Apr

28

This principle outlines the idea that markets change their behaviour. For example:

- the 13th business day of the month made money for 5 years ( lost for some days in the year, but overall ended the year profitable)

then the market changes and

- the same 13th business day of the month loses money for 5 years ( won for some days in the year, but overall ended the year at a loss)

If you tested the data set for the last 10 years as a single block, (5 years losing + 5 years winning) the regularity would completely cancel out. The only thing I can think of is testing data sets in chunks of say 1 year, but over 10 years. and avoiding large blocks in general. Any suggestions?

Steve Ellison writes:

I agree with the idea of shortening the lookback period. I remember the Chair suggesting 60 days as a typical lookback period, but obviously you would need a much longer lookback for an event that only occurred once per month.

I would also suggest assessing, if there really is an edge here, why? In this example, which market participants have reasons to sell (buy) on the 11th and 12th days of the month that override price sensitivity, such that others come in to buy (sell) on the 13th day? There is a lot more noise than signal in market price movements, and some of the noise may appear statistically significant if you torture the data long enough, but without an underlying reason, a regularity is unlikely to continue.

Jeffrey Hirsch responds:

The 11th and 12th trading days of the month – what we refer to in the Almanac as the mid-Month spike is driven by automatic payroll deductions bi-monthly or every 2 weeks into 401Ks and other retirement accounts where fund managers are required by law to invest. I discussed this with Steve Eisman on his podcast, The Real Eisman Playbook, recently where he comes in and helps me prove the point. It starts at the 19-minute mark and runs for about 2 minutes.

20:37: mutual funds are only allowed to have a certain amount of cash. So generally, let's say 5%. They're not allowed to have more than 5%. So, if all of a sudden people are putting money in because of their 401k, they got to buy. It's not optional.

Asindu Drileba adds:

I was playing with Google's decision tree Python library called YDF. (it's shockingly easy to use)

I simply used days of the month as features against, up or down days. Mid month dates showed very strong regularities (some up to 60% up days). I never understood why they occurred, until I remembered Mr. Hirsch talking about payrolls hitting brokerage accounts. What's different is that I found these in crypto. But it was harder to trade than I thought.

Larry R Williams writes:

It's been that way for years: the eleventh trading day of the month in stocks is usually a rally day, going way back to the 1980s when I first started trading this.

Apr

27

Since Americans have been messing with the rest of the world ever since 1775 (our first act of rebellion was to invade Quebec), could we begin looking for historical parallels from our own history before we get to the Turning Points view? The first reference to The Art of War in U.S. military literature does not appear until the 1939 article in U.S. Naval Institute Proceedings (“The Constancy of Fundamental Military Considerations”). I realize that it is now one of the fundamental texts that is part of the military coursework, but those of us who were raised in the textbook business have learned to appreciate how little of what people actually do and think about money and power can be traced back to what they read in school. The List may want to consider looking back to the specifics of our country's history in the 1850s for a useful parallel to current events.

Viewed through that lens, President Trump seems to be following very closely Millard Fillmore's Whig plan to divorce the United States from the opinions of the rest of the "civilized" world and have our tariffs answer all questions about the price of the dollar in foreign exchange. By 1851 the United States of America was the world's largest exporter of what were considered to be the world's two most important commodities: gold and cotton fiber. In 1852 you had Admiral Perry setting out for Japan, the French being told to surrender all claims to Hawaii (they had occupied Honolulu in 1849), Taylor's Clayton-Bulwer Treaty being vigorously enforced, and a pro forma apology for the failure of the second Narciso López Filibuster expedition to Cuba was combined with a pointed declaration to both Britain and France by Secretary of State Edward Everett that Cuba was "almost essential" to U.S. safety. Central Europe did engage Americans public attention; Kossuth was invited to come and address Congress. But it was not at all comparable to the Zelensky show under the Biden Administration; the Europeans, and the Austrians in particular, were told that the U.S. had no interest at all - financial or otherwise - in Central European affairs.

There is only one reason this parallel does not fit rather neatly. A decade later the U.S. would be in a Civil War. Fillmore, Pierce and Buchanan all have to be blamed for it by all the people who get paid to look backwards. No doubt the same future textbooks that will look to Sun Tzu for wisdom will be grading Donald J. Trump with the same terrible marks that the first New Yorker President has gotten. But it does help to remember that during Sun Tzu’s traditional lifetime (c. 544–496 BC, late Spring and Autumn period), "the war" he writes about was entirely about the civil war among the vassal states of Zhou. There were no "foreign" wars during this period according to the records of the Zuo Zhuan.

(Correction: Martin Van Buren was the first New Yorker to become President. Millard Fillmore was the second.)

Apr

23

Good book to re-read. Are all those crisis meetings are just choreography? In order to "sell" something unpopular (a war) to the managed masses in the West (or whatever system there is in Iran respectively). Humanitarian aid talks often precede wars as well.

Jeffrey Hirsch offers:

Art of the Deal. Seasonality edition

Nils Poertner responds:

Top notch analysis! (I'm wondering though, we in the West value transactions and deal making a lot - whereas in some countries, which are more religious…they may rather die than surrender).

Steve Ellison writes:

I just borrowed The Art of the Deal from the library because the Chair's brother says that the President's thinking process is all laid out in that book, and one ought not to react to his statements at face value because they are negotiating positions.

Jeffrey Hirsch adds:

Ever since Liberation day and the tariff tumble last year have had the President’s truth social posts as the only lock screen alert coming through my phone.

Kiran Kaur comments:

Free markets used to be a natural hand that would correct markets when they were inflated, avoiding catastrophes. But now we have the hand of government that removes the natural corrections that are supposed to occur and take out zombie companies. We have a few actors taking meetings behind closed doors to set the cycles, using regulation as a key mechanism. its nice for us because we are close to the liquidity that sets the rest of the markets.. Have you read Edward Chancellor's The Price of Time?

Asindu Drileba writes:

One opinion I heard recently is that, this conflict is actually doing exactly what "they" want. The constant talk of colonising Canada & previous "take over" of Venezuela is because these are oil rich countries. The conspiracy is as follows:

Shut down the strait.
Make Middle Eastern oil suffer logistics issues (price oil higher?)
Oil from Americas moved ok (priced cheaper?)
Demand for Americas oil increases. Subsequently, demand for USD also increases.
Finally weaken & decapitate BRICS.

Does this make sense? Or is it imaginary 5D chess?

Kiran Kaur responds:

Absolutely the most sane analysis i can imagine. Especially after reading the blueprint of the genius act and the user's guide to global trade. Increasing demand for us debt, oil, and the dollar, while decreasing dependencies on global players are agendas directly mentioned in both of those papers.

Apr

21

2014 NYT reports about the Professor Ellen Langer experiment on how the mindset affects aging (or can reverse it).

Back in the 1980s, Senior citizens (some of them on crutches) were invited into a hotel with furniture /music reminding them at the time they were young - and they weren't allowed to speak about illnesses or their challenges. And their ailments improved, some started walking more effortlessly / dancing etc. Interesting anomaly (in this case how the mind affects the body and vice versa).

In trading we are looking for anomalies as well (coz there is the juice!!, whereas ordinary folks tend to brush off anomalies as a mistake.)

Apr

20

The Royal Navy is one of the themes of the list, not least because of the Chair's love of the Aubrey-Maturin novels by Patrick O'Brian.

I have posted about a podcast I enjoy, The Rest Is History, and they did a nice three-parter on the Battle of Trafalgar. The newest information for me was the first episode, being the story of how the Royal Navy became the amazing fighting force that it was by 1805.

The episodes:

243. Trafalgar: A World at War

244. Trafalgar: Countdown to Annihilation

245. Trafalgar: Victory

Apr

18

How Costly Is Permitting in Housing Development?
Evan Soltas, Jonathan Gruber
February 2026

Permitting costs are widely cited, but little analyzed, as a key burden on housing development in leading U.S. cities. We measure them using an implicit market for “ready-to-issue” permits in Los Angeles, where landowners can prepay permitting costs and sell pre-approved land to developers at a premium. Using a repeat-listing difference-in-differences estimator, we find developers pay 50 percent more ($48 per square foot) for pre-approved land. Comparing similar proposed developments, pre-approval raises the probability of completing construction within four years of site acquisition by 10 percentage points (30 percent). Permitting can explain one third of the gap in Los Angeles between home prices and construction costs.

Apr

17

"While you may make many mistakes," J. P. Morgan's father advised his son,"never be a bear on your country or you will surely go broke."

Apr

16

In 2007 some pairs trades moved 25 standard deviations from their historical norms. If markets were truly random walks, such events would have had miniscule probabilities of ever occurring even had the stock market been in existence since the Big Bang.

As Augustin Lebron said in his excellent book The Laws of Trading, the more market participants assume some event can't happen, the more certain it becomes that the event will happen. Remember when house prices never went down?

William Huggins responds:

that 25 st devs quip just shows you what the spread of their calibration set was, and where the real problem was imo - assuming recent stability was some established fact (one of the problems with exponential weight decay)

Nils Poertner recalls:

Italian friend of mine (big hitter at US bank) had a burn out in 2007, and his wife checked him into a monastery (ora and labora Benedectiner type). Ora is contemplative - it is receiving (not thinking, thinking, thinking) it is what we don't know. Whether you have "AI" or "science models" it is like standing in a room full of mirrors and putting more mirrors into them and thinking one knows the future.

William Huggins writes:

My favourite way out of echo chambering one's self (and to avoid the lure of gurus as this august list taught me forever ago) comes from 17th century Japanese poet Matsuo Basho: "Do not seek to follow in the footsteps of the wise. Seek what they sought". In any competitive domain (markets, chess, etc), you have to learn how to think like a master rather than proverbially copying some smart kid's homework.

An overreliance on historical data instead of trying to imagine what could (quite reasonably) be, is one of the contributing factors that led the 2007/8 crash. In their August 2007 conference call (see pg 21), AIG's Joe Cassano told analysts (regarding their CDS business), "it is hard for us, and without being flippant, to even see a scenario within any realm of reason that would see us losing $1 in any of those transactions".

25 st devs indeed…

Larry R Williams adds:

People talking and over talking their book is a massive clue. Like tom lee this and last year.

Apr

14

Two new trends will likely emerge from the Iranian caper: renewable energy and nuclear power. Smart money will aggressively pursue renewable energy assets (including derivatives). Sovereigns will likely pursue nuclear power assets if they can afford the price tags.

Humbert A. responds:

An interesting thesis, The Economist had an interesting article in their 3/21/26 edition entitled "Burnout" of most interest in your line of thinking was a graph that showed Daily Wholesale electricity prices in 2026 in euros per MWh for France Italy Germany and Spain. The Economist posited Spain and Frances wholesale prices adjusted to the downside more quickly than Germany or Italy based on investments they had made in renewables and diversifying their sources of electricity. Your thesis seems to follow a general trend of dis-integration we have seen for some years now with supply chains. How far up and down stream can we disintegrate? Also BTW what does NFW mean I am assuming Not for web but I am new here.

Henry Gifford writes:

I have heard a lot about investing in renewable energy, but am not clear on how to do it. For actual real renewables I think of hydroelectric (dams with generators turned by the water) and geothermal (heat from hot springs generating electricity or heating buildings, not electricity powered equipment that cools the groundwater to heat a building, which the federal government treats as a form of renewable energy despite it using electricity) and solar panels and wind turbines.

No new rivers are likely to be discovered, and here in the US dams are being removed at a steady and fairly rapid clip to help the fish, etc. No new hot springs are likely to be discovered, as the best way to find them is to check road maps for places with the words “hot springs” as part of the name.

Solar panels can heat water to heat a building or heat water for showers and faucets, but many of them don’t work, especially here in the US, as the technical skills just don’t exist. In Europe they are sold as part of a boiler system, and come complete with electronics and pipe connections and clear instructions. Many of them work. They are installed by local plumbers and manufactured by giant companies such as Viessman and Buderis, who also sell boilers here in the US, but without the solar components, due to lack of demand and lack of expertise. Outside of the US and Europe these solar systems are virtually unknown in some areas, and super popular in other areas, especially areas where outdoor temperatures do not drop below the freezing temperature of water.

Solar panels that produce electricity are of course popular here in the US. The last time there was a market price for those systems, about 15 years ago, the systems cost $9.00 per summer noon watt of capacity. This is for the whole system, including panels, mounting racks, electronics to convert the DC the panels produce to AC at the correct voltage and phase to connect to the grid, wires, labor, permits, etc. If angled at latitude degrees from horizontal, oriented South, and never shaded, these systems produce, on an annual basis, an amount of electricity equal to about 1,200 times what they produce at noon during the summer. Sure, Arizona gets a lot of sun, but the panels don’t like the high temperature there. Seattle gets less sun, but the panels like the temperature there better. Thus for all the lower 48 states the output is fairly close to the 1,200 noon-hour equivalent. After losses in the wires and the electronics, one watt of capacity produces about 1,000 watt-hours of electricity. That 1,000 watt-hours is called a kilowatt hour by the utility company, and sold for an average of $0.09 at the time the systems sold for $9.00/watt. This makes the simple payback (no allowance for maintenance, change of value of electricity, change of value of money, etc.) the result of dividing $9.00 by $0.09. As this is very politically incorrect division, I will leave that to others. But, the payback is frustratingly long, especially as the panels only last for 20 to 25 years and start degrading the day they are manufactured, and the electronics might only last half that long.

One might wonder; if the payback is so terrible, why are they so popular? Because you are paying for them. And, because you are paying for them, very few are installed facing exactly South, angled at latitude degrees from horizontal, and never shaded, which of course makes the payback much longer than the math above implies. Even a small bit of shading, such as from a telephone wire, lowers the voltage of all the panels in an array, and can damage the panels, although the in-laws won’t notice and you will still pay the same amount.

The crazy long payback is why you don’t see them installed on roofs of warehouses and big box stores, where they can be oriented perfectly, angled perfectly, never shaded, and can offset the purchase of electricity at the much higher commercial rates those utility customers pay.

So, with such a horrible payback, the whole arrangement is as financially sound as a soup kitchen or a homeless shelter. Sure, lots of people bring home lots of money from those operations, but how would one go about investing in the soup kitchen “industry”? Solar electric panels are now heavily subsidized at both the installation end and the manufacturing end, thus any investment depends heavily on the winds of politics, not on any actual value added or created.

For wind turbines, the small ones mounted on buildings and lampposts are mostly for show. The only study I ever saw about how much electricity they produce said the measured amount was 0.2% of the claimed amount, but that study was based on a very few measured measurements.

I suspect very large utility scale wind turbines have a very good payback, but I have no idea how to sort out the claims made. Perhaps someone can invest in the companies that make and install those, but recent politics put a halt to large projects when they were 80% complete, which will probably bankrupt companies in that industry.

I still scratch my head when people talk about investing in renewable energy. If anyone has any ideas, please let us know – I think it certainly is the future in the not-too-distant future.

Zubin Al Genubi writes:

In Hawaii lots of people have solar panels. Electricity is .22 during the day but .64 from 5-9pm. I was going to get a battery and charge it with everyone else's panels and harvest the differential. Seems like battery tech is an idea.

Asindu Drileba comments:

Yes, it seems for seasonal renewable energy like wind, solar etc. The overarching strategy is to invest in battery tech (people with relevant patents & Lithium miners). Since the energy needs to be stored anyways. Maybe the FIT etf can satisfy this?

Some people like Lyn Alden have suggested that people have some Uranium ETFs. However, for stuff like hydro and geo-thermal, maybe a copper futures allocation since everything with a turbine has use for it.

The risk with commodities is that a large repository maybe discovered that will make prices fall. Investing in corporations with relevant patents for battery tech seems safer. But I also think a small commodities allocation (Uranium, Copper, Lithium miners) is worth it.

Humbert A. writes:

Our family looked at making an investment in solar. The project was on the small side right under 100 acres we were operating in a state in the U.S. that at the time had very attractive tax incentives. The most attractive option on the menu was a land lease which when the dust settled we decided it still wasn’t worth it. Our thinking was why convert 100 acres of perfectly good mushroom hunting ground into an unsightly solar array? This of course in addition to the actual math already mentioned.

Our experience however in our other operations, automobile retail our utility provider had a very interesting program we did take advantage of. Without going into needless detail it was a program where we had been paying into with our utility and we were able to make an investment in some approved “green project” solar investment was on the menu and with car lots in our region very attractive. Our is region prone to hail and extreme heat solar panels could shade and protect the inventory and in our case potentially reduce insurance cost in an event (it’s not uncommon to carry separate policies on New and Used vehicles thus having to pay two or even three deductibles in an event) we opted however for upgrading to LED lot lighting.

At least in the U.S. I tend to think successful investment in renewables will be more decentralized. For example the recent success of the Generac gas systems. Households through various utility and tax schemes will make emotional decisions to make their families energy use more diverse and secure at great cost to them and great benefit to the retailer. Essentially solving the problem at the household level Europe is trying to solve at the national level. Behind every blade of grass in America is an alternative energy generator.

Apr

12

Media ("attention economy") marginalizes positive stories of ordinary people building solutions from the ground up. That is why trading + media exposure during the day needs to be balanced in off hours to see that ((helping the neighbour, inviting to parties, gardening, anything that gives us joy). And this will be even more important in coming years (as social moods probably drops a lot…initially felt in Europe / Asia and later in the US. The US is not long convexity it is also short IMO).

Steve Ellison writes:

I have always followed Livermore's admonition to neither seek out nor follow tips, not even those from the brilliant members of this list. On X, I follow a number of accounts that I find add value by providing economic and market insight, but some of my favorite recent follows have been people who talk more about psychology and mindset than about particular markets.

For example, Ben Calusinski has some very interesting ideas. One is that authenticity is the one thing that AI can never replace. Another is that you have access to more information than any human in recorded history, simply by being alive today, so there is no excuse to not succeed. Possibly related to Mr. Humbert's point, Mr. Calusinski envisions a future in which 90% of the population is so dopamine-addicted by their devices that they achieve nothing, but a person who resists the siren call of social media and actually builds something, ideally something that aligns well with their authentic self, can do quite well.

Apr

8

I was thinking of designing a custom Consumer Price Index:

Oil
Copper
Wheat
Sugar

Anything important missing? or something that needs to be removed? My aim was to add something that is actually used everyday by ordinary people around the world.

Larry Williams asks:

Why? There are several very good ones already

https://doi.org/10.26509/frbc-ec-201002, Michael F. Bryan, and Brent H. Meyer

The Sticky Price Consumer Price Index (CPI) is calculated from a subset of goods and services included in the CPI that change price relatively infrequently. Because these goods and services change price relatively infrequently, they are thought to incorporate expectations about future inflation to a greater degree than prices that change on a more frequent basis. One possible explanation for sticky prices could be the costs firms incur when changing price.

Asindu Drileba responds:

Why a custom CPI? I honestly have no reason. It's more of a fishing expedition. The goal is to have a small list (under 10) of commodities and see if it produces some regularities.

It seems there are two kinds of commodities: Those that make people angry when the price goes up (life gets harder) like Oil, Sugar, Wheat. Those that make people happy (or indifferent), when the price goes up. Gold. I was thinking of making a small custom CPI based off 1). Which is why I excluded Gold. I was thinking of adding currencies to 1) like USD/EUR, USD/JPY & USD/CNY. Then maybe see what (this CPI) it may be good for.

Larry Williams contributes:

Add a booze stock.

Ed Kozun writes:

I agree in the past on the booze stock, but it sure seems like trends are changing and a lot of people are walking away from the sauce.

Larry Williams again:

Mary jane stock?

Zubin Al Genubi suggests:

Beer, wine, gas, hamburgers.

Ed Kozun ponders:

You’ve got my thinking about these indexes and what they are useful for and can you strip it down to essentials to think about pain points for “ordinary.”

1. any staple grain
2. residential energy per kWh.
3. cooking fuel(cost of making that grain into a meal)
4. Urban public transport ticket price.
5. Basic medicine. What cost does amoxicillin turn an infection into something that is not financially manageable.

Asindu Drileba continues:

Inflation usually doesn't affect wealthy people. (unless it's at levels of post WWI Germany, Mugabe's Zimbabwe & 1970s Cambodia). Petrol doubling in price may be annoying, but it won't change their behaviour.

As for the "others". Inflation causes 2 things. (these are untested suspicions)
Belt tightening. Spending on priorities first and less on luxuries. Will Live Nation stock be affected? Since less people go for concerts during periods of high inflation?
Will it still be worth it to buy the exact same iPhone as of last year that simply has a different name? Less visits to LVMH brands?

Red queen effects. People spending/borrowing more to stay in the same place. Payment processors collect more (since goods are the same, but transaction volume in $ goes up?)?

More leverage in markets (bigger "Open to High" & "Open to Low" ranges due to vol)? This may be more true in crypto where users are given up to 125x Leverage In some cases.

Apr

5

Video: Jennifer Shahade On The Hidden Cost of Thinking Too Far Ahead

Ordered the book written by a 2 times US female Chess player- it is about the dangers in thinking too far ahead (high IQ ppl like to do that and miss out the important turns when situations change…and keep getting too carried away). Good book for our special times IMO.

Thinking Sideways: How to Think Like a Chess Player and Win at Life

In Thinking Sideways, Shahade shows you don't have to be a great chess player to think more like a chess player. From building mind palaces to crafting decision trees, she reveals the most useful strategies from the ancient game that we can use in our daily lives. Drawing on examples from business, sports, and psychology, as well as her own experiences touring the world as a chess and poker player, Shahade transforms our understanding of what success looks like, and how to achieve it for ourselves.

Apr

3

In terms of trading, this makes me think of when rapid changes in market conditions push the trader's P&L into the red, and the trader gets tunnel vision and makes bad decisions.

Analysis of the helicopter crash by experienced pilot:

What REALLY Happened To Kobe Bryant's Helicopter?

The key issue is Continued VFR into IMC:

Continued VFR into IMC is when an aircraft operating under visual flight rules intentionally or unintentionally enters into instrument meteorological conditions. Flying an aircraft without visual reference to the ground can lead to a phenomenon known as spatial disorientation, which can cause the pilot to misperceive the angle, altitude, and speed at which the aircraft is traveling. This is considered a very serious safety hazard in general aviation. According to AOPA's Nall Report, approximately 4% of general aviation accidents are weather related, yet these accidents account for more than 25% of all fatalities.

Measures to reduce continued VFR into IMC accidents include improved preflight decision-making, enhanced weather awareness tools, simulator-based training and recurrent instrument practice for pilots who normally fly under VFR.

Nils Poertner responds:

Spot on. Good to slow down now anyway, walk slowly, speak softly, take good breaks. Have a dog and a cat nearby - they both remind me to not get too serious about things and slow down.

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