Nov

17

FTX surprise

November 17, 2022 | Leave a Comment

H. Humbert writes:

I find it amazing that an exchange with monopolistic market making, and no Manning Rule equivalent can ever lose money. As bad as stealing customer funds to cover trading losses sounds, I wonder if there's even worse to come because it sounds so incompetent. However, once again the value of crypto to nefarious actors is demonstrated by the 'asset classes' anti-fragility. Some flavor of the notion of honor among thieves.

Zubin Al Genubi replies:

Market makers can't handle big fast moves, of which we've seen some breathtaking one recently. I believe they are caused in part by the market makers and the ones who are just a bit slower get eaten by the lion. Of course this is sheer speculation on mu part.

H. Humbert comments:

With respect, your model of what a market maker is hasn't existed for about 15-20 years. Market making today is machine driven, speed of light kind of thing, and balanced/correlated across a firm's book. It is almost touchless for the most part.

So for example, if you are a Manning-Rule-free exchange, and you have your own internal market making operation that sees the flow first, you can, at the speed of light, see the direction of the order flow, front run it, sell into it, take the other side of the stupid trades ie the trades that are 'random' going against the flow that you are seeing, see the limit orders and the stop orders and run those etc etc. You see the flow first and decide how to execute against or with it or pass to the punters on the exchange.

It seems impossible to lose money at this and if you don't believe me, look at how few losing days Virtu and Citadel put up and they only get to see about 90% of just the retail flow in equities and they generally can't front run it. They can only decide if they want to take the other side or pass the order on to the market. Imagine if you had no fiduciary responsibility at all and no any kind of rule of best execution.

Anyway I go on and on, but point is, that FTX's Alameda lost money and a lot of it is very strange. Also, I should add, that I know absolutely nothing about crypto.

I can't help but notice that another of Vic's flags is prominent in this FTX story, and that's all the charity work they were doing. All while seemingly running some crazy embezzling thing to cover what? How were they generating these huge losses?

I knew a living human market maker at Schwab in the dot com era. His boss took and traded a single security(I won't name it) and split the rest of the book up. My living human associate got like m-z or something and one day he's long a zillion XLNX. Supervisor screams at him 'What are you and ANAL-IST?"–meaning what ever you think you know, get back to making markets and leave the positions to the buy side suckers. So maybe the losses are from directional market supporting efforts or some such.

Zubin Al Genubi suggests:

Maybe machine/com speed now determines winners?

William Huggins agrees:

can't see why that wouldn't be the case. on a precisely related note, a friend (ex-mit) gave a talk on algos in finance a decade ago, noting at one point how buildings were then being hollowed out to reduce microseconds of lag (i start the clip where its juicy).

H. Humbert writes:

This is one issue with co-location of servers at the exchanges, why it costs so much, why IEX markets a 200ms 'speedbump' to protect resting orders, why dark pools offer some very strange order types, etc etc but ultimately, the winners and losers imo, are determined by rent seeking in the regulations. Ban payment for order flow and Virtu disappears, ban internalization and Schwab has to charge commission, make best execution mean best possible all in price at the moment the order is received and all brokers will institute intermarket sweeps and order flow will go to exchanges, etc.

Stefan Jovanovich comments:

I hope H. Humbert will agree with this comment from the financial bleachers. The anti-trust laws, including agricultural marketing restrictions, have offered the same opportunities for rent-seeking around regulation without having any of the pushback from innovation - i.e. new and better ways to game the system. So, we have an age of inflation at the same time transaction and carry costs for retail customers have gone steadily down.

Duncan Coker writes:

This is a great description of the rent seeking infrastructure or "top feeders" as vic would say. It is all sell-side as that is where the stable income resides. Still as a lowly buy-sider if my choice is to get fleeced by the exchange/locals or the hft hedge funds I think I would go with the later. At least the hedge funds are competing against one other to steal from me. Don't even get me started with the wirehouses. Used to be 100 bp to execute/clear a trade back in the 80s, off exchange that is.

H. Humbert replies:

In the US equity world, which is the only thing I know anything about, the issue that that the HFT shops segment the order flow into smart and dumb and pay for the dumb order flow, which they get first look at and first dibs on off-exchange - through FINRA, which has it's own rules on order handling.

Segmenting the flow makes the rest of the market(not the internalizes, not the payment for flow(PFOF)), both lit and dark, more toxic in terms of adverse selection to resting quotes. This widens the spread, which makes internalization/PFOF more profitable - virtuous cycle kind of thing and also increases the concentration of who gets to see the flow first and decided where to fill.

Given the midterms, I think Chair Gensler has enough political capital to push through some of the rule changes he's been talking about: “Competition and the Two SECs” Remarks Before the SIFMA Annual Meeting

To me, the most likely significant change to get through easily is SEC's own Best Execution rule(amazing I know that there is none currently) and that could dramatically change where orders get filled. We'll see.

Oct

5

Chess.com: 'Niemann Has Likely Cheated In More Than 100 Online Chess Games'

We based this decision on several factors. First, as detailed in this report, Hans admitted to cheating in chess games on our site as recently as 2020 after our cheating-detection software and team uncovered suspicious play.

The interesting thing to me is the cheating detection system.

Big Al imagines:

Trying to imagine what it might be, the first thing that comes to mind is feeding each situation, move by move, into AlphaZero and seeing what AlphaZero would do. If the player's moves match too closely to a program rated 3800, when the player's rating is maybe 1200 points lower, then one must assume the play is computer-assisted.

Antonio Porres Miranda offers:

Statement by Magnus Carlsen

Steve Ellison writes:

I am not sure if the grandmaster is still among us on the list, but I have seen him on social media expressing concerns about what level of due process there is in the event of a public accusation of cheating. He thinks the possibility of being accused might be enough to motivate top players to skip events. For example, here.

Oct

5

In What Computers Still Can't Do: A Critique of Artificial Reason Hubert Dreyfus argued that an important part of human knowledge is tacit. Therefore, it cannot be articulated and implemented in a computer program.

first book was written in 1972. true back then and true today despite what others want to tell us. don't need a nano-second to know this by heart.

Zubin Al Genubi adds:

My theory is computer algos leave trails.

William Huggins agrees:

they always do. a friend who was at MIT for a few years had an interesting talk on algos and the firms tracking/hunting them.

Oct

1

Sentiments of individual investors about the stock market improve with consumer confidence about the economy, as if individuals were unaware that stock prices are a leading indicator of the economy.

Consumer Confidence and Stock Returns

Consumer confidence index (CCI)

Larry Williams comments:

Consumer confidence—MOST BEARISH EVER

Bud Conrad replies:

Thank you Larry. This 37-minute video presents about 50 charts showing everything already in collapse.

Stanley Druckenmiller said in his 25 year career investing he has never seen anything as negative as he sees now (Interview with head of Palantir)

Zubin Al Genubi writes:

The counter rallies sure can be violent in a bear market and it is easy getting buy orders filled. Interesting night [27 Sept]. Definitely foreign influence.

Stefan Jovanovich suggests:

Knickerbocker Trust Company

Zubin Al Genubi adds:

Someone did a quick study a while ago where most gains were in night session. Seems like that lately that bears sleep at night. No scary overnight crashes and trading halts.

Larry Williams is optimistic:

Perma bears! We are in a bull market.

Stefan Jovanovich agrees:

++++++

Sep

3

I was reading upside down to a grandkid today. Its an interesting exercise. Requires a mental readjustment. I recall some people looking at charts upside down. They are not the same. The Beatles and Jimi Hendrix used to play recordings of guitar played backwards. Bach used palindromic music. Also an interesting effect requiring a mental shift. This kind of exercise is good for the mind.

Alston Mabry responds:

In learning science this is called "disfluency." If one group reads some material normally, and a second group reads it upside down, the second group will have significantly better retention of the material over any given time frame. It's been done with things like normal type vs funky, hard-to-read type, as well as clear type versus fuzzy type. The group that struggles more mentally to read the material demonstrates greater retention.

Zubin Al Genubi adds:

In the book Why We Sleep he says a full night's sleep after learning helps retention by over 40% over all night crammers.

Nils Poertner writes:

reading a text upside down can have other positive effects, eg:
1. pay attention to the white between the black ink letters,
2. then turn it right again and read the text
3 reading is then typically easier

we all learn to read letter by letter. "w" "e", too, but overtime we tend to rush things and want to grasps whole words and lines but vision is all about habits and a lot more than reading a text.

smart phones support bad visual habits , as one is tricked to look at the whole text at once - but we need to practice the art of looking at details -at least from time to time, too, and to remember it. we got to remember things- memorize - that gives us the speed later. and first, we got to relax the visual field /brain (looking at white spaces is just one way to achieve it- there is a lot more one could say - see Bates method uses micro print for visual relaxation- yes micro print).

Easan suggests:

The advent of inverse ETFs helps look at charts upside down, doesn't it?

Aug

30

1. telling marauding children in back of a car (when on longer trips) to count number of green vehicles….and then red and so on (or let them experience boredom and don't give in and hand over a tablet).

2. for natural vision building -so ppl who lost ability to see far ahead (myopia), they would benefit from counting leaves of a tree or anything they can see - and don't worry if it is still blurry…it is getting better - coz nature rewards those who at least try….but once we believe something (that it can't get better - well, then it won't) - same for presbyopia (start counting tiny letters font size 1 btw).

counting can be wonderful for the brain and the brain is the motor that keeps it all together….millions of other applications. I wish ppl would do more counting - we are just going (as society) in the complete other direction. but the individual can escape that trend.

Vic comments:

very Galtonian who said "always count" and he kept a little pad and pricker with him at all times. counted the number of fidgets in the audience at 90.

Big Al offers:

I practice counting steps to measure distance, say around the park with the dogs, or on a hike.  I count only lefts or rights (switching between the two at intervals) so that for me one "pace" is two "steps".  I calibrated my pace counting against a wristband GPS and found that a mile is about 1100 paces for me.

Another practice is to count breaths, on the exhale, following the breath with one's attention.  It is focusing and relaxing.  One can calibrate one's breaths to measure time.

Nils Poertner writes:

love that counting for breathing - it is not that the drama outside does not exist, but in order to see things more realistically and go with probabilities also for trading… one better improve own mental health….. and many people (not just traders) are so fickle.

eg one of my trader friends would call me in the middle of the night and leave a voicemail that this and that is going to happen since he saw it on TV - mostly pictures that have a strong impact on his amygdala…

Zubin Al Genubi adds:

I count breathing 5.5 seconds in, 5.5 second out, 5.5 breaths a minute, and 5.5 liters per breath.

Andrew Moe writes:

I count seconds during cooking, particularly when operating on multiple dishes simultaneously. Also count seconds when trying to squeeze out an extra minute or two in the sauna.

Duncan Coker notes:

Watering the plants with a garden hose. 10 seconds about half gallon with my
sprayer.

Aug

11

I need some new books to inspire me. Suggestions? Last few science book were great.

Bill Egan replies:

Against the Tide: Rickover's Leadership Principles and the Rise of the Nuclear Navy by Dave Oliver.

Laurel Kenner adds:

Sue Stuart-Smith: The Well-Gardened Mind: The Restorative Power of Nature
William Logan: Sprout Lands: Tending the Endless Gift of Trees
Thomas Sowell: Black Rednecks and White Liberals

Michael Brush suggests:

The Gene
The Emperor of all Maladies
Why We Sleep

Henry Gifford offers:

Buildings Don’t Lie, Better Buildings by Understanding Basic Building Science: The movement through buildings of heat, air, water, sound, fire, light, and pests. By…well…Henry Gifford!

Big Al recommends:

Prime Obsession: Bernhard Riemann and the Greatest Unsolved Problem in Mathematics
The Seven Pillars of Statistical Wisdom
The Biggest Bluff: How I Learned to Pay Attention, Master Myself, and Win

Re Riemann, 3Blue1Brown has a great bit to enhance the visual:

Visualizing the Riemann zeta function and analytic continuation

A reader writes:

Major Transitions in Evolution: Maynard Smith & Szathmary
Indra's Pearls: Mumford + Series + Wright
Coe/Stone: Reading The Maya Glyphs
Fred Schwed: The Pleasure Was All Mine
Japanese Tales: Royall Tyler
African Folktales : Paul Radin
Ernst Haeckel : Art Forms from the Abyss
Owen Jones: The Complete Chinese Ornament
Trigonometric Delights : Eli Maor
Voices from the Whirlwind - Fenc Jicai
The Cowshed - Ji Xianlin
Rural Worlds Lost - Jack Temple Kirby

Paolo Pezzutti enjoyed:

Relentless Strike: The Secret History of Joint Special Operations Command

Laurence Glazier adds:

Emily St John Mandel, Sea of Tranquility. Sequel to her earlier The Glass Hotel, which was partly about a Ponzi scheme.

And Brandon Q. Morris, physicist sci-fi writer.

Peter Krupp writes:

Here are two science books that I found fascinating focused on quantum physics written by one of the great contributors to the quantum theory of computation, David Deutsch.

The Fabric of Reality (quantum theory - many world interpretation, quantum computation, epistemology, and much more).

The Beginning of Infinity (the nature of scientific progress, how it has accelerated in the past few centuries).

Jul

31

When you first start learning a sport equipment seems important. After years of practice and finally mastery you realize equipment doesn't matter. I suppose true. I suppose true life mastery makes you realize you don't even need equipment.

Peter Saint-Andre writes:

Recently I visited an uncle of mine for a few days and, to help while away the time, played a cheap guitar he had sitting around in his attic. I sure was happy to get home and play the nice Taylor 6-string I bought years ago on 48th Street (the now-vanished "Music Row") in NYC.

Steve Ellison adds:

I used my skis for 16 years. Good value for money, but in the meantime designs and materials improved. In recent years, my old skis were noticeably skinnier than those of others riding lifts with me. In March I bought new skis, and I hope I can be proficient with less effort.

Larry Williams writes:

Running shoes have made a major breakthrough with the carbon soles, etc. no way will I ever go back to my old Tigers.

Justin Klosek comments:

Musical instruments can improve over time, too — my Nord keyboard has terrific sounds (and effects) that used to require lots of pieces to achieve. now in one convenient package, and more reliable!

Michael Brush says:

Taylors are nice! Jewel used to borrow them from that store for recording sessions in NYC. She helped put Taylor on the map back then, and cutaways.

Peter Saint-Andre responds:

I bought my Taylor jumbo six-string (serial #690, made at their original workshop in Lemon Grove) in 1988, when Jewel was 14 years old and still living on a far.

Jeff Watson offers:

Interesting list of artists who play Taylors. Much more than Jewel.

Michael Brush replies:

Of course. But she put them on the map. I never bought one. I can't stand having to use Elixirs, and they got way to trendy. I have many Martins and Gibsons.

Big Al offers:

Some quotes from Yvon Chouinard:

You perfect a sport when you can do all of these things with less stuff. The most impressive ascent of Everest was by the Swedish guy who bicycled from Stockholm to Kathmandu and then soloed Everest and bicycled back to Stockholm. That is cool, as opposed to this huge multinational guided thing with computers and internet cafes at the base of Everest.

The more you know, the less you need.

The word adventure has gotten overused. For me, when everything goes wrong – that’s when adventure starts.

Jul

17

A 3-4 hour TSA line stretching past baggage claim. Horrifying. Some problems in the transportation industry. Its apparently widespread.

Laurel Kenner responds:

Guaranteed to happen when government goes full authoritarian and shuts down the economy for iffy epidemiological reasons.

Mind owner. Mother of fire kid. Hardened gardener.

Bo Keely recalls:

i had a flight out of SF to JFK on the morning of 9/11. i was sleeping on the couch of an executive hobo named 911 who was in charge of Bay Area disaster response. he shook my shoulder awake, and said, 'roll over and go to sleep. they've cancelled all flights into NY because the world trade center was just blown up.' so, i got to sleep in, and rescheduled for a few days later.

on arriving at JFK the security was crazy. we had to go into a tunnel and wait for about an hour, and then through a metal detector before boarding. as an experiment, i stuck a piece of metal in my cap that should have set off the detector. but it was too high on my head and passed without detection. I probably visited u & vic on that trip.

Jul

17

I notice many people don't really pay attention to others, or listen at all. They often talk, without listening. Or their attention wanders to something else. They are busy with their own train of thought and basically shut off the outside world.

It's important for traders to get out of their head and see what is going on around in price, in the world, in other people's minds.

Larry Williams agrees:

So true and more so when communicating with the market we never listen to it.

Nils Poertner comments:

quite insightful what you said. good to have other ppl remind us of that since humans (on their own) tend to have a tendency to go into their imagination we all do this more or less. painful to hear that from another person in the moment though.

Zubin Al Genubi adds:

Or worst of all, their smart phone. It's a pandemic size problem.

Henry Gifford recalls:

When I was a kid I lived a few blocks from a very large park in the Queens part of New York City. The park is a couple of miles long, mostly woods, and was crisscrossed by a network of trails at least six feet wide that were perfect for riding on our bicycles as teenagers. There was one very hilly part where the bushes and trees were largely missing, as it was heavily trafficked by motorcycles and bicycles going up and down and over the jumps.

Recently I went there on a mountain bicycle that I had bought when I was spending time in Colorado. Now the trails are one or two feet wide at most, with lots of poison ivy all over. I found a spot wide enough to turn around without touching the poison ivy, backtracked, and took streets to the other end of the park where the open area and jumps used to be. The trails there were no wider, and I never found the hilly, open area with jumps, as the whole place is heavily overgrown now.

Remembering that falling is a regular occurrence when I ride a mountain bike, and realizing that one fall into those bushes would likely result in poison ivy all over my face and neck and arms, yielding a summer to remember, I got out of there and sold the mountain bike a few days later.

The guy who bought the mountain bike explained why the trails are so overgrown now: video games, cell phones, etc.

Bo Keely writes:

better poison ivy than video games.

Jul

14

This guy does great vids:

But what is the Fourier Transform? A visual introduction.

Stefan Jovanovich appreciates:

Wonderful. Thank you.

Zubin Al applies:

And what do you do with it?

Fast Fourier Transform in Predicting Financial Securities Prices

Turns all the conflicting signals into a nice oscillator.

Jul

9

what could make it go up? real wages? repatriation of companies? a better modus operandi how employees are treated? those graphs should be on a front page of WSJ and not how to send more arms to Ukraine.

A reader writes:

How about ending or at least curtailing the welfare state. It is mind boggling to count all the handouts and public assistance that otherwise middleclass people drink up. Look at various housing assistance programs, prescription drug benefits, free breakfasts and lunches. It has gone from helping the truly misfortunate to subsidizing at least half the country.

Alex Forshaw comments:

What's the issue? It went from 63.5% to 62.5% in 7 years. Probably entirely explained by avg age / boomers (who stick around longer than priors) finally aging out.

Nils Poertner responds:

why? there is monster public and private debt plus tons of entitlements…and then we are at the beginning of a long rise in yields (nominal and real) - so better to have a high participation rate. same as in Europe.

Zubin Al Genubi writes:

Its demographics and those are hard to change. Immigration would help, as would education.

George Zachar clarifies:

please only look at the PRIME AGE labor force participation rate, ages 25-54.

Larry Williams offers:

Prime age rate looks strong:

Bud Conrad asks:

So now what does this mean? The almost pre pandemic participation level suggests that the populace is finding jobs, and that the economy is not in such bad shape.

But I see:
- Inflation wiping out savings, Real wages declining from inflation, Rising Rates changing basic discount rates making stocks vulnerable, Demand destruction from rising prices. Import prices rising faster than US CPI, (CPI is cooked books lower than reality closer to 20% per year), Deglobalization.
- Many of the bubbles popping in the last six months: Stocks, Bonds, Cryptos, High yield debt, Housing starting down, and the reaction of collapsing Consumer confidence, Earnings in contraction.
- Debt overhang indicating generational Sovereign Debt collapse (Over 100% of GDP in US).
- Failure of Fed and its sham of fixing inflation, which it can't. Probable Fed "pivot" this fall and returning to money creation to fund the government deficits. Displeasure with the government.
- Tax receipt decline from less income (Bill Rafter's detailed work). International conflict, (Russia, China).

Is the participation rate more important or a better indicator or more predictive than all the other problems?

George Zachar adds:

and the cleanest measure imnsho is the prime age employment/population ratio, which sidesteps the issue of who is technically counted as being in the 'labor force'.

the labor market is quite healthy. otoh, pmi new orders are collapsing. the former lags, the latter leads.

Jul

9

we are not in the 70s of course coz every era is different anyway, time to sharpen up. [Click on image to see full table.]

Zubin Al Genubi writes:

The 70's were bad: We just lost a 10 year war; Riots crime burning cities, hi crime stagflation, price fixing, crooked president and VP, CIA domestic assassinations.

Vic adds:

interest rates about 4 times the current as of then. the e/p minus the long rate is predictive. works every year almost.

Nils Poertner responds:

yes, and then there are non-US equities out as well - which will represent great opportunities.

Jun

1

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

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

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

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

Stefan Jovanovich links to an alternate view:

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

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

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

Nils Poertner adds:

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

May

29

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

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

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

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

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

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

Zubin Al Genubi comments:

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

May

26

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

Getting the start today of completion of symmetry big bar.

Doug Martin suggests:

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

Michael Brush is bullish:

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

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

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

May

10

…also get sold: spring 2001 and fall 2007.

Zubin Al Genubi responds:

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

Laurel Kenner comments:

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

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

Steve Ellison provides the link:

Inflation in the United States, by John Steele Gordon

May

1

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

- Adrian Bejan

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

Time And Beauty: Why Time Flies And Beauty Never Dies

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

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

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

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

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

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

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

Jeff Watson adds:

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

May

1

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

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

Duncan Coker writes:

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

Nils Poertner comments:

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

Apr

13

Carlsen has a great poker face:

World Number One Magnus Carlsen Stuns Everyone With His Poker Skills

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

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

A reader writes:

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

Zubin Al Genubi adds:

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

We asked,"Who did this?"

Big sis says,"Kenny did it."

Little Kenny says,"Kitty did it!"

J.T. asks:

So poker is the antithesis of chess?

Big Al responds:

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

Andy Aiken comments:

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

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

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

J.T. writes:

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

Stefan Jovanovich disagrees:

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

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

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

List of chess openings

Big Al responds:

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

War is definitely a "game" of incomplete information.

Stefan Jovanovich contends:

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

Apr

13

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

Jeffrey Hirsch responds:

No effect anymore from our studies.

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

From my blog and newsletter.

Apr

12

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

J.T. writes:

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

Apr

3

When looking back at the term structure of interest rates, certain periods stand out: 1998, 2001, 2006-7, 2018, and now 2022.

That history is displayed here, constituting the 2yr, 5yr, 10yr and 30yr rates shown as month-end closes. Note that the 3-month bill rate has been omitted, and that the 2-year is emboldened. All of the periods show an increase in rates prior to the congestion, and all subsequently resulted in economic difficulty. From basic economic education we have learned the causative connection and indeed current political “Policy” seems to be in agreement.

Kim Zussman asks:

Do you think the long term downward slope could affect the forecast ability of yield curves?

Zubin Al Genubi comments:

Its along the lines of "don't fight the Fed".

Bill Rafter responds:

IMO, the downward slope is a function of the Fed essentially trying to remove the US economy from the free market. So (1) yes to Kim for the observation that it will lessen the effect, and (2) yes to Zubin for the always true observation not to fight the Fed.

Had I take the picture back farther, say to the early 70s you would have seen much higher rates (i.e. 21% for the 3-month), so that downward trend is a long one.

Mar

20

How does Jevon's paradox play into the current situation with commodities?

Oil demand holds up in Norway, despite record electric car sales
In September, electric cars reached a record 77.5% share of new car sales in Norway. Yet, surprisingly, oil demand is higher than ten years ago when the first zero-emission cars were sold in the country. (UBS Editorial Team, 08 Dec 2021)

Zubin Al Genubi laments:

It's like my garage storage and my budget, demand grows to meet supply. Also despite efficiency the same energy created is used.

Big Al adds:

The road-congestion version:

The Fundamental Law of Road Congestion: Evidence from US Cities
Gilles Duranton and Matthew A. Turner
AMERICAN ECONOMIC REVIEW
VOL. 101, NO. 6, OCTOBER 2011

Abstract
We investigate the effect of lane kilometers of roads on vehicle-kilometers traveled (VKT) in US cities. VKT increases proportionately to roadway lane kilometers for interstate highways and probably slightly less rapidly for other types of roads. The sources for this extra VKT are increases in driving by current residents, increases in commercial traffic, and migration. Increasing lane kilometers for one type of road diverts little traffic from other types of road. We find no evidence that the provision of public transportation affects VKT. We conclude that increased provision of roads or public transit is unlikely to relieve congestion.

See also induced demand.

Stefan Jovanovich comments:

There is no marginal cost of entry into the "system" of free roads. The only way that public transit can begin to compete with highways is for their cost of entry - i.e. the fares - to also be zero. I had one great professor at what was otherwise a mediocre school - what Harvard then called Architectural Sciences - who taught this. I can still remember his lectures and one in particular - when he explained how he had been unable to convince the Indonesian government that the solution to their particular traffic problem was to fix the phone system. It was so unreliable that even in what was still a poor country the streets in Jakarta would be jammed by merchants and others getting in their cars so they could talk to one another in person.

See also bid-rent theory.

Big Al adds:

You'd think that policy would be a natural, especially for "progressive" regimes, given that public transport fares must skew towards a tax on the bottom deciles.

Feb

28

Given the following parameters in macro (FX and rates primarily):
Portfolio return target 10%
Vol average 8%
Max drawdown 8% - portfolio cut and out
Drawdown 4% - capital cut in half

How best to consider various ways to trade within these parameters:
What do you do at -2% drawdown in terms of adjust position sizes, risk, etc.?
How adjust position sizes, risk etc. at +4%, etc.?
How consider position sizing at point 0 relative to percent of portfolio at risk, trade return goal, etc.?
How best overall utilize a strategy to reach those objectives?

Generic questions and these and others can be expanded of course. Any thoughts or reference materials I might read?

Zubin Al Genubi comments:

Parameters need to be dynamic and adjust with volatility.

John Floyd responds:

Yes, agreed. I am thinking more along the lines of specific quantitative measures and rules such as fractional Kelly criterion and assessing probabilities outside a fixed system and how to size in drawdowns and upturns both when trading tactically and on longer-term basis.

Kim Zussman offers:

The authority on this is Ralph Vince, who is here or elsewhere. Search optimal F.

Zubin Al Genubi agrees:

Ralph Vince's books are quite good and improve on Kelly's risk measures.

Theodosis Athanasiadis writes:

it depends on the type of approach and systems. those parameters are for a high sharpe approach (>=2) which is hard in rates and fx. they also make you become ostensibly a trend follower and short-term trader in your approach and pnl.

there are many methods for sizing that at the end of the day are similar; expected return divided by a measure of risk. Kelly is just a subset of the whole spectrum. Vince's work is a must read. The question is the inputs and as you know better they are very hard to estimate. fractional sizing, sizing inverse to vol etc will help but it is not going to change your return profile immensely. Most likely you want an approach similar to constant portfolio insurance. the best approach would be to use simulations along with extremes/penalties (eg haircut your returns by half etc) to create a distribution of pnl and then decide the optimal way. it is tedious but you avoid making more assumptions and you incorporate worse than historical scenarios.

from my experience, those don't work well in practice and you end up reducing allocation when expected returns are higher but if you have those restrictions you need to have something in place.

Feb

18

The old canard, “You never go broke taking a profit” was not coined by a winner, that’s for sure.

Big Al adds:

Markets are an excellent venue for cultivating outcome bias and hindsight bias. It's too easy to look at a chart and think, "Why didn't I buy *here* and sell *there*???" Then you turn to face the future, and the future is blank.

Jeff Watson writes:

People who watch televised poker with the hole cards exposed and % to win, frequently make judgments of the players performances based on the complete information they see vs the incomplete information the player is working with. It’s easy to be an armchair quarterback.

Dendi Suhubdy comments:

True. You could however predict the bluff rate, and percentages from past play, which can be used to win a game. New outlier players are hard to predict because lack of data, you need some sort of one-shot learning there. Hard.

Zubin Al Genubi responds:

The best buys are at the point of maximum pain and uncertainty.

Feb

3

From Einstein On Creative Thinking: Music and the Intuitive Art of Scientific Imagination:

In other interviews, he (Albert Einstein) attributed his scientific insight and intuition mainly to music. "If I were not a physicist," he once said, "I would probably be a musician. I often think in music. I live my daydreams in music. I see my life in terms of music…. I get most joy in life out of music" (Calaprice, 2000, 155). His son, Hans, amplified what Einstein meant by recounting that "[w]henever he felt that he had come to the end of the road or into a difficult situation in his work, he would take refuge in music, and that would usually resolve all his difficulties."

btw, today [3 Feb] is the birthday of Felix Mendelssohn Bartholdy.

Stefan Jovanovich writes:

I don't really think; the few insights I have come from early training in copy editing and a certain skill for moving 3D objects around in space so they fit better (in the good old days this was called warehousing). For that kind of mind mulling, Haydn's Piano Trios have become the essential daily brain food for over a year now.

Nils Poertner replies:

perhaps there is a type of music, or composer, or melody, that resonates with a certain person for a while - almost like good medicine? a little goes a long way though.

Adam Grimes comments:

Speaking personally, I can't listen to complex music and do any other task. My attention is too easily diverted to the music and I spend too much time focusing on the music, which is an obvious reflection of how my brain has been trained. (I do think there are some fundamental differences in the way musicians perceive music compared to "everyone else", and different types of musicians also perceive differently, based on my experience.)

I do, however, like a wide range of musics, and I find bluegrass and old-school country are especially conducive to writing and programming. (Again, a very personal perspective.)

I do think musical training teaches people to hold and to manipulate patterns in a special way. There's also a lot to be said for the work ethic and focus of a musician. (When I was younger, I spent 6+ hours in front of my instrument, day after day. That requires a degree of focus and attention to detail that most people don't encounter very often.) But I'm still a little skeptical about wide-ranging benefits… maybe they are there, but expertise can be frustratingly domain-specific. I suspect there might be something in the pattern recognition and manipulation aspects that's meaningful, though.

Stefan Jovanovich responds:

For one thing, AG, you all actually hear the music. I can recognize the differences between the F-Minor (#26) and the E-Flat Minor (#31) because I have heard the pieces often enough to distinguish one combination of noises from the other; but that is all. I do not perceive the music.

Zubin Al Genubi adds:

After training and practice you can hear in your mind the perfect pitch of a note out of thin air and tell if a note is not in tune. Its another thing to train your voice to hit that perfect pitch.

Adam Grimes writes:

The skill of "perfect pitch" (absolute pitch), which is the ability to name notes out of thin air, is actually not trainable, despite a lot of work and effort. It appears to be a skill that probably all babies have, just as babies have the ability to hear all phonemes in all human languages. At some point, early on, the brain changes and unused (unheard) phonemes become relatively inaccessible (which is why, for instance, native French speakers struggle with the English "th" (and there are many other examples), and this appears to be the window that closes on developing perfect pitch. If musical training begins at a young age, this skill of absolute pitch may continue into adulthood.

It's also interesting that there's a range of pitches that will be accepted as "A", just as there are a range of mouth sounds that will be perceived as a specific phoneme. (in other words, not all speakers will produce the same sounds in a language exactly the same, and the same speaker might produce sounds slightly differently in different words, but the brain adjusts by categorizing.) I don't have absolute pitch myself (though I do have a few absolute "notes" that I can recognize or pull from memory), but in working with people who do, I've noticed they don't have quite the precision of a tuning fork. What they do have is a radically different perception of music than the rest of us, though the rest of us aren't as handicapped as we would be inclined to think.

There's a lot of very interesting work done and being done on perception. David Huron has written a few books that are both precise and accessible–always a nice combination of attributes!

Though perfect pitch can't be trained, what CAN be trained is the ability to judge relative pitches and to hear multiple notes played with precision. As you say, training the voice is another skill. I'm a very poor singer, but producing pitches with the voice is a critical part of internalizing pitch (and music, in general) for instrumentalists.

Big Al adds:

I think one of the most important lessons in music, especially for young people, is that you can begin studying something you know nothing about and, through practice, master it. Many people do not learn this and schools don't overtly teach it.

Jan

30

Chess is like looking out over a vast open ocean; checkers is like looking into a bottomless well.
- Marion Tinsley

Marion Franklin Tinsley (February 3, 1927 – April 3, 1995) was an American mathematician and checkers player. He is considered to be the greatest checkers player who ever lived. Tinsley was world champion 1955–1958 and 1975–1991 and never lost a world championship match, and lost only seven games (two of them to the Chinook computer program) from 1950 until his death in 1995. He withdrew from championship play during the years 1958–1975, relinquishing the title during that time. It was said that Tinsley was "to checkers what Leonardo da Vinci was to science, what Michelangelo was to art and what Beethoven was to music."

in honor of Marion Tinsley and the game of checkers, I pulled out yet another book of proverbs of Tom Wiswell, who is the Marion Tinsley of problems: the book is called Maxims, Mysteries, and Memories. It so far is unpublished but it will live on.

Here are some new Wiswell proverbs that are good for markets: "don't try to be brilliant, just try to survive." I think I succeeded. "there is never an end to the fine endings in checkers; like old man river, they just keep rolling along." and Tom's favorite: "Moves that disturb your position the least, disturb your opponent the most."

"Defeat is what happens to you while you are making other plans." Wiswell from Maxims with proposed associate editor and shout out to Susan Niederhoffer. have you tested that — from Wiswell: "Checkers seems to guarantee a long life - it is the board of health." Tom writing about Larry Evans and Sammy Reshevsky.

I repeat: checkers moves are very close to all the logic moves that go into the circuitry of computers for truth tables and arithmetic calculations. as such it is the best training for a youngster.

Vic's twitter feed

Laurence Glazier offers:

How Checkers Was Solved
The story of a duel between two men, one who dies, and the nature of the quest to build artificial intelligence

Zubin Al Genubi writes:

Sometimes when I trade I like to think I see signs of computer trading…such as multiple players running the same algo and doing something stupid. Probably just hubris on my part. In the old days I would like to think "now here is a bunch of retail guys calling their broker" and the broker sloppily entering orders, or some big fund in trouble and exiting a big holding like Worldcom. The tape talks. Why can't a computer figure it out. Its just a problem of size and bandwidth.

Big Al suggests:

The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution

Jan

19

From Marketwatch.

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

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

Penny Brown wonders:

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

Vic adds:

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

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

Nils Poertner comments:

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

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

Paolo Pezzutti writes:

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

Jeffrey Hirsch agrees:

Performance during January’s option expiration week

Big Al writes:

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

Jan

2

A reader writes:

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

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

Laurence Glazier writes:

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

A reader adds:

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

Andrew Aiken writes:

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

Nils Poertner responds:

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

Laurence Glazier comments:

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

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

A reader responds:

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

Penny Brown writes:

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

Laurel Kenner enthuses:

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

Zubin Al Genubi writes:

I've read pretty much every Michael Connelly book.

Laurel Kenner adds:

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

Ashton Tate writes:

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

Jeffery Rollert responds:

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

Laurence Glazier adds:

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

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

Penny Brown offers:

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

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

Kim Zussman replies:

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

Larry Williams adds:

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

Laurel Kenner replies:

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

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

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

Jan

1

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

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

SP 5000 next year?

Allen Gillespie writes:

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

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

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

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

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

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

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

Jan

1

From Human Error, by James Reason:

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

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

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

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

Nils Poertner agrees:

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

Duncan Coker offers:

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

Dec

10

Zeitgeist

December 10, 2021 | Leave a Comment

Nils Poertner offers:

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

- Elias Canetti, Crowds and Power

Larry Williams admits:

I fear margin calls a lot more than the unknown.

Zubin Al Genubi writes:

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

Larry Williams concurs:

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

Give Bones asks:

You size your trades using optimal F?

Larry Williams answers:

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

Oct

20

The energy crunch in China and Europe may grow into a bigger trend worldwide. Its one of those small line notes you notice and go hmmm. Like the pandemic was in early 2020. Hmmm, shortage of masks. Hmmm, Shortage of gas, coal. Things that make you go hmmm.

Water shortages also coming up. See how this winter is. Reservoirs are quite low. Look at weekly chart of FIW water etf.

Jeff Watson adds:

I’m noticing many holes where product should be on shelving at every retail establishment we patronize. I’ve been waiting on a part for my Jeep that’s been on back order for 6months. Still see little to no ammo in stores. The system is full of hiccups.

Tim Melvin notes:

I saw a lot of empty shelf space at Costco last week. Very unusual.

Pamela Van Giessen writes:

No joke. We have a huge problem. This is what happens when the world gets shut down and everything is all covid fear all the time. No workers. Test school kids constantly and they will end up being sent home and parents won’t be able to work. Then stuff won’t get made or shipped to where it needs to be. Freight train, fully loaded, sat parked in Livingston MT for nearly 2 weeks. Just left the other day.

As someone running a business that relies on actual commodities (flour, sugar, etc) I find myself overbuying out of concern that I will not be able to get basic ingredients. I had a hard time getting boxes about 2 weeks ago. It’s ridiculous.

Laurence Glazier writes:

It’s getting reminiscent or the Atlas Shrugged movie.

Nils Poertner suggests:

UK is worth to watch as most things we are going to see here in Eurozone or you guys in the US are happening a touch earlier over there (UK being such a tiny, little, open, exposed, econ).

Laurence Glazier adds:

Yes, over here in London it's harder to get petrol (i.e. gas) for the car, less things available in online stores.

James Lackey writes:

I can get everything to build a car a bike or a motorcycle and mysteriously no spikes no single bearing or one simple chip - I call BS. This is almost as big as a Vatican scam.

Jeff Rollert adds:

The most common boat engine, the Merc Cruiser, is quoting deliveries of full engines for next summer.

Duncan Coker notes:

Motors being taken out of production. Sounds a lot like a book I know.

Oct

20

How do traders deal with sleep patterns or disruption? Especially with markets in different time zones, etc.

Circadian Rhythm and Sleep Disruption: Causes, Metabolic Consequences, and Countermeasures

Abstract
Circadian (~24-hour) timing systems pervade all kingdoms of life and temporally optimize behavior and physiology in humans. Relatively recent changes to our environments, such as the introduction of artificial lighting, can disorganize the circadian system, from the level of the molecular clocks that regulate the timing of cellular activities to the level of synchronization between our daily cycles of behavior and the solar day. Sleep/wake cycles are intertwined with the circadian system, and global trends indicate that these, too, are increasingly subject to disruption. A large proportion of the world's population is at increased risk of environmentally driven circadian rhythm and sleep disruption, and a minority of individuals are also genetically predisposed to circadian misalignment and sleep disorders. The consequences of disruption to the circadian system and sleep are profound and include myriad metabolic ramifications, some of which may be compounded by adverse effects on dietary choices. If not addressed, the deleterious effects of such disruption will continue to cause widespread health problems; therefore, implementation of the numerous behavioral and pharmaceutical interventions that can help restore circadian system alignment and enhance sleep will be important.

Larry Williams comments:

That’s one of the hardest parts of this business 'secially when you live in 2 places.

Zubin Al Genubi writes:

Haha. I sleep when I trade. Wake up . Sell too soon.

Jeff Watson responds:

Sell too soon? My life story is that I always pay too much and sell too cheaply. It's a bad habit.

James Lackey adds:

In Ecuador your perfect 12 hours of sunlight all year 365 sure beats fall back to dark at 5pm here. The fall back time change and the further/ farther your from the equator is
More difficult than staying up 100 hours a few times a year.

Oct

6

in proper sell-off in equity, one eventually gets a massive backwardation - and we haven't seen this - almost the opposite- it slightly steepened yesterday - that is odd - and could mean a lot more stress but who knows, am not an equity guy just noticing it on the side and it needs to be tested more…

Zubin Al Genubi comments:

Decay of hi vol over time is a regular tendency. This leads to pennant like structures. The most dangerous time is at the expansion phase where the rate of expansion rapidly increases.

James Lackey responds:

This is a fabulous lesson for new specs that fall for the bear memes then get whacked post dip rally buying.

Look there are times for all things. We can make money short but it's so crazy risk dangerous and the vigorish is insane. I love Mr Vic's "never short" advice!

However if you must sell them without owning them I'd test when the vix is increasing in the short term ie today's vix is higher than 5 days ago then keep it to something like no more than a few trading days hod short et al.

My gist is paying huge vig and buying strength and selling weaknesses is the stupidest system ever! However I'm a man that made it happen and allot over many years even prior to my spec list school.

In closing don't lol but if you must: It makes sense to move all the contracts you can, all day every day when the vix is over let's say 25 and my hypothesis is when it's expanded rather than contracted.

With love honor and respect for those that trade for a living.

Nils Poertner adds:

whenever this graph (from Peter Garnry at Saxo Bank) is -20 or -30, it is possibly a contrarian buy.- that is how I read it. in other wards, in strong backwardation in the vix curve…eventually one needs to switch and be bullish - in context perhaps with other indicators? treat with caution - have not done study myself. always test for yourself

Oct

6

1. Human Error, James Reason. A rather disappointing academic treatise on cognitive analysis of how humans make errors which is really dragged down by obtuse academia speak. Two major sources of error are lapses and slips, and secondly errors of reason and rules. Slips are when you forget steps, lose your place, get distracted, fall into a habitual practice inappropriate for the situation. Errors of reason are using the wrong rule for the situation, where the plan does not go as expected, or the plan was wrong. When the rule doesn't fit, the expert acts like a novice.

There are the raft of heuristics. One is how humans utilize familiar patterns rather than calculate or optimize a current new situation. It is cognitively difficult to consciously think through a new situation.

An interesting section was about how the brain uses "autodrive" to do many familiar things to make room for conscious thought. I was driving down somewhere thinking, and look up and arriving at my destination, realize that I basically had no recollection of the drive there - just on autopilot. A lot of daily life is on auto pilot thus ripe for error.

It's a difficult read. Better to rent, than buy.

2. The Genetic Lottery: Why DNA Matters for Social Equality, by Kathryn Paige Harden

A flawed book addressing a difficult subject. Galton's biggest failing was his theory on eugenics. One of Harden's main points is to debunk the misconception that the genetics of race has any meaning. Race is close to meaningless in genetics. For example, people with genes from people from Africa have a much larger variation in genes than in all the other races, and the categorization of Black and White becomes meaningless.

Genetics does have an effect on personal traits. It predicts certain diseases. The attempt at connecting genetics with achievement in education, life satisfaction, and wealth, suffers from too many variables to have any use.

Their statistical studies, not disclosed, I think will not be robust.

3. John Steinbeck, Sea of Cortez, recommended by Andrew Moe. A beautifully written book and a joy to read.

4. Yottam Ottolenghi, Plenty More. Highly recommended cook book with smashing recipes for vegetarian dishes with a mideastern influence. He has other cookbooks such as Jerusalem with recipes that are real home runs. I've made a number with great success.

5. Michael Lewis, The Premonition. Excellent book about the sad state of the lack of preparedness for a pandemic in the US. Outlines some of the goings on in California to deal with pandemics and disease. Lewis is a fine writer and easy to read.

Pamela Van Giessen comments:

Lewis is a facile writer who performs a parlor trick by bringing forward, in Vanity Fair like story telling, that which will convince you that his view is the correct view. He will not be remembered 100 yrs from now.

A reader writes:

There are three sentences in the short review of The Genetic Lottery that are utter nonsense:

"Galton's biggest failing was his theory [sic] on eugenics."
"Race is close to meaningless in genetics."
"The attempt at connecting genetics with achievement in education, life satisfaction, and wealth, suffers from too many variables to have any use."

These sentences could probably be accepted in, say, the NY Times given that and other leading publications' denial of much of genetic science, but not on this Spec List.

James Lackey appreciates:

Fantastic report! I dig Lewis because moneyball was a great movie lol but really love him because his Wife is so amazing that he must be a good dude to keep her.

Duncan Coker

Thanks for the list. Has anyone read the latest from Steven Pinker, Rationality? It seems like a more scientific analysis of what Kahneman failed to do. We humans have trouble with advanced probability in every day life, so appear to be irrational, but there is more to the story. Do the shortcuts we use help or hurt. Try doing Bayesian Analysis at the grocery story. I think Pinker is one of the best writers we have at present.

An excerpt from Pinker's latest:

Why You Should Always Switch: The Monty Hall Problem (Finally) Explained
By Steven Pinker

Oct

2

Zubin Al Genubi writes:

bullish tendency

Larry Williams cautions:

Yes but not very much for october

Big Al starts the analysis:

Simple test on SPY, all dates thru Sept, 2021, comparing first days of the month to all days:

All days
count: 7171
mean % move: 0.04%
sd: 1.19%

FDOM
count: 341
mean % move: 0.25%
sd: 1.31%
z vs all: 3.28

Steve Ellison digs deeper:

Last 36 first days of the month, enough for significance and equal month weightings, but a short enough lookback to allow for ever-changing cycles, especially from prior knowledge of those who worked for the Chair: The average first day of the month is positive, but not significantly different from the overall upward drift of this period, t=0.68.

Date // Net change
10/01/2018 0.4%
11/01/2018 1.0%
12/03/2018 1.2%
01/02/2019 0.2%
02/01/2019 0.0%
03/01/2019 0.7%
04/01/2019 1.2%
05/01/2019 -0.9%
06/03/2019 -0.1%
07/01/2019 0.8%
08/01/2019 -1.0%
09/03/2019 -0.6%
10/01/2019 -1.4%
11/01/2019 0.9%
12/02/2019 -0.9%
01/02/2020 0.9%
02/03/2020 0.7%
03/02/2020 3.9%
04/01/2020 -4.7%
05/01/2020 -2.8%
06/01/2020 0.4%
07/01/2020 0.4%
08/03/2020 0.8%
09/01/2020 0.8%
10/01/2020 0.5%
11/02/2020 1.1%
12/01/2020 1.0%
01/04/2021 -1.5%
02/01/2021 1.6%
03/01/2021 2.3%
04/01/2021 1.1%
05/03/2021 0.3%
06/01/2021 -0.1%
07/01/2021 0.5%
08/02/2021 -0.2%
09/01/2021 0.0%

Average 0.2%
Standard deviation 1.4%
n 36
t 0.68
Average of all days 0.1%

Big Al continues:

Prompted by Steve's analysis, here is SPY broken into two-year periods, with September as the ending month. Shows the z of the FDOM moves for that period vs the SPY daily % moves for that period.

2yr end // z of FDOM
Sep-2021 0.69
Sep-2019 0.14
Sep-2017 1.67
Sep-2015 (1.18)
Sep-2013 0.16
Sep-2011 1.67
Sep-2009 (0.18)
Sep-2007 1.68
Sep-2005 2.88
Sep-2003 0.99
Sep-2001 0.85
Sep-1999 2.64
Sep-1997 2.56
Sep-1995 (1.23)

Oct

1

I've learned how to foil surf. (It was a brutal learning curve.) You can also downwind surf in open ocean swells on the open ocean, but it's tricky. You need to catch a chop that is steep enough to allow one to get enough speed to get flying on the foil. Once flying on foil, it is very fast and efficient and one can ride the open ocean like a bird.

The trick is to pick the right chops so as not to exhaust yourself paddling before flying on foil. There are 3 or more energy sources manifesting in the ocean wave pattern: (1) wind, (2) surface chop, (3) open ocean ground swell. The various energy sources create different wave energy patterns that overlap. At the intersection of 3 energy sources, a steep breaking chop is created which gives enough energy to paddle in and get up flying on the foil. This is the idea of a rogue wave, but on a smaller scale.

This practice can be applied to trading. As Larry Williams explained in his video on seasonality and cycles, there are energy currents and cycles in the market in seasonal wave patterns. Additionally there is energy in day to day price patterns and, as today, in monthly price patterns. It seems that occasionally three or more of these price patterns overlap and all the energy gets focused in one spot creating a good opportunity for a trade. An example might be 3 or 4 big down days, an x-day new low, an overnight drift pattern, and an end of quarter/month pattern, might all intersect for a good trade opportunity with lots of energy.

Sep

13

Friday predicts next week?

September 13, 2021 | 1 Comment

friday was a most unusual day: down 50 big from the open and set an x-day low but not a 29-day low. all things considered should be a great bull week next week, regardless of the reduction of progressivism and the rise of pele in the odds.

Vic's twitter feed

Zubin al Genubi follows up:

Friday-Monday regularity kicked in nicely. Little bit of sogi coffee action this week?

Sep

10

From Lee Child in Without Fail:

The thing about baseball is that the regular season is one hundred sixty-two games long. Way, way longer than any other sport. Any other sport has about half as many games as baseball. Basketball, hockey, football, soccer, anything. Any other sport, the players can start out thinking they can win every single game all season long. It’s just about a realistic motivational goal. It’s even been achieved, here and there, now and then. But it’s impossible in baseball. The very best teams, the greatest champions, they all lose around a third of their games. They lose fifty or sixty times a year, at least. Imagine what that feels like, from a psychological perspective. You’re a superb athlete, you’re fanatically competitive, but you know for sure you’re going to lose repeatedly. You have to make mental adjustments, or you couldn’t cope with it.

Stefan Jovanovich adds:

It's even worse. You go up to the plate knowing you are going to swing and miss or, at best, hit a foul many more times than you are going to hit a ball square into fair territory. And, then, on the ones you hit right, half will be outs.

Total # of games played in MLB and Negro League history: 232,680
Total # of perfect games, i.e., 27 outs, no hits, no walks, by losing team, no errors by winning team: 22
Ratio: Perfect to Played: 1/9.455045556128589e-5
[That is, 0.00946% of games played were "perfect". -Ed.]

May

20

In addition to the relentless new highs we saw a short while ago, there are sideways consolidation periods before an eventual break out.  It can be understandable after massive influx of liquidity, then an end to the surge.  The theory is that the economic momentum will shift to actual production.  Hopefully the supply disruptions will smooth out in a year or so.  I still can't get a hold of a jet ski or outboard. 
I am seeing help wanted signs all over, especially in restaurants which are now just opening back up. 
Timing wise, assuming the 2020 crash was our bear market, there could be  3 or more years of bull market ahead.  The average bull market lasts for 2.7 years. The average frequency between bear markets is 3.6 years.

May

2

Losing

May 2, 2021 | Leave a Comment

Zubin Al Genubi  writes:

The subject of Losing gets pushed under the rug in this woke world, but is an interesting subject and should be studied and examined.

Accepting loss, and understanding why is an important process.  Was the loss due to a mistake, lack of training, improper technique. Was the other guy just a better human or did he just work harder and longer, and try harder,?    Did you try your hardest? Was there some other mental stuff holding you back.  There are some tough questions, but questions that need to be examined to improve.

Sports competition is good for young people because it teaches how to lose.  A big part of sportsmanship is losing with grace.  

Some people really hate to lose, and it  holds them back.  I hear people verbally arguing, and rather than lose, they will start escalating and go for the jugular, and making personal attacks.  It's counter productive in life, in marriage, in business.  Fear of losing causes people to not try their hardest for fear that it will not be good enough and that they are inferior.  Fear of losing causes people not to take risks to avoid the pain of loss and the accompanying questions. Fear of losing is fear of realizing that you may not be good enough, and that your self delusion about yourself will be shattered.

Millennials grew up in the "everyone is a winner" generation, leading them to a sense of unjustified self entitlement and bewilderment at their lack of success.

A statistical    approach to losing is an excellent way to understand losing.  In a sample of  trials, some will be losers, some winners.  It has to happen. Hopefully you will have more winners over time, and the wins will be larger than the losses.  The distributions of a few big wins, which total more than many small losses are hardest. A common distribution is lots of small wins, and a few big losses which is related to the fear of losing issue.

Was the loss due to bad judging, prejudiced judges, corruption, bad system, unavoidable (shit happens)  type stuff.  In ski mountaineering, you can be cautious, but there is unavoidable objective hazard, such as an earthquake while you are in the mountains.  

There are some good tangents. Mitigation of risk is big.  The subject of luck is a good one.  There are many things you can't control: some are favorable, some not, and they affect you and your life.  Was your so called success due to luck or skill?. Its the black swan thesis. What percent is luck, and what part skill?  Did you overcome your circumstances, and handcaps, or did you squander your talents?

Though I don't about it gambling is a good field to study losing as discussed by Kelly, our friend, Ralph Vince..

James Lackey writes

What evidence do we have to support the statement about Millennials?

We know my kids yours brooks vics Stephan Gordon and I'm sorry how many others here..

Oh sure I knew your not talking about me us but….I've been mentoring just out of college kids or drop outs and I've never experienced the generalized view.

However my son does have cohort frustration.That's not a win loss handle it emotionally issue it's a work goal reality issue

Sorry if I hijacked your thread

Ken Sadofsky writes:

Is the list dissolving; the decency of adieSau. would have been appreciated.

Cheers for alice. 1939 5 top films n more. what would vic say?

James Lackey writes

Did you take my comments as not fit for British Navy dinner table?

I'm certain it is US Army Officers club cool. 

Please explain why. 

May

2

Here is another anecdote about the heating economy.  I put my old sailboat up for sale the other day.  I got 2 offers within hours of putting it up for sale. I am trying to buy another boat.  I saw a nice one that was put up for sale, and it sold in under 2 hours.  Just saw another one… same, sold in under 5 hours.  I hear the same thing from my real estate friends, and now in the news about homes going into overbids, no contingencies, panic type buying.  

In past cycles, I remember real estate going up 10% a month for months at a time. 
I guess the unemployment figures the other day were good and Labogola'd the market up in the afternoon, but the juice didn't last through to today.
 

Also,  I was looking at new jet skis, but there are none in stock…all used inventory sold out.  Looking at outboard motors.

Same thing, no inventory anywhere, long waits from factory.   
 

Apr

10

Zubin Al Genubi writes:

The all time usual rate is about 4% as I recall.

Jared Albert writes

https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018

The graphs are a ton of fun to flip through.

Mar

27

Pressure

March 27, 2021 | Leave a Comment

Victor Niederhoffer  writes:

What can the physics of pressure tell us about markets.  when a large accumulation of sel orders is directed at one point the force /area is great as it is in a triple top or double top or break thru the sogi/ what other elementary physical principles apply to markets. 

Zubin Al Genubi writes:

I can venture to say the idea of Gravity does NOT work in markets. Looking at a chart one gets the illusion of height or that gravity might effect prices but it is an illusion and a dangerous misleading illusion.

Peter DeBaz writes:

I'm not a physicist, so I'm sure that any understanding I have of physics would make a pro scoff.  Financial "momentum" could be an expression of newton's first law.  VN's original idea could be a restatement of f=ma, newton's second.  And finally, "value" trading could be a violation of the second law of thermodynamics, which is why, one could argue, that it never worked (lol). 

Andrew Aiken writes:

Black-Scholes-Merton option pricing formula is a direct restatement of the heat (diffusion) equation:

ut − ∆u = f(x, t)

and later refinements such as Heston, which allows for pricing “jumps”, are extensions of this equation with additional conditions.

(I prefer to price options in a way that doesn’t underprice tail risk)

Mar

22

Jeffrey Watson writes:

This Surfline article delves into the reasons that while the waves people are riding are getting bigger and bigger, nobody has died while riding them in a long time. The author attributes this to better training, better conditioning, better equipment, and new safety measures with a team effort. 

Since getting wiped out in the market can be accurately be described with a surfing analogy, what methods have you implemented to protect yourself from a six sigma event in the market?

https://www.surfline.com/surf-news/nobody-died-big-waves-lately/112815?

 

Zubin Al Genubi writes:

Using Ralph Vince's risk management tools.

Feb

1

100 pt Swings

February 1, 2021 | Leave a Comment

Getting to be a regular things recently.

Jan

30

Niches

January 30, 2021 | Leave a Comment

Zubin Al writes: 

At a surf break, the waves tend to focus and break in a small area ideal for taking off in a surfboard.  In a normal surf line up where the surfers wait for waves people crowd up, and informally queue up for their turn at the wave. However, 20% of the surfers usually get 80% of the waves.  These are the top feeders.  

I've learned how to foil surf on hydrofoils that fly above the water.  The take off spot is in a different spot that where the board surfers drop in, and the high speed and efficiency of the foil allow riding in places where the board riders don't and can't ride.  I can also ride breaks and wave conditions where board riders cannot and don't want to ride.  After close to 60 years surfing, its opened up a whole new world of surfing for me.  Due to the extreme difficulty learning to foil, and the very high expense of the equipment, there are only a handful of foil surfers around.  We reap uncrowded waves and   thrilling high speed rides flying above the water.  

In the ecology of the market, there are many niches.  Props to the GME traders who found a new niche.  In the law of changing cycles,though, the top feeders and brokers move to protect their niche in the greater picture of the market. 

The question is whether the de leveraging and higher margins and deposits for brokers in that niche will spread and affect the general market bringing it down a notch.

One theory I've had is that big waves correlate with high volatility.  Its pure superstition.  Under my theory, wive big waves down this weekend and with big waves possible Wednesday and Thursday market vol will be up midweek.  This is pure mumbo, never tested and just for fun.

 

Jeff Watsurf writes: 

I started foil surfing a few years ago, using a kite. A total game changer in my humble opinion.

Jan

22

Arc Sine Law

January 22, 2021 | Leave a Comment

50's gravitational effect in  effect today, together with the tendency toward new highs to continue.  Hard to believe but that  is what creates the wall of worry bull markets climb.

Jan

12

Zubin Al writes: 

Recently at a restaurant at lunch, two blue collar guys, one older, one
younger guy with a beard, both  in electricians uniforms sit down and  I
overhear the young guy explaining to the older guy about buying stocks,
and how if they double how much money he can make.  He says he doesn't
care how much it goes down, and that he will hold on.  The conversation
moves to Bitcoin, and the younger guy doesn't quite understand how it
works but that it keeps going up. To myself I'm thinking, "hmmm".  I
remember in late 1999 walking into the broker's office where I see a
young woman who I remember waiting tables there buying stocks.  I recall
taxi drivers during that same period talking stocks as conversation in
the cabs.

I wonder, is it different this time?
 

Dr Gangineni Dhananjhay writes: 

I have also got a similar experience in India. Near the brokerage
company where I regularly go to trade, I visit a Coffee stall. The
person running the coffee shop started giving stock advice. Which stocks
to buy and sell and general market opinion. I got afraid. Of course
this is an anecdotal evidence. I am seeing more of my relatives and
family members giving me stock advice. Time to be cautious ??

Jack Cook writes: 

For me, the Spring of 2001 'Aha Mr. Livermore, this is the top?  My
Masseuse was working on my lats and telling tales of retiring on all the
Cisco stock he had.

He is still my Masseuse.

Best in 2021

Heather

TikTok and Discord Are the New Wall Street Trading DesksCaitlin McCabe, Gunjan Banerji and Mischa Frankl-Duval-WSJ. A
new army of social media-enabled day traders is helping push stocks to
records and turning companies into market sensations. As trading by
individual investors boomed during the coronavirus pandemic, so has the
popularity of online communities where they gather. Platforms including
TikTok, Twitter, YouTube, Reddit, Instagram, Facebook and messaging
platform Discord have become the new Wall Street trading desks.
Individual investors gather to talk about hot stocks like Tesla Inc.,
boast of gains and commiserate about losses. These investors do more
than just talk, though. They piggyback on each others' ideas and trades,
helping fuel the momentum that has propelled some companies to
triple-digit or bigger gains in 2020.on.wsj.com/3bxmPHI

Jan

5

Perfect Example

January 5, 2021 | Leave a Comment

Victor Niederhoffer  writes: 

Of our favorite technique from street games " your own ma" the r's in Georgia  loudly proclaim that they voted r's but at the same time they are obviously string their hardest to sink the incumbent.  How can you fight the system when everyone is against you and they are hauling out every technique to make you look bad. Who is this notorious ballot stuffer that the   Georgia elected official had in a prominent position. And which the incumbent said was alone in the office with the suitcase of 100% voted or d's. the conference call claimed 7 or 7 deferent kinds of abuse and it was taken out of context by all media to say that the incumbent want just 11000 votes. I often was visited with a biased referee in squash who was against me because I was not from Merior or the prep schools or because I was Jewish. Osborne tried to help me. and I still remember how the finals of the championship was stolen from me when the referee called a ball down on me which he had never done. In other words, play was going on and there was no appeal but he shout out down. It doesn't seem important in retrospect but it prevent me from winning the world championship when I was 18 years old. the incumbent has to fight 4 millions against him and the forces against him are contagious to make matters worse.

Zubin Al  writes: 

Indeed, it’s the coordinated powers of the world against one man (a man in the most powerful position in the world). Trump has been an existential threat to China’s path to economic superpower status, an existential threat to the Climate Action 100+ coordination/cooperation, and an existential threat to the swamp. To what extent would they go to remove him?  It seems we are seeing it. “Whatever it takes.”  Tomorrow and the days ahead may be total chaos.

Dec

31

Zubin Al  writes: 

Each year I like to count the number of private jets parked during the holidays at the local FBO.  Many of the worlds richest people have homes here such as Bill Gates, Roberts of KKR, Charles Schwab, The Go Daddy guy, Dave Roux of Silverlake Partners…  and they all have private jets. The theory is that the rich know what's going on with the economy and is a tell for the future.

There are notably fewer jets this year. I counted 18 on Christmas and will update later today  on my way to foil big waves at the beach past the airport.  Usually the lot overflows to park jets on Maui and Oahu with 40 or more.

My take (and in theory the captain's of industry take)  is that this thing is not going to be over this next year, and will drag on.

Victor Niederhoffer  writes: 

Mr. Sogi I have had  numerous requests to interrupt you on my blog. when and  would you be a good time for that?

Zubin Al  writes: 

Usually around 1 pm Hawaii Time, maybe next week would be fine.  I just ask that you don't put me on the "spot" as you normally do when you ask me questions.  Pitch me some lobs for easy answers so I can avoid sounding too bad. 

Nov

13

Please only use wild salmon, never farm Salmon as the industry is infecting waterways with virus.  Sous vide Salmon for 30 min at 125F for flaky, lower for firmer wetter texture.  

Dengaku Miso Topping/ (BBQ sauce)  
3/4 cup less 1 Tbs white miso,  
2 egg yolks, 
2  Tbs Sake.  
2 Tbsps Mirin; 
2 Tbs sugar; 
7 Tbs dashi (Hondashi).  
Add one: toasted sesame seens, or grated rind of yuzu citron/lime, or fresh ginger juice.

Put miso in double boiler, and before putting over hot water blend in egg yolks, sake, mirin and sugar. Place over simmering water and gradually add dashi…stir til thick.  At the last moment add 1 seasoning.
Paint on sous vided salmon, and place on BBQ (or broil) for 30 seconds to a minute.
As we say in Hawaii, "Broke da mouth!"

Oct

23

Bosch

October 23, 2020 | Leave a Comment

Zubin Al Genubi writes: 

Murakami writes,"convenient approximations bring you closest to comprehending the true nature of things.

Laurel Kenner writes: 

 Also:  Walter Mosley's two series of noir set in LA and NYC, with heroes East Rawlings and Leonid McGill.  Inherent Vice and the Crying of Lot 49, by the paranoid master Thomas Pynchon 

and Raymond Chandler for the ultimate portrait of prewar LA. 

Peter Saint-Andre  writes: 

My wife, who is a big fan of the Bosch series, also recommends the Joe

Gary Boddicker  writes: 

I’ll second the C.J. Box recco, but I’m biased. Chuck was my next door dorm neighbor many years ago at Denver U and a friend. He would disappear into his room (even in the midst of a party) and we’d hear the typewriter banging for hours as we waited in anticipation…out would come a double-spaced, creative, plotted, story…usually things had “gone Western” and the bad guys met a very satisfying end. 

He is a wonderful example of someone who always knew what he loved to do, kept working at it until he got a break, and is now among the best in his field. He’s been banging out one or two a year for many years now and you won’t be bored. Especially appealing to those who appreciate the modern West, it’s people, the outdoors, and a good story. 

Oct

21

Hi vol Big Bar

October 21, 2020 | Leave a Comment

Another regular thing lately is after big boys finish dumping their excess into the close, the after market slowly rises up again. Here the half round tractor beam is assisting.

Oct

19

Election Modeling

October 19, 2020 | Leave a Comment

For the encore, will do Tip Toe Through the Tulips, while wearing a tutu.  

Oct

16

Supply Chain

October 16, 2020 | Leave a Comment

A few months ago Ralph mentioned the possibility of supply chain disruptions. My seawater pump on my sailboat is leaking.  When I went to try order a new pump the supplier said there are no sea water pumps in the country, and the manufacturer has been shut down for 2 months due to covid.  I'm on a waiting list.  

I also questioned the effects on real estate. In Hawaii my broker friend tells me that buyers from the mainland are snapping up multimillion dollars houses sight unseen and that prices are strong. They must figure that if they work remotely, why not be in Hawaii.   They haven't experienced the time difference.  I'll tell you that waking up at 3am in the morning is not easy, and it also means you have to go to bed early, so its tough. But someone's got to do it. 
The Airbnb's are all shut down, so I think some of those are on market.   
Due to a lack of tourists and snow birds I'm guessing the rental market is not as tight as it was.  We have no horn honking tourists and no heavy traffic, so its quite nice.
 I'm pushing our candidates to ease off on the heavy dependance on tourism as it can be destructive and unreliable.  Better industries in tech, like the woman who won the Nobel prize discovering the Black Hole in the center of Milky Way at Keck Observatory on Mauna Kea.  A friend worked up there as a tech up there for his entire career.

Oct

13

SPEC-LIST

October 13, 2020 | Leave a Comment

Zubin Al Genubi  writes: 

It looks like there are sharp steep drops and no other chance to buy, then an unrelenting drive upwards.  The election discussion, I think, is related and why SJ's call last election was important. The problem, for me,  is staying up all night.

Arthur Khaldarov  writes: 

There were other guys that predicted the opposite of SJ's call and right now we would've been quoting them.

…(obviously, if their prediction came true).

This list can tackle mini problems and become a great source of knowledge. Ideas are dime a dozen, but here we can analyze 3 a week and maybe have some home runs.

Ralph Vince writes: 

There is nothing to prevent others from contributing ideas here, market, electoral, whatever, and the political ones as well. 

there is not a limited number of messages per day or a limited number of topics.

There is however a limited number of people on this list, and only a subset who contribute. This argument rings of being dissatisfied that those who are contributing aren't being interesting enough. Those who have contacted you off list and complained about the electoral discussion have been welcome at any time to contribute all sorts of diverse topics here in addition to whatever is being discussed at the moment.

Oct

9

The asymmetry of real vol is always amazing with sudden drops and then the steady grind upwards.

Sep

28

Final Prediction

September 28, 2020 | Leave a Comment

Stefan Jovanovich writes: 

On election day Trump will be behind in every battleground state by a margin of at least 4 points.  The public polling numbers will look even worse than they did in 2016.  The current raw poll data - ignore RCP et. al. - shows Trump with a 40% chance of winning - which is what he had at this time in 2016.

I am betting against those odds and predicting that Trump will win, based on two assumptions about "events": 

(1) on Saturday he will choose Barbara Lagoa as his nominee and the Democrats will do a Kavanaugh melt-down that lock down Florida and gain Trump 2-4 points in Nevada, Arizona, New Mexico and Colorado.  It may even save Cory Gardner.  If he chooses Amy (Opus Dei) Barrett, he loses.

(2) the 3rd quarter GDP and economic numbers will be a blow-out that will ease the minds of the people who still resent Trump for allowing himself to be conned into betraying the people who earn a living outside of the corporate, government and non-profit moat - the land that I now think of as Oregano world..

Daniel grossman writes: 

Thanks Stefan.

I agree, Trump will win.  Although the Dems will put a tremendous final effort into PA and the Midwest swing states, so it will be touch and go.

Lagoa is the smart political choice.  Harder to attack a Wise Latina.

Zubin Al Genubi  writes: 

Stefan, Now that he chose Barrett do you and all you other Trump supporters on this list think he will lose?  And do you continue to think this is bearish?

Sep

24

Margins and Vol

September 24, 2020 | Leave a Comment

Zubin Al Genubi writes: 

Some brokers are increasing margin requirements ahead of continued and increased volatility forecast during the upcoming election.  

Some funky stuff ahead. Watch out.Interesting mid day turn Monday. Can't wait til the end of the day anymore with everyone jumping the gun.

Wonder again if 3350 will be a swing point.

Jordan Low writes: 

To be fair, the letter from Interactive Brokers explicitly mentioned the election as a rationale.

Sep

24

More Go

September 24, 2020 | Leave a Comment

So far today, bonds up stocks up….after a 10% correction.
I've been playing a bit more Go Make.  There is a funny switch between offense that switches back and forth between players, and also within the mind of the individual player. Go is a very binary game, yet as Wolfram, and Vince have demonstrated, even a simple binary function can create complex situations.
Speaking of stops, former List Member Seattle Phil, who also wrote a book on risk management, said that they will always find your stops. Like this morning where they searched out the round to clear off stops before taking it up.  The conclusion back then was that leverage was the key to risk management rather than use of fixed price stops.  Time stops for the expectation  period and leverage were the key to risk management.  I think this is where long term systems have a weakness.  

Sep

11

Trailing Stops

September 11, 2020 | Leave a Comment

Zubin Al Genubi writes: 

I would like some advice on trailing stops.  Lets say a guy took a trade, 3 down days, buy end of day, hold for expectation period of 1 day, sell half, set a trailing stop on balance.  Where?  low of day? break even? 20 period ema?  And how is best to move it up.  Low of day? Ema?  Fixed trailing?  I realize it is not efficient but selling at the expectation period would lose a run like last month from 3000 of 16%.   Things seem "trendy" now.  Appreciate any good ideas.  Can this kind of thing be tested?  I doubt it, because normal tests don't seem to catch trends as they tend to mean reversion.  Thanks.   

Sushil Rungta writes: 

I use a % trailing stop.  Usually, once I buy a stock, depending on the stock and the expected volatility, I place a trailing stop anywhere from 8% to 25%.  That way I do not lose any of the upside.  And the % trailing stop keeps moving higher if the stock keeps moving higher.

I am a novice and not meant to be advice.  Just shat=ring what I do

Ralph Vince writes: 

I think it depends on the particular market. For equities, I've found nothing worthwhile that constitutes a mechanical trend following methodology I would risk money on

I have a lot of experience looking for it though! Perhaps  a temporal solution is manifesting in the quities indexes right now, which will oly be evident at some future point in time?

Experience in the markets teaches us nothing, and I doubt it has any value whatsoever. If fact, there is a toxicity to it in that we begin to believe we know something that day one participants aren;t burdened with.

We are tasked with finding which of the 9 sections of the tic-tac-toe board a ball will (randomly) appear in. We choose the center. It comes up randomly in the NW corner. (It must like corners?). We choose the SW corner, it shows up in the NE corner. (see, it likes corners,) We select the SE corner. It comes up in the middle (Ah, two corners, then a middle…..) and on and on ad on. 

Forever.

"I have a good sense for where that ball will come up as I;ve been doing this for years." Or, better still, "I have a good sense of where that ball will come up - it;s mathematical! It;s somewhat deterministic," (as said the man walking into the convenience store to pony up for his next magic powerball number combination).

In markets, If you find something that works, and is working, it's about to evaporate. This is why I've migrated to longer and longer-term views on things, as it results in a longer time until things evaporate. Everything we think is true in the markets, is a delusion of our own making. Even the notion of drift: in equities, vanishes - first, for  decades or so, then, with the next fall of an empire. The probability of a drawdown, of any given magnitude, approaches certainty as the length of time given for it to transpire increases.

Most things in markets (as in all of life) that are real, often tend to be dull and tedious, require work to get our arms around,  and reside nowhere near where we are looking.

Ralph Vince writes: 

The point is everything we are looking at in terms of timing mechanism is ephemeral. I like longer-term models because they might outlive me (e.g. be long S&P500 when 90 day bills /  S&P500 div yield >1.8, which has batted 9 of 9 since 1980, below) before collapsing. The flipside is a much shorter-term model that will work, until it doesn't, then won't, until it does again!

I have never encountered anything in terms of equitisinexes that works in terms of trend-following, save for the notion of long-term, upwards drift. But as I say, once you are comfortable that something will always work, it is likely near-finished. The buy all dips / drift works in our favor mentality is not immune, but has had the good fortune of being a lugubrious beast.

Aug

25

Market

August 25, 2020 | Leave a Comment

Is really going vertical here.I remember some vertical markets in 99-2000. Tech then too.

Aug

20

Guides

August 20, 2020 | Leave a Comment

Zubin Al Genubi writes: 

Mountain guides are an elite group who guide people into the mountains and backcountry around the world.  They face high risk and uncertain conditions and their job is to mitigate risk while at the same time pushing the limits of their clients to reach higher heights.

A joke among the guides is that the most dangerous situation they can find themselves in is traveling in the mountains with a group of guides.  None of them want to speak up and point out the danger they are getting into for fear of stepping on the other guide's ego, or appearing foolish and other group dynamic issues.  In fact, group dynamics is one of the most dangerous elements in backcountry travel.  Such heuristic issues as who is the leader, fear of being considered scared (when in fact there is danger), fear of looking foolish, expert syndromes, group think, familiarity heuristics, get home itis, summit fever can contribute to disaster.

A lot of the new list members appear to be high level experienced market professionals from the looks of their intro cv's.  Chair is pretty laissez faire, but it's good to contribute without worry.  If you're wrong, someone will tell you how wrong you are here, or the market will, and that is good.  

Jeffrey Hirsch writes:

Eloquent summation Zubin and inspiring. I look forward to discovering and discussing my many flaws and errors

Aug

20

This mornings/last nights premarket bond run up, then closely followed by the spu opening run to  Chair's constructional round (eventually)… Similar to the big bond run, and the slightly lagged spu run up of Thursday: is it connected? regular?

Aug

19

3350

August 19, 2020 | Leave a Comment

Zubin Al Genubi writes: 

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/research_papers/9631.pdf

They say there is a correlation between yield curve term structure and volatility. 

Larry writes: 

Curve is still up and positive

Aug

19

Zomby

August 19, 2020 | Leave a Comment

Zubin Al Genubi writes: 

According to Chair's twitter theory the market should crash just before the election  to screw the incumbent. all the shorts (except Ralph) have gone bust. Ralph will hold and make another 400% on the break.

Covid should be bad and things will be shutting down again like Hawaii where government wants more control to convert business and get rid of excess foreign population. School kids will help the spread.

Localism and xenophobia trends should be strong and the China  cold war will depress business. Who will make our stuff? Not Detroit.

The 2-3 month away yield curve inflection reflects something about investors outlook in a negative vein short term. The inflections are new. The bull flattener scenario is in play and the long  yield continues to drop and the short end cannot.

This should give time meanwhile for  all time highs as the army of new daytraders and short covers buy at 9:45 everyday after the Euros sell US overnight. The 25 points swings are good  for daytraders.

Kevin Kirkpatrick writes: 

Regarding the supply chain in China, it is not just either China or the US. I don't have the latest update but perhaps the following article will provide some insight.

https://www.gartner.com/en/newsroom/press-releases/2020-06-24-gartner-survey-reveals-33-percent-of-supply-chain-leaders-moved-business-out-of-china-or-plan-to-by-2023

Cold war with China?!! It has moved beyond the stage of cold war. Trump administration has escalated its hostile actions against CCP but little has been reported by mainstream media and as a result most Americans have very little knowledge about what is going on around the world. I don't mean no disrespect but I tell it like it is. Trump administration finally realizes that talking to or so called negotiating with CCP will end up with nothing beneficial to the US. The most recent arresting of those CCP spies who have ties with People Liberation Army (PLA) is just the tip of the iceberg. I bet more arrests will happen. I can even say that most of the Chinese researchers coming from China in the major US research institutions have ties with the PLA and make them spies by definition. Will the escalation culminate in military conflict in South China Sea? The Jury is still out. I don't want war like many others. But sometimes it is a necessary thing to do to eradicate an enemy who is even much worse than Nazi Germany on many levels.

Aug

17

Laurel Kenner  writes: 

Gentlemen, your assistance is requested. As my son enters high school, I am earnestly seeding guidance on how to be a good mother during these next four crucial years. As I understand it, he needs validation and a clean house in all senses of the phrase, and not too much direct advice. I don't want him to become an adult with mommy problems, and I don't want him to go so wild that he spoils his later life. Specs, please share your thoughts. What are your most vivid memories of your mother during these years? How did she help or hurt? What makes a mother of a teenage son good or bad? 

kurtsskurtss writes: 

Avoid all lecturing/preaching/cajoling.  Instead, ask questions and try to act like a friend or confidante, way more than a parent.  If he trusts that you will not be judgmental, but instead will be a good listener and help him to recognize potential outcomes for various actions, he will be willing to share more of his life with you.  

Zubin Al Genubi writes: 

Give him well defined specific tasks he must do to get his allowance or a specified reward of his own choice. He can choose the tasks. Could be wash dishes twice a week or clean his room one a week. Could be all A's. Control behavior using incentives. Use of authority is useless as is an appeal to reason. Kids don't think. 

Write down the tasks on a calendar and check off performance as an agreed contract. Put in writing for bigger or long term rewards such as a car for no smoking or drugs till 16.  

Big AI writes: 

One thing i'll offer is this: once the average boy crosses the puberty

threshold, it's like somebody poured gas on him and lit him on fire.

most of his mental bandwidth becomes focused on girls and negotiating

all of that, especially in school where there are all these girls who

have crossed the threshold too.  and at the same time, this new

dynamic that is dominating his life is something he doesn't want to

talk to his mother about.

Paolo pezzutti writes: 

We are parents.  Not friends nor advisors nor confidants…..

Not even task organizers.  Our role in my view is to transmit values. Just that. Transmit values which are the main tools to live their life. They will then choose their objectives. Establish their priorities and tasks. Live their sex life. Values are the core issue.  

larry writes: 

Teach him to cook, wash clothes and iron.  It will make him self sufficient

Jonathan Bower writes:

I'll second this. Additionally, in Scouting many ideals are worthy of pursuit to round out a person's character and skills.

Jul

21

Hows the

July 21, 2020 | Leave a Comment

Haha.  I've been Foil Surfing on a foil board where you fly above the water at high speeds.  Its fun but the learning curve was very steep and it is the hardest thing I've ever done (except trading).  The wipeouts are brutal because you are high above the wave, which is also head high and moving about 20mph.  Kind of like jumping off the high diving board.  But since a foiler can ride a part of the wave no one else can ride, even though many people are out in the water surfing their regular old fashioned surfboards, I can have as many waves as I want.  It rides the rounded hump of the wave where it doesn't even break riding the energy of the wave which traveled 5,000 miles away from New Zealand.  

It goes to show that there is always a niche somewhere that is uncrowded just like in the markets.

Especially at the gravitational 3250.  I expect a crowd to gather there in the next few days.

Jul

21

Zubin Al Genubi writes: 

I heard an interview on NPR by a writer whose name I did not catch who agrees with Hernan's premise that China has surpassed the US. He attributes  to 2 really useless expensive US wars in Iraq and Afghanistan and failure to spend those trillions on infrastructure and education in the US.  China had no wars and spent extensively on infrastructure .  You can see immediately on landing in Beijing the beautiful, huge airport.  Compare that with the dump that is JFK Airport in NYC.  When I visited China ten years ago, I saw ribbons of highway stretching out into the distance way out in the hinterlands.  

larry writes: 

Yea but NPR is anti usa most always

Kim Zussman writes: 

Zubin is, as always, a devoted son of Mao

Jul

20

Hello

July 20, 2020 | Leave a Comment

Solid breakout above prior post crash highs. Bit low vol, and up bonds.  3250 in play.

Hate to mention the big triangle.

Jul

20

November

July 20, 2020 | Leave a Comment

Zubin Al Genubi writes: 

I rode a bike through Tibet and Western Szechwuan when China was taking it over.  I saw convoys of trucks 20 miles long that stretched for hours pouring troops into the region. They just replaced the Tibetians.   There are over 1.4 billion people in China!  Just the sheer numbers mean a lot.

How many on the list have been to China?  It was much different than what I had heard or imagined.

larry writes: 

I was first there in 1980—what a different china then than now. Been there 10 time or so and each time is different

Jul

17

Recently the intraday momentum has been good with quite large moves, if you could be there to catch them.  Even the last few days with the odd tight ranges had nice regular range bound swings making for good day trading. The large daily ranges are good.  If one is able to hang on for a few days and trail a stop or some such technique some nice moves could be captured.   Back in the turn of the century during the high vol at the century highs with high valuations on stocks, hundreds of points were crossed.  If you could capture 60 percent of a swing you did well. I think the same holds true now with the large moves.   When I say things like this I always keep in the back of my mind  that the cycle is probably about over since its become so obvious that if I can see it, so can everyone else.

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