side of the chart, and then put "Imports of Refined Copper" downstream of that junction?

I was using D3 in those days; now that I am much more experienced with Python, maybe I should search for a Sankey charting library in Python.

On the subject of copper, I perceive a macro trend that the US has geopolitical risk because too much domestic mining and basic material production was shut down, partly in order to export environmental impacts to less developed countries. Lithium and steel are in similar situations.

Peter Ringel writes:

"Sankey" that is a nice search term. I had it on my list to research. These guys use it a lot..

One finds several sankey libraries in Python on Github, such as this one.

Jul

27

Tommy had the best way of starting a meeting or conversation: "tell me a story - or teach me something." try it sometime on a first date or meeting.

Where Westport meets the world: Tommy Ghianuly

Friday Flashback #131
Posted on March 1, 2019
When Tommy Ghianuly died last month, Westport lost more than a great barber and good friend.

We lost a man who loved local history — and made his Compo Shopping Center business a shrine to it.

The walls of Tommy’s barber shop are filled with vintage photos. Most customers see them in the mirror as they get their hair cut. Sometimes, someone glances a bit more closely at one or two.

Each of them has a story. Tommy knew them all.

Video: Compo Barber Shop and Thomas Ghianuly

In 2001, Dr. Phil Woodruff approached me to help work on video project for the Westport Historical Society. One of the project ideas he wanted to explore involved the Compo Barber shop and its owner Tom Ghianuly. Tom had over the years decorated the barber shop with historically significant photos of Westport. Dr. Woodruff wanted me to help him create a video about the barber shop, Tom Ghianuly, and all of the photos on his walls.

Vic's X/twitter feed

Jul

26

There is a debate over the effects of passive investing, eg, whether it causes all stocks to be more correlated in their movements, makes markets less efficient, etc. Here's an interesting take:

Index Investing Makes Markets and Economies More Efficient.

I’m going to argue that the trend towards passive management is not only sustainable, but that it actually increases the accuracy of market prices. It does so by preferentially removing lower-skilled investors from the market fray, thus increasing the average skill level of those investors that remain. It also makes economies more efficient, because it reduces the labor and capital input used in the process of price discovery, without appreciably impairing the price signal.

As for the correlation issue, one can still see dispersion. Here are the S&P components sorted by YTD % return as of 23 July (data source), with stocks such as PLTR, NRG and NEM on the right (+) end, and UNH, LULU, ENPH and DECK on the left (-) end:

Jul

24

Today is the 246th anniversary of the foreign war excursion that would result in 2nd worst naval disaster in American history.

On July 24, 1779, the naval expeditionary force commissioned by the Massachusetts General Assembly departed Boothbay, Maine for Castine on the Penobscot peninsula where the British had a 750-man garrison. The expedition had 19 warships, 24 transport ships and more than 1,000 militiamen under the command of Commodore Dudley Saltonstall, Adjutant General Peleg Wadsworth, Brigadier General Solomon Lovell and Lieutenant Colonel Paul Revere.

On August 13th 7 British ships arrived to reinforce the Castine garrison. The response of Commodore Saltonstall was to burn his ships and lose 470 men by death and capture to the British, who were led by Sir George Collier. Collier would lose 13 men.

Saltonstall and Paul Revere later faced court martial because of the fiasco. Saltonstall would lose his commission, but Revere won acquittal.

The Penobscot Expedition would rank #1 in American nautical fiascos until 1941 when the Japanese Navy would visit Pearl Harbor.

Jul

24

a nice example of economy in the 1800's. a colleague tells him to get out of the rain but finds him a hour later drenched. what's the explanation? he was waiting the one penny bus not the two penny.

George Peabody never quite escaped the marks of his boyhood poverty. He routinely worked 10-hour days, every day of the week, and during one 12-year stretch he never took off three consecutive days. More visibly, he was frugal to the point of absurdity. His partner, Junius Morgan (father of J. Pierpont Morgan, who began his distinguished career in finance at the New York office of George Peabody), once found him standing in a drenching London rain. Morgan realized that Peabody had left the office 20 minutes earlier. Ron Chernow recounts their exchange: “’Mr. Peabody, I thought you were going home,’ the younger man said. ‘Well, I am, Morgan,’ Peabody replied, ‘but there’s only been a twopenny bus come along as yet and I am waiting for a penny one.’” At the time, Peabody had more than £1 million to his name.

Vic's X/twitter feed

Jul

23

Donald Trump set to open US retirement market to crypto investments
President preparing executive order to allow 401k plans to tap broad pool of alternative assets

Hm. Entry for ordinary folks or a sneak way / exit for established players? Have a got a picture of the angel fish in my office, to remind me of the deceptive nature of markets. Angler fish are those ambush predator fish living in deep sea, that can illuminate poles in front of their jaws….to catch smaller fish.

William Huggins writes:

am reading Gustavus Myers' History of Great American Fortunes (1907) at the moment and just absorbed 300 pages of railroad fraud perpetrated by those who got their hands on the "mcguffin" asset and then sold it off only once they had successfully looted the value. the same sort of economic transfer happens for early crypto adopters - those trillions of market cap are "paper only" until some rubes can be fleeced of their efforts for the worthless securities foisted upon them.

Stefan Jovanovich comments:

I hope this comment will not be read as argument or rebuttal but only as a factual footnote to Myers' work. The 50,000 shares issued by Fiske et. al. were "legal" in the same way that carried interest is "legal". They were allowed by New York State law in 1868.

The primary limitation on the issue of new shares of common stock for the Erie was its corporate charter. The board only had authority to issue $30 million in capital stock. Any issues above that amount required amendment of the corporate charter by the legislature and majority shareholder approval. The additional 50K of stock issued, at its par value, did not increase the total capitalization above the $30 million limit.

NY State law in 1868 allowed non-cash consideration. The contracts that the Erie board accepted as payment for the new shares were, in nominal dollars, fully equal to the par value of the shares issued. Shareholders had the right to challenge that claim; they were, as litigant frequently are, disappointed by the rejection of their challenge. The result was a situation that can be politely described as "judicial uncertainty" - i.e. a battle of conflicting injunctions.

Jul

22

Smörgåsbord

July 22, 2025 | Leave a Comment

Big Al offers:

Very nice Veritasium vid on randomness and information:

What is NOT Random?

Asindu Drileba likes a new interview:

I learned about Gappy Paleologo from this list. He has a new interview on a Bloomberg podcast. In it, he talks about:

- Why he suspects Astrophysicists make good quants
- Why AI can't fully take over trader's jobs (in principle)
- What makes a "good quant"

Jeff Watson is following the floor traders last stand:

Old-School Floor Traders Finally Get Their Day in Court Against CME
Trial opens in the Chicago plaintiffs’ long-running lawsuit claiming harm from the launch of electronic markets

The plaintiffs, who estimate that they are owed about $2 billion in damages plus interest, say the company broke its promises to them when it opened a data center for electronic trading that effectively doomed the old trading floors. CME has called the lawsuit baseless.

A spokeswoman for CME declined to comment. The company repeatedly tried to get the suit thrown out, but failed each time.

The lawsuit, filed in 2014, has dragged on so long that one of the original plaintiffs has died. Hundreds of former floor traders could be affected by the outcome. The trial, being held at a county courthouse in downtown Chicago, kicked off Monday with jury selection. It is expected to last several weeks.

Jul

21

CPI Data Quality Declining
June 20, 2025
Torsten Sløk
Apollo Chief Economist

To calculate CPI inflation, BLS teams collect about 90,000 price quotes every month covering 200 different item categories, and there are several hundred field collectors active across 75 urban areas.

When data is not available, BLS staff typically develop estimates for approximately 10% of the cells in the CPI calculation. However, in May, the share of data in the CPI that is estimated increased to 30%, see chart below.

In other words, almost a third of the prices going into the CPI at the moment are guesses based on other data collections in the CPI.

Bill Rafter writes:

Would anyone in the data business be surprised by this? I’m not.

Peter Ringel wonders:

Doge related?

Big Al offers:

US Labor Department reducing CPI collection sample amid hiring freeze
By Reuters
June 4, 2025

The U.S. Labor Department's economic statistics arm said on Wednesday it was reducing the Consumer Price Index collection sample in areas across the country due to resource constraints, but the move should have "minimal impact" on the overall CPI data.

Jul

19

For those who study such data, here’s the 2025 Big Mac index.

The Big Mac Index, a real and recognized metric developed by The Economist magazine in 1986, initially served as a light-hearted tool to measure purchasing power parity between countries. Today, it has evolved into a significant indicator of the global economy and currency valuation. This index compares the price of Big Macs in various countries to the price in the United States, offering insights into economic conditions.

Steve Ellison writes:

I love the Big Mac Index. But inquiring minds want to know, what about the eurozone, conspicuously missing from the article? The Big Mac Index judges the euro to be 15.2% overvalued, so this year's runup in EUR/USD appears not to be supported by burger fundamentals.

Jul

18

In the July 14 Wall Street Journal, an article argued that smaller banks—by virtue of their loan portfolios—are better positioned than larger banks to gauge the nation’s economic health. Intrigued, I tested that claim using Federal Reserve weekly data on Commercial & Industrial loans for both large and small banks going back to 1984.

As expected, small-bank lending proved more volatile, but it was consistently less “correct” than large-bank lending. Whether measured by simple rates of change or by shifts in their 12-month trends, large banks outperformed small banks in accuracy. This analysis does not include loan-performance metrics (delinquency or charge-off rates broken out by bank size), which — unsurprisingly — tend to peak during or immediately after recessions.

Jul

17

Your Favorite Chicken Sandwich Shows How Markets Iterate

Critics often scoff at the market economists’ claim that competition fosters relentless innovation. A recent meme points to the ubiquity of chicken sandwiches across major fast food chains as supposed evidence of stagnation in capitalism. If twelve top firms offer a similar product, the argument goes, how innovative can an economic system truly be?

But that line of reasoning badly misrepresents both the nature of competition and the role of iterative improvement in markets. The explosion of chicken sandwich options is not a sign of creative bankruptcy — it’s a case study in product refinement, branding evolution, and consumer-focused differentiation. Far from signaling sameness, the chicken sandwich wars reveal how even within a narrow category, firms continuously jockey to win customer loyalty, and with it, market share.

Jul

16

The Most Useful Thing AI Has Ever Done, by Veritasium

The biggest problems in the world might be solved by tiny molecules unlocked using AI. A huge thank you to John Jumper and Kathryn Tunyasuvunakool at Google Deepmind; and to David Baker and the Institute for Protein Design at the University of Washington for their invaluable expertise and explanations.

Overview: Alphafold

AlphaFold is an artificial intelligence (AI) program developed by DeepMind, a subsidiary of Alphabet, which performs predictions of protein structure. It is designed using deep learning techniques.

DeepMind site: AlphaFold: Accelerating breakthroughs in biology with AI

Jul

15

The rules for American warfare are painfully simple: we win the ones that other people start, and we lose the ones that we start. Today is the formal anniversary of the first loser war by the American Republic. Congress, at the urging of President Adams and his Secretary of the Navy, Benjamin Stoddert, revokes its treaty with France. Because the revocation put the country in a state of war with France but is not a formal declaration by Congress, our history books call it a "Quasi-War". Conventional history does its best to pretend that this was a success. History Today tells us "the Navy gained respect as a powerful force. It grew from a mere six vessels to about 30 commissioned ships. American warships captured more than 80 French vessels during the Quasi-War."

U.S. launches the Quasi-War with France, the first conflict since the Revolution

Total tonnage of ships captured during the Quasi-War
(the figures given are a range because the sizes of the individual ships captured have to be estimated; there are not enough surviving records to know how large each ship was.)

• American ships captured by French Navy: 200,050–400,100 tons
• French ships captured by U.S. Navy: 5,200–10,000 tons

We have better numbers for the the number of ships captured:

• American ships captured by French Navy: roughly 2,000
• French ships captured by U.S. Navy: 85-86

The American records are much more precise because the captures had to be valued; prize money was the incentive pay for the officers and sailors.

Steve Ellison writes:

Paul Johnson, in A History of the American People, wrote that Thomas Jefferson during his two terms as president was endlessly vexed by the depredations of both the British and French navies on American shipping. One wonders why we start any wars if we are guaranteed to lose.

Stefan Jovanovich responds:

The data for the war that the Democrat-Republicans (Jefferson and Madison) wanted and formally declared - the one that started in 1812 and is still looking for a name:

• U.S. Captures: 44,412–63,912 tons (200–250 vessels)
• U.K. Captures: 144,799–424,799 tons (1,406 vessels)

Jul

14

Selection of videos:

How can we make young forests “old-growthier?”

Forest management is hard to understand

Ecological Forestry: The Agony and the Ecstasy of “Messiness”

Five Things You Can Do to Help Forests — In 5 Minutes

And the book:

How to Love a Forest: The Bittersweet Work of Tending a Changing World
By Ethan Tapper

Proffering a more complex vision, Tapper argues that the actions we must take to protect ecosystems are often counterintuitive, uncomfortable, even heartbreaking. With striking prose, he shows how bittersweet acts—like loving deer and hunting them, loving trees and felling them—can be expressions of compassion. Tapper weaves a new land ethic for the modern world, reminding us that what is simple is rarely true, and what is necessary is rarely easy.

Jul

12

The Case for Free Trade
By Milton Friedman, Rose D. Friedman
Thursday, October 30, 1997

For example, the supporters of tariffs treat it as self evident that the creation of jobs is a desirable end, in and of itself, regardless of what the persons employed do. That is clearly wrong. If all we want are jobs, we can create any number–for example, have people dig holes and then fill them up again or perform other useless tasks. Work is sometimes its own reward. Mostly, however, it is the price we pay to get the things we want. Our real objective is not just jobs but productive jobs–jobs that will mean more goods and services to consume.

How Trade Agreements Have Enhanced the Freedom and Prosperity of Americans
By Daniel Griswold and Clark Packard

The most straightforward and preferable path to trade liberalization for any country is the unilateral reduction of trade barriers without regard for other countries’ trade policies. Unilateral liberalization allows a country to realize the gains from openness—mainly lower prices for consumers, lower-cost inputs for businesses, and a more favorable exchange rate for exporters—without the need for complicated negotiations with other countries. Many nations have followed this route with success, from Great Britain in the mid–19th century to China and India and other emerging economies since the 1980s.

Recommended Readings on Free Trade Versus Protectionism
By Williamson M. Evers

Economists, going back to Adam Smith and David Ricardo, are virtually unanimous that free trade benefits consumers and the overall economy. But there exist special interests who would gain in the short run from protectionist barriers. And there is a large segment of the public that doesn’t understand the arguments for free trade. Not surprisingly, there are politicians who are all too willing to gain votes by catering to protectionist interests.

'Ulysses Grant' comments:

"Free trade" was the English rebuttal to the ungrateful Americans who decided in 1789 that they would pay for the national government with tariffs. The intellectual debate only began in the United States a generation later; but, even then, it was only about how much harm Congress would do to libertarian beliefs in order to pay the bills. "True" freedom would only come much later, with the income tax - which has none of the defects that make tariffs so inherently immoral.

Vic's X/twitter feed

Jul

11

To what extent are all the spectacular reported profits of short term traders due to specialized lower commissions and preferred access to the bid-ask spread, especially but not limited to the openings?

Vic's X/twitter feed

Jul

10

Retail Trading in Options and the Rise of the Big Three Wholesalers
Svetlana Bryzgalova, Anna Pavlova, Taisiya Sikorskaya (London Business School)
First published: 02 October 2023

We document a rapid increase in retail trading in options in the United States. Facilitated by payment for order flow (PFOF) from wholesalers executing retail orders, retail trading recently reached over 60% of total market volume. Nearly 90% of PFOF comes from three wholesalers. Exploiting new flags in transaction-level data, we isolate wholesaler trades and build a novel measure of retail options trading. Our measure comoves with equity-based retail activity proxies and drops significantly during U.S. brokerage platform outages and trading restrictions. Retail investors prefer cheaper, weekly options with average bid-ask spread of 12.6%, and lose money on average.

We start by documenting the stylized fact that, although only a fraction of investors trade options, most of the PFOF received by retail brokerages comes from options, not equities. For example, in 2021, U.S. brokerages received $2.4 billion in PFOF for options and only $1.3 billion for equities. The lion's share of PFOF for options came from only three wholesalers: Citadel, Susquehanna, and Wolverine.

Jul

9

Terms of Trade and the Gains from Trade | AP Macroeconomics | Khan Academy

The Benefits of Free Trade: Addressing Key Myths
By Donald J. Boudreau and Nita Ghei

The growing rhetoric about imposing tariffs and limiting freedom to trade internationally reflects a resurgence of old arguments that stay alive in large part because the benefits of free international trade are often diffuse and hard to see, while the benefits of shielding specific groups from foreign competition are often immediate and visible. This illusion fuels the common perception that free trade is detrimental to the American economy. It also tips the scales in favor of special interests seeking protection from foreign competition. As a result, the federal government currently imposes thousands of tariffs, quotas, and other barriers to trade.

Vic's X/twitter feed

Jul

8

The NSF-funded ZEUS Laser Facility at the University of Michigan produced more than 100 times the global electricity power output (2 petawatts) for a duration of 25 quintillionths of a second.

The US has a new most powerful laser

Hitting 2 petawatts, the NSF-funded ZEUS facility at U-M enables research that could improve medicine, national security, materials science and more.

The ZEUS laser facility at the University of Michigan has roughly doubled the peak power of any other laser in the U.S. with its first official experiment at 2 petawatts (2 quadrillion watts).

Jeff Watson responds:

Those are black hole creation numbers (from chatgpt):

Jul

7

Lytton Strachey, in Biographical Essays, writes about David Hume:

Not long before he died he amused himself by writing his autobiography — a model of pointed brevity. In one of his last conversations — it was with Adam Smith — he composed an imaginary conversation between himself and Charon, after the manner of Lucian: "Have a little patience, good Charon, I have been endeavouring to open the eyes of the Public. If I live a few years longer, I may have the satisfaction of seeing the downfall of some of the prevailing systems of superstition." But Charon would then lose all temper and decency. "You loitering rogue, that will not happen these many hundred years. Do you fancy I will grant you a lease for so long a term? Get into the boat this instant, you lazy, loitering rogue."

Vic's X/twitter feed

Jul

6

As officers, you will neither eat, nor drink, nor sleep, nor smoke, nor even sit down until you have personally seen that your men have done those things. If you will do this for them, they will follow you to the end of the world. And if you do not, I will break you.

– Field Marshal William Slim, British Army

Bud Conrad is skeptical:

Of course, they all SAY things like that. But they have their own Officers' Quarters, that "Rank has privilege" and fat retirement on the boards of suppliers. Is there a specific application you're trying to comment on with this quote?

Stefan Jovanovich responds:

At age 16 Slim went to work as a clerk for Stewarts & Lloyds, a supplier of metal tubes. (Slim was able to get the job because he had grown up in the business; his father was an ironmonger.) In 1910, at age 19 he enlisted in the University of Birmingham Officer Training Corps. Because he had the money to buy a regular commission, he was given a temporary rank with the Royal Warwickshire Regiment in 1914. He served in Turkey (Gallipoli), Mesopotamia (Iraq) and France, was wounded twice and earned the Military Cross in 1916. In 1919 he was transferred to the Gurkha Rifles of the British Indian Army and served in the Northwest Frontier (Afghanistan). He was able to attend the Camberley Staff College in 1926; despite his inferior social background, he was invited to stay on and become an instructor. He returned to India in the 1930s and became commander of the 2nd Battalion, 7th Gurkha Rifles. After a year at the Imperial Defence College, he was promoted to brigadier and led the 10th Indian Brigade. In 1940 he was promoted to major general to command the 10th Indian Infantry Division, which operated in Iraq, Syria and Iran in 1940-1941. In March 1942 Slim was appointed commander of the Burma Corps. He led them in a 900-mile retreat from Rangoon to India. In May 1942 the Burma Corps was reorganized into XV Corps of the Eastern Army and Slim as appointed lieutenant general. In October 1943 Slim became commander of the Fourteenth Army.

The rest of the story is easy. The 14th (which became known as the Forgotten Army because they were last in the supply chain for everything) would defeat the Japanese 15th Army at Imphal and Kohima in 1944 and reconquer Burma in 1945. The Japanese would suffer 180,000 casualties; the 14th 24,000.

Slim suffered from the effects of malaria throughout his life; his nickname among the troops was "Uncle Bill".

Jul

5

The calendar here at Daily Speculations puts market days into four groups, based on the daily changes in S&P futures and bond futures:

Green = Stocks Up, Bonds Up
Orange = Up, Down
Blue = Down, Up
Red = Down, Down

Using daily data for the S&P and for TLT, from 2 January, 2024, to 28 June, 2025, I determined which color each day is, and then did the count for each color, and what % that color day is of all days:

Then I counted what follows each day, i.e., a Green day could be followed by another Green day, or an Orange, or Blue, or Red day. With a random distribution of days, you would expect random following days, i.e., if 40% of days are Green, and 30% are Orange, then you would expect any given day to be followed by a Green day ~40% of the time and an Orange day ~30% of the time. You could then look at deviations, e.g., Blue days followed by Orange days only 25% of the time could be counted as -5%-point deviation.

So I did this kind of counting with the calendar days, with these results, where you see, for example, the number of times a Green day follows a Green day (39), what % of the time this represents (33.1%), and the deviation from expected, measured in % points (1.33%).

• What follows Green days looks random (i.e., the numbers in the deviation column are close to zero percent).
• Orange days are somewhat more likely to be followed by Red days and less likely by another Orange day.
• Blue days look random.
• Red days are more likely to be followed by Orange days.

I keep thinking I should study Markov processes, especially "Hidden". I don't know if this kind of counting is a simple version of a Markov process, and if there is more that could be done.

Jul

4

Dollar’s Decline Meets Rising Dedollarization: The Threat Comes from Within
The Bloomberg Dollar Index has fallen nearly 8.5 percent, its steepest drop since the 1980s. Elsewhere, incremental signs point to emerging alternatives.
Peter C. Earle
June 23, 2025

The recent weakness in the US dollar has reignited the debate over the durability of the dollar’s dominance in global finance. Over the first half of the year, the Bloomberg Dollar Index has fallen nearly 8.5 percent, marking one of the sharpest declines since the mid-1980s. Yet while this drawdown has fueled widespread commentary about de-dollarization, it is important to distinguish between dollar weakness — a familiar, cyclical phenomenon — and the far more consequential and complex issue of de-dollarization, which concerns the dollar’s standing as the world’s primary reserve currency and medium of international exchange.

Rich Bubb writes:

A thought I had was that many/all future currency/ies might eventually only be crypto based. How that develops is an interesting (read: slightly frightening, for me) scenario. And I think the exchange rates would be a tough hurdle to deal with. Unless there'd be a worldwide cryptocurrency system. Then there's the point that must be solved, specifically that quantum computers of 'bad actors' might be able to hack/crack cryptos' security. Maybe crypto security protocols could be quantum-based, run by quantum computers?

Another point might be powering those Q-computers (electricity) constantly. Obviously without constant power any computer is a nice pile of parts. Furthermore, any significant programming errors could 'delete' trillions worldwide before any human could intervene.

Jul

3

The news is the Buss family selling the Lakers (and the online discussion whether the Lakers were a better investment over time than, say, the S&P).

I wanted to look at the value of college athletics and found this page:

What the top 75 college sports programs are worth

Then I used Perplexity and elbow (or mouse finger) grease to build this table showing revenue per student, sorted high-to-low. There are many possible errors in this data but it's just for fun and seems intuitively roughly correct.

Below is the top set of rows - click here for the full sheet (all 75 schools) which will appear zoomed out - click on it to zoom in.

Jul

2

I recently came to the conclusion that a lot of quants come from the field of Operations Research. I noticed a paper of MFM Osbourne was also published in an Operations Research Journal. After a bit of research with in this space I came across an approach called "Metaheuristics."

I think its very relevant to this list. Mr. Jim Sogi once described The Chair's approach to thinking as "Neiderhoffian thought." E. O Wilson called it "Consilience." "Metaheuristics", "Neiderhoffian Thought" and "Consilience" are all related, in that, they champion the idea that we can come across novel solutions via thinking in analogies & metaphors.

There is a table of curated Metaheuristics. It has algorithms inspired by Ants, Buffaloes, Rivers, Art (yes, like paintings), Squirrels, Wasps and Korean TV Shows (Squid Game Optimizer).

The gem I am talking about is a book called Advanced Optimization by Nature-Inspired Algorithms, by Omid Bozorg-Haddad. The book has 15 Algorithms. Notable mentions are:

- League Championship Algorithm (Inspired by sports)
- Shark Smell Optimisation (Inspired by how sharks use their sense of smell to find prey)
- Ant Lion Optimizer (Inspired by how larvae of Antlions entrap prey)

I consider the book well written. Each of the 15 algorithms are described in 4 ways. For example, the Ant Lion Optimiser algorithm:

1) It's done in plain English to give you a verbal understanding of what the algorithm does.

2) It's done in mathematics so you can know how to better understand the algorithm in math notation.

Example of math description of ant-lion algorithm

3) It's described using flow charts.

4) It's described in pseudocode so you can better know how to code the algorithms up.

All the 15 algorithms are described in this way. This was something I appreciated so much.

Jul

1

The A B C of Stock Speculation
By S. A. Nelson
16 Park Place New York
Copyright, 1902.

pp 28-29:

The elder Rothschilds are said to have acted on the principle that it was well to buy a property of known value when others wanted to sell and to sell when others wanted to buy. There is a great deal of sound wisdom in this. The public, as a whole, buys at the wrong time and sells at the wrong time. The reason is that markets are made in part by manipulation and the public buys on manipulated advances and after they are well along. Hence it buys at the time when manipulators wish to sell and sells when manipulators wish to buy.

In some commission offices, there are traders who, as a rule, go against whatever the outside customers of the house are doing. When members of the firm say, "all our customers are getting long of stocks," these traders sell out; but they buy when the firm says, "the customers are all short." There are of course, exceptions to this rule. If there were no exceptions, the keepers of bucket shops would all get rich. When the market has an extraordinary rise, the public makes money, in spite of beginning its purchases at what would ordinarily be the wrong time, and this is when the bucket shops either lose their money or close out in order to keep such money of customers as they have in hand.

All this points to the soundness of the Rothschild principle of buying a property of known value when the public generally is disposed to sell; or of selling it when the general public thinks it a time to buy.

Jun

30

sp and bonds 1-day changes similar to Mendel's independent moves to next generation. when an event occurs that throws one of pair of bond or sp off, treat it as a mutation.

Punnett square

The Punnett square is a square diagram that is used to predict the genotypes of a particular cross or breeding experiment. It is named after Reginald C. Punnett, who devised the approach in 1905. The diagram is used by biologists to determine the probability of an offspring having a particular genotype. The Punnett square is a tabular summary of possible combinations of maternal alleles with paternal alleles. These tables can be used to examine the genotypical outcome probabilities of the offspring of a single trait (allele), or when crossing multiple traits from the parents.

Asindu Drileba writes:

Orange (S&P Up, Bonds Down) and Green (S&P Up, Bonds Up)

Orange appeared 4 times. In 3/4 times, Orange transitioned to Green with an average point gain of 35.4 in the SPY.How long will this continue? I noticed the pattern last month, unfortunately I didn't "count" it. Was it around for longer periods of time?

Vic's X/twitter feed

Jun

29

We know that Morris had at least £11,250 sterling in January 1784 when Congress ratified the Treaty of Paris. That was the sum Morris contributed, as lead manager, to a subscription for “a vessel for the China trade”. The Empress of China venture would raise £27,000 – Morris’ £11,250, £6,750 from Daniel Parker, a New York merchant, £4,500 from John Holker, the French consul in Philadelphia, and £4,500 from other individual investors. The partners would buy a 360-ton, 18-gun sloop that had been built in Baltimore in 1783 as a privateer, convert it into a merchantman and load cargo in Philadelphia and New York: 30 tons of ginseng, 2,600 beaver and other furs, Spanish silver dollars, lead, pepper and naval stores (turpentine). The captain would be John Green. Green had served as captain of the Pennsylvania Navy sloop Aetna in 1776; in 1778 he had been captain of the brig Hope which is recorded as having captured £1,000 in prizes under its privateering commission. The Supercargo would be Samuel Shaw. Shaw had enlisted as an Ensign in the 3rd Massachusetts Regiment in 1775 after the Battles of Lexington and Concord. As Lieutenant, the Captain and then Major Shaw would serve under General Henry Knox as an artillery officer, then aide-de-camp and deputy adjutant general.

The Empress of China sailed from New York on February 22, 1784 with a crew of 34 (Green, Shaw, 2nd supercargo Thomas Randall, 2 carpenters, a barrel-maker and “several boys”). It would stop at the Cape Verde Islands for provisions in April, round the Cape of Good Hope, pass through the Sunda Strait (where it narrowly avoided a collision according to Green's logbook), and anchor at Whampoa on August 28, 1784. 1 of the crew would die in Canton of “illness”, and the ship would have £500 of repairs done while in port. Shaw would present a letter from Congress to the Chinese officials, and the Canton merchants would give Captain Green a painted fan with a portrait of the ship (the only image of the Empress of China that survives). Shaw’s September-December 1784 journal would record payments of £1,500 in duties and £500 for an interpreter. He and Randall would sell the ginseng for £6,000 and the furs for £4,000; they would buy 800 chests of tea (£15,000), 20,000 pairs of cotton trousers from Nanjing (£3,000), 64 tons of porcelain (£2,000), and silk fabrics (£1,500). The ship would weigh anchor at Whampoa on December 28 “with a fair wind”. They would sail around the Straits of Malacca, across the Indian Ocean, around the Cape of Good Hope and anchor at St. Helena on March 10 to take on water (£100). The carpenters would spend £50 in materials to repair minor leaks. According to Shaw’s logbook, the ship “Made land at New York, May 11, 1785, to great acclaim.” The cargo would be sold in Boston, New York and Philadelphia. Morris’ papers record a net profit of £6,250. What is puzzling is his calculation that this was only a 25% return on his investment of £11,250. What makes things curiouser and curiouser is that Daniel Parker will write to Morris that the venture has provided him with a “satisfactory return” and then flee to Britain 2 months later, leaving debts of £20,000 and the Empress of China put up for sale, advertised in the New York Packet as “copper-bottomed, scarcely two years old, fit for Indian with small expense.”

In 1785 he would purchase 100,000 acres in western Pennsylvania for £5000 and then sell half his holding in 1787 for the same amount. In 1786 he would invest £3,000 in the privateering schooner Dolphin; the following year the ship would record the sale of £3,000 in goods captured. In 1788 Morris' own balance sheet would show his liquid net assets at £20-30,000.

By 1790 Morris would purchase the Genesee Tract from the State of Massachusetts -1.5 million acres in the Genessee region of New York, paying £22,500. In 1791 he would buy the city block in Philadelphia (Chestnut-Walnut, Seventh-Eighth Streets) for £22,500. That same year Morris would launch the Delaware and Schuylkill Canal Company. Of its total £45,000 capital Morris would contribute £11,250. In 1793 he would sell 1 million acres of the Genesee Tract to the Holland Land Company for £75,000 and buy shares in the Bank of Pennsylvania (£4,500). In 1794 the work would begin on the Chestnut Street mansion, with Pierre Charles L’Enfant being paid £2,000 for design and supervision and £6,138 being spent that year on construction.

1795 would be the year of the very big deal. Morris, James Greenleaf and John Nicholson would form the North American Land Company; each would own 10,000 shares, and the venture would be capitalized at £675,000. It would own 6 million acres. Within 2 years (1797) Greenleaf and Nicholson would be in Prune Street Prison for bankruptcy. Morris would arrive there the following year (1798). Their collective unpaid debts would be in excess of £1,000,000.

Jun

28

Trade Negotiations aren’t Chess, Poker, or Go. They’re Bridge.
Chess is zero-sum and strictly competitive. Trade is collaborative; its foundational principles are voluntary exchange and mutual advantage.
Peter C. Earle, Subiksha Ramakrishnan
May 22, 2025

Trade negotiations are often mischaracterized as adversarial contests akin to warfare or chess. (The latter is increasingly invoked in varying degrees: 3d, 4d, and nth degree). Headlines speak of countries “battling” over tariffs or “outmaneuvering” each other in the global marketplace. But while those analogies may be emotionally satisfying and undergird ideological fervor, they fundamentally misunderstand and distort the nature of trade itself.

Unlike war, trade is not about conquest; it’s about cooperation under constraints. While no analogies are perfect, within the gaming milieu, a better model is to be found in contract bridge, where strategy, communication, and shared outcomes dominate the pursuit of mutual gain.

Jun

27

Drive Yourself Sane: Using the Uncommon Sense of General Semantics, by Susan Presby Kodish

GS is based on a careful study of human behavior and scientific problem-solving, bridging applied psychology and practical philosophy. Drive Yourself Sane provides time-tested methods for critical and creative thinking and constructive communicating with a variety of problem-solving applications for mental hygiene, personal development, education, business, etc.

Easy to read book about Global Semantics. Why relevant? Because we often confuse the image of something with reality. And that is recipe for insanity. eg. Dalio has this "machine" analogy for mkts and the econ. Fair enough. But the econ and markets are much more: Living organism etc (good to use "etc" as it reminds oneself that it is a lot more…) There is a famous picture that shows an "apple" and underneath the painter wrote: "This is not an Apple."

Humbert G. comments:

Image v. Reality. Dialio is the perfect example. What’s with all the gloomy billionaires?

Larry Williams writes:

Dalio sure looks like a loser always bemoaning the world same as Cooperman how did these guys rise so far?? Then I have been accused of not being smart enough to put my feet on the ground if it weren’t for gravity.

Rich Bubb ponders:

I've been thinking that Dalio is using historical events to try to not repeat AVOIDABLE/PREVENTABLE mistakes. Yet the rhyming of those events is intriguing. Especially the given nature of Nature, current hot wars, insane debt levels, growing militarization actions, natural resource over usage/abuse, wealth distribution, Us vs. Them polarizations, etc. Yep, gloomy.

His 'machine' concept of the Markets & Economics is an "approximation of a likely future" (my words). The coincidences of the factors Dalio describes at some pressure point will often start Change Cycles. We've witnessed this in our own short-lived & humble lifetimes.

The problem is that 'history' will not exactly repeat in some-yet-unknown terms but might rhyme in concept. The timeline/s of historical examples Dalio uses for large changes is/are very long. And the salient concepts, e.g., reserve currency, debt irrationality, Dalio's Big Cycle (some spanning decades or longer), "Dynastic Cycles' Stages", etc., are historically documented and presented in "The Changing World Order" (2021). The tables and 'chartwork' are visual reinforcements throughout, yet intriguing patterns do persistently re-occur.

My takeaway is generally that Major Powers' (Markets, Econ, military conflicts, extinction-level weapons/WMD^6, etc.) either don't see the cliff they are eventually going to go over, or those major powers refuse to find solutions to the recurring Root Causes that Dalio writes about.

I'm not finished with his 'Changing World Order' book. From what I have read, Dalio seems to try to codify history into significantly huge cycles, leading to changes in the World's Order. IMO, given the current situation (in our time, i.e., now) it isn't too difficult to extrapolate what's ahead… gloomy indeed. Maybe Dalio is "gloomy" for one or more reason/s.

Jun

26

Adam Grimes comments:

Cool chart. Interesting data. We have some farmers in the family but I would not have expected such a big difference.

Peter Ringel writes:

I think, this productivity boost shows Norman Borlaug‘s Green Revolution. There would be no India or China as we know it . And in the West too. The topic seems close to not being politically correct in our upside-down world.

Michael Ott brings expertise:

The Y axis is Mg/hectare, which is a different way to measure weight per unit area. Technically, a bushel is a unit of volume (8 gallons) that is understood to be equivalent to 56 pounds of corn or 60 pounds of soybeans. Most US farmers measure in bushels per acre, which is a different way to express weight per unit area.

The major increase in corn came from breeding AND fertilization. GMO corn was introduced in 1996 and reached 50% market share around 2001, which is pretty fast adoption for agriculture. Biotech traits certainly help with yield, but more so prevent disasters from insects and weeds, which harm yields.

Big Al finds another chart interesting:

Jun

25

Henry Siddons Mowbray was an American artist. He executed various painting commissions for J.P. Morgan, F.W. Vanderbilt, and other clients.

Destiny (1896) - Henry Siddons Mowbray (1858–1928), oil on canvas, Museum of Fine Arts, Boston, MA:

Jun

24

the forces of fate. finally a new all-time high. previous all-time high: 23 January, 2025, S&P 6123.

The Hallé - Verdi: The Force of Destiny Overture

La forza del destino

Over the years La forza has acquired a reputation for being cursed, following some unfortunate incidents. In 1960 at the Metropolitan Opera, the noted baritone Leonard Warren collapsed and died during a performance of the opera. The supposed curse reportedly kept Luciano Pavarotti from ever performing the opera, and the tenor Franco Corelli used to follow small rituals during performances to avoid bad luck.

Vic's X/twitter feed

Jun

24

The Wiley edition of Henry Clews, Fifty Years in Wall Street, has annotations by Jon Markman - the editor for Vic and me when we wrote a biweekly column for MSN Money - and a foreword by the Chair.

Henry Clews was a giant figure in finance at that time, and his firsthand account brings this colorful era to life like never before. He reveals shocking stories of political and economic manipulation and how he helped bring down the mighty Boss Tweed. He writes eloquently about the madness of the markets and how the era's greatest speculators amassed their fortunes. This book provides an expansive view of Wall Street in an era of little regulation, rampant political corruption, and rapid financial change.

Henry Clews was born in England in 1836 and emigrated to the United States in 1850. In 1859, he cofounded what became the second largest marketer of federal bonds during the Civil War. Later, he organized the "Committee of 70," which deposed the corrupt Tweed Ring in New York City, and served as an economic consultant to President Ulysses Grant.

Jun

23

Jarisch-Herxheimer reaction in medicine: A sudden and typically transient reaction (eg fever) that may occur within 24 hours of being administered antibiotics for an infection such as syphilis.

Application in financial markets? eg when a troubled stock sells off briefly after a new strategy or management is announced but the stock recovers after some 24-48 h carnage.

Asindu Drileba writes:

In The Education of a Speculator, Chapter 14, "Music & Counting":

Another frequent work I hear in the market is Haydn's Symphony No. 94 ("The Surprise"). The surprise is a simple fortissimo chord in the second movement, designed "to make the women jump." In a contemporaneous review of the work, a lyrical critic wrote:

The surprise might be likened to the situation of a beautiful Shepherdess who, lulled to sleep by the murmur of a distant Waterfall, starts alarmed by the unexpected firing of a fowling-piece.'

Two examples from currency markets:

1) Asia Currency crisis: When the Asian currency crisis of the 1990s was starting to manifest, IMF provided a loan to "stabilize" the economy. The currencies were stable for some time (the lull to sleep), then dropped by up to 80% in some Asian countries (the jump).

2) The Lebanese pound: The Lebanese pound remained very stable. Close to a flat line for 13 years (the lull to sleep), Then in Jan 2023 it dropped by 90% (the jump).

Equity Markets: "The best predictor that a company will go bankrupt, is stable income" — Nassim Taleb. Unfortunately its hard for me to get data on delisted (bankrupt) stocks so I can't test this. But the logic behind this reasoning is that, to provide stable income, corporations often optimise via unhealthy accumulation of debt, relying on a single supply chain (Apple & China), relying on a few big enterprise customers (Palantir & US Government).

While this optimisation makes it easier to milk profits that make a corporation look "stable" (the lull to sleep), it makes them more prone to catastrophic failure (the jump). A single customer canceling your service, trump tariffs on a single supply chain partner or debt unable to be paid may lead serious issues.

Jun

22

Converting 1-Day Volatility to h-Day Volatility: Scaling by sqrt(h) is Worse than You Think
Francis X. Diebold, Atsushi Inoue - University of Pennsylvania
Andrew Hickman, Til Schuermann - Oliver, Wyman and Company

We show that the common practice of converting 1-day volatility estimates to h day estimates by scaling by sqrt(h) is inappropriate and produces overestimates of the variability of long-horizon volatility. We conclude that volatility models are best tailored to tasks: if interest centers on long-horizon volatility, then a long-horizon volatility model should be used. Economic considerations, however, confound even that prescription and point to important directions for future research.

Jun

21

Anyone who appreciates the scientific study of finance will recognize the name of MFM Osborne as a pioneer, visionary, and creator of our field. He was the first to discover Brownian Motion in Stock Prices, the first to study technical analysis scientifically, the first to note the lognormal nature of prices, the first econophysicist, the creator of automated market making algorithms 50 years before they became common place, the creator of market microstructure, and the discoverer of clustering of prices among other things.

They might also know that he was an eminent physicist whose work on sound and electricity led to his discoveries in finance. Yet despite his renown, he is somewhat of an unsung hero having done his work mainly in the 1960s when our field was in its infancy and many of his contributions have languished in such journals as Econometrics, Operations Research and Journal of the American Statistical Association from that period.

I had the pleasure of knowing him fairly well during the 1960s when he did much of his work in finance. And indeed we collaborated on some papers, we had an extensive correspondence, and he served as one of the original directors of my firm Niederhoffer, Cross and Zeckhauser, Inc., the original name of the current firm of Manchester, Inc. I also had the pleasure of meeting and befriending one of his astronomical colleagues, Harold Weaver at the Univ of Cal, Berkeley, who audited my classes there, and we exchanged many a story about the astounding trajectory of Osborne's scientific career.

During the time I knew Osborne, I was aware that he was the most creative and competent eye in the world of finance, far surpassing in that respect all my teachers at the University of Chicago, of that period, many of whom are widely known, revered, and honored. And I always wondered, where did it all come from, how did a man of such genius arise, and how did his scientific work in physics, astronomy, entomology and oceanography lead to his contributions to finance.

Out of the clear blue sky, I recently found the book "Autobiographical Recollections of M.F Maury Osborne", transcribed by Melita Osborne Carter from a series of cassette recordings in 1987. Attached to the autobiography was a hand written note from MFM Osborne: "You have often asked about the path I took in life. Well here it is. And as you can see my upbringing and path was diametrically different from yours."

It is a pleasure, honor and duty to review this book, as I believe we can all learn from it. And a man of such great accomplishment should receive his due. The book reminds me of what Tom Sawyer would have been like if Tom had trained to be a scientist rather than a detective, and if he had been raised by genteel Southern Scientists rather than a house aunt. It's divided into 34 sections: Early Childhood, Mrs. John's School, Public School, Games and Other Activities, Kites and Model Airplanes, The effects of Personal experience, My House on Westoer Wenue, Summer Camp, Scouts High School, Eoodberry Forest, Mother's Influence, Incidents in Norfolk, University of Virginia Sophomore Year, With Hrdicka in the Aleutions, University of Virginia Other Activities, Mrs. Rose's Farm, American Student Union, Jail– Right and Wrong, University of Cal at Berkley, Lick Observatory, Student of Oppenheimer, Operations of the Naval Research Laboratory, Life in Forest Heights, Non-nrl Research Eddington Studies.

Maury was born on December 1916 and passed away in early 2003 at the age of 86. He has two daughters and two sons. During his life he published 47 scientific papers, received his PhD from the University of Maryland in biology in 1952, served as the Mayor of Forest Heights, and was a gadfly for all the physicists working in the fields of relativity, and all the early believers in the random walk theory.

Like most greats, his life was shaped by a combination of inheritance from eminent predecessors and a fortunate environment that enabled his inherited talents to prosper. He was the proud great grandson of Matthew Fontaine Maury, a famed astronomer, oceanographer and meteorologist who was known as the Pathfinder of the Seas and the Scientist of the Seas "because of his seminal work" The Physical Geography of the Seas, 1855. After great efforts to eradicate slavery in the South, as a proud resident of Virginia, Maury resigned his commission as Superintendent of the US Naval Observatory and joined the confederacy. 

He then devoted a good deal of the remainder of his life to the commercial possibilities of discovering and extracting minerals in the South as a way of rebuilding the fortunes of Southerners. MFM Osborne was very proud of his heritage from Matthew Fontaine Maury and followed in many ways in the highways and byways of his grandfather's career.

It was always hilarious to read in the autobiography that despite MFM Osborne's positions in highly classified government research, he always refused to sign any loyalty oaths because he would have had to deny that he was descended from a grandfather who had sworn to overthrow the US government with the outbreak of the civil war.

Here comes the scientist, MFM Osborne. What was his life like? What were the major influences on him? The significant events? How did he reproduce and eat? To get a flavor for his ecology, let's consider several of the typical events described in his autobiography. Osborne never accepted anything without proof. When he found an error in some respected authorities work he liked to say something like, "Someone's going to eat crow, raw squawking and fully feathered, by the time I correct his errors." He applied the same approach to life situations. He noted many people being sent to jail. But why were they sent? The answer would teach him what a society regarded as right and wrong. "No one is surprised if people want for no other reason than to explore mountain tops or caves or jungles. Well, the same is true in society. There are segments of society that one layer does not know anything about or very little about, and you can explore it with the idea of learning about it or improving it." So Osborne decided to spend a few months of his summer vacation from the University of Virginia in jail. He went about it by hoboing across the country until he was picked up by a plain clothes sheriff in Vanceburg, Kentucky. The Jail was a pre-Civil War masonry cell with two rooms with a cage on the outside with masonry walls three feet thick with 30 people inside. What did he conclude from his months in jail? "These people were not bad so much as they were just amoral in just the same way as primitive societies… Looking back I can say it enlightened me as to what constitutes right and wrong. Very much depends on arbitrary standards which change with time." He applied these insights into his study of the Constitution, the Bible, and his scientific pursuits. "It contributed to my understandings of the limitations of truth and falsity — of right and wrong. My experiences in Vanceburg, Kentucky were consonant ultimately with what I learned in many other parts of my life, and in many other circumstances." He applied this learning to question and correct the conclusions of science in many fields, particularly astronomy where he concluded that the errors of measurement were so great that separate investigators were liable to come to completely different conclusions concerning such fundamental questions as the truth of Einstein's hypotheses about the movements of the planets and satellites during eclipses, to the world of finance where he concluded that the students of the random walk were completely on the wrong track because they didn't take account of the influence of the bid asked spread, and the relation between volume and price.

It should be mentioned here that Osborne was a can do person. He was a boy scout and a fix it person. He built model airplanes, boats and kites while in his teens. "If you flew one of these airplanes at night and hung on it a thin wire in which there was a rubber band attached hanging down below the airplane, and the put a match to the rubber band, the rubber band would burn and melt and drop little flaming balls"— The unsympathetic police soon put a stop to that. "I told my children that I had taken a trash can and made a huge catapult out of old inner tubes and shot one of the smallest boys in the neighborhood in the trash can as a space capsule". He liked to hobo and hitchhike across America. He took a year off from school to work on a farm to improve his physical conditioning. He enjoyed pushing a wheelbarrow around, and hauling dirt and using a shovel. Eventually he used these skills to become the main hand on an archeological expedition with Professor Hrdlicka to explore the antiquity of man.

Time and again he used the knowledge he gained of how to get and improve his bearings to get out of life threatening experiences. On one of them however, hauling a car up to the observatory in Mr. Lick while he was studying at Berkeley, he managed to fall off a cliff and spent 1 month prostrate on his back in a hospital which time, he characteristically used to improve his knowledge of tensor calculus.

One of his typical chores there was to rake manure. He used his experiences there to come up with his solution to the problem of why the bee can fly or some insects can travel at 500 miles per hour, or how salmon can swim upstream 500 miles without eating. His conclusion: "Salmon are more efficient than the most efficient rigid body boat that humans can devise because they seek out and gain energy from the varying velocities of water that they navigate." When he performed archeological work, he had no compunction of diving 50 feet under water without deep sea equipment to recover a rake.

Another example of the Osborne way came when he was made mayor of Forest Heights. It was the first city outside of the city limits of Virginia. Anyone who moved tended to allow their dogs to run free. The dogs ran in packs and terrorized all the people of Forest Heights. Osborne concluded the solution was to have a dog day where every stray dog not on a leash that day would be shot. He became world infamous for that solution and received many a threat that he would be killed if he implemented it.

The path and conclusions of many of his scientific discoveries in astronomy, biology, entomology, finance, physics, optics, sound and especially Eddington's theory of relativity are detailed in the autobiography. His schooling at the University of Virginia, Berkeley, and Harvard provides a great window on the process of scientific education and discovery during the first half of the 20th century. His work at the Naval Research Laboratory provides insights into how large research institutions work, and the ins and outs of the bureaucratic process. His experiences with Oppenheimer, Feynman, and other great geniuses of physics and astronomy as well as the hum drum day to day of the kind of instruction provide a great foundation for the way science was carried out in practice rather than theory.

In view of the importance of Osborne's contributions to the world of finance and science, and the intrinsic interest of his autobiographical notes, his daughter Melita Osborne has prepared a biographical document that is available here [MS word .docx file, approx 300 Kb].

Jun

20

A Century of Evidence on Trend-Following Investing
November 1, 2017 - Brian K. Hurst, Yao Hua Ooi, Lasse H. Pedersen

As an investment style, trend following has existed for a very long time. Some 200 years ago, the classical economist David Ricardo’s imperative to “cut short your losses” and “let your profits run on” suggests an attention to trends. Early in the last century, the legendary trader Jesse Livermore stated explicitly that the “big money was not in the individual fluctuations but in…sizing up the entire market and its trend.”

The most basic trend-following strategy is time series momentum — going long markets with recent positive returns and shorting those with recent negative returns. Time series momentum has been profitable on average since 1985 for nearly all equity index futures, fixed income futures, commodity futures and currency forwards (Moskowitz, Ooi and Pedersen (2012)). The strategy explains the strong performance of managed futures funds from the late 1980s, when fund returns and index data first becomes available.

This paper seeks to establish whether the strong performance of trend following is a statistical fluke of the last few decades or a more robust phenomenon that exists over a wide range of economic conditions. Using historical data from a number of sources, we construct a time series momentum strategy back to 1880 and find that the strategy was consistently profitable over the next 110 years.

Jun

19

North American Land Co. stock issued to Bird Savage & Bird of London in 1795. Signed by Robert Morris as president and James Marshall as secretary. Morris' signature is pen cancelled. 9.75 x 12" Robert Morris was the financier of the American Revolution, and one of only two Founding Fathers to sign all three key American documents: The Declaration of Independence, the Constitution, and the Articles of Confederation. Morris was the first to use the dollar sign in official documents. The financial Panic of 1796 led to his financial ruin and he was incarcerated for debt in the Prune Street Prison. Date: 1795

Stefan Jovanovich writes:

Morris was the intern/apprentice to Charles Willing (Thomas Willing's father). When Charles died in 1754, Morris became a partner; he became a name partner in Willing, Morris & Co. by 1757. There was no formal registration of businesses in the Province of Philadelphia. "Firms" were known by usage as either individuals or partnerships. We know that the firm existed because its name appears in the Customs records as owners of the brig Nancy and on a bill of exchange for 500 pounds in 1757. The firm "dissolved" in 1783; in March 1784 Thomas Willing wrote a letter to a fellow merchant referring to "our late firm".

By 1781 Morris had left doing any of the daily the business of the firm because of his duties as a public official. On February 20, 1781 Congress appointed Morris Superintendent of Finance; and in September Morris became Agent of Marine - i.e. Secretary of the Navy. On December 31, 1781 Congress chartered the Bank of North America and Thomas Willing was named as its President.

The mixture of finance, merchant business and government was complete. Willing, Morris & Co. supplied muskets, gunpowder and food to the Continental Army. The Bank of America and Willing, Morris & Co. secured $5.4 million in loans ($4 million from France, $1.4 million from the Netherlands) and also made loans directly to Congress. When Congress did an audit in 1783 they found that the discrepancies in the accounting were for money that had flowed to the government, not from it. Willing & Morris had paid $100,000 in Treasury debts.

How Morris went on the become the richest man in the country, owner of "Morris's Folly" and the most famous bankrupt is Part 2 of the story. How Willing (not Alexander Hamilton) became the "founder" of the American system of finance is a whole new volume.

Jun

18

What exactly means this quote? I read of it years ago on a book about Medallion Fund but never understood if I got the meaning correctly.

We're right 50.75% of the time…but we're 100 % right 50.75% of the time. You can make billions that way.

- Robert Mercer

Peter Ringel responds:

my guess: trend following systems can have 40% win rate and lower. Yet via expectancy these sys can be very profitable. Medallion though, would do HF stuff, less MoMo.

Michael Chekalin comments:

Mercer refers to the consistency of Medallion. In other words, they are “consistently” profitable in the 50% area, which through proper money management, risk/reward, etc, can be extremely profitable.

Asindu Drileba writes:

I think its a reference to the "law of large numbers." Suppose you noticed the market goes up 51% of the time on Thursday. (for the 100 Thursdays in your sample dataset) This means that you will also loose 49% of the time. If you decide for example to only place bets for the first 20 days, you might have a win rate of 0%. All bets of the first 20 days can fail.

But the model will still be correct since you can make money for the subsequent 51 days and the lose money for the next 29 days — thus playing the market for all the 100 days (20 + 51 + 29). So your win rate will converge to 51/100 which is the same 51% you identified in your sample. You have therefore acquired 100% of the edge. I think that is what he means when he says "we are 100% right 50.75% of the time."

Nils Poertner adds:

Some specs have a 10pc win rate and do really well. Friend of mine was early investor in ETH in size- but all other of his ideas didn't work out. His nick name was "Harbinger of Failure." Kind of like the joke: "I told my friends I want to become a comedian - and they all laughed. And then I became a comedian and no-one laughed anymore." I often think about him now.

Jun

17

max without all time high currently >250 days very bullish. what else in timing is bullish?

"Time schedule are most strict for flowering and fruiting," says Heinrich. "I can make observations and then speculate about these schedules on the assumption that they came into being, and persisted because they uniquely served the tree of each species to reproduce itself better in the particular environment that it grows in." - The Trees in My Forest

Seasonal timing on a cyclical Earth: Towards a theoretical framework for the evolution of phenology

Phenology refers to the seasonal timing patterns commonly exhibited by life on Earth, from blooming flowers to breeding birds to human agriculture. Climate change is altering abiotic seasonality (e.g., longer summers) and in turn, phenological patterns contained within. However, how phenology should evolve is still an unsolved problem. This problem lies at the crux of predicting future phenological changes that will likely have substantial ecosystem consequences, and more fundamentally, of understanding an undeniably global phenomenon. Most studies have associated proximate environmental variables with phenological responses in case-specific ways, making it difficult to contextualize observations within a general evolutionary framework. We outline the complex but universal ways in which seasonal timing maps onto evolutionary fitness. We borrow lessons from life history theory and evolutionary demography that have benefited from a first principles-based theoretical scaffold. Lastly, we identify key questions for theorists and empiricists to help advance our general understanding of phenology.

Vic's X/twitter feed

Jun

16

From: Axios Generate (2 June 2025):

The startup GridFree AI, born in "electron economy" incubator Montauk Climate, emerges from stealth today with $5 million led by Giant Ventures.

It's modular, off-grid "power foundry" concept integrates gas power, battery storage, and cooling with computing infrastructure.

It's "systematic, repeatable, and becomes a manufacturing process, not a stick-built process," GridFree AI co-founder and executive chairman Ralph Alexander said.

It converts gas into electricity and cooling with 90% efficiency and ensures more power is used for the actual data center IT and processing units, which means much lower CO2, it said."

The efficiency of the overall solution enables a 50% increase in available power for IT loads," the announcement states.

This is a good idea. It utilizes an older concept called cogeneration, which has been widely employed in municipalities and on private campuses. This structure's capital and operating costs are significantly lower. Owners bypass onerous ISO, transmission, distribution, and utility charges. Their presence has no impact on LMPS (local wholesale power prices). Additionally, owners capture the turbine's waste heat and convert it into cooling, which data centers require.

With minimal barriers to entry, expect more data centers to capitalize on these opportunities, particularly near fuel sources (e.g., Pennsylvania, Louisiana, and Texas).

Jun

15

gregariousness. in bison, locusts, passenger pigeons. what insights does this have for markets?

listening to now:

The Glory of Their Times: The Story of the Early Days of Baseball Told by the Men Who Played It

one of the most memorable and saddest experiences of my life was visiting with Larry Ritter as he was dying at Roosevelt hospital. i had befriended Larry 10 years ago and found him equally knowledgeable about finance and old time and Negro Baseball. He traveled in a Yankees bus.

while visiting him on his last days a big curmudgeon walked in. we discussed Glory and I mentioned that the spoken words of it was just as good as the book. the curmudgeon said he never listened to radio, tv, computers or anything else. he didn't believe in any of the modern.

I was not surprised when he tried to ruin the US economy shortly thereafter. Paul Volcker was proud to be wrecker. The curmudgeon was a colleague of Larry's at NYU.

Vic's X/twitter feed

Jun

13

A few weeks ago I read about the death of Alasdair MacIntyre, described in Wikipedia as a Scottish American philosopher. And in some obituaries as "one of the great moral philosophers of the 20th century".

I heard his name here on the SpecList about 10 years ago when someone (sorry, I do not remember who, maybe GB?) recommended his book After Virtue, saying that it described how philosophy has gone wrong in the 20th century and how to correct it.

Intrigued, I bought the book, but like many things on SpecList, it was harder to understand than I expected. I think I read the 1st chapter or so, but I guess my knowledge of Aristotelian philosophy was not adequate and I could not make much progress. So the book sat on my shelf until now. I also did not quite grasp what Aristotle got right that later philosophers missed or what going back to Aristotle's views would mean in practice. The whole idea of reviving an earlier tradition seemed odd to me, I guess.

But still I am glad Daily Speculations made me a better person, at least judging by the books I claim to have (partially) read. Maybe someone else can explain it in terms I would understand.

Jun

12

Posted on April 20, 2011:

1. "There is no such thing as easy money"

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

[An example supplied on April 18 by Mr. Rogan: "The Reason For Geithner's Weekend Media Whirlwind Tour: White House Learned About S&P Downgrade On Friday" (zerohedge )]

3. It's bad to try to make money the same way several days in a row

4. Markets that have little liquidity are almost impossible to profit from.

5. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

6. The market puts infinitely more emphasis on ephemeral announcements that it should.

7. It is good to go against the trend followers after they have become committed.

8. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you'll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

9. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

10. A meme about the relation between today's events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

11. All higher forms of math and statistics are useless in uncovering regularities.

Read the full post with additional comments.

Jun

11

One must admire the first guy to introduce Brownian Motion into a theory about speculation.

Louis Bachelier's Theory of Speculation: The Origins of Modern Finance

Asindu Drileba wrires:

If you like that, you may find Louis Bachelier's other book Sketches in Quantitative Finance interesting. It's very accessible as it has no complex math and describes many concepts in probability/statistics in a very straightforward way. In it, he say's for example that despite Martingale strategies looking lucrative, "no one has gotten rich by using this method."

Jun

10

The Trees in My Forest by Bernd Heinrich is one of the best books about nature that I have ever read. theme of the book is, 'Trees exist as parts of an unfathomably complex web where each species is linked to others in growth, reproduction, sex'.

Each chapter teaches me big things about markets. (1) evolution of small versus big. (2) construction for strength. (3) Tree geometry. (4) time for a tree. (5) sex in a tree. (6) seeds and seedlings. (7) ants and trees.

The Homing Instinct by Bernd Heinrich is a great companion piece. Much detail about Lobagola in many migratory species.

the inexorable fate of round numbers: Octet Rule

Vic's X/twitter feed

Jun

9

Within the Non-Farm Payrolls (NFP) Report, two key employment categories—full-time employment and part-time employment for economic reasons—offer valuable insight into the state of the labor market. By analyzing their respective growth trends and comparing their slopes, we can better understand shifts in employer confidence and economic stability. Historically, economic downturns have occurred when part-time job growth surpasses full-time employment growth, reflecting caution among employers hesitant to commit to permanent positions. Conversely, economic recovery typically begins when full-time employment accelerates faster than part-time hiring, signaling renewed confidence in long-term business prospects.

Full-time employment has been growing steadily for the past six months and increasing consistently for 11 consecutive months. Part-time job growth, though still exceeding full-time growth, has declined over the last two months. This shift suggests a potential turning point in labor market trends. While employers have not fully transitioned to long-term hiring, the upward momentum in full-time job growth indicates gradual economic stabilization.

If this pattern continues, we may see full-time employment overtaking part-time growth, solidifying economic recovery. Monitoring sector-specific hiring trends—such as whether certain industries are driving full-time job gains—can provide additional insight into the strength of this shift. Wage growth and labor force participation are also critical factors to watch.

Jun

8

Here is the trading game used by the authors of this paper:

When a Crystal Ball Isn’t Enough to Make You Rich, by Victor Haghani and James White, of Elm Partners, September 23, 2024

The authors called the experiment “The Crystal Ball challenge.” They gave 118 young adults trained in finance $50 each and the opportunity to grow that stake by trading in the S&P 500 index and 30-year US Treasury bonds with the information on the front page of the Wall Street Journal (WSJ) one day in advance, but with stock and bond price data blacked out. The game covered 15 days, one day for each year from 2008 to 2022. In sum, the players did not do very well.

To gain further understanding, the authors invited five experienced macro traders - four men, one woman - to play the game, with markedly better results. The group of five consisted of a head of trading at a top-five US bank, a founder of top-ten macro hedge fund, a senior trader at top-ten macro fund, a former senior government bond trader at top-three US primary dealer, and a former senior Jane Street trader. These players all finished with gains. On average, they grew their starting wealth by 130%, with a median gain of 60%. All of the players were selective and highly variable in their trade sizing. These veteran traders predicted the direction of the markets significantly better than the 118 younger, less experienced participants (63% vs 51.5%), but mostly the authors ascribe the dramatically different results to the much more sensible trade sizing displayed by the experienced traders.

I played the game and got this result first (and only) time. The result is largely an accident as I wasn't paying attention to the rules or the sliders and so was taking far more risk than I realized. But maybe there is a lesson there.

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