Dec

24

1. Interest rates. Just as oil eventually went down, after breaking the back of the shorts, because the incentive to explore and produce went up, and people substituted other sources for oil, and reduced demand at the price, interest rates will eventually move back to 4%. It's been 6% in 1999 and averaged that throughout the last century. Why should not things in 10 years look like the average of the past 30 years? We couldn't have eliminated inflation. Certainly after raising this money from borrowings or service contributions, there will be revulsion, and people will be given the incentives to be expansive again with the money that exists. As production goes down, the inflation will go up even more than money with velocity constant, and velocity will increase eventually the same way it always has, as the incentive to spend money increases. Thus the 30 year bonds at 142 will in 10 years be where it was on average in the last 10 years. 

2. Holidays. There is a curious tendency for stocks to show inertia in the days surrounding holidays.

3. Runs. On the six days in the last 10 years, that are closest to the long run of declines we just witnessed, a negative run of five, the standard deviation the next two days was a mere 7%. 

4. Romance. When I go to shows, I like to think about what they teach about markets. From diamonds are a girl's best friend: "He's your guy when stocks are high but beware when they start to descend. It's then that those louses go back to their spouses. Diamonds are a girl's best friend." So many shows prove that romance based on business is better than business based on romance. Pal Joey and Guys and Dolls and Sweeney Todd (Mrs. Lovett) come to mind as prime examples. Rogers and Hammerstein seem to have been great businessmen, with Hammerstein and Ira Gershwin never writing a word that wasn't on tune, and seemingly Hammerstein a magnificent business person, who knew how to spend to get movie revenues, especially if he owned the movie company. I've always said that equal to those two in lyrics are Laurel and my brother Roy. I'd like some other great examples of very prescient lyrics.

5. Cambridge. Three months ago, I received a great fund raiser from the college I went to, suggesting I donate to get the great returns that their great managers can get in an annuity. You see they were making 15% easy and I could give to them, and I'd end up better financially than I was before. I queried as to whether there was a regulatory agency for such academic fund raisers, as I used the last straw when they wouldn't hold a memorial for the greatest squash coach in history for 3 years, until they could make it a fund raiser. Now they're reporting a 25% decline in the endowment in the last several months, but DailySpec has at its middle name "deflate ballyhoo," and one wonders if they have marked down their illiquid investments in such great real assets as oil and venture capitals. I hope their fund raising was not sparked by the same motivations as the last minute whirlwinds that apparently the market maker 50 billion fraud made. And I hope there was no attempt to justify bonuses with this mere 25% decline, and the reports that their managers received increased bonuses this year, will not come from the same pages as the reports of their previous eight-figure bonuses that appeared in EdSpec.


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