May

21

David, you are obviously much more knowledgeable about the game of baseball than I, so I'd like to ask your opinion on Gibson and Koufax.

How do you think they would have fared in today's modern game and how would they have been used by their teams?

David Lilienfeld writes:

Thank you, but I doubt the premise of your question is true. Gibson and Koufax would likely still anchor their respective teams, but neither would likely get more than 25, maybe 26 starts, tops. I doubt that their arms would have been as strong–they wouldn't have developed to be, they would also throw only 100-110 pitches/game (sorry, having seen the great Orioles pitching staff of the late 1960s/early 1970s, I'm a big believer in strong arms that throw complete games). Their control would continue to have been outstanding. The thing about both Gibson and Koufax is that they pitched enough innings and in enough games that when they got tired and they knew the bullpen staff was pitched out arm sore, they would suck it up and make a go of it. They would change their set-ups, mix-up pitches more and so on. But a pitcher can only be that mature if given the opportunity to play–and that's something verboten today. So while both of these folks would have excelled, I doubt they would have been the dominant forces that they were in their day.

Take a look at their records, or throw in Jim Palmer and Denny McLain too, if you want. They routinely pitched more than 270 innings–good seasons and bad. It wasn't until Koufax started throwing more than 220 or so innings that he came into his own. Heck, even in his last season, when his elbow had been so threaded by arthritis that he needed to soak it in ice for 2 hours after each game, he threw 27 complete games. I guess you could say that his career would have lasted longer if he hadn't pitched as much as he did–except that that's how he found his groove.

It's not as though this was something that characterized only the greats of the day. Jim Kaat started 42 games one season–and he played for more than two decades. Never mind that he won 280 games and was never elected to the HoF. Take a look at Steve Carlton. These guys were good, sure, but I think that, like Koufax, part of their greatness was that they were worked hard.

I'm sure there are those on this list who will say everything's fine with how pitching staffs are managed today, that I'm a dinosaur for taking such a risk with someone's arm to let them pitch so many innings, start so many games–that that experiences really isn't necessary for pitching excellence, never mind greatness along the likes of Koufax and Gibson. Much as I think the days of someone as competitive as Frank Robinson are passed, so too are the days of the dominant pitcher. Consider Jim Lonborg, who pitched more than 270 innings in his CYA year (1967). During the World Series, he pitched game 7 on two days rest. Two days! Would any manager even think of doing that today? I doubt. it. I could hear the players union rep going to court about it violating some contract clause. His wife might complain that he's being asked to do the impossible–3 days rest is pushing it as it is. Nope, the days of the strong pitcher are done.

Koufax and Gibson: we likely won't see their likes again anytime soon. Probably not in my lifetime, at least. And I doubt that if they came up today, they wouldn't be nearly as dominant, good as they might be. They would never be given the chance in the first place. It's almost five decades since Koufax retired, and people still talk about the devastating Koufax curve. The same is true of Gibson and his fastball. You need someone with the insights of a Branch Rickey to go back to the four man rotation that produced a Koufax, a Gibson. Do you see a Branch Rickey around? Me neither.

All of which may not be surprising. 100 pitches isn't very many, after all.

(Sorry for the long-winded answer, but pitch counts are a tender topic for me. I don't like coddled arms–just a sign of a pussy-wussy approach to managing the bull pen.)

Stefan Jovanovich comments:

Koufax and Gibson would most certainly be stars no but so would Bob Feller and Christy Mathewson (Tom Glavine as a right-hander). What has changed in baseball is that starters can't start at 80% and then work up to full capacity the way they did in the good old days. Matt Cain's innings pitched have matched the old timers but what he and other top-line starters have painfully discovered is that they now have to pitch the first and second innings with intensity. The technology revolution has allowed all hitters to diagnose their own swings and pitchers deliveries the way only a genius like Ted Williams once could do with only his own eyes. Felipe Alou sat down with his son Moises when the Giants got their first screen analyzer; his comment was "I never understood my own swing". The pitch count is stupid because it is a hopelessly crude metric. 75 pitches at Coors is a solid performance; at AT&T the same effort should produce 95-100. But no one now can go as long as pitchers once did; hitters aided by video study won't let them.

http://en.wikipedia.org/wiki/Felipe_Alou

David Lilienfeld replies:

Respectfully, Cain doesn't have the innings pitched numbers of past cohorts. And I disagree on the "new" need for intensity. You don't pitch an ERA of 1.1 without that same intensity, and while analysis of one's swing is helpful, pitch selection is moreso. You could have an optimal swing, you still couldn't hit a Koufax curve. Palmer's slider wasn't quite so devastating, but if he was on his game, it didn't much matter how good a hitter you were, you weren't going to hit the ball.

The thinking these days seems to be that with all the money being paid to pitchers, no one wants to risk an injured arm from over use (!). Hence the five man rotation.

Maybe we're just going to have to agree to disagree.

May

21

There is a market I am looking at to trade where supply is 100% controlled by a cartel and the same cartel can manipulate demand through marginal buying or selling, which they can store at zero cost for an unlimited period.  There are dealer firms that are approved by the cartel to buy at auction and resell in the secondary market.

There is an active futures market with electronic prices posted, but for the underlying cash market one has to pick up a phone and contact one of these dealers to get an accurate quote.

The cartel often hires its dealers to work for them directly and the opposite. These participants get relevant information in advance. The cartel wants the best prices available for the product it sells. However, at times they are willing to lose great amounts by bidding up prices to support the market.

The rhetorical question is, should I be trading this market?

Jeff Watson adds:

D. Humbert's query about trading an insider controlled market made me realize a very important rule that can be applied to trading. Never, ever play poker with someone who knows your hole card with 100% certainty.

May

21

When last I commented on CCL, it was once again in the Perils of Pauline mode, hoping that some Dudley Do-Right would appear and rescue it. As it turns out, CCL is hereby awarded the Tim Melvin Absolutely Horrific Luck Award after I came across this little item: Search Ends, Two Australians Lost . It's hard to promote a fun cruise and make some money when you can't keep the passengers on the ship. I was looking at Royal Caribbean, kept stumbling across Norwegian (which looks good if growth investing is your thing), and noticed that CCL can't get out of the way of its own two left feet. We'll see what problem surfaces next month, as it seems likely there will be something.

May

20

This chart of 10 Yr Treasuries reminds one of the very kind companionship that Mr. Pitt provided to Aubrey and myself up the lazy river in Disneyworld Orlando a year ago. One wonders whether there are any regularities in it. vic

Anatoly Veltman comments:

One may observe the consecutive higher lows throughout the multi-year uptrend. One concludes that any first lower low will serve to produce technical downtrend of significance; at that time get out. Easy money!

Jeff Watson adds:

I'll say it again, the mistress never gives away, "Easy Money," and there is no such thing as easy money for the non-Flexion.  One suspects that those who make "easy money" in the market have some kind of Faustian Bargain in effect. I have to fight  tooth and nail for every quarter cent.

John Netto says:

Jeff- start studying market positioning and how the market is structured before large Econ data releases and Fed announcements. Being aware of this will point out asymmetrical situations which tend to provide profits at a much higher  velocity.

Jeff replies:

John, thank you very much for the most enlightening market lesson I've had in 35 years of trading.

Vic Niederhoffer is skeptical:

One is content to eke out any profit let alone one at a higher velocity. When I can unravel the meaning of Mr. Netto's post, I mite be poised to become a wealthy man.

John Netto clarifies:

The Chairman has asked me to provide further detail on what specifically i'm referring to by putting oneself in trades where  the velocity of P and L can appreciate at a greater intensity based on identifying market asymmetries.  Take the most recent nonfarm payrolls number. During the beginning of the week we saw estimates around 150,000. The day before  we saw ADP miss … estimates were then lowered for the nonfarm payrolls number from 150,000 to 140,000 by the Street.

We saw a rally in the bond market and some weakness in equities with the S and P sitting around 1585. This was the first sign  of how the market was positioning for what was believed to be a weak jobs report.

The number beat consensus coming in at 165,000 and with the market surprised by the results and positioned the opposite way,  bonds sold dramatically and equities put in a gap up, go up day - with neither of those markets returning to the scene of the crime since. As a professional trader supporting myself from my trading P&L, understanding market positioning is one of the  big ways I generate P&L. The aforementioned example was particularly lucrative.

May

20

Robinhood Investment Corp. has named a top International Monetary Fund official its chief economist for emerging markets.

Lorenzo Giorgianni will join the $13 billion Connecticut hedge fund in October, the Financial Times reports. Giorgianni has served as deputy chief of the IMF's Strategy, Policy and Review Department, and will formally leave at the end of next month.

Giorgianni sought to head off concerns about his leap from a high-ranking public-sector post to a major hedge fund.

"I look forward to joining Robinhood and complementing my experience in policymaking by deepening my understanding of financial markets," he said. "I am following a protracted cooling-off period during which I have no access to confidential information and no involvement in any work that could give rise to a conflict of interest."

The explanation doesn't appear to appease everyone, with one former IMF official telling the FT, "It's terrible. A revolving door is fine, with an appropriate cooling-off period, but he should be [immediately] out of the building."

Giorgianni's cooling-off period began in March. He "is no longer involved in any work that could give rise to a conflict of interest before his departure. This is fully in line with the fund's ethics guidelines," an IMF spokeswoman said.

May

15

Two quality reference works I recommend reading for those interested in the substructure (hours & minutes) of price action (The books touch on the ultra high frequency microstructure also) are

1. Asset Price Dynamics, Volatility & Prediction by Stephen J. Taylor

2. Introduction to High Frequency Finance by Dacorogna, Gencay, Muller, Olsen & Pictet

At the time of their release both were somewhat controversial but the subsequent research findings have not destroyed the concepts put forth.What both books allow one to do is to take a framework for looking at markets - the so called 'stylised facts' and then start a series of tests around these theorems to see if prediction can come from description.

I have been applying derivative ideas that I have developed across the US futures markets for some time. A recent post on the site by Mr Zussman about overnight moves making up large proportions of total returns has made me revisit both the conditional heteroskedascity and time zone ideas raised by the authors.There are some morsels to be had by classifying overnight moves by both magnitude, geography and base country and applying the above.

May

2

The Junto will be held Thursday May 2d at The Mechanics Institute (20 W 44th St between 5th and 6th, NYC). The speaker will be Dr. Bradley Thompson Professor at Clemson and Director of the Ayn Rand Institute . The topic will be "The Pitfalls of Education". Thompson writes:  "The theme of the talk is, to quote William Lloyd Garrison and the American Anti-slavery Society, 'Immediate Emancipation, Immediately begun.'"

All are welcome. 

May

2

It is rumored that AAPL placed their 10-year paper at 10yrTbond+75bps, which means about a 2.4% rate, if I'm reading the screen correctly. Given that the yield on AAPL's equity is about2.9%, that's a nice positive-cash-flow way to conduct a buyback and still keep your overseas cash hoard protected from taxation. Not that it matters (or has any magical power), but for the equity to get to a2.4% yield, with a divvie payout of $12.20, it would need to hit about $508.

One wonders how many other firms are doing, or considering doing, this type of buyback financing.

Rocky Humbert writes: 

For the period January 2008 to June 2012, Apple stock rose at a compounded IRR of 40% for a price change of 331%. For the same period, the Nikkei declined at -1% …. for a price change of -12%.

For the period June 2012 to present, Apple stock declined at a compounded IRR of -27% for a price change of -25%. For the same period, the Nikkei rose at a compounded IRR of 34.5% for a price change of 26%.

Who in "their right mind" would argue that the Japanese aversion to iPADS does not fully account for this statistically significant negative correlation?

Furthermore, with respect to your comment about my trade in Apple stock (which I ka-chinged yesterday as it finally valued the arbitrage accretive value of the buyback with no regard for growth prospects about which I have no opinion): I would note that Warren Buffet argued cogently that Apple should use its cash pile to buy back stock when it's below intrinsic value and create wealth when Mr. Market is irrational. As Apple followers know, there was much speculation about Apple's cash deployment plans — and that the behemoth actually traded down on the morning following this announcement shows that it took some time for Mr. Market (as distinct from the HFT bots) to correctly assess the significance. If Hewlett-Packard had followed the same path, instead of literally throwing out billions on (what turned out to be) a fraud acquisition in England, I might still own that stock and it would likely be trading in the 40's today. Instead I sold it "horribly" at 27 on the news of the acquisition and incurred a loss and the ridicule of many on this site.

Apr

30

In line with the HBR study exhorting egalitarianism, there is egalitarianism in the ratio of europe to us at 5.00 a consilient number. We all have the idea that has the world in its grip in our markets. 

[Ed.: the chart shows GX/ES, the ratio of Dax futures prices to S&P futures prices].

Apr

27

It is interesting to contemplate the distribution of waiting times to the next 10 day max's and 10 day min's in S&P futures since 1 1 1999.

[Ed.: an n day max is defined by {for 1 = 1 to n, c[t] > c[t-i] } i.e. the close is higher than the previous n closes] 

Col A: days since last 10 day minimum
Col B: Number of occurrences
Col C: Waiting time to next one

Col D: days since last 10 day maximum
Col E: Number of occurrences
Col F: Waiting time to next one

.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-

Col A  Col B     Col C            Col D     Col E       Col F

0        524                          0         789
1        297        10.5              1         373        8
2        219        13                2         276        9
3        188        14                3         226        10
4        165        15                4         185        11
5        146        15                5         161        11
6        140        15                6         148        11
7        130        15                7         131        11
8        124        15                8         119       11.5
9        119        14                9         115        11
10       110        14                10        108        11
11-15      426        15              11-15      375        11
16-20      289        15              16-20      226        12
21-30      339        16             21-30       257        11
31-50      288        13             31-50       257        11
51-100     54         06             51-100       11         05

There were 3575 trading days during this period with no drift per day, i.e. the adjusted  futures started and ended at the same level.      

Many assymmetries are evident.

The maxima occur with much greater frequency. The average waiting time to the next 10 day min or 10 day max is constant until 51 days has elapsed. The waiting time to the next 10 day minima is greater than the wait to the next day maxima  after more than 10 days have elapsed.                                                                      

I studied this because I am brushing up on my knowledge of stochastic models, reading many good books on the subject. I find the subject very refreshing and useful and it is good to keep the paper and pencil less feeble at counting.

One would point out that Mr. Tom Downing did very good work on writing this statistics program while he was employed by my firm.   Vic, chair.

Apr

23

I have been considering whether there is any evidence that socially responsible businesses are better investments than profit maximizing ones. Most of the research points out that it is hard to define profit maximization because short term and long term maximum paths might differ. The concept of risk and return is also relevant with higher return often decreasing the chances of surviving. The duty of a company and its directors to its shareholders, and their incentive to do better for themselves and their shareholders by increasing earnings also plays a part. The concept of dead weight cost is also relevant which is minimized when marginal cost equals marginal revenue and the pricing is such that the demand curve intersects the supply curve at the profit maximizing price. I found this article on going for fourth downs refreshing and provocative in this area.

Rocky Humbert writes: 

I think this is an important subject to consider and the current academic literature does a comparatively poor job. For starters, there is no satisfactory definition nor rubrics of "socially responsible businesses." The monikers of "sustainability" and "green" and "sensitive to communities" are difficult to quantify to say the least. And frustrating to understand in many cases. A chemical plant that dumps its toxic waste into the backyard (while poisoning its workers and neighbors) is?? clearly maximizing short term profits at the expense of long term profits. And it's clearly socially irresponsible. And it will eventually fail. In contrast, my office landlord just installed infrared soap and hand towel dispensers in the bathrooms (presumably to be green), but will they have a good ROE on this? I have no idea. Will they attract new tenants because this is a "green" building? If the rent is the same, I suspect yes because some # of customers get incremental utility from transacting with socially responsible businesses. In contrast, no one (reasonably) gets incremental utility from transacting with socially irresponsible businesses.

The "duty of a company and its directors to its shareholders" is a decidedly American concept. The reality is that torts and taxes and regulation mean that the actual implementation of this duty may in fact include social responsibility. Things have changed over the past 100 years (for better or for worse). So — the answer to the chair's question must be: if the cost of being socially responsible is small, then socially responsible businesses MUST BE better investments. If the cost of being socially responsible is large, then it's less clear — and there is the free-rider problem.

Rishi Singh writes: 

I had the benefit of hearing the current owners of the Empire State building give a talk on going green and increasing revenue a few years back. Their synopsis was that going green for the sake of going green was too expensive for the marginal benefit (e.g. solar panels). Instead, by gutting office space, adding insulation, different windows, and light sensors to turn off lights, they improved the quality of the offices and significantly reduced utility costs at a reasonable cost. By adding these features they could charge higher rent while also improving their green footprint and returning to profitability. An example of market forces awarding the cheapest implementation of reduced energy usage.

Susan Niederhoffer writes:

Some thoughts:

1. His point about short term vs. long term is very important … because long term you see/pay for your short term decisions. Conscious Capitalism companies are long term focused. We have used as proxy for good companies, 100 best companies to work for, or some other third party list.

2. Your heading reveals a trade-off mentality, that it's either or. That's not what we've found. It's possible to keep looking for solutions that make ALL stakeholders better off (and most CC companies include the earth as a stakeholder to avoid those nasty externalities). Even if it costs in the short run, doing the right thing will pay off over time. Patagonia is a good example.

3. CSR is often the crony capitalist trying to tack on a beneficial marketing strategy to get on the green bandwagon (his landlord). You have to dig deeper to sort out which companies really mean it.

4. Transparency is getting harder to avoid. Companies that delay finding out about the negative impact they have in their supply chains and fixing them will pay when their customers discover and put it on twitter. Brand loyalty is hard to buy.

5. You will have fun debating these with John at Junto. Keep up the research…but better read the book too.

Russ Sears comments: 

The problem also is there are many "socially responsible" businesses that are not to be believed. The customer wants to do business with a business that is on the loyal side of the prisoners dilemma. It signals that they value repeat business, and this one transaction will not be be maximized at the customer's expense. In other words, a properly designed social response shows that the business considers itself to be in an infinite set of transactions. It will take less now so that the great great grand kids can make up for the small cut they give back to society. Like Zacheus the tax collector, if they miscalculated and took more than their share, they will return it 4 X what they took.

The problem however, is that often a social responsible business is really doing a slay of hands. Like Capone gifts to the Opera, or LiveStrong gift to healthy living.

Also sincerity is terrible difficult to measure, but it's something many individuals think they are better at than they are. Like ants, they are to be trusted because they give off the scent that they are from the same "tribe".

Apr

23

My squash coach at school, the great Jack Barnaby liked to tell stories about how he beat this and that player in the semis of this or that tournament in the 1920s. We liked to characterize it as "the older we get, the better we were" and had some tee shirts made on that vein. The current market brings back those days. (the worse we are, the higher we go). One can't resist shorting it on occasion to one's cost. One is also reminded of the historical fact I've seen which is that french stocks went up during the French Revolution.

Kevin Elian writes: 

Great point. And the French market being up was probably the result of inflation:

On March 17, 1790, the revolutionary National Assembly voted to issue a new paper currency called the assignat, and in April, 400 million were put into circulation. Short of funds, the government issued another 800 million at the end of the summer. By late 1791, 1.5 billion assignats were circulating and purchasing power had decreased 14 percent. In August 1793 the number of assignats had increased to almost 4.1 billion, its value having depreciated 60 percent. In November 1795 the assignats numbered 19.7 billion, and by then its purchasing power had decreased 99 percent since first issued. In five years the money of revolutionary France had become worth less than the paper it was printed on.

Apr

22

We achieved a 20 day minimum on 4 18 2013 at 1534 in spu. It is interesting to see the expected duration of time in market days until the next 20 day mimimum:

number of days______expected duration
since last 20_______until next 20 day min
day minimum
1                  24
2                  30
3                  33
4                  36
5                  37
6                  40
7                  41
8                  42
9                  46
10                 48
11-15              45
16-20              43
21-30              41
31-50              50
51-100             39
101 and above      20

Thus, we can see that 20 day minimum are rare, and they don't exert a gravitational effect until 100 trading days have elapsed. As the observations are not independent, the standard life expectancy distributions don't fit it. However, if we were dealing with 20 day maxima in daily changes, then the standard distributions would apply and the duration to the next 20 day maximum in daily change would be approximately 40 days.

Apr

22

It may pay to keep an eye on the Aussie dollar in the near/medium term as it appears things have been coming to a head. A recent article in the Sydney paper mentions 42 dollar fish and chips, and 10 dollar bottles of water being sold. Add this to project investment diminishing, commodity prices on the back burner, banking services employment in some sectors struggling, a government political landscape that possibly has been the worst ever, and further rate cuts on the agenda. The market has been in a yearly range of 1.02-1.06 and it looks like the lower end is about to be tested. The Titan may be now be tested.

Apr

19

It strikes one as wrong that governor Deval Patrick said "there will be no vengeance but accountability." I had the displeasure of hearing him speak at a Milton commencement of my daughter when he was a mere student out a few years with a hateful message that at least saved me from ever contributing to Milton again.

Anonymous writes:

The reason they picked the wrong place to terrorize is that there will be tremenous amount of vengence.

Because, marathoning, is only for those in great shape. And Boston, with its qualifying standards, is only for the elite of the elite.

The best and only true vengence is success. They have just unleashed an enormous amount of motivation in every runner's strong and true heart.

Apr

4

An emerging "flu" may be spreading in East Asia. There have only been 4 deaths so far, so how important could this really be? I have two friends, one is in a think tank dealing with bio-terror threats and the other is at one of the federal agencies. The former canceled her vacation travel 3 weeks hence and the latter did the same, though his is coming up next week. The latter was particularly noteworthy as his wife is pregnant (3 mos) and they had decided (after 4 miscarriages) that they wouldn't travel after she was in her second trimester. Stay tuned. Hopefully, the situation settles quickly.

Apr

3

Matt Welch, editor of Reason Magazine, will be speaking on Thursday April 4, 2013. Usual place: 20 West 44th St, NY NY. First floor reading room. Start 7:30pm. All DailySpec readers are invited.

Apr

1

The Family just returned from Florida. One can see a boom or a bust around every corner. On one hand (econ joke) you can see the boom– new real estate projects, Disney full to capacity as of noon. On the other hand the bust– the Space coast Condos at whole sale prices 89k a few hundred meter walk to the most beautiful beaches.

What is remarkable to me is to see and hear of old friends doing the same things as 11 years ago. Yes, the bucket shoppes are back with 50 men screen watching.

I love Florida. My family and friends are there. The weather was a bit cold for a few days, then it was perfect. The Atlantic waves were a blast with the full moon set to the West and the magnificent sunrise over the ocean. What a perfect way to start the day.

After a 12 hour drive into the Nashville rain, with the grass a bit greener, a few leaves on the trees, it is a very late spring here. I asked the wife, FLA? She replied, not a chance. Make some money honey and buy one of those condos with in walking distance and do learn how to surf.

Kudos to Watson and Sogi… what a workout those waves are! One may never forget how to ride a bike, but when it comes to the waves, I put on the towel. Not sure if I'll ever learn. 

Mar

29

Out of the Wild West called Belen a thug with a cap pulled low over the brow grabbed and began shaking Maria the ´purse´ of Yellow Rose of Texas. He picked on the wrong person at 8am on March 14, 2013 at the early waterfront market. Buttons popped as the two slugged and shook allowing citizens and vendors along the crime ridden waterfront to get a make on the youth´s face. The thief tore loose the purse and ran down a long stair with Maria tumbling end for end after to gain speed.

He escaped onto the plank maze of sidewalks on stilts above waterworld Belen but he had victimized the wrong girl connected to the right bunch. The Yellow Rose of Texas Rangers was born to serve the Belen and Iquitos territory and stop crime against tourists and Peruvians.

The next day I was Maria´s bodyguard. With a bruised and scraped leg having had medical attention and another sizeable purse under a fresh blouse bouncing like a heartbeat, I shadowed her like a father. The crime scene is at the foot of Palcazu Street with one hundred concrete steps descending to the Rio Itaya. Smoked fish wafts into our nostrils at the first fish table where a senora explained past a gold tooth what happened.

´Maria has been my good client for four years. Her first daily stop when the purse is full is where you are standing to get the morning catch. Would you like to try it, senor? The youth has been watching her day after day knowing her purse would be heavy with cafe money at the first stop, and he attacked as she pulled it. Maria fought, but the youth was stronger and he ran down the stairs with the purse and Maria on his heels. She slipped and slid down the stairs.´

´Do you know the robber?´ I asked. ´I do,´ she answered.

´I know him better!´ bellowed Omar the vendor at the adjacent stall. ´He has terrorized our clients and pickpocked the tourists for years. He´s been in and out of jail, but he keeps coming back for more. The police can do nothing but raise the iron bar over his head and release him because the courts are crowded.´

I offered a reward for the bad man: 10 Soles ($US4) for the name and 20 Soles for the capture- a small fortune. And I returned to the Yellow rose outdoor tables where the day before over a gordo omelet I had seen her return bleeding and empty handed.

´May I be her bodyguard?´ I asked restaurant owner Gerald Mayauex.
 

´You´ll need backup,´ he agreed wisely.

I put the word out on the grapevine to Richard Aku Fowler, a legendary figure in Iquitos, who ambled up with the sun at his back even as I took the last bite of the omelet.

We explained the crime, the threat to tourism, the apparent shy law enforcement to enter the lower market, and the need for a solution. He pulled a sheet of paper out his pocket, revealing handcuffs dangling on a belt loop, and other bulges under the pants.
´DON´T MOLLEST THE TOURISTS IN BELEN. THE LONE RANGER.´ the wanted poster read.

The Lone Ranger is a fictional hero, an ex-Texas Ranger who with his faithful Native American companion Tonto, fights for law and order in the American old west. The character is an enduring icon in American culture. Departing on his white stallion after righting a wrong, the stranger would shout, ´Hi Ho Silver!´ leaving behind one silver bullet, and someone always asked, ´Who was that masked man, anyway?´

We grabbed a motokaro taxi with a surrey fringe to the Belen market. Thousands of tourists from around the world visit the seamy, flea hopping market each year, and one asks, why? It is a ten block study of fascination of food and human odors, shouts by vendors, wonderful people, action around each bend, and you can get everything you want- even pickpockets- at the Belen market. About one tourist per week is shorn, hardly ever harmed, of his valuables. The young hoods also pick off Peruvians riding by on motorbikes with a fat wallet sticking out a back pocket. The sting is always the same: The ragamuffins hangs at the top of one of five stairwells, lying in wait like little lions panting in the heat with the Jones of a drug habit, until a prey comes, strike boldly, and scamper down a hundred steps to the river. I have been robbed of a camera, watch, and seen five other tourists fleeced. The thief is faster and rarely collared, leaving behind tourists with shrugs and scowling citizens. The Belen police are vigilant and somewhat brave, but haven´t figured out the scheme, overburdened with Billy clubs, tear gas and pistols, nor do they care even with that to enter the lower bowls of the waterfront.

Aku and I staked out the crime scene standing ten yards apart and ostensibly minding our own affairs, him examining cabbage, I feeling tomatoes, and waited. After thirty minutes the flies began to bite, but thirty minutes later a reticent fish vendor whispered in passing in my ear, ´The Rato is eating at a table one hundred meters away, follow me…´ and we tailed him there. A National Policeman in brown stood behind the eater watching every move of the knife and fork. Aku cooed, ´The perpetrator will be high as a kite from the money, but he´ll have just a few Soles to pay for the meal. Officer Vela ordered the man, ´Stand up, you´re under arrest!´ and Aku was on him in a flash, and snapped handcuffs on surprised wrists and shoved them into the small of his back. Another policeman joined us, and they marched as if Aku was their Captain for three blocks to the Sixth Street Belen police station.

´My job is done,´ he said at the entrance handing me the silver key to the handcuffs, and vanished into the market.

´Who was that stranger?´ asked Officer Vela.

´Why, that´s the Lone Ranger.´

Left alone on the station step. I trundled the hombre into the lobby past a beefy policeman with a shotgun and a keen eyed cop with an automatic rifle. The police chief´s face over the counter registered shock as he waved us upstairs. Around a corner and up a flight of stairs I met head detective Fernando Rios ´Sherlock Holmes ´ Zarate of the criminal investigation department of two.

Their office is one small room that catches the heat from downstairs with two desks, one modern computer, a shelf of documents, and the perp was roughly seated on a long hard bench. ´Senor Rato, Sherlock asked gruffly. ´What do you have to say for yourself?´

´I didn't do it.´

´What didn't you do?´

´Whatever the gringo says I did.´

Officer A. Vela S., twenty years old and lithe from what he calls ´eighteen months of very hard and valuable training at the National Police Academy on the Nauta highway, joined and explained what had happened and punctuated, ´And then a tall stranger took over, left a silver key, and disappeared.´

´Who was he?´ asked Sherlock.

´Why, that was the Lone Ranger´ said Vela.

He dissected my face with his eyes, and I began almost to fathom the profound intellect and memory of Sherlock Holmes, a trouper for 28 years. As the perp writhed on the bench in withdrawal, begging the cuffs be loosened, I explained the tourist and expat view of the Belen marketplace.

´Peru tourism has risen like a meteor that will peak in early May when 100 travel agencies land in Iquitos from around the world for a Peru Tourism Conference. They will arrive on Copa Air on one of the first international flights and be greeted by a new airport immigration agency. With the addition of a 5-Star hotel Iquitos will become the gem of Peru. The one sore spot in Shangri-La is Belen. Most tourists go there, about one in forty is robbed, and the strategy is usually the same.´ I explained the stairway escape hatches that the robbers use.

He leaned forward, and stared thoughtfully into my face. ´Thank you for bringing in Senor Rato. We will begin a police report now.´ The man gave his name as Elvis Gafica Reategui, 30-years old, height 5´7¨, weight 70 kg., pocked face, no document, with no particular address and nothing in his pockets. The gold tooth senora was brought in to identify him and sign an eye-witness statement, and left.

'He didn't resist arrest and was amicable,´' I piped, 'So there´s no need to hit him.' ´ Vela,´ ordered the boss without glancing up from the report. ´Take Senor Rato to his cell.´ A few minutes of paperwork later a burly cop entered and informed, ´His real name is Eliseo Baos Aneulo, age 30, domicile Penjamo, he´s been in and out our jail three or four times on the same charge, and admitted today´s crime.´

 ´How did you find out?´ I wondered. The head detective smiled as the officer retorted, ´I raised an iron bar over his body and he squealed.´ He did not say he hit him.

Two hours later, Sherlock put the last punishing period on the handwritten one- page report, and pushed it across the desk for my signature. I signed, with a flourish an addendum swearing, ´I do not speak Spanish,´ and shoved the document back. Then I handed the detective the poster ´Don't molest the tourists in Belen. The Lone Ranger' that he beamed over for a full minute after I snapped a photo.

There was one more thing to do before leaving the station. The silver key. I went downstairs alone to the rear building and surveyed the Sixth Street holding tank. There are two 10´x10´ block cells connected by a narrow alley where a ragtag youth slept but arose as I stepped over him. He tried to pickpocket me, but I pushed him down and asked, ´Where is your bed?´ and he curled up like a pup and slept. In one cell a misfit awaiting an interrogation or eyewitness gawked through the slats as if he was seeing a ghost. The heavy bar doors are unlocked and can be opened from the inside… but then there are the shotguns and rifles. I opened the door to view Eliseo Aneulo crashed on the bare concrete and gently prodded his shoulder. ´Ohh,´he groaned, and rolled away. I removed the cuffs, he rubbed circulation back into the wrists and hands, and indicated he was hungry. I nodded and slammed shut the door.

The sun was setting on another market day as I exited the building, when suddenly I was sided by a hefty uniform filled with self-importance and multiple stripes on the sleeves. He cordially introduced himself as the new shift ´Sherriff´, adding, ´Word is going around on the case, and I wish to thank you, and especially the Lone Ranger.´ I gave him some change to buy our thief a meal, and left.

The next morning Maria the Purse was the hero of Belen and did not need a bodyguard any more. They cheered

and showered her with spinach, bananas and greens for her own kitchen as she made the hour round of 80 kilos for the restaurant. For the first time a policeman stood watch over each Belen staircase as one patrolled the stem on a motorcycle. The case was closed and Belen is safer for a time.
 

 Sherlock has forecast the fate of the thief in the legal procedure. He will be held for about four hours and released. Since the robbery was for 300 soles ($US120) it is a misdemeanor, far less than the 1400 soles required for a felony to send him to the Brazil Street carcel. Assault is not taken into account unless it causes a serious injury. There must be a testimony to make a police report from either the victim or, as today, the eye witness senora Gold Tooth. Since the thief has a record and address he will be sent a notice to appear in court. ´It will be ignored,´ guesses Sherlock. In another week a second notice will go out, a third, and then ´We will start looking for him. If I didn´t release the mugger today I'd lose my job. We do about five reports daily at the Belen station alone. The courts simply do not have the time or money to process cases that do not at least pay for themselves.´

Tourism is on the rise outside Iquitos too, in Lima, up at Machu Pichu, around the Amazon and throughout this national paradise. The Texas Rangers of the old American West had a saying, ´One riot, one ranger.´ Now two centuries and half way around the globe in Iquitos their aims are to help the police, update the antiquated laws, change the revolving door court system that puts Senor Ratos back on the streets in four hours, and to make Peru a safe tourist haven.

Mar

28

Here is a table

Expectations of gold when above and below moving average in new millennium .


.....................Expectation next 5 days


................gold above mov avg    gold below MA


length of mov av


....80                 1.7            1.4


....40                 1.8            1.0


....20                 1.0            2.5


....10                 2.2            0.7


.....5                 1.2            2.0  



Thus, we save Dr. Kim some use of minitabs  and conclude that gold below 20 day moving average slitely more bullish than above and all the rest random.


All based on 1500-1800 observations a side.           


	

	


	
Mar

	
14

	

	

	
Speaking with a friend who is a broker for one of the big banks, he says his clients who exited stocks three years ago are calling wanting to get back in leaving instructions to buy on the first pull back. This is completely descriptive with no predictive value, but the H. H. Harper passage come to mind which I retrieved from google and I can certainly relate:


"Whereupon my friend, who occupied the uncomfortable position of a "sold out bull", became wretchedly aware that he had dropped out of the race long before the course was completed, and by doing so he had thrown away a grand opportunity.It may here be explained that the mental attitude of a "sold out bull" toward a rising market is much the same as that of a bulldog chained in his kennel while a dog fight is going on outside. A speculator may stand buy and view with unruffled complacency the most enormous profits of others in securities that he never owned, but if one of this own pet stocks continues to advance after he has sold out, it not only reflects the error of his judgment, but the remorse he suffers in contemplating the additional sum he might have made dampens all the pleasure of reflecting upon the profit he actually did make "



H.H.Harper circa 1924


Vince Fulco writes: 


A great practical example is CRR (carbo ceramics): I own a token amount in my IRA after being longer at lower prices. Not many pullbacks the last few weeks and every modest one, the stock then surges for a time. Frustrated buyers like I have never seen. This is not a "long & loud" tout; only mentioning because the action is so pure and outside the norm from other holdings. There is something about peeling off some on the way up which makes it easier to wait for the grand finale


Jim Lackey writes:


It's the opposite of the end of year "countdown to fiscal cliff". Now it is "count down to SNP Cash close highs". I'll make a prediction… it is the usual (+-)=2 points on PNL after one is involved with such mumbo back and forth whip saws.


	

	


	
Mar

	
14

	

	

	
 Been traveling a bit in Asia so seeing more billboards in an hour than we have in all of the Virgin Islands. What I noticed is 95% of the ads for upscale clothes, jewelry and such have large photos of models scowling, casting a dour look or an air of haughtiness.


Why is that?



If I was selling clothes I would want my customers to think they might be happy after forking out $300 for a pair of jeans.


Jeff Watson writes: 


Talk about dourness, I lived through the grain markets in the 80s, which had a southward gravitational pull for years and years/nobody wanted grains, there was no money in it except for cent and a half trades and the two dollar brokers. Things were so bad that there was no public participation and was a game between only knowledgeable players…..


Just like the state of horse racing today. In the past, the general public (paying too much, selling to cheap and always collecting short, less than true odds even on longshots), would grease the wheels with all that extra cash mostly ending up in the insider's pockets, as always. Back in the old days, 15-20,000 amateurs would regularly take a day off to spend a the races (now you're lucky if 800-1200 show up, all insiders). The insiders would eat the low hanging fruit the public was offering. That low hanging fruit is largely gone, and the game is reduced to just the insiders, the scholarly, and well informed picking each others pockets…… nickel and diming it and devouring each other instead of the schools of bait fish which are largely absent. It's simple ecology 101. As goes for the track, it goes for the markets. I suspect that the Chair could probably expound on this idea 10X better than me (and probably poke enough holes in it to sink the Titanic). 

	

	


	
Mar

	
6

	

	

	
 For anyone who thought the worst is definitely over for the EMU, it might be helpful to watch Italy over the next couple of months. The irresistible force meeting the unmovable rock sort of thing, as the Germans preaching austerity are met by Italians saying no way as they head home for their mid-day pennichella. I thought the European banks were close to being buyable again, but I guess I was wrong. As Carder observed, beware the Ides of March. They seem to be an interesting time for things happening in Rome.


Paolo Pezzutti writes: 


As an Italian once again I have to observe how prejudices are still widespread. I don't know many people in my country who head home for the mid-day pennichella. I work at least 12 hours a day and like me there many who work pretty hard. Often with low salaries and unfair contracts. This article  references the position of the left party (Democratic Party) which is bringing forward, very similarly to other countries in Europe like France, the idea that the kind of austerity we are implementing has very tough implications socially and on the economy (we entered in a deep recession because of higher taxes). One can agree with this position or not, but frankly speaking, I don't think this kind of silly humor is appropriate. 

	

	


	
Mar

	
4

	

	

	
 Dear Laurel and Victor,


I wanted to thank you both for your inspiration and detailed analysis through your website and books. I am the proud owner of The Education of a Speculator, Practical Speculation, and Fifty Years on Wall Street. Victor's teachings have taught me to look at markets from a different viewpoint. His views on capital markets are unprecedented and his lessons are invaluable. For that I thank you both.


I currently am 26 year old, full time trader and researcher. I have been working on a piece (see attached) after observing the fallacy of trading euphoria as I call it. I know I may not be as experienced as some of the other contributors to the site but I'm hoping that you may find the article informative at the least and worthy of a post on the website. If not no worries, thank you again for your time and consideration.


Keep up the great work.


Sincerely,


Brian Cauthen


= = = = = = = = = = = = = = = = = = = = = = = = = = = = =


The Art of the Pump by Brian Cauthen


I had the privilege of watching the $CBMX "pump and dump" on Thursday afternoon. Within one day this stock rose from $2.86 to a high of $7.64 off nothing more than hype from a simple news article.


Although some variables tend to differ, the majority of pumped stocks over the years have similar basic characteristics.


A Pumped stock churns higher at obscene fundamental levels with high spreads and no predictability in a short span of time.



Within minutes manipulation swarms social media fueled with frauds and pumpers talking about long term valuation and balance sheet statistics of the pump.



PR's, blogs, insiders and online "trade rooms" help promote the stocks as they advance and squeeze, catching initial shorts by the pants.



All at once the rug is pulled, sending longs into a panic dumping shares. The insiders and front runners are way out by now. We may see an additional attempt to regain footing back to highs but that is usually overtaken by hesitant longs begging to get out due to new uncertainty.



Social media ramps back up with gurus claiming how they mentioned the high and are now short the stock catching easy gains. The bag holders are screwed losing large amounts of cash, vowing to never get fooled again.



The SEC charges the PR firm and insiders with fraud. The parties admit no wrong doing and settle for fractions of the profits made off the pump.



Wash, rinse, repeat.



Some of the most notable pumps of all time include $LEXG(April 2011) $BVSN ( March 2012) and $ROSG (August 2011 and May 2012).


Deceit and promotion for self advancement at the expense of others is nothing new on the Street. The part that worries me is that it's becoming the norm.


By the close Friday afternoon $CBMX was trading at $5.27, down 30% from the highs.

	

	


	
Mar

	
4

	

	

	
 The Junto will be held Thurs. March 7th


Time: 7:30 pm


Place: 20 West 44th St., ground floor


Cato Institute senior fellow Brink Lindsey will speak about "The Folly of Nostalgianomics," his term for the celebration of the post-World War II quarter century that has been popular among commentators like Paul Krugman.


Brink has written me:


"I'll address the puzzle of the 'Golden Age' of the post-WWII quarter-century, which was a period of (a) impressive economic gains and (b) heavy government intervention in markets. I will resolve the puzzle by showing that conditions for economic growth were much more favorable then than subsequently–and therefore even very bad economic policies were consistent with strong economic performance.


"Accordingly, the claim that we should go back to 90% top tax rates and heavy unionization (or equivalent types of government intervention) because we had those and high growth in the 50s and 60s is on a par with claiming we should institute widespread corruption and censorship because China has them and is growing rapidly.


"I can also address claims that living standards haven't improved since the 70s. This is demonstrably untrue, although it is true that (measured) productivity growth since the 70s has slowed down and so have (measured) income gains, especially for less skilled workers."


As is usual with Junto meetings, the evening will be highly interactive, with plenty of opportunity for comments and questions.


Hope you can make it!


Gene Epstein


Junto Moderator

	

	


	
Mar

	
4

	

	

	
Smith is like the perfect example of the regression bias. Whenever he scores a lucky 3 pointer, they give it to him the next 5 times, and then luck is random, and his below average skill takes over and the Knicks lose the way they did to Miami today as they have so often in past, and especially when they take Stoudemire out and leave Smith in. Shades of Gallinari and Antoni. 

	

	


	
Feb

	
28

	

	

	
I always liked this post by Brett Steenbarger under the Letters Prize category. Maybe all of us should remember this before posting something:





I wanted to comment on how some old men grow old gracefully whilst others grow old grotesquely, and to look at how this effects their take on the markets. I believe that those who age worse often exhibit worse trading symptoms!


Ayn Rand used to talk of second-handers: those who derive their self esteem from the perceptions of others, not from objective achievements.One virulent form of second-handedness masquerades as virtue: the need to be needed. I suspect it’s behind the overly chivalrous and boastful demeanor, but also behind the pessimism.


The doomsayer needs followers who feel endangered and vulnerable. The forecasts of doom make the prophet needed to get through the pending calamity. No one needs a savior if the forecast is for sunny times ahead. By undercutting the sense of security of others, the doomsayer carves out a niche for himself: I will get you through the market panic, the economic collapse, etc. The same dynamic is at work with the seemingly solicitous and chivalrous man who wants his woman dependent upon him.


I’m thinking of a couple I once saw in counseling. He refused to let her work outside the home, insisting that he must be the breadwinner. She was bright and talented and, now that the children were older, wanted to work. She took up a hobby (quilting) and became quite expert at it. Eventually her quilts became collector items and she was a hot item on the art festival circuit. He was increasingly threatened by her success and tried to derail it by belittling its importance — all the while maintaining his love for her and his willingness to provide for her.


He needed to be needed: his greatest threat was an independent woman. The doomsayer similarly needs to be needed. The confident, optimistic investor is his greatest threat. To become needed, they must make others needy. Such is their benevolence.


She divorced him, by the way, and went on to become a successful instructor of quilting and crafts, owning her own business.


And 20 years after 1987, we stand at new highs and the doomsayers continue to beat their drum. Odd how we excoriate those who encouraged people to buy stock in 2000, but say nothing about those who counseled against equity ownership for the last 10,000 Dow points. If a physician sickened his patients in order to have a steady stream of revenues, no one would hesitate to call it malpractice. But what of investment advisors who fill their clients with fear in order to sell them services and seminars?


“You need not examine a folly”, Rand once wrote; “you merely need to identify what it accomplishes”. Pessimism and negativity create dependency and a psychological crippling. The need to be needed is a need to undercut the certainty and security of others. That’s why it’s a “symptom of something worse”.

	

	


	
Feb

	
26

	

	

	
It is interesting to see the S&P take the same 25 to 30 point dive on the uncertainty concerning the Italy election that they did on Dec 28 when they declined to 1384 versus todays 1487. What a great opportunity to move the market back and forth whenever an important briefcase or suit is spotted at the airport, the Fed, or the Forum. 

	

	


	
Feb

	
21

	

	

	
I came across this interesting graph, which isn't likely much of a surprise given where the market is these days–no fear and all is well in the world. What I don't get is that absent 1987, there are few drops in the trendline, and it's been a notable feast and famine starting in 1997 or so. Question from the ignorant: what happened in 1997? There was LTM in 1998, but the upswing seems to precede that.


Jordan Neumann writes: 


Asian currency crisis. Some on this site could tell you more about it.


Pete Earle writes: 


Currency hi-jinks which began in Thailand, spread to Indonesia, South Korea, the Philippines, Malaysia, Singapore, Hong Kong, and resulted in a number of short, sharp recessions. 


Gary Rogan writes: 


I read something about that series of recessions a few months ago that seemed quite instructive to me. While there were a small number of countries that had what could be described as hi-jinks, most of them did not. The way global investors reacted was indiscriminate though, and they pulled out capital from anything that remotely resembled a dangerous Asian duck, whether or not it walked or quacked like one. This fear response can probably be generalized to how different panics start. 

	

	


	
Feb

	
6

	

	

	


"The fraudster who fooled a whole nation: Portuguese media pundit exposed as conman":


"As an ex-presidential consultant, a former adviser to the World Bank, a financial researcher for the United Nations and a professor in the US, Artur Baptista da Silva's outspoken attacks on Portugal's austerity cuts made the bespectacled 61-year-old one of the country's leading media pundits last year.


The only problem was that Mr Baptista da Silva is none of the above. He turned out to be a convicted forger with fake credentials and, following his spectacular hoodwinking of Portuguese society, he could soon face fraud charges.


Mr Baptista da Silva's conversion into the latest must-interview figure on the media circuit began when he turned up last April at Lisbon's main philanthropic institution, the Academia do Bacalhau, with a large supply of business cards – which, it later turned out, bore false credentials – and an impressive-sounding dissertation entitled Growth, Inequality and Poverty. Looking Beyond Averages which, it also transpired, was "borrowed" from its writer, a World Bank employee, via the internet.


At the time, Mr Baptista da Silva also claimed to be a social economics professor at Milton College – a private university in Wisconsin, US, which actually closed in 1982 – and to be masterminding a UN research project into the effects of the recession on southern European countries. He even, some reports say, tried to pass himself off as a former adviser to Portugal's President, Joaio Sampaio, and the World Bank.


Blessed with such an impressive CV, Mr Baptista's subsequent criticisms of the Lisbon government's far-reaching austerity cuts, as well as dire warnings that the UN planned to take action against it, struck a deep chord with its financially beleaguered population.


According to the Spanish newspaper El País, his powerfully delivered comments at a debate at the International Club, a prestigious Lisbon cultural and social organisation last month, were greeted with thunderous applause and a part-standing ovation.


Then, in a double page interview in the weekly newspaper Expresso in mid-December, Mr Baptista da Silva continued to denounce the government's policies. That was followed by an interview for the radio station TSF, appearances in high-profile television debates and well-publicised meetings with trade union leaders to advise them on economic policies.


Yet in the country's jails, Mr Baptista da Silva's sudden appearance among the intellectual elite caused amazement among his former cellmates. A colleague from his old school, lawyer Ricardo Sa Fernandes, who had come across Mr Baptista da Silva behind bars by chance when visiting one of his clients, told Visao magazine that when he saw the convicted fraudster on TV he was "staggered by his ability to put his past life behind him".


Mr Baptista da Silva's comeuppance began when the UN confirmed to a Portuguese TV station last month that he did not work for the organisation, not even as a volunteer, as he later alleged. Further media investigations uncovered his prison record and fake university titles, though Mr Baptista da Silva's claims to have studied economics have not been categorically disproven.


After sending out a press release blasting his former journalist friends and colleagues for what he called a "witch-hunt", Mr Baptista da Silva has now disappeared completely from public life, and there are reports he is under investigation for fraud charges by the police.


Meanwhile, the media's search for an equally articulate and charismatic replacement critic of the government's economic policies – although perhaps not one with such overwhelmingly impressive academic credentials – continues apace."






	

	


	
Feb

	
4

	

	

	
 It has been a while since the dailyspec discussed the potential for mayhem in the Straits of Hormuz. So far, the greatest threat to American interests has come from our own Navy. It has been nearly 4 years since the USS Hartford collided with the USS New Orleans. The "accident" injured 15 sailors; the repairs to both ships cost over $100M.


The folks at StrategyPage  just reported some of the details of the accident report:


1. There was no one supervising the sonar operator when the collision occurred


2. The sonar operator was not, in fact, looking at his screen at the time but talking to a fellow crew member


3. The ship's navigator was not plotting the ship's course but "doing something else, while listening to his iPod"


4. The officer in charge failed to raise the ship's periscope to scan the horizon before the ship breached the surface


In total there were 30 errors in procedure.


Chris Tucker writes:


Complacency and sloppy work are very difficult to control after they have taken hold of a work group. The proper place to kill them is in early training. People who are responsible for large numbers of other peoples lives and/or for highly valuable property need to be trained in active vigilance early in their careers. Unfortunately, safety is a boring topic to most — it lacks the intrigue of the higher mission, it lacks the luster of fancy technical gadgetry, and because it is something that has to be practiced with diligence day in and day out, at all times, it is difficult to keep at it.


But safety and its execution is absolutely essential to any complex operation. Organizations and systems that require precautions have to inculcate a culture of safety and then impress it into their people regularly. It can never be treated as a one off training item and then checked off as completed, it has to be pressed, again and again and drilled into the subconscious so that it comes automatically. Active surveillance, much like active listening, is a skill that requires practice to master.


I suspect that in the crossing of an active shipping lane like the Straits of Hormuz, that submarines use active sonar, but I have no idea how frequently they ping. Probably on the order of once every two or three seconds, much more than that and there is insufficient time to capture reflected signals without interfering with them. The point is that an operator, especially at a time that requires extra vigilance — like surfacing, needs to actively direct his attention to his equipment and scan for threats at least once every three seconds.


While this sounds easy enough, it requires a great deal of will and energy. Distractions constantly compete for attention and need to be reduced. Again, training is the only way to control this and create an environment that rewards attentive execution of duty and punishes the creation of distractions and sloppy behavior. I suspect that if the navy chose to drill procedures in vigilance and active surveillance as often as they train for emergencies or attack maneuvers, the frequency of these incidents would be dramatically reduced.


P.G writes: 


Excellent stuff on complacency, but "culture of safety" might be too strong a goal for any place in the military. It's true that the Navy is the service where war most closely resembles peace. Most naval ships in WWII saw only a few hours of combat over the years' duration. Day-to-day operations were quite similar to peacetime ops, with the environment (including friendly ships) being the principal enemy. But the few hours of combat were the whole point, and it seems to me that safety must not be so deeply ingrained that it cannot be easily discarded when the necessity arises.


Paolo Pezzutti writes: 


Western navies nowadays are dealing with decreasing budgets, changing operational scenarios and threats, issues in recruiting and retaining the professionals they need. All these factors are tightly linked. The level of ambition of naval forces is questioned in terms of requirements and capabilities needed. The threats is different from what it was at least two decades ago and attention is growing mainly for maritime security tasks. Hard to justify expensive investments to develop complex and futuristic weapon systems. For sure maintaining the fleet efficient and effective is tough at times when navies are struggling not to reduce numerically their fleets below critical thresholds. Recruiting highly skilled professionals and most of all retaining them is also critical. They need to find a motivating environment that meets their expectations. Innovation and technology are allowing the reduction of manning on board ships and submarines in order to achieve the compression of operating costs. This is also introducing risks because each member of the crew has more tasks than in the past to perform and no redundancy. On the job training and management of emergencies are issues to deal with. More focus over the past years is on modelling & simulation to train crews ashore although any sailor knows that these solutions cannot fully replace experience gained at sea. Some have questioned the extent of manning reduction that was envisioned as acceptable only a few years ago based on lessons learned developed on new constructions. The quality of training is key as days at sea spent each year tend to decrease. Incidents are the expression of this situation. Training concepts and processes have to change and adapt rapidly to this environment. As budget and personnel decrease, this is the challenge of this decade. 


An interesting sidenote about, "Stick close close to your desks and never go to sea, And you all may be rulers of the Queen's Navee!":



The object of Gilbert's satire is not so much the person of publisher and politician W. H. Smith as the system that in essence de-professionalized command positions in the British armed forces, and promoted those with wealth and political connections rather than military ability. Thus, Gilbert was in effect attacking the long-standing aristocratic tradition of purchasing commissions. Instead of "serving a term" as a midshipman (which was the conventional route leading to officer status and ship's command), Sir Joseph has taken a strictly political route to the Admiralty.



Russ Herrold writes:


A former officer (here: identified as JG) from the US Navy who served in submarines inter-lineates replies to the article you linked to:



Sub commanders are under a lot of pressure to keep their sailors from leaving the navy (JG agrees). But the long periods submarine sailors spend away from their families creates pressure to get out and take a civilian job close to home. (JG agrees) The submarine sailors are very capable, and highly trained, people. Getting a better paying civilian job is not a problem. So sub captains try to keep the crews happy. That often leads (JG: Bull Shit!) to lax discipline. (JG continues: just lax discipline with this command)


Interestingly the article's remarks about generally available better substitutions employment were not addressed in the initial comments back to me; in following up privately, JG thinks the author is over-stating the substitution opportunities …


But then that makes for a more urgent article, then, doesn't it?



Chris Tucker adds: 


My whole point is that these people are professionals and should be behaving like professionals. They are in positions of responsibility and need to act as such. There is a tremendous amount of self validation that comes with knowing that you know your business and that you act accordingly. People that understand this arrive at work with their heads held high and don't just talk the talk but actually walk the walk. They don't feel entitled to anything unless they've earned it themselves. This is the kind of behavior and path to self esteem that needs to be engendered. It is not about safety, per se, probably a bad choice of words on my part. It's about being a professional, about being an expert. And about wanting to be those things. It's about knowing what needs to be done and doing it properly, correctly and without fail.

	

	


	
Jan

	
31

	

	

	
 Driving through the Owens Valley on a beautiful sunny clear day, the entire 150 mile stretch with 14000 peaks towering above showed the geological effects of immense glaciers that filled the entire valley during the past ice age. Ice could have been 3000 feet deep gouging up mountains. Even Mauna Kea in Hawaii has clear geological evidence of glaciers! The last ice age was as recent as 10-20,000 years ago and ice covered a large part of North America. Global warming is the end of the current ice age and has provided good weather and prosperity and the growth of civilization and the human race for 20,000 years. The reverse of global warming, namely cooling, is not an attractive alternative. Imagine if cooling began. It would mean summers with snow that did not melt lasting through destroying crops. 4 years of snow on the ground through summer would wipe out most of the world population. 4 years of 40 foot snow accumulation would erase most signs of civilization under a layer of ice. When Krakatoa went off in 1883 the ash plume circled the world and there was no summer in the US that year. Imagine the impact on gnp and the markets if cooling commenced. Its awful to imagine. So its a case of unintended consequences or be careful what you wish for should they figure out how to reverse global warming.


A commenter writes:


Cold weather crops like rye and barley would come back in vogue if we had an ice age which is not unthinkable. The zones for planting crops would change drastically. One would expect that researchers might do some genetic tinkering with corn, wheat, and soybeans, allowing them to flourish in a colder climate. Quite a number of scientists are predicting a Maunder Minimum  at the end of this current solar cycle, which coincided with the "Little Ice Age.".


Steve Ellison writes: 


Quite a long time ago, I reviewed Evolutionary Catastrophes: The Science of Mass Extinction  by Vincent Courtillot. Every one of the 7 mass extinction events identified by M. Courtillot was caused by global cooling. Therefore, I agree that global warming (which I see no reason to doubt) is the lesser evil.


David Lilienfeld writes: 


In the 1950s, 1960s, and 1970s, 1980s, and 1990s, the asbestos industry maintained that "there was reasonable disagreement" among scientists about asbestos as a cause of lung cancer; no asbestos-related regulations were needed. In the 1950s, 1960s, 1970s, and 1980s, the same was true of the tobacco industry for tobacco and lung cancer (and other sites, too). In the 1980s, 1990s, and last decade, many in the social conservative school of thought maintained that there was little evidence, or at least controversial evidence, about the role of human papilloma virus in the development of cervical cancer (I won't get into the matter of hand and neck cancer and HPV). In the 1960s, 1970s, and into the 1980s, the US salt industry insisted that the data linking consumed salt and hypertension were controversial and that no regulation of the salt content was needed. The argument against the consensus view holds only so long as additional data do not validate the view of that majority. With Copernicus, that was the case. It was the same with the role of bacteria in the development of peptic ulcers.


Absolute certainty and uniform conclusions by all members of the science community shouldn't be needed for policy formulation. If they were, then the Marlboro Man and Joe Camel would still be roaming the ranges and desserts of our television screens.



Ralph Vince comments: 


What a logical stretch David.



In the tobacco litigation, we found secret emails amongst the defendant employee's indicating a nefarious conspiracy to keep their methods and activities secret.


The East Anglia emails are similar in that regard.


I can tell you, from firsthand observation of the computer code that was in the email trove (because I have been writing code since the 70s, and I can tell you from examining someone's code what nationality they are, what mood they were in when they wrote it, and often what they had for breakfast). The code that was dumped was utterly damning to their cause. Not only does it show that the data does NOT sufficiently show that we are experiencing (anthropomorphic or not) temperature rises, but taints the issue because it raises the question of motive. We're left knowing that CO2 in the atmosphere has increased, a seeming understanding that this should have caused temperature rise, and the facts that do not comport to this, and as-yet no legitimate scientific reason (there are some theories, but that's all) to account for this.


Scott Brooks writes: 


I suggest that we look at the motives of the people involved in perpetuating what I believe is a giant con job.


Let's say the earth is warming. Is this a man made phenomena or is it just a normal cycle that the earth goes thru from time to time? Who stands to profit from these suggestions to stop global warming? Al Gore and his ilk?


Why do we trust these idiots in DC to make decisions that are common sense based and "special interest group" based?


If we start down this path that global warmists like yourself want us to go down, what happens when the earth keeps warming up (i.e. let's say it's really just a cycle the earth is going thru and not man made)…….what will happen then? Do you think the politicians will say, "Well, it's not mans fault. So let's roll back all the regulations", or do you think that they'll bloviate about how they need even more power to solve this horrible problem?


Why are you so willing to give more and more power to the government when they have a LONG history of abusing that power to their own selfish ends?


If you chose to go down that path, you will find people like me standing in your path actively trying to stop you.


Garrett Baldwin writes: 


I wasn't going to jump in on this, but I wanted to shadow something Scott said.


With regard to motives, pay attention to the way that the hearings and the solutions to solving this problem are handled. Some of us want the market to solve the problem. For example, let's say that the biggest threat in the world were something that is hard to measure, like the earth is running out of fresh air.


I'd argue that if that were a serious problem, a man would come a long and invent a machine to solve it. We'd rely on human ingenuity. We'd beat back that threat…


But the people who stand to profit through centralized alchemy only want to do it one way — their way. And any solution that is market based, creates competition, and doesn't enrich allies or decision makers or centralize more power with the government is either demonized, destroyed or regulated from the conversation.


The reality is that central planners can't solve this problem. They claim that they invented the internet, but if the government were still operating the internet, it would just be two dudes from DoD playing pong back and forth between New York and Camp Pendleton. This entire hype has evidence of scam all over it. Naomi Klein has demanded that the U.S. distribute $2 trillion to third-world nations who are "victims" of the U.S. and our energy policy. Ironically, the nations that are demanding the money are also the ones that are near the bottom of the Heritage Economic Freedom Index. Countries that aren't developing because they keep they limit their own people's ingenuity and production are going to get $2 trillion and then do what with it? Usher in a green economy? Come on…


So, when I hear the idea that we have to "do something" and do it fast without exploring the data, without asking questions, and without being allowed to have a debate because doing so would cast the distrustful of government as people who don't care about the children or the future or humanity. Meanwhile, the alarmist will have a moving wardrobe of children follow him as he spouts off how important his intentions are and how we are monsters.


Beyond that, we also ignore one thing in this discussion.


What are the positive benefits of global warming? After all, Greenland had a booming farm trade 1,000 years ago. I'd like to get some beach front property in Greenland. I'd also think that trade through the Arctic Circle would be nice and reduce shipping to Asia in half. Why is global warming such a terrible thing? Is it because we refuse to embrace the challenge, and because there's profit to be made by saving us from ourselves?


So, I will say from my perspective this. I don't consider climate change a big deal, and it's not something that I worry about. Humanity will adapt after government spends trillions of dollars chasing this dragon..

	

	


	
Jan

	
30

	

	

	
 "Zimbabwe has mere $217 in the bank"


Jan 30 2013 07:48 Sapa



Harare - After paying public workers' salaries last week, the balance in cash-strapped Zimbabwe's government public account stood at just $217, Finance Minister Tendai Biti said Tuesday.


"Last week when we paid civil servants there was $217 (left) in government coffers," Biti told journalists in the capital Harare, claiming some of them had healthier bank balances than the state.


"The government finances are in paralysis state at the present moment. We are failing to meet our targets."


Zimbabwe's economy went into free-fall at the turn of the millennium, after President Robert Mugabe <http://www.whoswho.co.za/robert-mugabe-3562> began seizing white-owned farms.


The move demolished investor confidence in the country, paralysed production, prompted international sanctions and scared off tourists.


After more than a decade - in which the country suffered hyper-inflation of 231 million percent and infrastructure that crumbled as quickly as prices went up - the situation is now more stable.


But public finances remain a mess and local business battles against unstable electricity supplies, lack of liquidity and high labour costs.


Zimbabwe's government has warned it does not have enough money to fund a constitutional referendum and elections expected this year.


Biti said that left no choice but to ask the donors for cash.


"We will be approaching the international community," he said.


The country's elections agency said it requires $104m to organise the vote.


Government's national budget for this year stands at $3.8bn and the economy is projected to grow 5.0%.


The mineral rich country is now using the US dollar and the South African rand.

	

	


	
Jan

	
28

	

	

	
 It seems lately the TV is flooded with AARP and those reverse mortgages we discussed. A Colonial Penn salesman called me (wont give my actual number anymore) 9 times, then I finally answered. To me it seems the more the Market and our economy "improves" the more these charlatans proliferate.


What correlation do you experts see?



Regards,


Alan


Anonymous writes: 


When a niche expands, such as it did in this case with the Great Bust of 08, there is a rush into the new territory. The effort is to get there first, to beat the competition to the new territory. When the niche gets saturated or starts to shrink, then it will test the character of the marketplace. If it is a fair free market, the competitors will battle amongst themselves by giving some combination of lower pricing and better service to the customers. If however, some believe they have a government favor or regulatory advantage, rather than serve the customer, they will press that advantage. They will try to beat their competitors by oppressing the customer.The sales will become more deceptive and fraudulent. Everybody is happy when there is plenty of food. The wars start when food gets scarce.


The fraud becoming the norm rather than the exception in the mortgage markets started when home-ownership peaked.


Ralph Vince adds:



And when "food gets scarce," leaders (often little more than self-appointed) and media have seemed to exacerbate the divide, seeking to use the weight of one side are all, to their advantage by stoking the flames to points beyond unreasonable — whether A French writer of early 19th century, an Austrian convict in the 1930s, a South American or Latin American of (fill in the blank) or a ……


It isn't so much the leader, but rather the gullible that follow, convinced that their fellow man have been the problem.


Anonymous replies: 


For lawyers and media gullible public, fines, prisons (or lack there-of) and arms certainly can be how they think they can gain a governmental advantage. 

	

	


	
Jan

	
23

	

	

	
 Note my blog to Laker Nation below:


D'Antoni is a D'isaster. He caused almost as much havoc IN NY as Superstorm Sandy. Apart from what everybody knows that there is no D in Antoni and his penchant for trying to cram square pegs into the round black hole of his offense, e.g., expecting Pau to run like a 20 year old guard and play on the perimeter, his constantly changing rotation which ignores other proven talent like Jameson's 18+ career PPG including last year, is making the Lakers perform like a novice high school girls' team caught in the act of stealing each other's prom dates. Strategy like starting Darius Morris who runs around like a chicken without a head as he drives head-on to the basket and misses most layups while rarely passing off, is as dumb as a Hatfield like him walking into the West Virginia lair of his family's mortal enemies, the McCoys. Before his enemies get wind of his whereabouts, D'Antoni should hightail it out of here and resign as he did in NY and slink off in the middle of the night. That would only be poetic justice for the heinous crime perpetrated by Jim Buss on Laker Nation when he woke PJ up in the middle of the night to inform him that his services would not be required. Then Buss should prostrate himself at the feet of the Zen Master and beg him to come back for 15 mil or so. That will pay for Jeanie's ring and put the purple and gold on the path toward their own ring # 17!

	

	


	
Jan

	
22

	

	

	
 I have noticed a lot more ads on AAG reverse mortgages touted by Fred Thompson and Henry Winkler hawking another reverse mtg so you can rob the equity from your home. Anyone know any stats on how many poor souls lose their homes?


Also a lot more ads featuring Alex Trebek and the need for Colonial Penn burial insurance.


Regards,


Alan


David Lillienfeld writes: 


Same experience here. My late sister-in-law insisted that if it was good enough for her cousin, it was good enough for her. Besides, she told me, the Fonz wouldn't think of misleading anyone. After all, he's the Fonz. When I finished talking with her, I called my nephew, and he started processing guardianship papers the next day. This was about 5 years ago, too. I have no idea what the fee structure is like now, but I can't believe it's improved much.

	

	


	
Jan

	
22

	

	

	
Not all right wing radicals are forecasting inflation. Many of us are of the other side of that coin. The conservatives are back to the old argument that money supply creates inflation.that argument was destroyed since the Big O took office. M1,2,3,4 increases did not produce inflation. Gee whillikers, what does that mean?


They should go back to the drawing boards, but instead beat the same old drums, preach the same old mantras.


Alston Mabry writes: 


In the present regime, the Fed is increasing the money supply only by the amount of interest they are paying the banks to park at the Fed the very money the Fed shovels at them.


Mr. Allen writes:


The mistake is to think the inflation must show up in rates like in the 1970s. in the 1940s, the last time we had a significantly managed economy rates averaged 2.5% but inflation average 5.5% for the decade. That can occur when there is anchoring or when people think the inflation is transitory in nature. Under a gold standard, which is what inflation targeting is - short rates were volatile but long rates flat as a board because there was no systemmic inflation. Also, you can get stagflation which are higher prices and lower output which is more of what we have experienced as taxes, insurance costs, etc. are up but unit output for many industries flat. Also, do not fail to realize how empty the bucket was in 2008 v. now, Continentals did not immediately loose their value but there were $350 mil of those which in today's dollars is $3.5 trillion, so the Fed may in fact just now be crosses the Rubicon.




A commenter writes:


And 30-100% increases y-o-y in health insurance premiums for independent contractors and other small biz types. why? because they can under the guise of obamacare. really putting the squeeze on some average joes I know.

	

	


	
Jan

	
15

	

	


	
Wonderin, from anonymous

	
January 15, 2013 | 1 Comment

	

	
 If the actions speak louder than words and all the rest is talk, Japan has made clear they are buying up to $500 billion in US bonds and notes in short order to add to the $1t they already have. That's good enough for me to believe US debt cap record of 16 for 16 will stay unblemished. At least someone still loves our flawed hero, aka the dollar.



It could all be set to refrain of What's the Use of Wonderin' from Carousel



What's the use of wond'ring


If he's good or if he's bad


Or if you like the way he wears his cap


Oh, what's the use of wond'ring


Is he's good or if he's bad


He's your dollar and you love him


That's all there is to that


Common sense may tell you


That the ending will be sad,


And now's the time to break and run away.


But what's the use of wond'ring


If the ending will be sad?


He's your dollar and you love him,


There's nothing more to say.


Victor Niederhoffer adds:




If all free market people would get off the hobby horse of saying we're going to have hyperinflation and that we have to do someting different and this is the key to their program, and their worries, and concentrate on incentives, and cronyism, and entitlements, and class warfare, and on the growing class of non-productive slaves to the higher powers, the non-American way and how great it would be if people were left free to choose and rise, and the hatred arising from the drones, the world would be a much better place, and their efforts would not be so fruitless and dysfunctional.

 

	

	


	
Jan

	
13

	

	

	
 from:


Practical Hints for Investing Money

Francis Playford, Sworn Broker

Smith, Elder & Co., London, 1855

google books


p. 36


THE NATIONAL DEBT POLITICALLY CONSIDERED.


The National Debt, which has previously been stated as amounting to between seven and eight hundred millions sterling, is considered by a great number of persons as a great national evil, and not without good grounds; as a proof of which, the payment of the Interest or Dividends consumes, at ordinary times, more than half the national revenue. The whole amount of the revenue is estimated at £52,000,000 a year, of which £27,000,000 are consumed in payment of Dividends, leaving only about £25,000,000 available for the remaining expenses of the Government;—thus clearly showing that as our necessary taxation is more than doubled by the payments required by the National Debt, it is an undoubted evil, involving the country in the necessity of supporting a very heavy annual burden in the way of taxes on the many leading requisites of civilised life.


On the other hand, however, it must be remembered, that a very large portion of the Debt was incurred during the administration of the late Mr. Pitt, and under subsequent Ministers in the course of the long struggle with revolutionary France, for the purpose of enabling our country to oppose the grasping ambition of the first Napoleon, which would otherwise, in all probability, have united nearly all the Powers of continental Europe in one overwhelming descent on our shores, and reduced, most probably, free England, to a mere Gallic province. From this extent of misery we are happily spared; and, however great the cost, we cannot but feel that we did not make the sacrifice in vain.


As respects the reason for having raised it by means of Loan rather than Taxation to the required amount, this will be self-evident from the vastness of the sum found necessary for empowering us to resist the enormous forces arrayed against us. In a word, it would have been simply impossible.


On the other hand, it is advanced by some,—a statement, the bare supposition of which will, no doubt, startle some of our readers,—that this Debt, notwithstanding the serious evils which were mentioned, is so thoroughly incorporated with our National habits and institutions, that, from being an evil, it has, in fact, become a Public advantage; inasmuch as, without its existence, numerous persons, who now live in comfort and a perfect sense of security, would have no means for safely investing their Capital. Widows and children, almost innumerable, now derive their sole and entire support from this source; and even the poorest, who have saved the amount of a few pounds, as a provision for their old age, hasten to invest it in the secure Asylum of the Public Funds, or, in vulgar parlance, "put it in the Bank." By such procedure, it can scarcely be denied that Trade benefits largely; for persons living on Dividends, it will be seen, are customers, without being rivals and competitors for a share of the profits; though, no doubt, it may be argued on the other side, that Trade is thus deprived of large sums that would otherwise be devoted to it, and thereby much limited in its operations. Vast sums are also yearly brought into the country and invested in the English Stocks by foreigners, availing themselves of the far higher character for security possessed by our Funds over those of other countries.


Thus, therefore, in this vast Debt, both evil and good are the indisputable result. That it has done good, we know by the evils which it enabled us to avoid in past times; and we are also sure that a numerous portion of all classes has been benefitted; though the very great increase of Railways and other undertakings paying fair Dividends, supplying the Public with a more extensive field for Investments, and gradually acquiring more and more of the Public favour and confidence, will, in this more speculative age, detract from any such plea for the necessity of maintaining so enormous a burden upon the country. In brief, it seems doubtful whether in any other country in the world the result of so enormous a Debt could, by any possibility, have appeared so beneficial.


That warfare of any magnitude cannot possibly be carried on by the Nation from its ordinary revenue, has been fully borne out by the results of the last few months; and experience proves that a lack of resources at the onset is most disastrous. This being the case, it is necessary that ample funds should be obtained in the most popular and expeditious way: though, nevertheless, we must not lose sight of the injustice inflicted on posterity by an unscrupulous resort to, or abuse of, the numerous facilities provided by a great mercantile community for contracting Government loans. Our Financial Reforms, too, have in late years done much to alleviate the burdens of the State, and the reduction of the National Debt has made great progress, operating alike beneficially on the value of, as well as the Public demand for, all classes of Government securities.


CAUSE OF FLUCTUATIONS.


The variation in the price of Funds—a subject so vitally interesting to a large portion of the Public—is due to several causes which mutually affect each other. The first of these is undoubtedly supply and demand, which is the criterion of price respecting every kind of property whatever. Next is to be considered the price of Bullion and the state of Exchange with foreign countries. The Funds are also very powerfully affected by the rate of Discount fixed by the Bank of England, which varies considerably at different times added to which, they are powerfully influenced by the actual or supposed stability of the Government, and its consequent power of keeping faith with the Public creditor. To exemplify the confidence with which the Public treat the British Funds, the fact is worth noting that Consols and the price of good Freehold Land in England generally move pari passu, yielding nearly the same rate of interest for investments, and at thirty-three and one-third years' purchase, being equal to Consols at par. Land, therefore, at twenty-five years' purchase, is equal to Consols at 75, and in like proportion.


All the Government Securities, in fact, and Consols more particularly, are vastly influenced by a constantly increasing demand, owing to the vast number of Trust accounts continually arising from the deaths of Capitalists, Deeds of Settlement, &c, which generally compel Trustees to invest the Capital or Funds committed to their charge in Government Securities; the result of which is, that enormous amounts are sometimes locked up for many years. Sums of money, also, pending the decision of Chancery suits, are invested in this manner. Now, as this process of absorption of Stock out of the market has long gone on, and still continues to increase, it must in time become an important feature for consideration; particularly, when it is remembered that in all cases of reduction of Interest or Conversion of Stocks, the Act of Parliament authorising such conversion or reduction, usually holds Trustees, &c, harmless from liability for submitting to the same.


Some parts of the surplus Capital of our great Joint-Stock Banking and Assurance Companies, as well as the accumulations of Savings' Banks, are also invested in the Funds; but as the latter are only temporary investments, when anything causing an unusual demand for money occurs (as, for instance, convulsions of trade or a bad harvest), these large companies, as well as the Savings' Banks, become extensive sellers in the market, and create for a time what is called "a panic,"—that is, a great and sudden fall in prices.

	

	


	
Jan

	
8

	

	

	
 On the corporate morality thread, I can offer some experience of the company I first worked for, a large manufacturing business. The number one priority ahead of profits, customer service, quality or value was safety for the employees. We will not injure our employees, and there was zero tolerance on this issue. The quickest way for a manager to lose his job was lax safety practices. And in fact some of the work around machinery was dangerous. Every meeting started and ended with reports and progress on safety. It is the morally right thing and does not conflict with good business. Safety at work or anywhere else is fundamental. Secondly, this focus attracted a culture of employees who cared not just about safety but about the other things that make a business successful, productivity, investment in new ideas, costumers and creating value. I would predict that companies with good safety records internally have equally good performance externally for customers and shareholders, and the opposite.


Jeff Watson writes:


My grandfather had another indicator of the condition of a company. Drive by the place and look at the parking lot. If it's full of older cars, junky cars, it's probably not a good place to work for and probably is a poor credit risk. On the other hand, if a parking lot is full of shiny new cars, it's probably a better place to work and probably has better financials and business.


David Lilienfeld writes:


I don't doubt the morality in corporate behavior. In the pharmaceutical industry there is lots of concern about patient safety. There are two schools of thought about why: The first is that the companies are enlightened and accept George Merck's "Do well by the patient, and you will do well by the society." The second is "A dead patient doesn't buy drugs."


My observation is that while the industry has a sincere interest in patient safety, it can also deceivingly discounts that safety in preference to efficacy, which is perceived to be the reason drugs gets approved. I don't think this is a conscious effort at deceit. That doesn't make it any less real. Many of the leading pharma houses have come to accept that and have tried to design in fail safe safety mechanisms into the approval process. It will take another 4-5 years to see if they are having their intended effects.


	

	


	
Jan

	
7

	

	

	
 When I grew up, I dreamed of emigrating to the US. As the world has changed more rapidly than one could imagine, I altered my plans. Some 16 months ago I relocated to the ex-Soviet Baltic state of Latvia. Now I am happy to see NY Times write about its economic recovery.



"Used to Hardship, Latvia accepts Austerity and its Pain Eases"



"Hardship has long been common here — and still is. But in just four years, the country has gone from the European Union's worst economic disaster zone to a model of what the International Monetary Fund hails as the healing properties of deep budget cuts. Latvia's economy, after shriveling by more than 20 percent from its peak, grew by about 5 percent last year, making it the best performer in the 27-nation European Union"


"Britain, Portugal, Italy and also Latvia's neighbor Lithuania, meanwhile, have bubbled with discontent over austerity. But in Latvia, where the government laid off a third of its civil servants, slashed wages for the rest and sharply reduced support for hospitals, people mostly accepted the bitter medicine. Prime Minister Valdis Dombrovskis, who presided over the austerity, was re-elected, not thrown out of office, as many of his counterparts elsewhere have been."


"Also largely absent are the leftist political forces that have opposed austerity elsewhere in Europe, or the rigid labor laws that protect job security and wage levels. In the second half of 2010, after less than 18 months of painful austerity, Latvia's economy began to grow again."



Also worth mentioning is that in one year builders' salaries have increased by 17%, though from a low initial level.


The state runs with a healthy surplus.


The government is cutting the tax rates.


	

	


	
Jan

	
3

	

	

	
Junto is tonight at 7 pm at The Mechanics Institute (20 West 44th Street, New York, NY 10036).


Don Boudreaux  will be talking today about common fads and fallacies in popular media about economics.


All are welcome.


	

	


	
Jan

	
2

	

	

	
Looking at SPY reversal patterns (2007-present): If two consecutive trading days were each up >1%, and they were preceded by a drop of at least 1%, the next 2-day return was negative (NS):



One-Sample T: DUUXX


Test of mu = 0 vs not = 0



Variable   N   Mean     StDev   SE Mean  95% CI             T

DUUXX   18  -0.0097    0.025  0.0058  (-0.022, 0.002)  -1.64


Variable      P

DUUXX   0.119


	

	


	
Jan

	
2

	

	

	
The difficulty of getting back in once you have sold in stocks is underlined vis a vis the buy and hold strategy, as well as the fate of short selling, as well as timing— by the fast 50 point move in stocks today.


Gary Rogan writes: 


It seems like generally speaking one should either trade, as in being in and out "often" or buy and hold. Buying and holding except for periodically being out or short seems to be what Victor is addressing, and I have always been suspicious of "market timing". All it takes is getting it wrong once, and you are in a hole that's expanding for a long time.


I'm still curious how Victor was so sure there would be a deal.



Anonymous writes: 


What was the effective date of the STOCK Act to ban congressional insider trading, I wonder. As a staffer, one could have slapped the emini around harder the Khan brothers squash ball.


Victor Niederhoffer replies: 


Let us hope that the profits from such activity were sufficient to assuage any such desires for a few days.


Russ Herrold writes:


The dance is a re-run and in prior seasons, the cliff is avoided. Sitcom writers can re-cycle plots endlessly.


Kim Zussman writes: 



It's the binary conundrum of markets:


Buy the rumor / sell the news (or buy the news)

Buy and hold (or sell and sit)

You can't time the market (but some can)

Stocks beat bonds (except for the last decade)

Printing presses lead to disaster (which may not come in our lifetime)


The President of the Old Speculator's Club writes in:


I heard a Congressman speak recently and have to admit it was an enlightening experience. Traditionally, members display a certain amount of restraint when speaking of colleagues with whom they find grievous fault. In a refreshing departure from good manners, this gentleman took the gloves off and bluntly stated that a goodly number of his fellow representatives are less than bright. The word "clown" came up several times and "stupid" might have been slipped in.


Although he artfully avoided specifying individuals or party, I couldn't help but believe that he, like many in the "beltway", had come to the same conclusion: the arrival of the Tea Party contingent has been nothing short of a national disaster.


Unsurprisingly, the congressman's public and scathing view is shared by the current establishment elite. (It's dangerous to out there and speak your mind if what you say is out of step with the conventional wisdom.) His case is provided with added cover by a host of recently published and similarly themed books ("It's Even Worse Than It Looks", Mann, "Do Not Ask What Good We Do", Draper, "Beyond Outrage", Reich, and "The Party is Over", Lofgren).


However, the "fiscal cliff" isn't a maiden making her debut. We've had two relatively recent encounters with her; so her charms, though formidable, are familiar. Her appearances in '91 and '95 were just as awesome and, as expected, so compelling that one of the parties bit into the proffered apple. Unfortunately, the fruit, which is bitter and often fatal, is the produce of the tree of Folly. On this most recent visit, though, she is confronted by a group so naive and simple that her blandishments have gone unrequited.


In any event, it's apparent that the respect (whether real or faked) House members used to show each other, at least in public, has been thrown over for a newer, more aggressive, in-your-face approach. Long gone are the clever and informed debates which provided a rich mix of facts, history, and truth. It seems important to figure out why this has developed and if, in fact, a functioning government is still possible.


If one studies what the House has been in the past and what it has evolved into, it's impossible to overlook that this body has lost, or given up, much of it's power and authority. The growth of the executive branch (the Imperial Presidency) is one factor. Back in '96 the congress and the president worked long and hard to create the first welfare reform package. Contrary to forecast of terrible consequences, the new programs worked well.


Yet, in one day, an Executive Order by the current president re-established the old, failed programs. Another assumed power has been the declaration of war, and the most recent threat: unilaterally raising the ceiling on the debt.


While the Executive Order has been increasingly utilized to usurp powers constitutionally granted to the House (and Senate), the greatest loss of power has been though Congress' voluntary abandonment of authority to "regulatory agencies."


Figuring that some issues were just to tough, complex, or time consuming, the country has had foisted upon itself the EPA, FDA, TSA, USDA (with 20 sub-agencies within it), the Dept.of Commerce (with 17 sub-agencies), Dept. of Defense (with 32 sub-agencies) and the list goes on and on. Each agency is staffed by unelected individuals, many with their own agendas, who dictate new regulations that possess the force of law. It's understandable that so much work has to be delegated, but to give it to agencies that are unanswerable to the body that created them is inexcusable.


Then, of course, there is "party discipline." Sam Rayburn of Texas, Speaker of the House for many, many years, gave each incoming freshman representative of his party one piece of advice: "If you want to get along, go along." And they did. Those that didn't faced many difficulties: in committee assignments, in getting their legislation to the floor, in receiving party re-election funds, and they'd be high on the list of targets should redistricting become an issue.


Unfortunately, this approach worked, and worked well. As a result, many constituents found that the views they wished their representatives to promote in D.C., took a back seat to the views favored by the party leaders - many of them from different parts of the country with substantially different interests and goals. The "house of the people" became a house held hostage. Matters reached a new low in representative government when the other party adopted the same process.


Then 2080 rolled around and enough citizens, aggravated at the apparent unresponsiveness of their representatives, threw them out and ushered in the Tea Party. A delicate balance has been disturbed and the Dysfunctional Couple, used to newcomers adjusting to them, failed to realize that these clowns - these yahoos, actually believed in what they'd declared. Whether they win or lose, prevail or fail, their chances for another re-election are small. But for a brief period they have served as reminders that doing the people's business is serious business and that a promise made is a debt unpaid.


For a brief period this collection of vagabonds has added a dose of virility to a confederacy of eunuchs.


As to the President's actions in the recent negotiations, he did nothing, offered nothing…he arrogantly summoned everyone back to D.C. Most came back assuming he had a proposition - he didn't - even CNBC's John Harwood was a little taken aback at the presumptuous gesture. Some time back I suggested I was all for giving this guy everything he asked for - and then letting him perform as he has suggested he would. He has received almost everything; now it's time to lead. This from a guy who, in his short term in the Illinois senate, voted "present" on over half the bills that went through. He is structurally averse to taking a position - preferring, instead, to demonize his opponents.


So, first time at bat, he (and his faithful followers), are hand-wringing over what roadblocks the GOP will/might place before a debt ceiling deadline is reached. It's time he quit talking and started doing.

 







	

	


	
Jan

	
2

	

	

	
 The world's greatest sporting gimmick ever is fast approaching as well: The World Baseball Classic.


I found it surprisingly enjoyable last time around, but this year, I'm very curious to see what will happen with Cuba and one of its best players. There is a wealth of talent rising there, evident by the success of Aroldis Chapman and Yeonis Cespedes. As Cuba continues to be closed off, scouts are chirping over a first baseman who could be one of the best power hitters on the planet. He'll be showcasing over in Japan on March 2.


His name is Jose Abreu, and here are his staggering numbers from the 2010-2011 season…


.453 batting average; .597 on-base percentage; .986 slugging percentage. 33 homers and 93 runs batted in 212 at-bats. Granted, playing in Cuba is similar to High-A ball in Carolina, but the numbers are still remarkable and there is a lot of variance in the amount of talent on his team Serie Nacional - a team whose games MLB scouts can't even get close to. Given that he's 25, it appears it's unlikely he'd ever make the MLB jump… but Cespedes jumped at 26.


Last season, Abreu hit .394 with a league record 35 home runs (90 game season). He's appears to have more power than Yeonis Cespedes, who was team Cuba's centerfielder in 2009… but he doesn't seem to run as well (Abreu has Gus Triandos speed). He also leads the league in intentional walks and finds himself hit by pitches very often (both numbers above 20-25 for the season).


I'll be interesting to see if he can outpace Cespedes, who hit .458/.480/1.000 with a double, 3 triples, 2 home runs, five runs and five RBI in six games in the tournament in 2009. Cespedes then defected in 2011, and now plays with the A's with a very impressive rookie campaign this year.


An interview with Oakland scouts I read last year said they were doing everything they could to scout Abreu. So I have to ask why Cuba would even take the chance by putting this level of talent on the roster… The country lost two players in 2009. It's likely that more will defect when Cuba finds itself on US soil for the final rounds.


But then again, it's Cuba, and he could actually be 35 for all we know. Livan Hernandez is supposedly two months younger than Derek Jeter, but he looks old enough to be Jeter's uncle. His half-brother Orlando "El Duque" Hernandez was actually four years older than he said he was. So, there's not a whole lot of confidence in the numbers.


The two other players I look forward to seeing in the WBC are:


Abreu's teammate, Alfredo Despaigne, who is a five-tool star at 26, and frequently finds himself at the top of the Cuban league's home run leaders.


Japan's Masahiro Tanaka. In 2011, Tanaka went 19-5 with a 1.27 ERA, 241 strikeouts, 171 hits and only 27 walks in 226.1 innings pitched. He's in the Dice-K, Yu Darvish mold and could be the next big signing from Japan in the coming years.


It's always exciting to see talent in places where we never really have the chance. Here's hoping we can get a chance to see hidden gems to liven up Bud Selig's international experiment that has a lot of the feel of watching minor league ball until the finals.

	

	


	
Jan

	
1

	

	

	
One finds it absurd that the lawmakers are "risking a stinging rebuke from financial markets" unless they agree to the increased taxes on the upper class without any spending cuts. Thus, a somewhat unusual feedback circuit is built with the financial markets trying to influence the politics an the politicians anticipating the financial moves —- all without gravamen of testing.


Anatoly Veltman writes:


Doesn't it point to the charade that stocks have become? Are you still a confident investor?


Jim Lackey writes:


One would think the opposite. Commodity ETF's and the ilk are the sham. Individual stocks, low vig, no cost of carry, hold forever. It's the best deal outside of private where one must be on the job 24/7 or have a trusted one.


Vince Fulco adds:


Except for the self dealing of mgmts providing themselves with bonuses regardless of actual corporate perf, making operations appear horrible just before an LBO, padding staff & BOD with friends and family, diluting outside shareholders with every kind of option available.


 

	

	


	
Dec

	
30

	

	

	
 Driving a motor car or motor bike is probably the best analogy I can think of for trading.



Start, Stop, traffic lights, dogs and cats on the road, cows, give way signs, t intersections, signs saying "kangaroos for next 50 kilometres ahead–and that is just in the first few 100 metres of leaving home– and then when you hit the express way, and consider yourself in the clear, there may be road works, or fog, and unsighted hazards ahead.



It's very rare you can enter an express way…of start to finish, or finish a journey uninterrupted.


It is our jobs as traders to close down all risks as they appear, in whatever form, to cause minimal bumps and bruises to ourselves. Problematic situations will appear when you expect OR when you least expect them, and when you do get uninterrupted runs, you appreciate them, since it is what you have planned for, but see less often than one may hope for.


Be flexible, bend like the tree, always give way when on the road, and when you hear the sirens move top the left and beware of trouble ahead.


Peter Tep writes: 


"Be like water" - Bruce Lee



Nice post Craig. I liken trading to Bruce's Jeet June Do methodology– using all the skills we have to move forward and strike the opponent down.


What worked yesterday may not work tomorrow. Especially with the presence of HFT, SMSF, central bank presence.



Chris Tucker adds: 


If one were to "always give way when on the road" in NYC, one would never get anywhere. Cabbies will eat you alive if you let them, they will try to force their way in front of you and then look at you as if you are a criminal when you fail to yield.



Yes, always giving way is a much less stressful way to navigate, but there is no victory in it!


Jeff Sasmor writes: 


Depends on how aggressive you want to be and what sort of car you are driving. If you are driving a beat up car and honk and go, they give way. I speak from personal experience on both sides of that transaction.


Jim Lackey adds:


Look where you want to go. Do not look where you don't want to end up. In a slide, if you look at the wall, you'll run right into it. If you look ahead down the race track it's amazing, you'll auto steer and correct your way out of the spin. In a crash, hold on, and do your best not to get hurt and head for the pits for repairs.



Last night during the 200 MI trip from the hill outside of Birmingham, AL, the transmission cooler lines on my BMX van broke. It must have been a sight as trans fluid was all over the engine trans and back of van in a cloud of smoke. Good thing we didn't have a fire. You know what I did? I eased it back to the pits. I exited, dumped some fluid into the trans and made it home. This AM all fixed.



I froze my tail off shooting weapons for 12 hours in the Bama country with my Sisters family. They have more weapons than anyone I know. My son did the walk balk with the AK-47 and I burst out laughing as another teenager was taking some hot brass as they ejected from the chamber. I told the kid to move. Good fun safe day. I can still hit a 300 meter tager with a .22 rifle 2nd shot after 20 years of no practice. Okay, it wasn't 300, but simulated as a 4" target X meters away…bing…


My nephew made the comment, all these weapons are so easy to use it's ridiculous. Yeah, that is how and why there are 10 year olds in the militia in Africa. The only reason I shot at all was the current news flow. I really have no interest in firearms. After shooting the 150MM main gun and killing tanks at 4,000 meters on the move, with F-15's as cover and the Apache on my 6 and MLRS destroying 1k by 1k boxes at a time… real war is reprehensible. All the arm chair warriors really need to tone it down a bit. The only comment I agree in the past 4 weeks of talk was Professor Stefan with his Bellini. If you want to put on the show of defense, that is the smartest idea I have ever read. Those shot guns are world class and perhaps I'd buy it from him. I own no weapons.



I am still thawing out after 13 hours outdoors then the 3 hour drive home then the work this am. My water heaters theromcouple died.. Lowes and HD are useless! Ugh, Ace hardware has all the parts they are amazing, but after inspection my buy American just bit me… Standard brands, made here in TN, has a special thermocouple. I asked the local heater man if he'd be kind enough to drop one off in my mailbox. He said sure, but the clerks said they have to charge me 69 bucks for the Sunday trip. I can wait a day. The part is 14.99. I can do it myself. It's already apart.



I am a man. The ladies must have hot water now. Ill sacrifice my McDonalds budget for Jan and have my man stop by. Perhaps he will find another problem as well.



Back to Carz racing and trading… it's not the one big edge that makes a champion…it's the 10,000 little things all done perfect that adds up to a big edge. The biggest edge of all is the drift over 100 years. After two crashes and a dozen panics the past 12 years, I find it hard to believe that buying every panic with prudence over the next decade will not produce a fine profit. 


	

	


	
Dec

	
30

	

	

	
 


Barbara


Directed by Christian Petzold



With a time-frame starting back in 1980, the accumulating tension of time and place in Barbara begins as physician Barbara Wolff (Nina Hoss) arrives at a modest rural pediatric hospital in East Germany, clearly transferred there not with her acquiescence, from a prestigious hospital in Berlin by never-named Authorities. Her 'crime' is obliquely referred to as that she had had the unmitigated gall to commit a request for an exit visa.



What comes to mind is the Orwell book and film 1984 (1984), where remorseless monitoring, and literally rewriting reality into a never-was 'history,' are the norm. Adding to the received nerve-rattling classics of life under surveillance as the German The Lives of Others (2006), and 2007's Romanian 4 Months 3 Weeks and 2 Days, director Christian Petzold—one of Germany's leading contemporary filmmakers—visits the perturbed, seething yet everyday calamities and wastes of the East German totalitarian era: Paranoia goes deep. But, heavily draped with an Iron Curtain, paranoia is entirely justified.



The Barbara we see for the preponderance of this meticulously reported could-be reality is cool to stand-offish with colleagues—even a handsome, responsive doctor named Andre (Ronald Zehrfeld) who gallantly batters against the wall of her reserve. No matter her remoteness from her physician coworkers, she comes to life with immediate sensitivity, professionalism and warmth when dealing with her sometimes desperate patients, who suffer from a plethora of socially induced ills. A century ago, these women would have been given a DX of "hysteria," but here, their paroxysms and longeuers have readily apparent etiologies. People cannot live healthily under constant fear, badgering, harassment and humiliations large and small.



We see from constant random body searches and intrusive shakedowns of her apartment that Barbara has ample reason to maintain her reserve. Anyone, everyone, in Cold War-era East Germany could be an informant or "a cadre" (as my grad students in China called class informants they surreptitiously, and cautiously, pointed out to me). Through another ocular, by the same token, anyone can also be an anonymous, clandestine hero. This however takes planning and cunning.


We see from constant random body searches and intrusive shakedowns of her apartment that Barbara has ample reason to maintain her reserve. Anyone, everyone, in Cold War-era East Germany could be an informant or "a cadre" (as my grad students in China called class informants they surreptitiously, and cautiously, pointed out to me). Through another ocular, by the same token, anyone can also be an anonymous, clandestine hero. This however takes planning and cunning.



With spare narrative and a dead-on sense of physical and emotional atmosphere, Petzold creates an unbearably vivid portrait of a period that, in the intervening decades, has come to seem strangely both current as well as fractured-old. Facial expressions do not alter with time, nor does the practice of medicine; even the era-clothing is not distinctive enough—as in the new American release about adoptive restrictions to non-typical couples in the early 1980s, Any Day Now, which shouts gaudy gauche gefehrlach post-psychedelic America to such an extent that you keep wanting to bring in the wardrobe mistress—to spank her for such transgressions against good taste. Filmed in strong mustards, greens, blues, it nevertheless reads like a grainy black-and-white feature of Russian 1950s vintage.



Filmed in the verdant, lush, blustery province of Brandenburg, Barbara is often ravishing to the eye, especially as the lithe eponymous character pedals through forests, windblown fields and country roads. As she appeared in the harrowing WW II A Woman in Berlin (2008), Hoss, who never smiles for the first two-thirds of the film, exerts an almost-hypnotic effect, drawing us in steadily to unveil a character whose single-minded goal, only gradually glimpsed, slowly yields to more, and more complex, issues. John Le Carré spycraft sensibility threads the story. Secrets are harder to keep when one's office, home and bodily orifices are searched at whim. As the story transmogrifies to assume the lineaments of a thriller, it might be open to debate whether the film ends the way Westerners are accustomed. Is it a 'happy' end? Such questions are often irrelevant to serious filmgoers, as they are noxious to fair consideration of the handling of important themes.


 This is not a manicured, made for TV all-ends-tied-together pastiche. In this sophisticated, deftly crafted portrayal of grass-roots Communistic realpolitik, Petzold leaves viewers with the sense that, when it comes to such events, people and issues, neat packages are rarely available. Nor, to be fair, ought they be.



The residuum is a silent acknowledgment that, indeed, some progress has moved the needle forward. Injustices and totalitarianism still exist, but a few of the worst have in time been ameliorated. There is some sort of hope in that.

In German. English subtitles.

 

	

	


	
Dec

	
27

	

	

	
Dr.


I just noticed you are running a contest on best investment idea for the year (2012). Yes, I even have time to read dailyspecs when I am in Cambodia. I don't know if its to late to qualify, but I have couple for this year. Short Yen and long Vietnamese stock market. My thinking goes, Japanese would have to come up with something drastic and they will, to stop appreciation of yen, and as much as i don't like people's thinking in Vietnam, long Vietnamese exchange (hnx or ho chi minh), median age is 27, hungry and ready consumers. And there is a want among the young to be westernized as fast as possible. I met lots of ex-pats from US in Vietnam who came back to open up small business in Vietnam. One other important thing is the communication infrastructure around the country, internet wifi is everywhere and inexpensive due to cut throat competition.


I wish I could say the same about Cambodia, my god, people are wonderful, but if you move 5 minutes from the center, streets are not paved yet no running water and forget about electricity, and there is 0 infrastructure (again, thats outside the center. The whole place is running on charity. I am not sure why this is (not long enough here), every business man I meet says, it takes forever to get anything done here. Third one is a gamble (its all a gamble, this one is a bigger one), long Euro, I hate euro, and there is 0 reason for its existence, but everyone hates euro these days, so I went long (today actually), there is no way (anything is possible) on the election year we will see collapse and/or deterioration of the currency, it will happen, but not yet (at least that's my thinking).


If I still qualify and win, make winnings go to the charity of your choice, I am sure you looked into many already (but not to 9/11 museum fund, you know how I feel about those salaries). After South E.A. the salaries and lifestyle of most Americans seem obscene (I am living with my wife in as much comfort as we need and want on $15-$20 a day and that's A LOT here, (including rent). Good observations on Paris and London, Paris is not the same anymore and moving into a sadder state every year (same is with my ex-favorite city Florence, compare to 1999 now its just a Chinese clothing market).


Arthur Khaldarov adds:


Just to clarify: This was written and emailed on  Thu, Jan 5, 2012. 


	

	


	
Dec

	
26

	

	

	
This report "Trading With SVMs: Performance" sounds very interesting. The result on trading the S&P500 (without leverage, I think) since 1952 is 32.59% of annualized return while during the same period Buy&Hold is only 15.14%.


Here is Wikipedia's article on SVMs.


I wonder if anyone has used SVMs in real trading. Could you kindly share any experience about it?


Victor Niederhoffer writes: 


One of my very rare strengths counterbalanced by many much more glaring weaknesses is that I can usually look at any paper in statistical finance and find its weaknesses in 30 seconds or less. I looked at support vector machines in that context and could not figure out why it should do better than discriminant analysis or similarity analysis. I was turned off by the statement that armi garch results using the last 5 changes gave similar alluring results, as I don't believe they will work unless they are retrofitted during particular periods. The non-linear features that SVM tries to capture would not be predictable or repeatable I would think nor would it in any case be immune to ever changing cycles. I will look at this much more carefully with the doc before I can render a totally worthless opinion on this. 

	

	


	
Dec

	
20

	

	

	


 The Iquitos Prison occupies twenty acre surrounded by a 12´concrete wall with four corner turrets that rise like rooks over the denuded jungle within. Eight pavilions house 160 prisoners each for a total of 1300 while forty guards stroll the garden patched complex to keep order. The prison uniform is street clothes but long pants only, while the guards sport tight black T-shirts inscribed INPE in gold on the back. They are armed with .45´s.








On my last day in Peru I visited the prison, first stopping across the street to rent long pants and a dress shirt for $1.00 for admittance. I turned to face the prison entrance, an arched gateway with a short line of visitors.








Inside this walled town inmates are indistinguishable from citizens outside who at any moment may end up right here due to the evil Amazon mothers-in-law and the crooked court system that convicts on bribes and rarely justice. You are put here and kept here depending on your pocketbook, not the crime. The four main convictions in order are sex crimes, drugs, robbery and last fighting. After talking with about one hundred prisoners today I will conclude that half are innocent and nearly all have overextended sentences as the system and their ex-girlfriends slowly squeeze money out of them over the days and years.








Some of the very females in the visitor´s line batting eyes in front and behind me, who lied in the first place to thrust their boyfriends here, and now of legal age, visit each Sunday to draw the curtains before the bunks. Each is paid for sex and, anticlimactically, the boyfriend urges her to retract the original rape charge.








The queue of fifty visitors, lovers, contraband runners and Sunday ministers moves quickly with eight at a time admitted through a ten-foot iron gate in the wall. Then there´s a pause at each of five stations where guards copy identification information, a green chicken imprint is stamped on my right forearm, at the next pause a visitor number is drawn in yellow magic marker below the chicken, at the next another black number 3-16 who is the prisoner I´m fated to visit, at the ensuing a beautifully engraved chit # 43 is traded for my passport photocopy, as I keep my original taped to my side that soon escapes a quick frisk at the final station.








The chit and number penned in red at the bottom of my arm journal prove I´m a visitor rather than convict and I´m told to return in five hours by 2pm or spend the night in the Crossbar Hotel. A pleasant guard in black and gold points me to a plank path across a muddy field to Pavilion 3 to ask for Ruso, the only gringo inmate in the entire complex. I briskly walk the wood plank expecting to find an Italian in for drug smuggling, and a guard politely steps off the one lane into the mud to let me pass, tipping his hat, and pointing ahead for ´Ruso´.








After walking the plank, the guard at Pavilion Gate 3 reads my arm moving his lips, pulls the single skeleton key to unlock the ancient lock, it opens with a creak, and locks behind me. I march a dim aisle like an alley on a moonlit night with open door cells on either side as inmates stare stunned, gape and a few cup their hands to mouths whooping, ´Ruso!´








I turn into Cell 16 and am surprised as a shaggy head pops out from the bed screen, giant bare feet hit the floor, and a huge hand envelops mine with a hardy ´PriVet´ (Hello!) in Russian. This is Ruso, which I quickly learn is Spanish for Russian rather than his name, though he is known throughout the system as Ruso.








A solitary black chess pawn sits on the desk in front of his bed as a clear invitation that I ignore for the moment. Our conversation is in Spanish as he speaks little English.








Ruso exports wood, and has lived in Lima for six years. One year ago he and his brother arrived in the heart of the Amazon at Iquitos to search for wood. His brother got in a fight with three men and bested them, and was subsequently arrested for beating a man to the pulp. Ruso was not at the fight but his crime in Peru is being the brother of the man who fled to avoid trail to Russia. In the perverse Peruvian court system Ruso was put behind bars to serve his brother´s aggravate assault sentence of three years. Before coming to Lima to start the wood business he earned an economy degree, is keen eyed, moves purposely with a royal bearing, twenty-eight, powerfully built, and no worry lines on a square face that begs a shave and haircut.








We make short small talk for he´s anxious to introduce me to the Teacher whom he claims will open every nook of the prison, even places I don’t want to go.








First, we tour his Pavilion, or concrete blockhouse with two flights of stairs and long cement halls connecting about twenty cells with eight beds each that are flung open each morning. Each 30´ square room has one toilet and shower, and each inmate has painted his space with a personal color scheme and hung posters of politicians, scantily clad girls or his own artwork. Ruso´s space is glossy white, tidy like the others, and stacked with non-fiction books on economics, nature and biographies from the block library.








We amble to the Block core that hems a 30´ x 60´ concrete soccer area alive with kicks and shouts over a deflated excuse of a soccer ball. Around the mini-field a dozen inmates run picnic table cafe´s, gambling rings, a crafts shop and barber shop. Prisoners whittle and fashion knickknacks, some paint, and others design or patch clothes to barter or sell to each other to eke a living. A weight lifting area with bars through concrete blocks as dumbbells and barbells gets constant use as many inmates are heavily muscled like Mastiffs. A rousing sermon well attended by forty hand clapping, foot stomping inmates screams through the windows over the soccer field. The scene is a sort of Eden in the Sunday morning sunshine away from the dank cells. It is hardly different from outside the walls except for the thick iron locks.








An 8-foot chain link fence with razor wire hugs the Pavilion with one gate to liberty to roam the twenty acres compound… and enter, if you can afford a ticket at each gate, the other seven Pavilions. It´s a macabre Disneyland. The chief guard at each gate, not his helper screw, has a key, for he has worked the system for years to attain this commanding post to accept or snub bribes to admit or refuse anyone to his Pavilion. So prisoners are free to walk within their own walled blocks in daytime, are locked in their cells from 10pm to 6am, and may leave the same way visitors enter, by bribing the guard chiefs.








´Money talks inside,´ Ruso quips and winks, adding, ´You are my guest,´ and palms the equivalent of $2 with a hand pump to the guard chief at the exit. It is a large sum where outside the minimum wage is $1 an hour. The guard pockets the money, claps Ruso on the back, and opens the gate to exit Pavilion 3 onto the main grounds where the other six pavilions and turrets reach to the sky like War of the Worlds. Few prisoners see this for years because of the price.








We pass Pavilion 2 adjacent to the prison perimeter wall where the last prison escape attempt in 2007 failed when the guards allowed via bribes a 19-inch diameter, 30-meter tunnel to be dug for six months from inside the Block and under the wall to the street, and then swooped in for the capture of 35 escapees. The breakthrough day that Peru´s national soccer team was to play the first qualifying round of the World Cup was smartly timed thinking the guards would be watching the soccer game and not tending to their posts, but someone squealed.








We slip into the carpenter shop within a 20-meter square hut with a log saw to cross-section and cut planks, planer and other equipment. Ruso brushes his hand gently across the wood like a lover´s cheek, explaining that he spends a lot of time here filling orders for civilians for tables, chests and beds. They´re custom crafted and picked up on visitor´s day. It would also be a tight place to hollow a log or furniture leg to store or transport contraband.








On reaching Pavilion 4 that resembles and is minimum security like Ruso´s Block, he pulls the chief guard aside to grease his palm while I chat with the backup screw who informs that the two guards per Pavilion gate work 24 hours straight, and then are off for two days. He avows the turnkeys prefer this arrangement that requires them to work only ten days a month. Each of the dozen guard´s I´ve bumped into is savvy, amicable toward the prisoners and me and, according to my tour guide, on the take. The chief gives him a big bear hug, shakes my hand, and admits us into the Block. We search the bobbing heads on a concrete cafeteria floor that fills the core area instead of soccer. Five cafes and as many pushcart vendors do a bustling business as prisoners chat, play cards and board games as if at Starbucks. This is a more affluent crowd with many seniors, and I´m tipped it is the white color crime Block.








One graying man with twinkling eyes holds an erect posture that stands out so brightly that I inquire of him. He is the former Pevas Mayor, a large jungle town downriver one day by boat, where he was convicted four years ago of accepting money while in office, and for some reason has chosen not to or cannot afford to bribe the court for a get-out-of-jail card. I was told that anyone with a non-violent crime may pay via an attorney to the court about $3000 for quick release, or $10,000 for the worst crime.








The majority of the men are sex criminals, or better termed victims, serving an average ten years for having an affair with an underage (17 years or below) girl; or twenty years for so-called rape. One man I speak to has spent a month short of twenty years inside for having sex with a drunken legal age girl who told police and testified in court that he raped her. He will be released in one month and is anxious for freedom. A few other men tell me, yes, they had sex with a teenage girl like most other Peruvian males, but that the mothers-in-law came at them with claws bribing the police for arrest unless they paid the girl´s family a queenly sum. They cannot afford that game and end up skewered in the penal system.








Ruso spots and yells over the mill to the Teacher. A shout back, and a tall thin man with spectacles above a perpetual smile weaves to draw the Russian´s hand and, on learning that I not only speak but have taught English, clears the floor with a jig. He is respected inside as the official English instructor- the guards address him in English as Teacher- with thirty students in all eight Blocks whom he charges pocket change. He picked up a little English in his youth as a jungle guide, strengthened it inside by reading books, and I am the first person who speaks better whom he has met in three of his six year sentence for having sex with a 16-year-old minor. There was leniency since she was his steady girlfriend that he planned to marry until she brought up the rape charge.








Ruso buys the Teacher a coffee and me lemonade, and on finishing suggests that we walk outside around the yard. Teacher bows his head in shame admitting he cannot afford the standard $1 bribe to leave the Block, but Ruso tells him not to be silly, that Teacher is our guide and the Russian foots the bill.








On swinging gaits with new elbow room we saunter the twenty acre compound, greeting ´Hola´ to the guards and ´Buenas´ to inmate gardeners of little jungle patches outside the Pavilions. Then past a tangle of construction equipment and abandoned bunkers from years gone by to the maximum security Block. .








In maximum men are stripped of their faculties by drugs and time served and so sadly are seen to their core, ragtag and clawing the chain link fence thrusting bubblegum and trinkets at me for coins to support their habits. They beg and alternately roar like lions. ‘You are dangerous!’ the Russian scolds them cheerfully, and then whispers to me, ‘Do you want to go inside?´’








‘Sure,’ I reply, and we turn the fence corner past the frantic men to the Sergeant with the key in to their cage.








It is a din inside. The halls are littered with men sitting sleeping with their foreheads on their knees and gum wrappers. Only six inmates watch TV, hardly any smoke cigarettes due to the cost, many sell candy or dirty girl sketches for change to fill out their emaciated frames or empty minds. The Block houses a younger crowd with strained faces, wild eyed, and doomed to spend decade sentences for crimes of violence, usually robbery or rape.








An atypically rotund middle-aged inmate with accountant eyes seeks out Ruso like a viper, wraps his arms like an anaconda around him and all the while narrows his eyes at me. The alert Russian squeezes him back hard, nods okay at me, and the man releases and smiles warmly. I get the feeling he believes I’m there to buy something, which is fixed when he introduces himself as the prison drug kingpin. Willie Sutton said he went to banks because ´That’s where the money is´, and the kingpin apparently has placed himself in this miserable Block because that’s where the business is. Marijuana and coke for personal use are legal in Peru, but heroin also works through the visitors and guards to the kingpin. ´Anything you want,´ he tells me, ´I can get,´ and then bows out politely that cues a circle of young unkempt inmates to tighten around us.








Yet a man of simian proportions parts them to grin broadly at my guide who nods a second okay that prompts him to utter, ´I am the Block Enforcer, and if you need help just whisper my name Pedro and your fears will go away.` He then steps back through the circle that breaks to allow his graceful exit, and a dozen young convicts approach without touching to beg cigarettes, offer marijuana, and sell candy.








Word echoes along the hard hallways that a gringo is in maximum! and fifty men more shyly than not come up in tactful groups of three to five. Many move directly to the Teacher to show off their new English vocabulary to which he grunts and grins and solicits my corrections. I hold court and teach everyone the words for sky and hope…








Two Mongrel pups prance down the hall sniffing for scraps and accepting tender pats from the inmates. The dogs are in far better flesh than the men in leading a Life of Riley with Carte Blanche to scratch and exit without bribing the guard and, no doubt, to enter another Block where the pickins ain´t so slim.








The dogs pass under a 6×12´ exactingly painted ´Rules and Regulations´ sign in rainbow colors that strictly forbids contraband such as drugs, electronic devices, weapons, fighting, and touching a guard. The punishment is solitary confinement in the Hole for stealing, fighting or breaking most of the other rules. The Hole which a few of the men cringe to recall is 1×2 meters by 2 meters high with only a mattress from which a person may not leave for his stay of one week to two months on bread and water.








I don’t meet the maximum Block Leader but he and the other Leaders seem to run the penal institution. Eight Pavilions with eight Leaders, as outside where chiefs run villages. Their responsibility as mediators is to iron out problems before they would annoy the authority. The guards are loath to enter any of the Blocks for any reason without a SWAT team, and so the Leader keeps them out of the loop. I am told that the guards never taunt or hit a prisoner. Let’s say an inmate infracts the most commonly broken rule of no fighting that if not for the in-house system would result in being sent to the Hole for two weeks and going stir. Instead, the offender is brought by the Enforcer to the Leader who listens patiently, decides on a short counsel, or as often as not doles out harder encouragement. That discipline, as in my school days, is a hit across the hands with a ruler, except in this case the offending prisoner is made to cross his hands and given blows on the palms with a heavy rattan stick. One young guy displayed bruised swollen hands, and attested, ´The stick hurts like heck!,’ but cheerfully accepted it in lieu of the Hole.








In contrast, American prisons host fairer courts, shorter sentences, broken rules, snitches, fighting and gangs, and combative guards. The Iquitos penal complex is more like an American turn of 20th century rural town except no one is at liberty to leave.








The Russian as the sole gringo in the community seems to be the King of all and kept in check only by the guards and his Block Leader who also respect him, if not for his physical prowess and sharp mind, then for his wallet that is always padded for bribes to get nearly anything he wants. He is totally at ease among the Peruvians on both sides of the bars who all seem in awe of his size, wealth, intellect and communication skills.








His parents do not know he’s in prison because it would embarrass them, and the returned brother to Russia has told them their son is walking in the jungle looking for wood. He has served one of a three year sentence and is content to fill in for his brother except that he’s bored to tears. It is more expensive to bribe himself out because of his noteworthy case and large bankroll that may be pinched longer by the court and jail. Yet, he claims that after one year imprisonment the balance has tipped in his favor and he is working with two Lima lawyers on the proper fee to be sprung.








‘How do you communicate with the lawyers all the way in Lima,’ I ask after we drop off the Teacher at the carpenter shop and stroll on to Pavilion 3. He smiles quickly and silently, guiding me by the elbow past the turnkey, down the hall where I first walked in alone and into his cell. The black chess pawn sits lonely on the desk. He asks if I play. I say I used to. He remarks that he started playing at age six, but it is just a hobby. ‘Chess is to Russians as baseball is to Americans.’ He pulls a board from under the mattress, I sit on his bunk and he on a crate with his back to the cell door. He extends fists across the board and I choose the left, that opens to a white pawn and we quickly set up the pieces. The Teacher walks in with something in his hand too, hops surreptitiously into the bunk behind me and draws the curtain.








There is no chess clock except the game must end in one hour to get me out before the end of visiting hours at 2pm, and if the game has no winner in that time we agree in advance to a draw. I have one strong opening, the King’s Gambit, and push the King’s pawn two jumps ahead against the Russian. The Gambit is taken and the game evolves into a wild and wooly middle with hands flying over pieces like a Bruce Lee movie. In thirty minutes of nearly flawless play at one of the most beautiful games of my life, in a King and pawn end game I am a pawn up. He rises and tips his king, shakes my hand, and then draws open the curtain behind me.








The Teacher is reclined on the bunk texting his attorney to get out of jail in three months for $1000 to a judge. He has brought the contraband phone perhaps from the carpenter shop to escape the weekly scrutiny of unannounced Swat Team cell shakedowns. I nod in understanding at them both and turn for a long walk out without looking back.








The Iquitos prison visit was an invaluable seminar where I learned that behind walls and wire and bars life goes on not so differently as outside on the streets of Peru. It is the most pleasant Crossbar Hotel of ten I’ve visited around the world, and nearly anyone could bear a year looking through the slats here though I have no desire to return except for a good chess game.







	

	


	
Dec

	
17

	

	

	
 As far as emotional bloodsports go, there promises to be a bit of athletic theater at MSG in NYC tonight.



Mike D'Antoni and his Ritalin offense, both recently of the Knicks, come to town with his newest victims, the low-ebb Lakers, a roster of all-stars suddenly resembling the cast of a Jerry Springer show in their collective dysfunction.


Carmelo Anthony didn't exactly see eye-to-eye with D'Antoni when they were both here in NY last year so Melo is probably going to try to put on a show to rub it in to his erstwhile nemesis. While on the other hand, Kobe Bryant never likes ceding the spotlight to anybody so he's probably he's going to try light things up as well.


As for D'Antoni, this does not exactly shape up as a MacArthuresque return, as the crowd is probably not going to be very hospitable. There will be nothing genteel about any of this. D'Antoni probably won't need a Kevlar vest but a pocketful of Xanax might be strongly advisable.


Victor Niederhoffer comments: 


This was written before Antoni trash talked the team after his loss and boos. Someone has to say, "coach, it's not the players, it is your system". 


Uncle Howie Eisenberg writes in: 


Agreed. His system obviously doesn't work for the current Laker roster and he keeps trying to shove square pegs into round holes. He is the anti-Jackson who became the greatest coach or manager that ever lived by getting the most out of what every player brought to the table. Case in point: Instead of capitalizing on Pau Gasol's great ability inside which puts him among the top 3 power forwards or centers in the league, he has him on the perimeter where his outside shooting is middling and berates him for not being in shape to run full speed all the time. He (actually) is a Hatfield in need of a McCoy to run him out of town. Unfortunately Jim Buss by his early morning rejection phone call to the Zen Master has forever precluded the return of the guy who could have best exploited the 4 HOFers on the Lakers while enabling the others to transcend themselves.


As far as the defense is concerned I don't know whether it is as Felton said not getting back in time, or the over emphasis of the fast moving offense that causes players to either not put out on defense or maybe not have the energy to do it on both ends of the floor.


	

	


	
Dec

	
14

	

	

	
In the middle of the 90s I was beating slots here in Greece where I come from like butterfly cherry master or similar video 3 reel slots so I even had rng. I could 'read' these machines, or we had an electronic device to cheat royal poker, so I'm just trying to say that nowadays slots can be beaten if you only know a very small detail of software.


	

	


	
Dec

	
1

	

	

	
 I loved this article  with new findings about the giant sequoias.


"They are so old because they have survived all the threats that could have killed them. They're too strong to be knocked over by wind. Their heartwood and bark are infused with tannic acids and other chemicals that protect against fungal rot. Wood-boring beetles hardly faze them. Their thick bark is flame resistant. Ground fires, in fact, are good for sequoia populations, burning away competitors, opening sequoia cones, allowing sequoia seedlings to get started amid the sunlight and nurturing ash. Lightning hurts the big adults but usually doesn't kill them. So they grow older and bigger across the millennia."


and


"Among the striking discoveries made by Sillett's team is that even the rate of growth of a big tree, not just its height or total volume, can increase during old age. An elderly monster like the President actually lays down more new wood per year than a robust young tree. It puts that wood around the trunk, which grows wider, and into the limbs and the branches, which grow thicker.


This finding contradicts a long-held premise in forest ecology—that wood production decreases during the old age of a tree. That premise, which has justified countless management decisions in favor of short-rotation forestry, may hold true for some kinds of trees in some places, but not for giant sequoias (or other tall species, including coast redwoods). Sillett and his team have disproved it by doing something that earlier forest ecologists didn't: climbing the big trees—climbing all over them—and measuring them inch by inch."

	

	


	
Nov

	
27

	

	

	
A post purporting to show that buy and hold investing does not work has appeared on our list. It is reprehensible propaganda and total mumbo. They do not take account of the distribution of returns to investing over long periods that have been enumerated by the Dimson group and Fisher and Lorie. It is sad to see this on our site. The arguments against buy and hold seem to be that the professors found that short term investing didn't work so they erroneously concluded that long term investing must be the alternative. Shiller is mentioned and cited with approval.


Alston Mabry writes: 


To explore this issue numerically, I took the monthly data for SPY (1993-present) and compared some simple fixed systems. In each system the investor is getting $1000 per month to invest. If during that month, the SPY falls a set % below the highest price set during a specific lookback period (the 3, 6, 12, 18, 24 or 36 months previous to the current month), then the investor buys SPY with all his current cash (fractional shares allowed). If the SPY does not hit the target buy point this month, then the $1000 is added to cash. Once the investor buys SPY shares, he holds them until the present.


For example, let's say the drop % is 10%, and the lookback period is 12 months. In May of year X, we look at the high for SPY from May, year X-1, thru April, year X, and find that it is 70. We're looking for a 10% drop, so our target price would be 63. If we hit it, then spend all available cash to buy SPY @ 63. Otherwise we add $1000 to cash.


Each combination of % drop and lookback period is a separate fixed system.


Over the time period studied, if the investor just socks away the cash and never buys a share (and earns no interest), he winds up with $239,000. On the other hand, if he never keeps cash but instead buys as much SPY each month as he can for $1000, then he winds up with over $446,000, which amount I use as the buy-and-hold benchmark.



If the investor uses the fixed system described, he winds up with some other amount. The table of results shows how each combination of % drop and lookback period compared to the benchmark $446,000, expressed as a decimal, e.g., 0.78 would that particular combination produced (0.78 * 446000 ) dollars.



Results in this table.


The best system was { 57% drop, 18+ month lookback }, or just to wait from 1993 until March 2009 to buy in. Of course, it's hard to know that 57% ex ante. The next best system was { 7% drop, 3 month lookback } coming in at 0.99.


This study is just food for thought. It leaves out options for investing cash while not in the market. And it sticks with fixed %'s without exploring using standard deviation of realized volatility as a measure. So, there are other ways to play with it.


Charles Pennington comments: 


Thank you — that is a remarkable "nail-in-the-coffin" result.



Nothing beat buy-and-hold except for the ones with the freakish 57% threshold, and it won by a tiny margin, and it must have been dominated by a few rare events–57% declines–and therefore must have a lot of statistical uncertainty..


That's very surprising and very convincing.


(Now some wise-guy is going to ask what happens if you wait until the market is UP x% over the past N months rather than down!)


Kim Zussman writes: 


Here are the mean monthly returns of SPY (93-present) for all months, months after last month was down, and months after last month was up (compared to mean of zero):


 One-Sample T: ALL mo, aft DN mo, aft UP mo


Test of mu = 0 vs not = 0


Variable      N      Mean     StDev   SE Mean  95% CI            T

ALL mo     237  0.0073  0.0437  0.0028  ( 0.0017, 0.0129)  2.58

aft DN mo   90   0.0050  0.0515  0.0054  (-0.0057, 0.0158)  0.92

aft UP mo  146  0.0083  0.0380  0.0031  ( 0.0021, 0.0145)  2.65


 The means of all months and months after up months were significantly different from zero; months after down months were not.


Comparing months after down vs months after up, the difference is N.S.:



Two-sample T for aft DN mo vs aft UP mo


                  N    Mean   StDev  SE Mean

aft DN mo   90  0.0050  0.0515   0.0054   T=-0.53

aft UP mo  146  0.0084  0.0381   0.0032


Bill Rafter writes: 


A few years ago I published a short piece illustrating research on Buy & Hold. It contrasted a perfect knowledge B&H with a variation using less-than-perfect knowledge using more frequent turnover. Here's the method, which can easily be replicated:


Pick a period (say a year) and give yourself perfect look-ahead bias, akin to having the newspaper one year in the future. Identify those stocks (say 100) that perform best over that period, and simulate buying them. Over that year you cannot do better. That's your benchmark.


Then over that same period do the following: Buy those same 100 stocks, but sell them half-way thru the period. Replace them at the 6-month mark with the 100 stocks perfectly forecast over the next 12 months. Again sell them after holding them for just half the period. Thus the return from the stocks that you have owned and rotated are the result of less-than-perfect knowledge. Compare that return to the benchmark.


Do this every day to eliminate start-date bias, and then average all returns. The less-than-perfect knowledge results far exceeded the perfect-knowledge B&H. Actually they blew them away in every time frame. It's really obvious when you do this with monthly and quarterly periods as you have so many of them.


The funny thing about this is the barrage of hate mail that I received from dedicated B&H investment advisors, who somehow felt their future livelihoods were threatened.


If anyone wants that old article, send me a message off the list. We called it "Cassandra" after someone with perfect knowledge that was scorned.


Anton Johnson writes in: 




Here is a link to BR's excellent study "Cassandra", as it lives on in cyberspace.

	

	


	
Nov

	
22

	

	

	
Following DailySpec tradition we repost here  our article on Thanksgiving  and economic incentives.  Happy Thanksgiving to all our readers!

	

	


	
Nov

	
19

	

	

	
 Umberto Eco, in his studies of mass media and culture, has an essay on popular new devices. His thesis is that they start out by being used by the wealthy and then get used by the common man, and lose much of their value from the law of diminishing marginal returns.


He uses the railroad and cell phones as examples. I have found that many new things like the smart phone have decreased their marginal productivity. Studies show that 30% of users sleep with their smart phone next to their bed. I have not had the displeasure of being interrupted in romance by a smart phone ringing yet and answered, but I am told it is common.


What are the implications of this for market analysis, especially of individual stocks.  I find that my past research which did not use "as is" files and was heavily dependent on compustat is deeply flawed. Indeed my approach seems flawed. I am trying to improve for the future. My kids seem to make money with their stock purchases based strictly on the future growth of popular products among the younger generation. I wonder how to improve.


Thomas Miller writes:


Maybe Peter Lynch was on to something although I don't see how his "method" can be quantified.


	

	


	
Nov

	
18

	

	

	
 I wanted to share my latest oped with dailyspec, as I thought you might find it interesting, and perhaps worth writing about.



In the piece, I explain why Dodd-Frank, the federal law designed to regulate Wall Street, is actually harming farmers — and could end up raising food prices for ordinary Americans. The law's ham-fisted approach to derivatives is wreaking havoc on the "swaps" that farmers use to guard against swings in the price of their crops.


—


The Dodd-Frank Net Might Ensnare the Family Meal



Federal regulators recently roiled America's farmers with the release of new rules for financial instruments. The Commodity Futures Trading Commission, one of the agencies charged with implementing the Dodd-Frank Wall Street Reform Act, officially announced the new requirements and said they would take effect by year's end.


What does Dodd-Frank, passed in response to the 2008 economic crisis and aimed at reforming a vast swathe of the financial sector, have to do with farmers?


A great deal. Among the instruments covered by the Commission's proposals are agricultural commodity "swaps." Basically, swaps empower farmers, ranchers, agribusinesses and other food suppliers to hedge against certain risks common to their trade, like bad weather or a crash in the price of a food item they sell.


Swaps might sound like they serve some distant, exotic purpose far removed from the lives of average Americans. But they play a key role in providing food producers with a basic level of financial security through tough times, which helps to ensure price stability for consumers.


Consequently, the way the Commission imposes Dodd-Frank rules on these instruments will have a profound effect on Americans' pocketbooks. And right now, all signs indicate the Commission's approach to implementing Dodd-Frank is going to inadvertently smother agricultural swaps with over-regulation.


In the rush to prevent another crisis, it has cast its net too wide. As a result, Dodd-Frank could make risk management significantly more costly for America's farmers, driving up volatility in the market and potentially leading to huge price increases for consumers.


The Commission's new rules affect agricultural commodity swaps that aren't sold on exchanges and don't run through third-party intermediaries –so-called "over-the-counter" swaps.


Consider a bread baker in Kansas City. He buys thousands of pounds of flour each year. Because of this year's droughts, though, he's worried that America's wheat supply will shrink, driving up flour prices over the next twelve months.


So, to hedge against a price spike, he buys $10,000 in over-the-counter flour swaps today to guarantee that next year he'll be able to purchase up to 10,000 pounds of flour for $1 per pound. In 12 months, if the price of flour is dramatically higher, he'll have saved himself a huge amount of money. The price could also be lower, of course, but that's the risk he runs in order to guarantee he won't go bankrupt.


Right now, over-the-counter agricultural swaps are mostly unregulated. But that shouldn't be a point of concern — these instruments had nothing to do with the financial meltdown.


Nevertheless, this new round of Dodd-Frank rules would impose a slew of new requirements on these instruments. Buyers and sellers would have to trade them on approved exchanges, and they would need to have a certain level of capital on hand to trade. Reporting rules regarding profits and losses would be ratcheted up.


There would also be mandatory "clearing," meaning swap trades would be required to run through certified middlemen. This is a particularly backwards idea.


The over-the-counter agriculture swap market has been running safely and efficiently for years without mandatory middlemen. No one — not even the regulators charged with implementing Dodd-Frank — claims otherwise.


On the other hand, the traditional futures market operating under mandatory clearing rules has been home to some of the biggest financial meltdowns of the last few years. About a billion dollars evaporated before the brokerage firm MF Global declared bankruptcy in October 2011. And Peregrine Financial had racked up a $200 million shortfall in customer funds before it was forced to shut down in July.


The clearing rules regulators are so eager to foist on over-the-counter agricultural swaps were in full force for both MF Global and Peregrine. And yet, the system still suffered massive losses. This regulatory structure is obviously broken.


So implementing Dodd-Frank as planned means forcing agriculture swaps to move from a regulatory environment that is universally acknowledged to be working well to one that has failed repeatedly to prevent fraud and abuse. That's just senseless.


Overregulation can be just as dangerous and costly as under-regulation. And in this case, these invasive Dodd-Frank rules could dramatically drive up operation costs for farmers, ranchers, and others involved in food production. The rise in expenses would, in turn, be passed along to American consumers in the form of higher food prices.


Some farmers would no doubt be driven out of the swaps market altogether. With no way to manage financial risk, the next hurricane or tornado could put them out of business.


At the very least, regulators need to give themselves more time to study this issue by installing a three-year moratorium on the Dodd-Frank rules governing agricultural commodities. Blindly marching ahead and imposing strict new requirements on these instruments would wind up doing substantially more harm than good.


*Don Coursey is Ameritech Professor of Public Policy Studies at the Harris School of the University of Chicago.

	

	


	
Nov

	
18

	

	

	
 I found something interesting and unusual today that I thought would be most appropriate on your site.


An exploitable arbitrage opportunity is developing on the eve of the US Presidential election on some of the more active prediction markets. The following quotes are as of Nov. 5 8:19 PM EDT:


- Intrade sells Obama to win at $6.76 (meaning you can buy a binary futures contract that pays $10.00 in the event of an Obama victory for $6.76). There is about $50,000 worth of unmatched contracts ready to be sold instantly between $6.76 and $7.00.


- Betfair has matched 1.28 odds on Obama (meaning you can win $1.28 for each dollar bet on Romney). There is about $60,000 worth of contracts ready to be matched instantly between 1.29 and 1.31.



Assuming you buy $50,000 of Obama above market on Intrade at an average price of $6.88, and sell $58,140 of Obama at an average bet of 1.3 on Betfair, your payoff at expiry (i.e. most likely within 48 hours) will be as follows:


Obama victory: $(72,674-50,000)+(58,140-75,582) = $5,232 profit. Romney victory: $(0-50,000)+(58,140-0)*0.95 = $5,233 profit.


That's a 4.8% *risk-free* return in two days (note that this is after all transaction costs), which is a conservative estimate since it assumed that you play aggressively and snap up market orders at a significant premium. If playing with more than $100,000, say $1M, the return goes down to about 3%, which is still nothing to scoff at considering the time-frame is two days.


The reason that this arbitrage exists is that, unlike more conventional markets, this one is difficult for US citizens and some Europeans to exploit for structural reasons. The IRS, for example, won't allow tax write-offs for losses on either market (in fact the activity altogether 'may' not even technically be legal for US citizens). For this reason, a law-abiding American would wind up paying so much in taxes on the winning side that the net would be negative.


But for someone from a country with less hostile online gambling laws, and a little quantitative know-how to find the right asset mix, there is free money to be extracted from this preposterously inefficient market. If I weren't the law-abiding American I am, I'd be picking it up right now; having to watch others do it because of my country's puritanical laws is more than a little annoying.


Maybe your readers would enjoy this little slap in the face to efficient market theory, even if not in time to make proper use of it. Thanks for your time!


Regards,


Igor Z.

	

	


	
Nov

	
13

	

	

	
Mumboism is to trade flexionics as Petraeus' wife is to Petraeus?


Available ex-ante mumboism mined trading signals is useful even to anti-mumboists?

	

	


	
Nov

	
8

	

	

	
 I voted for Gary Johnson, but come on, Romney didn't commit all kinds of blunders. He ran a decent, energetic campaign. Far better than McCain or Dole or probably even the Bushes. It took Romney until late in the campaign to hit his stride, but by the end he sounded far better on the stump than did Obama. And of course he won the debates.


But every time Romney opened his mouth, the press crucified him for a blunder. When he made a very mild and presumably knowledgeable comment in London on preparations for the Olympics, the nationalist, socialist English press cried he had insulted their country and the US press piled on that his foreign trip was a disaster. When he happened to mention being supplied with binders of women, it was absolutely the worst, most anti-women comment anyone could every make. When he questioned the apologetic US reaction to the Libyan riots, the press said he was politicizing a tragedy. Meanwhile the President could ignore pleas to send support for our diplomats, resulting in the murder of our ambassador and shorted-handed former Navy Seal security team, and the press was totally uninterested in looking into or even reporting the matter.


But the real trouble was structural, as Vic pointed out. It is now, and certainly will be in the future, impossible for a Republican presidential candidate to win.


Based on exit polls, Romney won 58% of the White vote, Trouble for him was that Obama won 93% of the Black vote, 67% of the Hispanic vote, and 75% of the Asian vote. BTW Romney also won 60% of the married vote of all races — an incredible figure never mentioned in the blizzard of commentary about Romney's "war on women." These are figures that would have resulted in a landslide for Eisenhower or Kennedy or Reagan.


All in all, Romney won the traditional American vote. What Obama won could somewhat unfairly but not totally unreasonably be characterized as the anti-American vote — the alienated minorities, those on the dole given Obamaphones and such, the capitalist cronies, the lefties and naive young, the Hollywood dabblers, the academics and a large chunk of the intellectuals.


	

	


	
Nov

	
5

	

	

	
 Today's little relief mission to the hard hit Rockaways area was very telling. Fema and NYC relief crews were nowhere to be seen, and everything was being run by a local city councilman and an army of volunteers.



The folks who run the public library down there had decided to turn it into a makeshift relief center, and we were able to get them a much needed generator and some other supplies. The most relief was provided by millionaire hedge fund manager Roy Niederhoffer, who in 1 day managed to put together an army of people to bring down cars and even a 26 foot u-haul truck with enough pre-sorted food to support 100 families of 4 people for days. Note he didn't just write a check, but he actually quarterbacked the entire operation (for the second day in a row).


Oh, and when we were leaving trucks for the New York Daily News (owned by billionaire Mort Zuckerberg) rolled up to drop off much needed blankets.


I wish Mitt Romney had written a check for $10 million bucks and called up his other wealthy CEO buddies who run companies like Costco or Home Depot and had them divert a bunch of trucks down to the hart hit areas. That would have been the best answer to the constant ridicule by liberals that he's just too darn rich.


Mick Tierney writes: 




Just to provide a little balance to the "1% big government" post, here's a story I heard just this morning.


Our 73 year-old pastor takes three weeks off every Spring and Fall to re-visit small churches in Virginia, West Virginia, and North Carolina (a routine he established about 17 years ago). He takes another four weeks each summer for a church/school/medical facility he has established in Haiti (a project begun about 20 years ago).


This year he was asked to make a first visit to a small church (35) in the vicinity of the SETI Institute — obviously in the middle of Nowhere, WV. While there he and his wife were invited to dinner by one of the church members. After discussing various local issues, he asked if his hosts had ever met any of the SETI staff.


They replied that they had receive one visit. Late one afternoon a gentleman knocked at their door and announced that he had a heating blanket for them. They thanked him kindly but refused as they already had one.


He informed them that he was aware of this, but that their current blanket had developed a short. They checked and discovered he was right - without explanation he gave them the blanket and left.


Now you can return to the possibilities of election day computer hacking.


	

	


	
Nov

	
2

	

	

	
 Bullies, as adults, generally abuse their authority. If you stand for excellence and have some success you will attract the attention of bullies. It has been my experience that bullies hate a good success story but despise the successful more for the attention and admiration of others than their success. The heroes of myths, Bible stories, and legends are often victims of the drummed up accusations of bullies. Apparently, most ancient cultures were gravely concerned with bullies in everyday adult life.


Here are several tells that a bully's complaint against you is a witch hunt rather than legitimate complaint:



1. You are singled out after publicity.



2. Many interviews are held and are fishing expeditions of your weaknesses.



3. In these interviews, there are two types of witnesses, those that routinely support the bully and those that are intimidated and gladly rat out their neighbor to get the bully to leave their doorstep.



4. The interviews are one sided.


(It is widely known that the bully and their cohorts have immunity for much more corruption. Interrogations do not happen for them. Romance, money and power are often a triangular core. The bully often is a mistress of the ruler in the stories)


5. The bully often will intimidate and harasses the friends and family who would give the moral support to the victim.




6. It makes no financial sense for the bully to waste so many resources pointing out your minor faults.


It makes sense to do whatever it takes to rid yourself of an organization that allows one to be bullied.


I wonder if the moral implication of the ancient stories is correct, that rampant bullying is a subtle sign of an empire or emperors impending sudden chaotic demise…

	

	


	
Nov

	
1

	

	

	
 The NYC Junto will still be meeting at the usual place, the Mechanics Institute, 20 West 44th Street New York, NY, at 7pm Thursday November 1, 2012 with Mr. Greg Rehmke  delivering a talk on evolution of economic behavior.


Hope to see you all there!


Sincerely,


Victor Niederhoffer and Dailyspec


	

	


	
Nov

	
1

	

	

	
 I wonder how many homes are not covered due to lack of flood insurance or not being able to get coverage on Jersey Shores etc. ?


Anonymous writes: 


Flood insurance is easy to get. There is a "basic" version and an add-on. The basic version on our Jersey Seashore house cost $20 per $100k of coverage and the add-on was an extra $47, PER YEAR. It is subsidized by the Federal government, which is why it is so cheap. Only an idiot would not have it. And yes, there are idiots out there. If you are in a flood-prone area, you want as much insurance as you can get.



If you are not in the defined "flood plain" it can be difficult to get flood insurance because the Feds do not subsidize it. We also had a lakefront property that somehow managed to be out of the designated flood plain. Coverage for that property was about 3 times that of the beach house. And that property did have some minor flood damage, although I chose not to submit it.


Bill Herrmann adds:


Federally subsidized flood insurance is a very good example of government incentives pushing the economy in the wrong direction. Just as “Too Big to Fail” encourages some institutions to take larger risks then they would otherwise, federal subsidized flood insurance encourages building in the flood plain. (Which is generally not a good idea.)





	

	


	
Oct

	
18

	

	

	
 I took my aging beloved 100k plus mile truck to her certified primary care provider (dealer) recently and they identified $5000 worth necessary procedures which they printed in a very nice report. With same report I got a second opinion from a smaller family run care provider (garage) who I trust, at one fifth the cost. Since I am paying this is out of pocket I opted for the cheaper one. If another party was paying this for me I would have been indifferent.



anonymous comments:


For those going on Medicare, the death panels are not panels but cost containment measures put into place.


What has changed treatment the most in the last few year is "adverse" reaction to treatment. The Doctors have to pay for treatment out of their own pockets if after initial treatment, the patient has an adverse response within set time periods based on the condition.


The doctor not wanting to risk the lose of income and time, therefore will only accept the most physically fit for hip replacement or even cardio operations.


"He is a smoker that overweight, what does he expect if his hip goes out…we don't guarantee miracles." is a typical response felt if not said.


One wonders if this will actually cause the working poor and lower class to receive less treatment than before, at least at their most critical point in their lives, as these are often are the people with the highest probability of "adverse events".


an anonymous person comments:


Well, what are some thoughts around the notion that if individual people are more financially responsible for their own health care, they will take better care of themselves?


anonymous responds: 


This I believe is the most insidious part, most people that get medicare trust the government way too much to question that they will be getting less care not more, under a medicare plan. Handouts are seen as "free money" without consideration for their second order effects on incentives and motivations.


This is especially true amongst the working poor class in my opinion. It will be generation X and Y before the "lesson" (they need to take better care of themselves) will be accepted. By then either medicare will be cut so far back or rationed to a point where by the time you are 65, everyone, if they have half a brain, becomes a "Medicare conservative" because they have seen Government work.


	

	


	
Oct

	
3

	

	

	
Tomorrow night, Thursday, October 4th, is the Junto. 


It will be held at the General Society Library,

on 20 West 44 St., between 5th and 6th Aves.



Gary Hoover will be giving a talk called Think Like An Entrepreneur.


The talk will begin promptly at 8pm but we will socialize beginning at 7pm.



All are welcome. 


From Victor and Dailyspeculations

	

	


	
Oct

	
2

	

	

	
 If the average welfare recipient receives something on the order of $43,000/yr, and the average American's salary is $46,000/yr, the personal discount rate is approximately 6.52%.



There's no initial capital laid out to get on welfare, just a lot of forms and standing in line; But many welfare recipients don't really forgo income to stand in line, so I'm using $0.


Given that the Presidential term is 4 years, the total welfare benefit over those 4 years is $172,000; applying the simple NPV, is a single vote "worth" approximately $156K?


Gary Rogan writes: 


A single vote, for some specific person, is worth ANY amount of money to that person if they aren't the ones paying for it. The now violent riots in Spain and the free phone lady and the $16 trillion deficit are all consequences of that one simple fact.

	

	


	
Sep

	
28

	

	

	
 Last night, during our breaking the fast supper, my daughter had an interesting discussion with me and my wife. My daughter is a senior in high school, and she's finalizing her applications for college–early decision application, early decision 2 applications, and regular admission applications. (When we first started talking about colleges last spring, I gave her a book on game theory–intro level; she never read it, unfortunately–too busy with classes.)


She had wanted to go to Wesleyan. It had everything she was after–small liberal arts school with lots of on campus activities, a strong record of graduate/work placements, small size, and a school where parties were not the rule of the day. Oh, and that it was on the other coast, away from my wife and me, only increased her interest in the school. She was also looking at Wellesley, Colby, Bowdoin, Carleton, Grinnell, and so on. Some public ivies too–U Wisconsin Madison, U Washington, and even some of the U of Californias, though the latter is her safety school.


The problem with the liberal arts colleges is that they now cost a fortune. Generally north of $45K a year and often north of $50K. The situation with the ivies isn't much different–they also cost a small fortune. The out-of-state tuitions for many universities (including the public ivies) are in the mid-20K range, and the chances of finishing in 4 years when attending them is diminishing by the semester. Needing to attend a U of Cal for 6 years to finish a major used to be a rarity. Not anymore. And there is no reason to think the status quo will improve any time soon. Here in California, the system developed by Pat Brown (the current governor's father) had the U of California system, the Cal State system, and then regional community college system. Not only are these systems struggling to find some way of increasing their capacity, but they are doing so at a time when the state government is cutting funding for education throughout the state, including these three post-secondary systems. This problem is not limited to California. In the SUNY system, all tuition goes to Albany, and the state legislature decides how much goes back to the individual campuses, rather than looking at each campus as a P&L center (as U of C campuses do).



Why bring all this up? My daughter is now contending with the question of what's the best value for getting a college education rather than what's the "perfect place" for her. So far, so good. This was what we discussed last night at dinner, and it got me thinking about the post-secondary education system here in the US. At the college level, that system has been in place for three centuries or so. At the graduate/professional level, the current system came into being during the mid-to-late 1800s. The problem is that with the current levels of tuition, the cost of a baccalaureate is rapidly becoming (if not already there) out of reach for much of the middle class population. Using loans is rapidly becoming untenable in the face of college grads unable to find jobs and one-in-twelve of the workforce unemployed. (I won't get into the loan fiasco as regards professional grads–the average medical student having debt north of $150K and for more than a third, it's in excess of $200K.) For many of the existing loans, it seems likely that someone other than the college grad will be left paying the bill. That's debt of about $1.2 trillion at risk. The bottom line is that the current system is rapidly becoming–if it is not already–unsustainable.



The question must be asked about what is the value of a bachelor's degree. I ask the question because it is becoming easy to have access online to some of the outstanding courses available at many of America's premiere universities. Will a degree really have much value when an employer is interested in what you have learned somewhere–online or in person? It used to be that the only way to obtain the knowledge was to attend a college or university in a degree program. The degree was a proxy for knowledge. But there are now other sources for obtaining that knowledge–does spending the money on a college degree make sense any longer?


The situation is even more daunting when you consider that during the mid-1970s, when I went to Johns Hopkins, tuition was about $3K a year. That was also the price of a Chevy Nova car at that time. A Chevy Spark now costs under $15K, and has a MSRP of $12K and change. Tuition at Johns Hopkins today? $50K.


All those contributions to one's alma mater are prolonging the day of reckoning for a system that will need to undergo extensive reform, and that reform will need to accommodate other forms of education rather than only in-person class attendance. Western Governor's University (www.wgu.edu) may be one example, but insofar as it is built around actual degrees, I'm not sure that it's the only type of solution.


An educated workforce is a major prerequisite for a competitive United States, yet the education system is in the middle of a crisis about which there is precious little discussion. That has to change.


Richard Owen writes: 


Education is becoming the quintessential branded luxury, taking a commodity input and stamping it with a brand.



Markets are made at the margins: the price driver has been (i) the rising share of wealth located abroad and (ii) the higher percentage of production available to the best paid domestic workers. The West is importing the GINI ratio of the Emerging Markets when it comes to high end property, education, etc.


Take British public schools: fees are now $45k/yr for the full school life, rather than just a terminal three years at college. For three children that's $135k/yr post-tax wage dollars. 7% of the UK is privately educated historically, yet the former figure is well into the 1% income range. Whats made up the marginal demand? Wealthy foreigners with untrammeled, untaxed, EM boom dollars. London is undergoing a reverse colonization. Hence in some bijou streets in the capital, residential is up 40% in two years, (having fallen not at all during the crisis, so that's not a bounce off the lows).


Carder Dimitroff adds: 


I have two daughters in their 20s. Both have Ivy-league degrees. Frankly, I'm not sure Ivy matters.



There are wonderful state and private colleges. Most decent universities offer inquiring minds incredible opportunities. If a student is looking to learn and grow, most "average" universities can dish out more than most students can handle.


A good example is my cousin's daughter. She attended a low profile public college in Florida. She went in with the attitude of learning and developing. She and several of her classmates became Fulbright Scholars. Now she is Ph.D. candidate at Duke.


If you look at Ph.D. candidates at the nation's leading research institutions, you may notice most of them never attended Harvard, Yale or Princeton. The same can be said for many business, political and military leaders.


Each school has its own culture. In my opinion, a key to a parent's success is matching the college with the student's personality. If the student love the place from day one, all is good.


	

	


	
Sep

	
27

	

	

	
 For anyone who is interested…it seems this event involves quite a bit of he said she said, with some good old miscommunications, and selected curve fitting thrown in for good measure.


"The Inconvenient Truth Behind the Diaoyu/Senkaku Islands" :



My research of over 40 official Meiji period documents unearthed from the Japanese National Archives, Diplomatic Records Office, and National Institute for Defense Studies Library clearly demonstrates that the Meiji government acknowledged Chinese ownership of the islands back in 1885.



Anonymous adds: 


In the current drama of this event, the very ownership of the island, though seemingly at the core, is actually a very secondary issue. What is worth watching are the following.


1) In a country where there is zero tolerance for demonstrations and even public gatherings, how come  there were suddenly so many demonstrators on the streets?


2) Why is there is so much resemblance between the main slogans, banners and pictures? Who made them?


3) During some demonstrations in front of Japanese embassies, why weren't passersbys allowed to join in? Who were those allowed?



4) Of the people leading most of the violence in the streets, how come many are short-haired, tan-faced, strong-muscled, young and well-coordinated? How come they had no fear of the police when doing the violence?


5) At a time when Bo Xilai is being judged and when the Party leaders are fighting in closed doors for who will take charge in the future, is all this just a coincidence?


	

	


	
Sep

	
21

	

	

	
Afternoon esteemed (daily)specs,


I haven't done any research on the data and the numbers but even a fool like me can observe world wide stock markets, look at the release of data of economic indicators and see that something fishy is going on. I'm referring particularly to the Australian market and the release of the Chinese PMI Manufacturing numbers, and the dropping of iron ore prices.



Ready to take notes…..


	

	


	
Sep

	
20

	

	

	
 i almost beat your record points in scrabble with 104 points with disquiet. i scored bingo points and triple word score and double letter score on my u. love, aubrey


Uncle Roy replies:


WHOA!! Good work! I can't wait to play with you sometime. Here are some helpful tips:


Make sure to think about having even numbers of vowels and consonants in your rack after you play your word - so on your next rack you won't have all vowels or all consonants.


Leaving double letters in your rack for next turn is usually bad, except E which is only a little bad.


Try to score at least 60 points with each blank you get.


Learn all the 2 letter words (there aren't that many") and play words parallel to each other for extra points.


On your first move, if you don't score 18-20 (including the double word), pass and draw new tiles to try to get a bingo if you think you're close.


QI and ZA are very useful… and don't forget trying to use X on a triple in two directions which scores 52 at a minimum.


Think about what you "leave" in your rack for next move. If these letters are "good" letters like ETAION SHRDLU (the most common letters in English words), you're likely to draw some more of them, and then be able to make a bingo.


Unless you have two S's,don't use an S unless it is an above average score (for you) - usually average is about 20 so try to make S really count.


Good players get an average of 1.5 bingos per game. You should be getting at least an average of 1 for now… and 1.25 when you learn some more words as you get older.


At the end of the game, think whether the other player has a Q, Z or X. If they do, don't get let them play them by making ZA or QI or QAT.



Here is a list of two and three letter words which is worth learning.


I love you! See you very soon!!!!


Love Uncle Roy


AA AB AD AE AG AH AI AL AM AN AR AS AT AW AX AY BA BE BI BO BY DE DO ED EF EH EL EM EN ER ES ET EX FA GO HA HE HI HM HO ID IF IN IS IT JO KA LA LI LO MA ME MI MM MO MU MY NA NE NO NU OD OE OF OH OM ON OP OR OS OW OX OY PA PE PI RE SH SI SO TA TI TO UH UM UN UP US UT WE WO XI XU YA YE YO



——————————————————————————-

AAH AAL AAS ABA ABO ABS ABY ACE ACT ADD ADO ADS ADZ AFF AFT AGA AGE AGO AHA AID AIL AIM AIN AIR AIS AIT ALA ALB ALE ALL ALP ALS ALT AMA AMI AMP AMU ANA AND ANE ANI ANT ANY APE APT ARB ARC ARE ARF ARK ARM ARS ART ASH ASK ASP ASS ATE ATT AUK AVA AVE AVO AWA AWE AWL AWN AXE AYE AYS AZO


BAA BAD BAG BAH BAL BAM BAN BAP BAR BAS BAT BAY BED BEE BEG BEL BEN BET BEY BIB BID BIG BIN BIO BIS BIT BIZ BOA BOB BOD BOG BOO BOP BOS BOT BOW BOX BOY BRA BRO BRR BUB BUD BUG BUM BUN BUR BUS BUT BUY BYE BYS


CAB CAD CAM CAN CAP CAR CAT CAW CAY CEE CEL CEP CHI CIS COB COD COG COL CON COO COP COR COS COT COW COX COY COZ CRY CUB CUD CUE CUM CUP CUR CUT CWM


DAB DAD DAG DAH DAK DAL DAM DAP DAW DAY DEB DEE DEL DEN DEV DEW DEX DEY DIB DID DIE DIG DIM DIN DIP DIS DIT DOC DOE DOG DOL DOM DON DOR DOS DOT DOW DRY DUB DUD DUE DUG DUI DUN DUO DUP DYE


EAR EAT EAU EBB ECU EDH EEL EFF EFS EFT EGG EGO EKE ELD ELF ELK ELL ELM ELS EME EMF EMS EMU END ENG ENS EON ERA ERE ERG ERN ERR ERS ESS ETA ETH EVE EWE EYE


FAD FAG FAN FAR FAS FAT FAX FAY FED FEE FEH FEM FEN FER FET FEU FEW FEY FEZ FIB FID FIE FIG FIL FIN FIR FIT FIX FIZ FLU FLY FOB FOE FOG FOH FON FOP FOR FOU FOX FOY FRO FRY FUB FUD FUG FUN FUR


GAB GAD GAE GAG GAL GAM GAN GAP GAR GAS GAT GAY GED GEE GEL GEM GEN GET GEY GHI GIB GID GIE GIG GIN GIP GIT GNU GOA GOB GOD GOO GOR GOT GOX GOY GUL GUM GUN GUT GUV GUY GYM GYP


HAD HAE HAG HAH HAJ HAM HAO HAP HAS HAT HAW HAY HEH HEM HEN HEP HER HES HET HEW HEX HEY HIC HID HIE HIM HIN HIP HIS HIT HMM HOB HOD HOE HOG HON HOP HOT HOW HOY HUB HUE HUG HUH HUM HUN HUP HUT HYP


ICE ICH ICK ICY IDS IFF IFS ILK ILL IMP INK INN INS ION IRE IRK ISM ITS IVY


JAB JAG JAM JAR JAW JAY JEE JET JEU JEW JIB JIG JIN JOB JOE JOG JOT JOW JOY JUG JUN JUS JUT


KAB KAE KAF KAS KAT KAY KEA KEF KEG KEN KEP KEX KEY KHI KID KIF KIN KIP KIR KIT KOA KOB KOI KOP KOR KOS KUE


LAB LAC LAD LAG LAM LAP LAR LAS LAT LAV LAW LAX LAY LEA LED LEE LEG LEI LEK LET LEU LEV LEX LEY LEZ LIB LID LIE LIN LIP LIS LIT LOB LOG LOO LOP LOT LOW LOX LUG LUM LUV LUX LYE


MAC MAD MAE MAG MAN MAP MAR MAS MAT MAW MAX MAY MED MEL MEM MEN MET MEW MHO MIB MID MIG MIL MIM MIR MIS MIX MOA MOB MOC MOD MOG MOL MOM MON MOO MOP MOR MOS MOT MOW MUD MUG MUM MUN MUS MUT


NAB NAE NAG NAH NAM NAN NAP NAW NAY NEB NEE NET NEW NIB NIL NIM NIP NIT NIX NOB NOD NOG NOH NOM NOO NOR NOS NOT NOW NTH NUB NUN NUS NUT


OAF OAK OAR OAT OBE OBI OCA ODD ODE ODS OES OFF OFT OHM OHO OHS OIL OKA OKE OLD OLE OMS ONE ONS OOH OOT OPE OPS OPT ORA ORB ORC ORE ORS ORT OSE OUD OUR OUT OVA OWE OWL OWN OXO OXY



Continued here



	

	


	
Sep

	
14

	

	

	
 


 I saw this chart on the esteemed Political Calculations  web site.  I notice the graph shows Japan, U.K. and Brazil holding some of our debt. How much debt does the US hold in other nations? If that debt were added, would a net debt picture look better?

	

	


	
Aug

	
31

	

	

	
 Graham Greene wrote in The Quiet American, "Innocence is like a dumb leper who has lost his bell, wandering the world, meaning no harm."


For me at ten years the loss of innocence was trying to look out the Idaho living room window one evening with a light on inside and snow outside and I was surprised to see my reflection. For an instant there was confusion to who I was: the reflection or what it saw. I moved slightly to feel my body and determined thereon to be the person inside it.


A second mindful decision occurred twenty years later in a Michigan kitchen alone reading and a sentence from Carl Jung´s Memories, Dreams and Reflections. I looked up abruptly from archetypes as universal thoughts, symbols, or images having a large amount of unconscious power, and are shared… and it popped into my head from that point on to control my own thoughts. With willful effort I practiced the multiplication tables for ten minutes until the answer to 2 x 2 did not arrive until I caused it.


The third grave verdict that has shaped my life took place in a Michigan basement while reading Lewis Carroll's Through the Looking Glass where the page turned to the hideous monster poem ´Jabberwocky´. It´s written in mirror text, and it doesn't matter that I was reading in a coffin lined with electric blankets against the icy wind whooshing through the wall cracks, or that I was reading with an Edmond Scientific top grade mirror to reverse the text so the Jabberwocky came alive from left to right. Suddenly it dawned on me that I could turn the book upside down to cause the print to flow right to left and dispense with the mirror and monster. That´s how I´ve read hundreds of book to date, and the reason is to balance the body, eyes and brain to a more perfect symmetry to think better critically.


The fourth waypoint on the road to objective thinking was learning the chessmen and their moves that is as much a model as computers for the thought process.


The fifth rest stop is quotations that has become a lifelong study, and one of the best on critical thinking (that is attributed to no one) is "Critical thinking is thinking about your thinking while you're thinking in order to make your thinking better."


So in a long march to discovery of self along the best road I know how, in the first step I determined the body manufactures the thoughts; in the second that I could control the thoughts, on the third that the body must remain healthy and symmetrical to think better; on the fourth to use models to understand how the mind functions, and at the fifth to stand on other´s shoulders and pass along their advice.


Howard Zinn said, "History can come in handy. If you were born yesterday, with no knowledge of the past, you might easily accept whatever the government tells you. But knowing a bit of history- while it would not absolutely prove the government was lying in a given instance- might make you skeptical, lead you to ask questions, make it more likely that you would find out the truth." I might add this is not only true of government but of medicine, business, sports and anything else worth thinking about. The trick is to balance being skeptical and open. If you are only skeptical then no new ideas filter through to you and nothing new is learned. On the other hand, if you are open to the stretch of gullibility without an ounce of skepticism, then you won´t be able to distinguish the useful from the worthless.


The one skill everyone on the planet needs is the ability to think with objectivity. If we are prepared to think for ourselves, and learn how to do it well, there is little danger of becoming slaves to the ideas and values of others that is taking the earth and limiting self-potential. The list of core critical thinking skills includes observation, interpretation, analysis, comparison, evaluation and explanation


There are some training workouts: math, read Sherlock Holmes, logic riddles, and conversing with other critical thinkers. The number and direction of steps up from fuzzy thinking to a height of acute awareness varies from person to person. The ultimate step a quantum leap because no problem can be solved from the same level of consciousness that created it.


The adventure of critical thinking is the finding of self. You develop insights into what is and can be. I´ve found as much as possible, and the chase goes on.


	

	


	
Aug

	
31

	

	

	
 I've lived in southeast FL for 13 years and have gone through Category 2 & 1 hurricanes and a borderline Category 2/3 hurricane.


Category 2 can cause severe damage, Categories 3 & 4 can be disastrous.


With some preparation, Category 1 can be slept through.


Tropical storms can cause inconveniences such as road flooding but not much damage. Isaac has been a tropical storm and a Category 1 . As such it has been overhyped.


I suspect there was a political reason for this.


Jeff Watson writes: 


At the beach, on the Gulf side, even a direct hit from a Cat 1 is frightening, and that's why we have to evacuate even from a 1. Storm surge at high tide is a sight to behold.


Sam Marx comments: 


People who live at the water's edge should be prepared for hurricanes or shouldn't live there at all.


Outside of the water's edge, a Cat 1 hurricane does not do much damage , except, inland, for road flooding and damaging some houses built under the very old building codes.


Isaac became a Cat 1 over water and quickly dropped to a tropical storm over land. It should not have received the excessive media coverage it got.


Tradercraft adds: 


Tell that to the half a million people in New Orleans who are sweltering without air conditioning right now, and their frozen foods spoiling (can be several hundred dollars worth of food), and unlikely to get power back for a week, Entergy announced. Not something one can easily sleep through.


Sam Marx writes: 


I believe there never has been so much media coverage over a Cat 1 hurricane or tropical storm in the past as given to hurricane Isaac.


Gibbons Burke writes:




The fact that it followed a path very similar to that of Katrina, and actually hit New Orleans on the seventh anniversary of that storm had something to do with the attention it received. But the fact that it was early on slated to hit Tampa during the RNC convention certainly got the media's interest in the storm going, and once they get started on something, they often like to beat it to death.


Victor Niederhoffer writes: 


The wisdom of Gann in predicting confusion and uncertainty and volatility during the anniversaries of vivid events is underlined.


Anton Johnson adds: 


Tips for live coverage of minimal hurricanes.


1. Wear loose-fitting rain gear, preferably with an open hood to better accentuate wind gusts.

2. Stand with feet sholder width apart and knees bent. Lean torso and head into the direction of the wind for effect.

3. Use minimal wind-screen on microphone, speak loudly as if straining.

4. Position shot to include a fluttering small diameter palm, and a dilapidated structure with flapping corrugated metal.

5. Adjust light filter for gloomy effect.

6. Cut to animated overly-enhanced color radar during lulls.

7. Pan to blowing fronds, leaves and trash if possible.


	

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