Jan

31

Jensen on Galton

January 31, 2023 | Leave a Comment

Francis Galton

GALTON, FRANCIS (1822-1911) If any figure in the history of the behavioral sciences can be characterized as an original genius, it is Sir Francis Galton. He never held an academic appointment, yet he is rightfully claimed to be the founding father of differential psychology, of psychometrics, and of behavioral genetics. His creative efforts presaged almostall of the major theoretical issues under investigation in these fields in the twentieth century. Few scientists have had such wide-ranging andlasting impact.

Also:

Galton’s Legacy to Research on Intelligence

Jan

30

there has been a remarkable increase in wealth so far in 2023. jan S&P is up 3%, long term bonds are up, gold is up 11%, nikkei up 10%, dax up 7%, copper up 10%, bitcoin up 50%, sugar up 10%.

perhaps this is greatest increase in wealth ever. note that jan 2023 ends with five consecutive 20 day highs in a row. and to top it off regulatory capture for 2024 is ascending with the guy now leading in the odds. perhaps no consilience that big guy is up 50% in odds.

there will be talk soon about Jan barometer. of course it will be untested. problem with it is that in 2009, jan sp was down big. the next 11 months were up 55%. conversely in 2001 big reverse from jan S&P up 5% to down 25% for the year.

it can't go up steadily, or the public will not be wrong footed. indeed the regularities call for a down feb after a dipsey doodle in the first tow weeks of Jan.

putting it all together i find that when jan S&P is up, the average for next 11 months is up 6%. similarly when S&P is down first month, the average change is up 6%. using bonds as a barometer we find similarly random moves to end of year.

all results are from 1996 to present. there is also the problem of ever-changing cycles and the low power of any study with 26 meager observations.

Vic's twitter feed

Jan

26

The first chart needs mouseover code, but otherwise…

An Analysis of Deaths in U.S. National Parks

Charles Sorkin comments:

Before I even scrolled down to the horizontal bar chart, my guess for most likely cause of death was "car accident." The bubbles with the highest death frequency are the ones with extremely high road traffic, such as Yosemite, Great Smoky Mountain NP, and the Blue Ridge Parkway. I'd expected that the super-remote parks, like North Cascades and Denali would be more death-prone, but perhaps visitors are far more prepared for contingencies.

H. Humbert writes:

A man seems to have killed himself or slipped into one of the boiling geysers in Yellowstone this past summer. His foot surfaced a few months ago.

Having hiked pretty extensively in Yellowstone, I can attest to there being more danger from falls than grizzly bears. You can be hiking along and all of a sudden find yourself on a cliff.

My biggest fears when hiking have been lightning (when hiking on a ridge with a quick moving summer storm rolling in) and trees — as in being in a lodge pole pine forest trying to get out and over much deadfall and the wind picks up.

A few of us were wandering far off trail, exploring mud pots and geysers. All of a sudden the ground started sinking under me. Fortunately I reacted quickly and alerted the rest of the group. That was way scarier than the wet grizzly paw print we came upon one time.

Most park visitors don’t venture far off the beaten path which is why drownings and falls are the leading causes of death. Those who do venture out tend to be more prepared and knowledgeable. Most of the time.

There is an older gentleman who does a lot of off-trail hiking in Yellowstone to see wildlife and he records his hikes. He seems to have mastered the art (and science) of wildlife spotting while keeping himself safe.

Shortly after he did this hike, he did another where he had to make himself scarce from two grizzlies. I learned a lot by watching what he did to stay out of harm's way.

Zubin Al Genubi connects:

The category Death by GPS has some lessons for quants who don't look up and around.

Big Al adds:

An interesting fist-person read:

‘That Girl is Going to Get Herself Killed’

There is risk in the wilderness — even in mild adventures — and yet we still seek to reason with it, to assign order to it, to control it, and to tempt it.

H. Humbert responds:

Thanks for the read, Al. It is spot on. I would add that even when we are careful and respectful and experienced, anything can happen. In the wild, especially a place like Yellowstone, change is constant so what may have been safe last year may not be so stable this year. Even for Stan Mills who is super experienced, respectful, and cautious, he found himself between two grizzly bears. As he pointed out in his video on the incident (not the one I linked to), when two bears meet, chaos can ensue and he would have been right in the middle of that mix if not for his swift action and a whole lot of luck. For those of us bit by the wild bug, we do tempt it. Because hiking in these places offers a “high” that is almost impossible to obtain any other way because when you are in the wild you have to be so aware of your surroundings that there can be no space in your head for anything else, and you feel and hear and see more of everything. I call it being in the complete and total present tense. But I have no illusions about trying to order or reason with it.

Jan

24

>(1) i was often beaten but i now ask myself if each of the defeats which fortune did not spare me was not inflicted at the very moment that it was necessary. (2) if i have sometimes beaten a Tilden or Borotra, it is because i have willed with all my forces to win, mainly and necessarily a meticulous preparation.

(3) on the court a player should always be on his toes. one should never face the net. (4) It is not a rapid movement which allows of imparting a lot of speed to the ball but a long and supple movement carefully executed by taking all the necessary time.

(5) one must be patient and convinced that serious and conscientious work will always give the result which ca be reasonably hoped for. progress for me meant placing my feet better and more rapidly. that made me 15 points a game better.

(6) i never play a stroke standing still but always by drawing nearer to the ball and going beyond the point where I struck it. (7) never be immobile but take up a good position immediately for playing the next stoke. (8) "stay calm above all" - Lacoste on Tennis.

Vic's twitter feed

Jan

18

prob of bicyclist winning rises to 21%.

Logic of Belief Revision

with all the talk about how everyone at the fed is on the same page and is locked into raising rates, the real determinant of their activity will be how the bicyclist is doing and what will help him. apparently they feel that hawkish is good for him now with the S&P harmonious.

The investment biker joins el erian and Mr. Wonderful in that special category of usefuls.

the good news for S&P is that the Ray-Ban bicyclist has advanced to 22.5 % in prob of winning. as mentioned, the more he's in trouble the better he gets, like the S&P.

very good news for the bicyclist: He shows that he has at least 12 more years of life expectancy by getting up from floor without using hands or floor or fixed object.

everything at 1-month high since dec 2: S&P, crude, bonds, gold. fortunately, the Fed is always 3 months behind the form. soybeans at 6 month high also.

Bullard: "I told you so":

Simon Wilding The Policemans Song Pirates of Penzance

Huey Calloway, The Good Old Boys: got to get the herd to dodge before the others get their first and lower the price:

Jim Rogers reveals the 'biggest risk' in 2023, as well as 'cheapest assets'

Vic's twitter feed

Jan

14

how many disparate crucial things have been withheld routinely until after elections, starting with Pfizer having a vaccine before 2000, and the son, and this and so may others. apparently this is not ephemeral as prez prob down by 4%.

if only there was as much grief when a businessman who has enriched the masses with beneficial products passes away, rather than Hollywood stars or football players, the world would be a better place.

Schelling on microbehavior and seating arrangements:

Micromotives and Macrobehavior — Thomas Schelling on the Locks and Meshes of Economics

Have you ever paid attention to the seating arrangements at different venues? People are willing to pay good money, for instance, for front row seats at a concert hall, theater, or sporting arena. In fact, students pay even more money to attend college. Yet when it comes to their seating patterns, many seem to do just the opposite, congregating instead around the back of their lecture hall. It goes without saying that different people apply different rules to different settings.

are the seating arrangements like behavior of speculators deciding when to bring prices up to the next ten level? can one predict based on the behavior? when did specs decide from the seating at the 70 level open to seat themselves above the professor at the round?

tremendous increase in world wealth recently - oil, grains, stocks, bonds at one-month highs - some close to 6-month high - the Fed is always 3 months behind the form. talking about fight against inflation. what's the truth? all political.

Vic's twitter feed

Jan

10

Warnings galore

January 10, 2023 | 1 Comment

warnings galore amid predictions of rates above 5%. as the old timer said, when the brokerage houses are most bearish, that is time for "professor". one wouldn't be surprised is sogi is able to drink some Kona today or tomorrow.

with unanimous predictions of drastic decline in rates, bonds at 50-day high.

"It is only by buying when surface conditions show stocks to be unattractive and by selling when surface conditions are attractive to buyers that one may graduate from the ranks of the lambs." Beating the Stock Market by McNeil, 1926.

lancet study says for adult males above 60, chances of dying is 0.00013 if you dont take vaccine. cox hazard ratio non-significant.

the bed rock is killing inflation regardless of the 1929 where they killed everything.

the Gray Lady is concerned that rate increases will hurt their man in 2024 and be inversely correlated with income of persons.

Vic's twitter feed

Jan

2

I do not focus on foreign currencies in my trading. And there are people here, such as Mr. John Floyd, who are far more knowledgeable about FX. So some of you may find these thoughts a bit simplistic; keep in mind I am an amateur!

I believe that a factor that makes a country's currency attractive to investors is the success (or lack thereof) that foreign investors have investing in the country in question. We can gauge this success by using ETF's that specialize in particular countries. For example SPY measures the performance of stock investors in the US, while EZU tracks investing in Eurozone stock markets.

What do we see? In recent months EZU has been performing better than SPY. For example in the last 6 months of 2022 SPY had a total return of 2.03% and EZU 9.56%. For 2022 as a whole SPY -18.38% and EZU -16.67%, two ugly numbers, but EZU did better. (These numbers will change between now and Dec 31, but not by much).

In my view this kind of comparison (especially given that Europe did poorly the previous few years, so it's a remarkable turnaround) will attract additional US investors to Europe, strengthening the currency. That is why I am bullish on EURUSD for the month of January 2023.

Bud Conrad responds:

Your logic is that if the stock market of a country rises, the currency of that country will rise in exchange rate. In the early days of this Speclist, the chair would ask me if I had "counted" the historical experience, which you cite for the last six months and year, but usually you need something like three cycles of inflection to get confidence.

The more usual comparison for currency strength are the Interest Rate Parity, using the futures market expected exchange rate and the difference in Interest rates.

And there the International Fisher Effect, also described here.

Often international traders look at trade balances for the country that has a trade surplus to be more attractive so the currency might rise. Trade surpluses mean they are a lender and not in debt to other countries. The US is the world's largest debtor, but the currency has been doing well.

John Floyd writes:

Doc makes the broadest, cleanest, and most accurate point about what drives currencies: what are expectations for return by BOTH domestic and foreign participants, and how does that drive investment flows into equities, FI, FDI, etc, which shows up in the BOP and Capital Account - on the other side of the ledge is the Current Account and the Errors and Omissions.

Admittedly I don’t know much about currencies and this is the area I know least about, but flow data is well researched and document by many at banks, independent research firms, IIF, IMF, BIS, etc. One challenge is it is often very much lagged, so Doc’s idea of looking at actual market instruments makes sense, and this is often particularly useful for emerging markets.

Capital account flows can fund a current account deficit for a very long period of time. Look at the US now or look at the Asian Currencies pre the crisis: errors and omissions become important given capital flight, particularly EM. Think Russia pre ’98 and Swiss bank accounts, etc.

As Doc well knows infinitely better than me, we need some more data and this can all be tested.

More broadly, outside of equity flows, Bud’s point of interest differentials will drive some capital flows. Also consider FDI from Europe to North America to diversify dependence on European energy costs and to friend shore manufacturing capacity.

And I would be remiss to not mention Italy (sorry Doc). Italy is in a Euro straightjacket that not even Houdini could get of. ECB is tightening with inflation at 10%, Italy 150% debt to GDP, Italian per capita GDP is barely higher than when joined Euro in 1999, Italy needs circa $250 billion in funding in 2023, 10 year yields in Italy up from 1 to 4.5%, all Italy issuance past few years was essentially bought by the ECB. This is not politically sustainable. Just look at the evolution of recent German politics. The ECB’s TPI is there but is intended for temporary dislocations and will require Italian political concessions. Oh and Italy is 10x Greece and the world’s 3rd largest sovereign debt market behind the US and Japan.

Read the full discussion here with additional contributors and charts.

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