Sep

16

Talking with strangers is surprisingly informative

"anybody knows more about something than you do"

Significance

Conversation can be a useful source of learning about practically any topic. Information exchanged through conversation is central to culture and society, as talking with others communicates norms, creates shared understanding, conveys morality, shares knowledge, provides different perspectives, and more. Yet we find that people systematically undervalue what they might learn in conversation, anticipating that they will learn less than they actually do. This miscalibration stems from the inherent uncertainty of conversations, where it can be difficult to even conceive of what one might learn before one learns it. Holding miss-calibrated expectations about the information value of conversation may discourage people from engaging in them more often, creating a potentially misplaced barrier to learning more from others.

Zubin Al Genubi agrees:

I've noticed people don't listen well. They often like to talk. Its good to listen and encourage others to talk and they think you are a great conversationalist. As Yogi Berra said, Listen and its amazing what you can learn. I have some good ideas but no one listens to me.

William Huggins adds:

2018's Nobel in econ went out (in part) for the endogenous growth theory, which posits that a good part of economic growth that isn't "more people" or "more kit" comes from the positive externality associated with education. Romer basically says that once someone learns how to do something better, we gain by having them tell us about it. people uncomfortable with updating their beliefs might avoid conversation and lose out as a result (value of keeping an open mind?)

Nils Poertner writes:

deep down it is probably that we are so excited about our own ideas (whether adequate or not) - that we often over-sell it to ppl in our own social circle. mea culpa. whereas with strangers it is often more a light touch - or an encounter that lasts a few minutes only and this lightness creates a magic…and a sparkle and that is all that is needed sometimes.

Gary Phillips expands:

I've always been a gregarious person, not because I am socially needy, but because I often find conversations with strangers to be an edifying experience. Quite instinctively I gravitate to the following people:

1) smarter / better educated individuals - if you're going to converse with someone, you might as well learn something. I love talking with my friend David, who is a Lubavitch rabbi. His knowledge of the Talmud is extraordinary, and its analogs to trading are remarkable.

2) older people - experience has given them a rational perspective on life and insights that are invaluable. My favorite encounter was with Lou Lesser, a L.A. real estate developer who was 93 when I picked him up in Beverly Hills and drove him to Laguna Beach. He regaled me with stories about his life, including personal experiences with Marilyn Monroe, John Kennedy, and Mickey Cohen. It was a ride I'll never forget.

3) tourists in the U.S. - talking with a 2 young ladies from Kyrgyzstan I met at a local bar in Chicago. Extremely intelligent and well educated, they were extremely critical of the lack of education and sophistication of the average American. They were completely shocked by Americans' lack of knowledge and ignorance of what lies outside of America. I was the only American they had met, who had heard of their country. Nevertheless, while they were very cynical, they were also beautiful, charming, and thoroughly engaging.

4) people from diverse and varied walks of life- if you are seeking a diverse experience with people of varying levels of social status, there's no place better than the joint. My 30 days spent incarcerated in the Montgomery County Correctional facility was not necessarily entertaining, but it was certainly educational. There's not much street cred to be earned jacking an O.G., so I was afforded a level of respect, and was able to engage and befriend various inmates, from incredibly disparate backgrounds and lifestyles.

5) people you meet while travelling- my favorite aspect about traveling is the ability to meet a wide variety of people. I have a tendency to let my guard down while traveling, and open up even more than usual. recent trips to Japan, Mexico, and Crete were made all the more enjoyable because of the people my wife and I interreacted with and met.

Kim Zussman responds:

Typically internationals - especially Europeans - look down on Americans in this way. As if the prize is not what you own but what (or who) you know (especially in France).

Funny thing is that in most countries outside the US wealth-generation efforts are futile because of huge governments and massive corruption. At least if smart people aren't allowed to become rich at least they can become educated, cultured, and erudite. Their educated-but-poor status is a consolation prize, and when they are here there is envy.

In the USSR the only wealthy people were in government or military - which is the same now with the addition of para-governmental oligarchs. You can be talented and work like the devil but if you're not connected you have to settle for Dostoyevsky and Dugin.

The problem with America is that, for the most part - less so in recent years - the main limit on your personal success is yourself. This is not very compassionate (elevation of failure), and is the fuel of socialism. We are ugly Americans for not expending formative decades on poetry, languages, and philosophy - but allowing people to compete in a quasi-free economy.

Pamela Van Giessen writes:

There are interesting people wherever you look for them. Especially in this day and age, no one place has a monopoly on interesting and clever.

Larry Williams agrees:

And they don’t have a clue where our state and cities are. Snobs for the most part Europe is not superior to much of anything other that Italian wine and food. It’s a worn out old lady that was beautiful in its day.

William Huggins asks:

Any Americans here happen to read Gustavus Myers America Strikes Back (1935)? He had a pretty savage takedown of European elitists that's heavy on economic history and well referenced. Much of the sentiment here echoes his charges.

Stefan Jovanovich notes:

Disdain for Americans at home and abroad is the oldest of all cultural traditions. It has survived the death of beaver hats, bustles and whist and shows no signs of decline. I think the scorn for Americans here in their own country has its root in bewilderment - how can all these fat stupid slobs have made their language and money the world standards for communication and exchange? Beats me.

Boris Simonder suggests:

A test would be to survey domestic population on domestic locations of cities/states. Who would do better since you mention location of cities/states? Jay Leno has some clips from his Walk of fame episodes.

High quality cars Larry, at least fossil, although EVs and H2 is up-coming and leading. Telecom networks, Beer, furniture design, clothing designs, Handbags/Cases, Trucks, Industrial/Electrical Machinery/Equipment, Pharma, Mineral fuels, Plastics, Optical/technical medical apparatus, Iron/Steel, Organic chemicals, Insulated wire/cables, Optical readers, Centrifuges, Electrical converters, Auto parts to name a few high value exports. EU accounts for approx 30% of total global export value. Just a tad more than Italian wine and food.

That old lady still has some of the most beautiful ones. Go visit Norway again.

Larry Williams responds:

I'll take the food! You can have the handbags and such.

Sep

3

Tiger Management founder Julian Robertson dies at 90

I enjoy reading obituaries because there is a series of events that we use to describe a person - at the same time there is this internal rollercoaster of emotions going on - which we never know.

Alston Mabry adds:

From the NYT obit:

“I had become convinced that the hedge fund was the way to invest,” he
recalled, and that short-selling was “a license to steal.”

Mr. Robertson prospered, but in the mid-1990s his performance grew
ragged amid the mania for untested dot-com stocks. Investors withdrew,
and in 2000 a baffled Mr. Robertson, his strategy no longer working,
closed shop.

“There is no point in subjecting our investors to risk in a market
which I frankly do not understand,” he told investors.

In a 2004 biography, “Julian Robertson: A Tiger in the Land of Bulls
and Bears,” Daniel A. Strachman quoted Mr. Robertson as saying, “The
mistake that we made was that we got too big.” This meant, he added,
that “to make it meaningful we had to buy a huge amount of a company’s
stock, and there were only a few companies” where that was an option.

Easan Katir remembers:

While on a road show pitching a private equity deal in 1989 I recall a rendezvous Dean Witter had arranged at Tiger Management. I briefly chatted with Julian. He handed us off to a few of his cubs for the meeting. RIP, Julian.

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.

Jul

23

97-year-old Billings billiards player not letting age slow him down

Nils Poertner responds:

good for him. an inspiration for others.

"It just astounds me the shots he makes. When you’re 97, usually your vision isn’t real good. And to make the shots he makes you have to have good vision. You have to be able to see the ball, you have to know where to hit exactly and he does," Asleson said.

Jul

23

You have to admire a state that distinguishes is BBQ intrastate between eastern and western styles. Ole Time BBQ on Hillsborough in Raleigh serves an excellent example of the former for those in NC. (ie Stefan)

Reading The Boys in the Boat about the 1936 U Washington crew team and their journey to compete in the Berlin Olympics. Some great coaching and lessons from Ulbrickson the Washington coach. The downplaying of expectations before big races, "My boys are not ready for the race but they're the best we got", the quiet in the boatyard before the competitions, the practices at night in brutally cold conditions to avoid observation from competitors. The Stoicism in the face of victory and defeat.

Art Cooper responds:

I enjoyed The Boys of '36 by PBS on their American Experience series very much.

Jeff Watson adds:

I’ve been rereading Finnegan’s Pulitzer-Prize-winning Barbarian Days, arguably one of the best autobiographies I have ever read. The best surfing literature.

Nils Poertner writes:

good to read a book at all. most adults I know, in particular - males, and from a certain age onwards, say 40 - often give up on reading long text. why? hm, I guess visual stress during the day from excessive near vision these days so overwhelming (screen time), and made worse by poor visual habits etc (ppl don't blink enough when they read text etc) maybe other reasons, too. lack of curiosity etc.

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

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

27

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

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

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

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

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

QDA algorithm

Laurel Kenner asks:

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

Newton Linchen responds:

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

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

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

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

Nils Poertner adds:

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

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

Paolo Pezzutti comments:

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

Leo Jia writes:

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

Jun

5

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

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

Larry Williams disagrees:

Dead wrong on DeMark.

Nils Poertner responds:

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

Larry Williams writes:

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

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

Jun

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

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

8

When roots of a tree hit an obstacle eg a rock, they embrace it and grow around it. That is how living organism work isn't it - they somehow adapt.

Speaking to younger ppl (below 30) there is a bit of despair I can pick up which wasn't there say 20yrs ago. And plenty of good reasons for it perhaps and I agree with them so often. It is amplified by media, professors, parents, celebrities , and then group think etc etc…they all set this emotional temperature of negativity and cult of fear. applications are everywhere - nominal rates can not rise in the US coz the econ would collapse etc etc etc…completely un-nuanced…whatever the topic…almost irrelevant.

maybe individually or collectively there is a lesson to be learnt from trees.

Henry Gifford writes:

Most everyone has seen sidewalks pushed up by tree roots, but the way the roots do it isn’t exactly what it looks like. The roots don’t actually push the sidewalk up.

What happens is that as the sidewalk expands and contracts with alternating sunlight and darkness, and maybe moves for other reasons, small spaces become available which the roots grow into. Then, each time the space opens up a little, the roots expand a little more, thus the sidewalk can’t move back to its original position, and gradually ends up far from its original position. The mechanism is called "ratcheting." Reminds me of overnight price movement.

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

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

28

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

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

Stefan Jovanovich comments:

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

Nils Poertner adds:

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

James Lackey responds:

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

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

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

Nils Poertner replies:

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

Dec

21

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

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

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

Stefan Jovanovich comments

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

Nils Poertner responds:

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

James Lackey writes:

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

Dec

12

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

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

Laurence Glazier writes:

Let’s remember that Handel was enjoying himself too.

Nils Poertner replies:

Wasn't he a pretty good investor as well?

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

Vic adds:

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

Jeff Watson offers:

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

Adam Grimes writes:

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

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

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

James Lackey writes:

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

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

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

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

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

Life without music is death.

Laurence Glazier responds:

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

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

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

Larry Williams suggests:

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

James Lackey :

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

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

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

Laurence Glazier comments:

Better the passion is in the art than the artist.

Nils Poertner writes:

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

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

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

James Lackey adds:

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

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

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

Alston Mabry suggest:

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

Part 1

Part 2

Part 3

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.

Nov

12

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

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

Nils Poertner comments:

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

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

James Lackey writes:

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

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

Nils Poertner expands:

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

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

see Jacob Libermangood intro on light, vision and health

James Lackey responds:

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

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

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

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

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

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

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

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

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

Larry Williams adds:

Increase telomere length

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

Nov

8

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

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

Maybe some like this piece here as well:

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

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

Gyve Bones adds:

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

17. The Argument from Aesthetic Experience

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

You either see this one or you don't.

Alston Mabry writes:

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

Peter Saint-Andre offers:

A quote from Pablo Casals:

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

Nils Poertner responds:

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

Jeffrey Hirsch recalls:

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

Richard Owen wonders:

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

Laurence Glazier suggests:

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

Richard Owen admits:

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

Nils Poertner makes a connection:

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

Duncan Coker writes:

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

James Lackey expands:

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

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

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

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

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

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

Adams Grimes writes:

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

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

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

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

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

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

Gyve Bones harmonizes:

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

Bach - Sinfonia from Cantata BWV 29 | Netherlands Bach Society

Peter Saint-Andre responds:

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

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

Adam Grimes comments:

And he probably just dashed them off!

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

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

But perhaps I'm wrong on that.

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

Peter Saint-Andre writes:

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

Laurence Glazier writes:

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

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

Oct

29

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

November statistically significant seasonal bets

Nils Poertner suggests:

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

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

14

Heard a great quote today while driving and listening to SiriusXM. No clue who said it but enjoying this nugget of deliciousness from the meal for a lifetime:

Music is mathematics for the ears.

[Ed. note: attributed to Stockhausen]

Art Cooper writes:

Here's another, in a similar vein:

Geometry is frozen music.

Peter Saint-Andre chimes in:

Music is the hidden arithmetical exercise of a mind unconscious that it
is calculating. - Leibniz

Music is mathematics - and architecture is music in stone. - Ayn Rand

Andy Aiken builds on the theme:

Goethe said, "Architecture is frozen music".

There aren’t physical geometric forms, but many physical representations of geometry, such as in architecture.

Nils Poertner suggests:

Christopher Wolfgang Alexander

(born 4 October 1936 in Vienna, Austria)is a widely influential British-American architect and design theorist, and currently emeritus professor at the University of California, Berkeley. His theories about the nature of human-centered design have affected fields beyond architecture, including urban design, software, sociology and others.

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

5

Decoded neurofeedback

"Decoded Neurofeedback (DecNef) is the process of inducing knowledge in a subject by increasing neural activation in predetermined regions in the brain, such as the visual cortex. This is achieved by measuring neural activity in these regions via functional magnetic resonance imaging (FMRI), comparing this to the ideal pattern of neural activation in these regions (for the intended purpose), and giving subjects feedback on how close their current pattern of neural activity is to the ideal pattern. Without explicit knowledge of what they are supposed to be doing or thinking about, over time participants learn to induce this ideal pattern of neural activation. Corresponding to this, their 'knowledge' or way of thinking has been found to change accordingly."

Nils Poertner comments:

interesting. personally, I found cross-training v helpful - so honing skills in non-work areas, too. eg, professional trader in equity who has singing as hobby might benefit a lot from taking professional singing classes to open up new pathways (also re creativity in trading. also) - am happy to be the subordinate then whereas in trading there can be some unconscious resistance in learning from others.

Jeff Watson adds:

Ben K Green wrote a book called Horse Tradin'. The entire book is cross-training and might even be on Chair's list of recommended books. If it isn't on a list, then it should be.

James Lackey writes:

I've been working on this for a while now 3 years. Path duration outcome based on neuroscience. Dr Andrew Huberman my skate park guy is one of the best - Prof from Stanford University and Army special forces fan. It's fantastic to study.

Nils Poertner responds:

yes excellent. the thing is it can't be an endgaining experience, one needs to have an intrinsic interest in something /also the learning part. if ppl love skateboarding for the sake of skateboarding and hire a teacher to get better, this enthusiasm may carry over for trading (learning /improve process here as well) too.

(our whole culture is way too much based on endgaining - maybe not in all areas - but in a lot of them which is part of the problem why are in this situation altogether)

Sep

19

some comments on the big decline.

(1) it was a decline red in tooth and claw with bonds, stocks, and gold down.

(2) it was harbingered by the decline of 47 bucks in gold on thursday. a once in a decade decline. the main reason there was a status incongruence.

(3) everything bad for the US. the 70 billion of equipment left behind. and all the US could come up with was that the afghans and their allies aren't smart enuf to reverse engineer it.

(4) the foreigners have to decide on options expiration whether they should continue their US buying. with the US in decline from the withdrawal and everything related, why should they park in US.

(5) the status incongruence of the admission we killed 19 civilians in the drone strife. but this was clearly an attempt to come up with good talking points about our over the horizon capability. this was the only thing they coudn't blame on pele another incongruence.

(6) the incongruence of Milley worrying about sanity of Trump but not concerned about the montreal semantic test for other high officials. incongruence of no punishment for generals who worked for raytheon and g.d. but impeachment if pele did it.

(7) as the professor says, the market moves to every higher numbers with cataracts along the way.

Vic's twitter feed

Jeff Watson writes:

With many talking doom and gloom regarding the future, it is a noteworthy accomplishment for the S&P to only be 2.5% off it's ATH.

Mark Graham asks:

so what's next come monday?

Jeff Watson responds:

Who knows what the market is going to do on Monday. Who cares what I think? Who cares what anyone thinks should happen in the future? Why should one trust the "experts?" People might have an idea of what might happen, but that's about all it is. I can't count the times I've been perfectly convinced something would happen and it didn't. What happens tomorrow happens, and you will either be right or wrong. That's the case for every one of us. It doesn't matter what Chair, Bill, Sogi San, Larry, myself, or any other member of this list thinks the market is going to do. It only matters what you think and how you navigate the often treacherous currents, eddies and shoals of the markets. Opinions given for free, market tips, supposed insider info, etc are worth less than what you pay for them. LeFevre talked all about tips, and allowing others to do one's thinking for them, and his advice should be heeded.

Larry Williams joins in:

There are people I listen to intently; they have established they are worth listening to…some are on this list. An explanation of why a trader expects such and such to happen is not a “tip". Big difference.

Jeff Watson clarifies:

Since I obviously wiffed the ball in my previous reply, to clarify and make my point clear, the message was it's best to keep one's own counsel.

Larry Williams concurs:

Yup, listen to all but pull the trigger at the target you see.

Nils Poertner adds:

I think what is tricky for most people to understand that in many other parts of business life (in particular as an employee), one can do very well as long one is social enough, aggressive, disciplined enough, progressive etc… or went to the right school…

whereas maneuvering mkts (long-term - over decades) by oneself requires a different mindset altogether - and trading even more so than pure investing

Aug

31

I don't believe in psychology, I believe in good moves!
- Bobby Fischer

Met top player in chess (IM level), who started trading in 2014 and has done very well for himself. Loved his attitude re learning.

Chess is wonderful training ground as ppl tend to look at things more objectively.
Think about it - to be good at chess player- one has to become very honest with regards to oneself. Self-deception is not going to work for long.

And empathy means real empathy (understanding moves of others, not projecting own fantasies which modern world is all about). Kids got to learn chess more.

Michael Cook agrees:

Couldn’t agree more!

I think there are a good few other parallels. If we take a game in a series as a trade, eg sometimes you can see your position degrading over time and sometimes something you never saw coming, in a move or two, completely destroys you. If it’s obvious to you, it is highly likely it is obvious to your opponent (the lack of value of first order thinking) etc etc.

Nils Poertner seconds:

agree. modern psychology is overrated and chess (and other board games) under-rated for the human mind.

so many ppl have strong views about this and that (eg academic world). and that is fine for me, but in chess one is getting more or less direct feedback within a few minutes or hours.

An enjoyable few minutes with one of the best:

Magnus Carlsen's Mind-Blowing Memory! World Chess Champion tested

Aug

24

One of the things that make me a poor manager but perhaps a leader mindset is to me pointing out problems with out a proper solution seems, well, silly.

At the trading desk here in Weston with Mr Vic, the one thing that caught my eye quickly was the FTSE and it's low prices. I have no clue so google landed the link below. any ideas?

Has the FTSE 100 really performed as badly this century as it appears?

Nils Poertner muses:

good spot - many other indices are rich (and firms, too, eg. Apple)?

long FTSE is probably the next big thing for Cathy Woods - am mentioning her name since she gets a lot of bad press in Europe but her calls have been quite good in last few yrs.

Paul O'Leary is skeptical:

FTSE an unlikely place for Cathie Wood to find the hyper growth she looks for.

A reader offers a critique:

The author shoots himself in the foot when he says if you bought all the companies in FTSE 100 in 2001 this is what you would have got…the constituents have changed. I skimmed the rest because it was clear the author didn't really know what was going on.

James Lackey clarifies:

Thank you paul, my apologies to all. My better question is what is wrong with English stocks or is that a bad question, i.e., nothing is wrong? I've lost so much money buying laggards and value, specs forgive me.

Big Al theorizes:

Here's a theory: The Digital Revolution has been one of the greatest expansions of human activity/productivity/wealth in history and it has been centered in the US, as have the stocks of the companies surviving the competition for doing the revolutionizing. The winners have been added to indices, and the losers dropped. This equity/index mechanism has far outperformed all others.

James Lackey responds:

Big, that is what I needed! I was lost (did not get the joke) and as usual was the last to know.

Stefan Jovanovich provides an historical perspective:

Big Al nails it, once again. The British invention of industrial production achieved the same startling results; within a third of a century, the center of the world's low-cost production of fabrics shifted from the hand-looms of India to the "infernal machinery" of the Midlands.

Aug

13

Trouble ahead?

August 13, 2021 | Leave a Comment

Jeff Watson writes:
The market weathermen, self described sage like realists, always see trouble on the horizon and are compelled to give all knowing, logical reasons the market will get hit. Sometimes even invoking "science." To them the pressure is dropping hard, the seas are building, and we're about to get hit with sustained gale force winds. It's always doom and gloom to them. They want the little guy to get scared, pitch his position and make the broker money, rinse and repeat. Meanwhile, Steve provides some perspective and his chart lists 49 reasons for the market to get hit…while the S&P went up 35X during that time. Unfortunately the brokers don't want their clients looking at charts like this or reading Dimson.

James Lackey agrees:

Jeff says what we all learned the hard way. The market in stocks is an engine designed to go up. Any business decisions based otherwise are in between risk-based conservative - which in most cases is a good thing - and ruinous, as the vigorish will grind you to a long-term guaranteed loser.

Michael Cook responds:

I broadly agree with this but let’s not take it as written on tablets of stone.

One of the nastiest human failings in my opinion is recency bias and for investors in US stocks, an entire career (unless a very seasoned investor indeed) has been a basic bull market tempered by the bear markets of 1997, 2002 and 2008 and whatever the hell March last year qualifies as. Recency bias on steroids.

But it doesn’t mean it must always be like that. Just ask eg the investors in the Japanese stock market 40 years ago who pretty much are still waiting to be making money now…

Leo Jia adds:

Even if there is a sharp drop, it will only be shallow and short term. This is not a big bubble and there is no euphoria yet. If one suspects big money are selling, the question is what is the alternative to the US market. Perhaps the worry will be legitimate when Turkey and China become out of any concerns.

Nils Poertner writes:

what makes the difference between folks who are in the market - and trade successfully in the long-term and those who don't is often the acquisition of implicit knowledge. Things we know are true on some level, and that we need to experience personally many times to know that they are true - not in the absolute sense but more intuitively - and percentage-wise.

we live in a very explicit world now everything needs to be spelled out. but the "absense" of something is a better guide than the appearance of an event.

an example would be that SPX drops by 3pc one one day (after months of overheating) - AND the financial press is somwheat quiet aout the drop. as long as they are loud…one can normally relax a bit more.

not to be confused with long-term investing. eg, some of my English friends who bought prime real estate in the 90s in London, and levered up every year with new flats, are all fabulously rich now. was it being lucky or smart? who knows? implicit knowledge is underrated - was my point to say.

Leo Jia comments:

Even if there is a sharp drop, it will only be shallow and short term. This is not a big bubble and there is no euphoria yet. If one suspects big money are selling, the question is what is the alternative to the US market. Perhaps the worry will be legitimate when Turkey and China become out of any concerns.

Duncan Coker writes:

Agreed, it's worth noting that the 00's were the worst decade since the 30's for stocks. I'd propose there was a bearish recency bias going on during the 2010s.

I liked the video about carnival scams. I recall "winning" an album at age 13 from a darts game on the boardwalk at Asbury Park, NJ. No doubt I overpaid. It was a vinyl from a band I had never heard of at the time called the The Allman Brothers which forever changed my life in music.

Aug

10

Leo Jia asks:

Any thoughts on the prospect of Turkish economy? Is Turkey a good buying opportunity now for holding 5 years?

Larry Williams clarifies:

Is the Turkish economy about the same as the Turkish stock market?

Some references:

The CIA World Factbook: Turkey/economy

iShares MSCI Turkey ETF (symbol: TUR)

Nils Poertner responds:

as we know from other EM countries, listed equity can be really a good play - even with fx tanking. see Latam and many Asian countries. a vast "play" on the USD (as lots of banks are financed in USD - and EUR) and a bet on the faith in the current regime. cap controls an issue.

understanding EM requires study of previous bull-and bear mtks for EM mkts itself- doing the tedious work - building implicit knowledge over time, cycles, mass psychology, whateever it takes - it is worth it, Jia  and a lot of fun - as one learns from it and can share with others.

John Floyd writes:

Larry has somewhat taken the words out of my mouth on the economy and stocks in Turkey.  I would expand on that somewhat given the unorthodox nature of the current Turkish administration and the expanding Taliban presence and thus likely growing chance of further friction with the US, following recent and historical comments by the head of Turkey on the topic.

As economy and FX it does sure have the potential to get things right and turn for the better.  But, the odds of that happening and the headwinds against it seem rather large at the moment.  The current path is one of further unorthodoxy in policy and leadership combined with expanding debt that will likely lead to a default or restructuring and FX going from 8.6 north of 10.

Reserves are tenuous at best, local capital outflows a perennial risk, and the need to continue to pump up the economy through credit, tourism headwinds given COVID, current account deficit of 5%, etc…

Given the circa near -20% returns for the Turkish indices there may be some gems within the them with careful selection, as is needed in China given the P-like oligarch crackdown there as the aim by X is to stay in power for life and control data and tech to do so.

James Lackey suggests:

As John clearly said the news risk..what about the derivative of the big Mac index and or the hot dog stand.

If I'm forced to value a stock on foreign exchange correctly, I'd go to Turkey, rent a flat, and open a food stand and sell Harley Davidson T Shirts. The McDs index of brands is HOG. I can sell merchandise like a roadie at a show and let's use the most recognized brands in the world.

Mercedes
Toyota
Harley 

Sell shirts for 6 weeks and my guess is you're going to learn exactly what's going on.

Larry Williams adds:

Bring lots of NIKE stuff to sell.

Jayson Pifer provides local insight:

Fwiw, I can offer some boots on the ground perspective.  I spend a few weeks a year in Turkey and have done so for the past 15 years, missing last summer due to covid however please take the below comments with an appropriate amount of salt.  Each time the conversations come up on investing in real estate there.  And each year, I come away boggled at the lack of progress and steadfast in keeping money away.

If I were to hazard why the Turkish economy isn't more than it could be, I would suggest that it is the general absence of faith in any of the government constructs.  Without commenting much on their current 'populist' leadership, I mean to say that the average person has little faith in the police, courts, and laws and work around or without them.  (plied with a bit of scotch and I could relate some Keeleyesque tales of my encounters there with these systems :) )

Absent true legal financial recourse, trust stays in small personal circles that are difficult and slow to grow and this has various and deep side effects.  As an example, if one were to meet a VP of a bank in the US or UK, you might assume they had interviewed for the role from a range of candidates and/or had been in the role for a while and knew the business and their area. One would likely be correct in those assumptions.  In Turkey, you do not have that assurance as they will probably have gotten their role through a circle of acquaintances.  They may be qualified or not, but they are almost certainly in somebody's inner circle.

The low trust and inner circle workings are seen in both the political and business environments.  When new leadership comes in, it is typical and considered normal to bring in their trusted group, reward them for their loyalty and displace anyone they do not trust.  Partisanship there compounds the issue, similar to the partisan wars in Google but with more serious consequences if one supports an out of favor party (eg. non-AKP). 

Wrt the stock market, my impression is that it's a lottery.  There is money to be made, for sure, by smarter and luckier people than me.  But the risks are real.

I don't have numbers, but my anecdata shows a worsening brain drain with talented turks leaving the country and those that have returned are struggling.

Taking a further step back for the five year horizon posed originally, my impression like Mr. Floyd's is that Turkey has headwinds and not much to stop it from falling.  My questions are what could change to reverse this trend?  A change in leadership is often cited, but it would not create an overnight increase in trust.  I could barely speculate how long it might take, but would guess decades if all went well.  While it's not exactly fair and I'm out of my historical depth, I compare it with Iran when it went down the path of Islamic leadership in '79.  How will Turkey not fall into the same trap?

Theodosis Athanasiadis comments:

Historically real exchange rates have been a good predictor of emerging market economies and equities through the mechanism of cheap exports, labor, external investments etc. they are a form of valuation for the whole economy. I see them currently at multi-year lows which has been bullish for equities in Turkish lira for the long term.

John Floyd responds

Yes, on real rates in Turkey that is true and can be seen in the standard OECD PPP, but that has been like that for ages and you need the positive catalyst for change…..move to orthodoxy one way or another….monetary, fiscal, and geopolitics…should gradually grow confidence in varying degrees and speeds and drive capital flows in a positive fashion if it occurs and given valuations you can find some gems I am sure…perhaps on well capitalized companies that can benefit from the inflows and cheaper FX…plenty of meals for a lifetime if you look at Argy, Venny, Russia, SA, Zimbabwe, etc…

If anyone is bored, I did an interview on Turkey last August - it somehow has gotten just under 20k views that highlights both contemporaneous points at the time and some of these longer term issues.

Alex Forshaw writes:

Erdogan is in bed with the asset heavy industrial elite of Turkey… this is China but with very ineffective capital controls (mainland Chinese stock performance has been terrible for 12+ years btw, altho indices don't include juicy dividend yields). They're all massively overleveraged, and basically long and wrong The only way is devaluation / financial repression (forcing inflation >> cost of capital) until they deleverage… but Erdogan can't really let them deleverage because the economy would implode, Turkey is poor, the opposition is highly organized with high recourse to violence (Kurds), so Erdogan would be dead. So they just keep building and building, but who's going to come?

Seems to me that Turkey is uninvestable until Erdogan is gone…but he's a de facto dictator…so he can't go.

Leo Jia offers more data:

Turkey housing index

New home sales are down lately, which may be caused by the pandemic:
Turkey: new home sales

But existing home sales shot up sharply in recent years:
Turkey: existing home sales

Jul

28

it is one thing to lament how much rigidity we see from the progressiveness - and it is another thing how much un-necessary rigidity we are subject to.    eg. self-sabotage is another way of saying it - in particular in trading. see also Brett Steenbarger on it.
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