May

6

Shtetl (full documentary) | FRONTLINE

This is a very depressing video about envy and how bad things can become. I think it also adds to previous discussions about madness of crowds (how ordinary people start participating in senseless murder) and illustrates that there is really no limit to how primal humans can become as long as they are given the green light.

Two take aways:

a) Don't hang around envious people.

b) Always make sure you have as little as possible that people can envy you over.

May

5

Fundamentally one thing i like of Tesla its the self driving technology, even if proper implementation is probably years ahead, maybe even more. And this extraordinary technology was funded thanks to Tesla high stock price. With the high stock price it strenghtned the fundamentals which fueled funding for innovation creating a virtuous cycle.

Thanks to this Elon could borrow easier and invest more and more… i waited to see if sentiment flipped on its favor again, but it didn't, so the same dynamics that made him so successful in the past will now (not now actually, as its months already) work against him can help deteriorate the fundamentals even faster.

I do not forget about the exceptional ability of american companies into adapting to different economic environments, but i have a lot of confidence on this trade. Plus all the reputational risks of Elon with his political activity and its exposure. Again, Elon's exposure is what helped a lot TSLA growing so big, but now that exposure is working again him unless he recognizes the mistake is doing and change the way he deals with his public image, which he won't.

In Q1 2025, Tesla's net income dropped an incredible 71%, to just 409 mln , compared to the same quarter in the previous year. This dramatic decline signals serious trouble in maintaining profitability, especially when you consider that without 595 mln from selling zero-emissions tax credits, Tesla would have actually posted a loss. This reliance on external credits to stay in the black is a grim indicator of weakness in its core operations. Operating margin is Operating Margin is at 2.1%, which is below industry.

And, in my opinion one of the most bad-looking things is the warranty liabilities, which is out of control. Let’s assume they hit $3.5 billion, up from, say, $2.5 billion in Q1 2024—a 40% jump in one year. Compare that to their $409 million net income in Q1 2025, and you’re looking at a liability that’s 8.5 times their quarterly earnings which will drain cash and destroy profitability.

If this trend holds, which very likely will given the self reinforcing behavior of the stock, tesla will need to raise prices of the car to cover the costs shutting demand even more,cut research and innovation and raise capital.

And most don’t realize how much Tesla’s battery production hinges on cobalt from politically unstable regions and a conflict or export ban could choke their supply chain overnight, spiking costs or halting production. It’s a hidden risk, that can cause serious problems, without adding the macroeconomic current environment which you are probably aware of.

Elon's bold announcements worked very well in the past because it was unexpected, now he lost that power. He has no power to influence his stock if not for a day or two, those especially retails who bought the dip in the past, made a lot of money and will do it again more and more forgetting about Robert Bacon ever changing cycles and the market can only come down when nobody expects it.

Henry Gifford writes:

A few days ago I attended a reunion of my grade school class. Guys I haven't spoken to in decades were commenting on how the rush to all-electric for cars and buildings strikes them as insane.

For seven years I taught about energy efficiency at the graduate level in an architecture college. One assignment was to compare the energy used by a gasoline powered car to an electric car, including the energy required to make the electricity to charge the batteries. No student over those years argued that electric cars saved any energy at all when the energy needed to make the electricity was included. In the later years more students refused to do the assignment, and instead take a D, as the assignment became more politically incorrect as the years went by.

I imagine fewer students would do that assignment these days, but sooner or later those who don't believe electric cars save energy, or reduce burning of fossil fuels, will get even more tired of keeping quiet to avoid being seen as an outcast. Remember, it was a kid who pointed out that the emperor was naked - no adult dared say that. But sooner or later, something along these lines will have a large effect on TSLA stock. Or, there simply won't be enough electricity around, and/or the price will be so high people will not want to buy the electricity and stop buying TSLA cars.

Without the backstory that TSLA is good for the environment, or saving the planet, it wouldn't be much more than a cool looking, inconvenient car that will need a very expensive battery replacement long before a gas engine needs replacement.

Sam Johnson responds:

Electric cars seem the best optimized for full self driving (individual tire motor control, acceleration/deceleration). They will take over in most climates for this reason alone. Everyone will want the tech, even if "less green."

Stefan Jovanovich comments:

The point of Tesla from its inventor's point of view was that it would provide ideal learning curves for (1) advanced fabrication and (2) autonomous machine thinking. If you were going to visit Mars in your lifetime, you had to have a rocket and a planetary construction technology that used (1) and (2). The instinctive mistrust of Elon Musk by short sellers and Democrats has not been misplaced; he is the consummate hustler. Since we (the BW and I) never trade or speculate, we have never once been tempted to go long or short on TSLA.

For us the connection there is an unavoidable connection between TSLA and NVDA; and we have, as a family, been long on NVDA for a dozen years now. We had no choice; our one and only child chose one of its engineers for her true love, and he chose her. We had to study Nvidia as a business because we were financially married to it. What we found is that rare company that can have repeated growth spurts like a child's - where everything financial - revenues, earnings, cash flows - increases 10 times faster than the financial world around it while its "bad" years never see declines any greater than the figures that Wall Street considers normal for a "recession". It did this without ever once getting the permanent subsidy that Musk had to depend on for TSLA.

I agree with HG about TSLA's technology; he is confirming Carroll Shelby's prediction that, in the end, hybrids would be the best engineering solution to the question of how you match electrical motor drives to automobiles.

TSLA as a car brand can disappear, and Musk will not care; he will have acquired the knowledge needed to build rockets at scale. Given his wonderful abilities as a financial hustler - PayPal remains to this day a wonderful invention of something no one needed but everyone bought into, Musk may find a way to get others to buy him out (has anyone ever actually made money in Ford after it went public?).

Update to earlier Idiot advice about common stocks: NVDA and PHM are now Owns, not Buys. TOL is the one company we are still punching on the Buffett bus ticket. We will continue to be married to NVDA financially because its climb to vertical integration is only half-way done. I asked the SIL if there was any comparison between Carnegie's acquiring the coal, iron ore, clay and earth metals that his mills used and Nvidia's "investment" in America. He wisely deferred to offer any opinion since that would be, in the small minds of SEC lawyers, "inside" information. He did offer a general comment: for the world of ICs and their users, the vertical integration is already happening; it is AI.

May

3

Some in these areas of science (genetics, animal development and behavior) have proposed that humans have essentially domesticated ourselves during the Holocene.

Domesticated silver fox

The domesticated silver fox (Vulpes vulpes forma amicus) is a form of the silver fox that has been to some extent domesticated under laboratory conditions. The silver fox is a melanistic form of the wild red fox. Domesticated silver foxes are the result of an experiment designed to demonstrate the power of selective breeding to transform species, as described by Charles Darwin in On the Origin of Species. The experiment at the Institute of Cytology and Genetics in Novosibirsk, Russia, explored whether selection for behaviour rather than morphology may have been the process that had produced dogs from wolves, by recording the changes in foxes when in each generation only the most tame foxes were allowed to breed. Many of the descendant foxes became both tamer and more dog-like in morphology, including displaying mottled- or spotted-coloured fur.

But there has been criticism of the breeding experiment and conclusions.

Asindu Drileba responds:

My definition of "domestication" used to be that of "Animals simply living under the care of other animals". When I watched a PBS Eons video some years back, I learned that Paleontologist's had a very different definition of "domestication". They define it as "the dependence on the care of other living things, to the extent that they cannot no longer live in their natural environment (the wild) anymore."

In the animal context, humans domesticated dogs and stray dogs (dogs with no owner) are riddled with wounds and in general don't do well. They would probably die if left in a forest. Foxes however look good in the wild.

In the human context, a human being with no owner (a government, a parent or an employer) usually does as badly in the manner of the stray dog. This human would perfectly fit the paleontological definition of what would be a "domestic human". The same applies for the ownership class/ruling class. They have used the working classes to domesticate themselves so they too, also can't survive with out them either. An undomesticated human would be people that can survive in an environment urban dwellers can't, the natural environment.

Like how the Khoisan do well in the desert, or tribes in the deep Amazon also do well. If you dumped a random urban dweller in the Amazon rain forest or the Kahalari desert (under same circumstances as the natives) 99% of them would die within weeks.

May

2

I wanted to ask Carder's opinion on this article that I came across titled:

China builds world’s first working thorium reactor using declassified US documents

It uses molten salt to carry the fuel and manage heat, while thorium serves as the radioactive fuel source. Experts have long viewed thorium reactors as the next leap in energy innovation. Some scientists estimate that a single thorium-rich mine in Inner Mongolia could theoretically supply China’s energy needs for tens of thousands of years with far less radioactive waste than current uranium-based reactors.

Carder Dimitroff responds:

Thorium is a fuel that is currently used in some commercial reactors. Canadian reactors can accept thorium and other nuclear materials in their CANDU reactors. (Read more: We can use thorium.)

One reason that the US, EU, and other reactors do not use thorium is that their reactors and related supply lines were not designed to accept that type of fuel. In US PWRs and BWRs, the reactor relies on precise fuel physics to achieve optimal performance. Changing the type of fuel would present a tough, if not impossible, outcome in terms of performance, let alone capital and operating costs.

When compared to a plant's production costs, nuclear fuel is surprisingly inexpensive, including the cost of disposal. Most of its energy is wasted. Consequently, there is little motivation to change the nuclear fuel's value chain.

Molten salt reactors are not new. In 1959, the US built the "Sodium Reactor Experiment" in California. Since then, several other countries have improved the design. Today, it is a viable technology, particularly in the Small Module Reactor (SMR) market. One example is TerraPower's Natrium Project (Bill Gates). They are currently testing the liquid sodium fuels for their Small Modular Reactor (SMR) product. (Read more: Terrapower: Natrium)

Apr

29

a goldmine of techniques to use for markets. concentration ratios, capture recapture, signaling, aural detection, etc:

Ecological Methods 3e

Ecological Methods provides a unique synthesis of the methods and techniques available for the study of populations and ecosystems. Techniques used to obtain both absolute and relative population estimates are described, and approaches to the direct measurement of births, deaths, migration and the construction and interpretation of life tables are reviewed.

Vic's X/twitter feed

Apr

28

I’ve been a professional racing driver from the age of 3, the first time I’ve been on a karting circuit driving, until 17 doing a formula 4 championship and I placed myself at the 3rd place in the international final race in karting at 15. Here’s what I learnt from that extremely competitive sport that may apply to trading, investing and I’d say to many other aspects of life:

1. You can’t perform well in all the track conditions and different weathers, you may suffer more with the hot weather and perform best with cold, or the opposite , the key is to survive and doing your best when conditions are not ideal, and maximize your performance when the conditions are in your favor.

2. Think astute and strategically, an important part of winning a race was being smart in the way you used your tires. You could only have one set of tires per race, so if you had a very qualification, during the manche (the fight after qualification which will give you a place on the grid of the final race) it was smart to preserve your tires and drive conservative in order to arrive at the final race, maybe even a couple of positions lower of where you could’ve been, but with better tires. In this way you’re going to be performing best at the last race, which is the only one that matters.

3. When I was 12, a retired legendary old man who was the karting principle of Ayrton Senna (he had like 100 t-shirts with still the sweat of ayrton, because senna when he was in Italy racing never changed t-shirt but just threw them away, but he never sold any as memory) called Ernesto, who’s not very well known online but he’s been a crucial person on Senna’s life, was impressed with my driving skills and decided to help me in winning the world championship when I was 12. He told me, as important rule, the importance of being patience. When I was 2nd, to not surpass the 1st guy, stalk him and make him go nervous , always right behind him , until it’s the right time. You’re going to be relaxed, keeping your engine fresh and when it’s the last 2 laps you surpass him. It very well applies to trading and investing I’d say.

4. Do not show your edge and your strong performance. When I was practicing during the weekend race, I’ve never showed when I was performing well. You need to keep the eyes away from you and make your competitors think you’re performing terrible or average. Then you surprise them on Sunday at the race day. It very well applies to fund managers I think.

5. Talent is not enough. You need to be talented, competitive , prepared and very well trained on track; but it’s as much important to be good at selling your talent to the right person, otherwise you won’t go nowhere. My goal was to become a f1 driver , and I’ve seen countless of people and friends getting extremely close , spending a fortune, and then getting nowhere. And then I’ve seen a guy, talented but not as many others, achieving this goal thanks to his ability to network his talent to the right person. In finance it’s the same I believe.

6. Luck. Luck played a very important role in racing , it was the little peace of the puzzle needed to end a perfect race. But after seeing it so many times, I can tell one thing for sure: luck favors the bold, so when you’ve the wind on your back push over your limits, because luck will drift in your favor.

7. Arrogance and humility. The true enemy of a man , I discovered not to be losing but to win and winning too much. That’s where the real strength is seen; not from how you handle losing.
Winning, especially winning streaks, will make you feel arrogant and superior to others, training and practicing less and underestimating your competitors. Always try to stay as much humble as you can because it was humility that made you winning and it’s the lack of humility that will destroy you.

8. Setups. Always change as many setups as you need until your performance improve if they’re bad and you don’t feel adapted to the current circuit conditions, but NEVER change a setup that it’s currently winning. I’ve often see setups working amazing, turning a race into a terrible performance trying to make a great setup a perfect one. When something it’s working, let it work and don’t interfere.

9. Edge. Don’t expect all your competitors to follow the rules, I’ve often seeing racers, maybe multibillionaires ones who could afford to cheat on an international event , doing little cheating maybe to the engine or to the kart itself to gain that very little edge to win a race. As my father used to told me when as young kid, it’s important to be morally on the right side and do what’s right doing the best we can having the best engine as possible at the limits of what’s allowed, but never a single step beyond. It won’t give you an edge today but it will give you an edge tomorrow.

10. Strategy. You need a strategy to perform, but the biggest wins are the ones that come from your intuition where you drive with your heart and soul and let your talent and preparation to the heavy lifting without rationalizing too much. It very well applies to trading, espeicially on volatile times.

11. Keep eyes open, around the paddock I often had my eyes very opened trying to understand what the fastest drivers were doing and which setups they had, not necessarily to copy them but to get a feeling on what’s working; in fact they were often trying to hide crucial parts of the setup, but still every little detail made a difference; in trading I think it’s important to do that.

Apr

28

Most resonant

April 28, 2025 | Leave a Comment

i've always found the 19th century heroes the most resonant. one of the joys of the Tredoux books on Galton is how they all appear: Conan Doyle, Spearman, Cyril Burt, Pearson, Livingston, Bennett, Binet, Gilbert.

Karl Pearson

Charles Spearman

Cyril Burt

Alfred Binet

George Bennett

Vic's X/twitter feed

Apr

27

88 years old and skating. He started skating at age 70.

Octogenarian skateboarder shreds concrete in Spain's Bilbao

"My bones are special," he chuckles between sips on a post-workout glass of white wine at his favourite bar in Bilbao's working-class neighbourhood of Begoña. "Though I touch wood."

Steve Ellison writes:

In only 2 more years, he will be old enough to have "sufficient experience … to command success" in Wall Street, as Clews put it, and know exactly when to skateboard down to lower Manhattan in a panic.

Apr

26

Does someone have a great modern macroeconomics book to recommend?

William Huggins responds:

it depends how theory heavy you want it to be. the author i usually recommend is Mankiw but Williamson (intermediate) and Romer (advanced) are good too depending on your needs. for the best "whole picture" i like a CFA publication from 2013 called Economics for Investment Decision Makers, by Piros and Pinto, which gives a great summary of micro, macro, and int'l econ under one roof.

for single-day-beach-reading i bought a casually interested buddy a copy of How Economics Explains the World, by Andrew Leigh, which is a great intro for non-users.

Apr

24

Planck's principle:

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it…

An important scientific innovation rarely makes its way by gradually winning over and converting its opponents: it rarely happens that Saul becomes Paul. What does happen is that its opponents gradually die out, and that the growing generation is familiarized with the ideas from the beginning: another instance of the fact that the future lies with the youth.

— Max Planck, Scientific autobiography, 1950, p. 33, 97

relevance of how new ideas are being adopted in science, markets, everywhere.

Jeff Watson responds:

Science by consensus is not science. Just ask Galileo.

Malcolm Lui adds:

That's how government corruption sometimes dissipates as well.

Pamela Van Giessen writes:

John McPhee wrote extensively about this and how the science of geology advanced over a few centuries in Annals of the Former World. Scientific community consensus is pernicious, and it is clear that there is mostly no convincing it.

William Huggins comments:

the foundation of science rests of replicability - anyone with the same data should be able to replicate results (even if they disagree about the mechanism). once replication is established, the difficult questions come from "is this data sufficient and representative?"; "is the data generating process stable or dynamic?"; "did i gather data in support of my hypothesis or to try to disprove it?". the fun stuff.

philosophy of science ensures we ask good questions and have good tools to tackle them with. this is why the Ph in PhD is short for "philosophy."

correction: "same data" is the wrong phrase - "equivalent, out-of-sample" would be a better choice of words.

Asindu Drileba writes:

The problem with the human mind is that it has too many glitches. You can verify data successfully and still be wrong. Here are two examples from Astronomy. First, The Mayans had models that would accurately predict eclipses. So, your data of when eclipses occur would replicate really well with their model. However the model of the solar system the Mayans used, had the Earth at the centre and the Sun revolved around it. The assumptions of the model were completely wrong, but the data (predictions) were accurate.

Second, is Newton's models, that predicted the movement of a comet accurately. Then you often here people say that Einstein proved Newton wrong with Relativity.

I think when it comes to science, explanations are very flimsy. What should matter is if the idea useful or not.

Francesco Sabella responds:

I think it’s a very good exercise to start from the point of view that our mind is bound to make mistakes, have glitches and start to work from that assumption; even if it’s not always true but it can be good as working hypothesis.

Big Al recalls:

Years ago, doing simple quantitative analyses to post to this list, I learned that one of the biggest pitfalls was my own desire to get a nice result.

Apr

23

excellent book to study for all biological areas that math will uncover

Modeling the Dynamics of Life: Calculus and Probability for Life Scientists, by Frederick R. Adler

The goal of this book is to each the mathematical ideas that will help us understand various phenomena in life sciences. These are the same ideas that researchers use in their work, as well as in collaborations with colleagues engaged in more empirical activities. They are not specific techniques, such as differentiation or integration by parts, but rather they revolve around building mathematical models.

A mathematical model is that crucial link between a life sciences phenomenon and its description in terms of mathematical objects. We will gain the skills needed to construct a model, make sure it works, and understand what it implies—we will learn how to translate appropriate aspects of a life sciences problem and its assumptions into formulas, equations, and diagrams; how to solve the equations involved; and how to interpret the results in terms of the original problem.

Vic's X/twitter feed

Apr

22

Reading list

April 22, 2025 | Leave a Comment

Victor Davis Hanson Should Stick to the Classics
by Don Boudreaux at Cafe Hayek

Prof. Hanson, for example, presumes that the trade surpluses of various foreign countries are the results of clever cheating by those countries’ governments – cheating that yields unfair benefits to those countries as it damages the U.S. and inflicts on us Americans harmful trade deficits. He’s apparently unaware that countries that run trade surpluses also necessarily run capital-account deficits: global investors prefer, on net, to invest elsewhere than in those countries. In contrast, countries that are especially attractive to global investors run capital-account surpluses – another name for trade (or, more precisely, current-account) deficits.

Jeff Watson is keeping up with the CME dispute:

Here’s an interesting article about the upcoming trial:

Judge clears the way for a titanic trial pitting old-school traders against CME Group

But the plaintiff traders, many of whom formerly worked in the pits and are retired now, allege that CME reneged on a deal preserving members’ rights — including preferred trading floor access and pricing and information advantages — when it closed the physical floors and confined transactions to the Aurora operation. As a result, they say, the value of those memberships (reflected in B shares of CME) has fallen by two-thirds in the past decade even as CME’s A shares (the stock held by ordinary investors) have soared in that period.

Humbert X. writes:

I wonder if the PMs will get a heads up on tariff changes?

Trump Media Launches Separately Managed Accounts

SARASOTA, Fla., April 15, 2025 (GLOBE NEWSWIRE) — Trump Media and Technology Group Corp. (Nasdaq, NYSE Texas: DJT) ("TMTG" or "the Company"), operator of the social media platform Truth Social, the streaming platform Truth+, and the FinTech brand Truth.Fi, along with Yorkville America Equities, an America-First asset management firm, and Index Technologies Group (ITG), an originator and provider of thematic investment solutions, today announced that the three firms have created a strategic partnership and launched a new suite of Truth Social-branded Separately Managed Accounts (“SMAs”). These investment strategies offer investors access to curated, thematic investment strategies rooted in American values and priorities.

The initial lineup of SMA strategies includes:

Faith & Values
Liberty & Security
Energy Independence
Made in America

Apr

20

An interesting article that is making me think its mostly IP theft:

An image of an archeologist adventurer who wears a hat and uses a bullwhip

One of the internet-est things to come out of the most recent update to GPT image generation is the Studio Ghibli-zation of everything - another reminder of how OpenAI (and everyone else) trains on images that are very obviously someone else’s work.

Carder Dimitroff adds:

It's also an energy thief. Some data center owners are trying to get ratepayers to cover infrastructure costs through the state ratemaking process. On top of the capital costs, ratepayers are also expected to pay elevated marginal power costs. It's not just power. It's also natural gas:

This proposed gas plant to power a data center campus is massive

The soaring power needs of data centers continue to raise eyebrows, and nowhere is this more evident than at one Pennsylvania project, where a massive proposed natural gas plant would replace a legacy coal facility.

Pamela Van Giessen responds:

Thanks for sharing this. Every publishing/media legal department should read this, along with all artist guilds. And then they should do their own tests. AI was always theft.

Asindu Drileba offers:

There is a developing case NYT vs OpenAI:

Judge explains order for New York Times in OpenAI copyright case

April 4 (Reuters) - The New York Times made its case, for now, that OpenAI and its most prominent financial backer, Microsoft, were responsible for inducing users to infringe its copyrights, a New York federal judge said in a court opinion on Friday explaining an order from March 26.

Ars Technica did a more comprehensive article about it a year ago.

Apr

19

Great and sententious discussion of regression by Tredoux in the second volume of his Galton bio (with tremendous applicability to markets):

However the concept of regression to the mean where it has been comprehended at all has led to persistent popular misunderstandings about its nature. Failure to spot regression to the mean recurs so often it seems to be a universal law of human behavior. Examples could be multiplied endlessly. They involve selection of a bad condition to which some intervention is applied after which the condition is observed again. Usually it has improved. Therefore the policy is supposed to work.

Francis Galton's Genius: 1865-1911, page 225

Vic's X/twitter feed

Apr

18

I know The Chair uses linear regression and so do some hedge funds. But what are you people using it for? Predicting earnings? Stock Returns? Stock Prices?

What kind of inputs make sense to insert into a linear regression model? What mistakes do you think people make when using linear regression?

Big Al responds:

A book the Chair has recommended:

Applying Regression and Correlation: A Guide for Students and Researchers

I've used correlation for exploring lots of simple questions like, "Does the move on Monday predict the move on Tuesday?" The basic model is just "does A predict B?"

One mistake often made when looking at time series like stock prices is to use absolute dollar/point changes rather than % changes. Always use % changes.

Apr

17

An interesting analysis of the options market on April 9th Trump Tariff fiasco. It seems the options market was aware of incoming policies before they were enacted.

$70 Million in 60 Seconds: How Insider Information Helped Someone 28x Their Money

On April 9, 2025, someone risked $2.5 million on SPY call options—and walked away with $70+ million in under an hour. The trade was placed at 1:01 pm. At 1:30 pm, Trump announced tariff pauses. The market exploded upward. These options that cost 85 cents were suddenly worth more than $25.

It wasn’t just the profit. It was the precision. The market moved before the news. The options were bought before the rally. The volume spiked in contracts that almost never see this kind of interest unless something is expected. And the pattern wasn’t visible on previous trading days. This wasn’t a trend. It was a singular event. — $70m in 60 Seconds.

Apr

17

Any market parallels?

The Theory Of Societal Stupidity
by Dietrich Bonhoeffer

Dietrich Bonhoeffer (4 February 1906 – 9 April 1945) was a German Lutheran pastor, neo-orthodox theologian and anti-Nazi dissident who was a key founding member of the Confessing Church. His writings on Christianity's role in the secular world have become widely influential; his 1937 book The Cost of Discipleship is described as a modern classic. Apart from his theological writings, Bonhoeffer was known for his staunch resistance to the Nazi dictatorship, including vocal opposition to Nazi euthanasia program and genocidal persecution of Jews.

Stefan Jovanovich asks:

Why do we need a theory?

Steve Ellison adds:

Gustave Le Bon in his 1895 book The Crowd noted that the intellect of any crowd was far lower than that of any of its members. And he considered all political parties to be crowds.

Apr

16

guaranteed to happen: "powell says that they will do what they do regardless of any political pressure." great applauds in the Chicago audience.

Vic's X/twitter feed

Apr

16

That is the creature Hugh Hendry - the Acid Capitalist - says we have to find in order to profit from our speculations.

The events in Ukraine are that gorilla. They are predicting the likelihood that Trump, Putin and the Muslim oil producers will establish a Drill, Baby, Drill world of orderly energy production and supply priced in U.S. $. The effects on the European and Asian consumers will be comparable to what happened to the German-speaking world and its silver standard when the French fulfilled the terms of the Treaty of Frankfurt by paying their reparations in gold.

Big Al needs some help:

Perplexity answers the question, "What happened to the German-speaking world and its silver standard when the French fulfilled the terms of the Treaty of Frankfurt by paying their reparations in gold?"

Malcolm Lui asks:

Who are the “they” in “They are predicting the likelihood …” ? And why would Muslim oil producers favor increasing production? The Muslim OPEC producers historically favored limiting production to keep prices high and stable. If they wanted to increase production, they have had plenty of opportunities to do that.

Stefan Jovanovich answers:

They = "events, dear boy". The prediction is that the new cartel of oil and gas exporters will establish "orderly production" that manages the risks of overproduction in the same artful manner that OPEC once operated before the invention of fracking.

William Huggins responds:

So you are suggesting us producers will submit to directives from moscow or Riyadh to limit their production? No evidence of anything but predation among those players but somehow trump purs them all on the same page? I have a bridge for sale….

Read the full conversation.

Apr

15

Bullish

April 15, 2025 | Leave a Comment

the 5 days after service day bullish. about 4 in 5 up. also bonds bullish in that long time since 20-day high. thus despite attempt to beggar the neighbor and embarrassing unanimity of advisers that trade is bad, the stats say bullish.

Vic's X/twitter feed

Apr

15

The president seems to believe that trade deficits are evil and must be stamped out. If he ever actually succeeded at meaningfully reducing the trade deficit (so far the reverse is happening), what would be the implications for capital flows into and out of the US, and how might those changes affect markets?

Malcolm Lui responds:

Finance professor Jeremy Siegal wrote a piece decades ago about how the trade deficit is driven in part to demographics. Currently, the US is consuming more than it can produce, due to baby boomers retiring, no longer working, while still consuming. China is on the other side of the coin, with a younger workforce that is producing more than it's consuming.

Eventually the demographics will reverse, along with the trade deficit. The old folks in the US pass away, along with their consumption, and the US will start producing more than it's consuming, while China's young ones become old, retire, and they start consuming more than they are producing.

Asindu Drileba writes:

This sounds like a very plausible explanation for the phenomenon of "cycles" in the stock market, as described by the senator.

Apr

14

Although the stated goal is to reshore high-tech manufacturing, exempting tech products undermines that aim, while taxing low-end goods won't bring back production that left decades ago. The policy thus fails on both fronts: it neither restores domestic manufacturing of cheap goods nor incentivizes reshoring of advanced technology.

In any case, the US dominates the key technologies of the future. China is only a follower and Europe is not even in the competition so far. So regardless of who is the the Pres or what he is doing, dynamics related to growth may remain untouched.

For a counter, however, once again the “Tweet-based policy” during the weekend eroded predictability of statistical patterns.

Apr

14

Looking back at 2008

April 14, 2025 | 1 Comment

A Few Observations, from Victor Niederhoffer
October 12, 2008

1. Of the 100 biggest markets around the world, almost all are down 40- 60% in dollar terms with the exceptions' being Tunisia and Botswana. The impact of the decline this week, unless rapidly reversed, is going to be very severe on purchases. The previous 20% caused great angst; imagine what this decline will do to those who rely on retirements. The positive feedback of the decline in a negative direction also impacts the election results with every market decline making it more likely the Republicans will be blamed for the situation.

2. The worst aspect of the decline this week from a health point of view was that fixed income around the world cratered, thereby reducing world wealth by a good 15% as opposed to the normal situation where the equities go down 10% and the fixed incomes go up 8% leaving total wealth down only a little. And the people that talked about how bearish it was for stocks because commodities were up would never say that it's bullish now because commodities are down 40% over the past four months.

3. A new word should enter the market vocabulary, a waterboarding decline, being a decline that seems to have a breath of life at the open before going into a death spiral.

4. Because of the decline in all sectors, the wealth/price ratio has stayed relatively constant with corn, copper, soybeans, wheat and oil down 40- 50% since June 30, thereby keeping the number of bushels and barrels we can buy with one DJIA relatively constant, making the number of ounces of gold you can buy with the Dow less than 10 for the first time in a googol, and looking like a bargain for the Dow.

Cagdas Tuna writes:

The plan was to make US assets cheap and make everyone afraid to invest in them(thanks to VIX spike Monday). We all make joke of him but Trump’s post few hours before 90 days pause was the peak. Look at inflation numbers it is officially coming down as most companies were planning this sh*t beforehand. The more we see bad news the bullish stocks are.

David Lillienfeld responds:

You're making the assumption that we're done. I don't know that we are.

Nils Poertner comments:

in any case - def good to watch out for anomalies, or things that shouldn't happen and then they happen - and then there is more of it normally.

Apr

13

i have now finished the brilliant Tredoux bio of Galton. and Tredoux is very Galtonesque in his masterly ability to explicate every area that Galton touched. After 10 years without proper review of Galton, here's a Galtonian example of two geniuses uncovering it at same time.

From 2002, Review of A Life of Sir Francis Galton, author: Nicholas Wright Gillham, reviewer: Gavan Tredoux.

Starting almost from scratch in all the subjects he investigated, Galton invented rigorous intelligence testing, founded experimental psychology in Britain, established the scientific basis for fingerprint identification, formulated the statistical concepts of regression and correlation, pioneered early investigations of genetics, and founded the biometrical school.

Vic's X/twitter feed

Apr

12

Bessent 's most recent public comments about Treasuries seem to me the best answer to the suggestion that "they" want to debase the dollar:

In his remarks to the American Bankers Association on April 9, 2025, Bessent criticized the current regulatory framework, noting that leverage capital restrictions, such as the Supplementary Leverage Ratio (SLR), can become overly restrictive. He pointed out that these rules sometimes treat Treasuries—the safest assets—as if they carry significant risk, requiring banks to hold additional capital against them. Bessent suggested that regulators should reconsider this approach, hinting at reforms that could allow banks to hold Treasuries with less punitive capital requirements. He emphasized the need for a regulatory system that supports economic growth and questioned why "the safest asset in the country" faces such constraints under current leverage rules.

The question to be asked about "the dollar" is the one Hamilton and Willing tried to answer: who will own the Treasuries IOUs? Since the Americans had no savings, Hamilton thought the answer would have to be foreigners. Willing was clever enough to realize that Treasuries could become the savings if banks gave up the fantasy that deposits could be lent. The banks had to be discounters of each others' notes and dealers in personal loans/commercial paper. They could accumulate Treasuries as capital and leave leveraging to private capital (Astor became, by far, the richest man in the country by being Fannie and Freddie for his own and others' properties).

I doubt that Bessent, of all people, has any plan for the exchange price for the dollar any more than Willing had any belief that the BUS (which owned half the capital of the entire country) could set the discount rate. As he said yesterday, “Up 10 down 5 is not a bad reaction.”

Apr

11

I was searching for 'Lobogola' in my saved files… Found this…

Ten Lessons From the Recent Bear Markets, from Victor Niederhoffer
February 3, 2008

1. There is no such thing as a bear market, only markets that have gone down a lot from a previous high in a reasonable time frame.

2. The market had its best week in 5 years two weeks after having the worst week in 5 years.

3. When the vol rises to above 30, expect a 1-2% gain in next two days with say a 90% prob.

4. The differential between the discount rate and the 10 year rate is an excellent predictor of short and long term movements in the market.

5. The market likes to set a big minimum at the beginning of the week and all the limits downs have occurred on such days.

6. The knowledge of a big forced seller in the market will filter out and effect everything and the market will go to unprecedented low levels until the sales are requited.

7. The Fed chair thanked Milton Friedman for insuring with his research that the Fed would never again cause a depression by tightening the money supply during a time of economic doldrum and we may thank Milton Friedman and the Fed chair, and Mr Kerviel for insuring that no such depression or recession will be induced again by such activity.

8. The market will go back up along the same path that it went down, i.e. Lobagola lives. (Remember Lobagola's story about the elephants). [More on Lobagola and the elephants below. -Ed.]

9. Buy and hold must not be leveraged too high for it to work.

10. The tried and true patterns are the most dangerous during times of crisis. (Beware of patterns with a 90% chance of success).

Scalawags: Bata Kindai Amgoza ibn LoBagola

But his assumed name lives on amongst the lore of investors. In his book, he tells the story of an elephant stampede. The beasts rush through an area and always return the same way. When there is a surge of the market that soon ceases and comes back again down that same path, that’s called a LoBagola.

Apr

10

Pride

April 10, 2025 | Leave a Comment

the worst thing about the admin's approach to politics, trade, and the economy is failure to take account of the many proverbs along lines of "pride goes before the fall". there are hundreds of examples but "i am the best negotiator" is a perfect one.

Vic's X/twitter feed

Apr

9

20-day highs

April 9, 2025 | Leave a Comment

now 49 days away from last 20-day high on 2-19, 2025 at 6166 (futures). 98% chance that next 20-day high will exceed the old level. expected duration to next exceedance is 12 days.

good example of stock market being the key driver. approval rating dropped to 41% with one 20-day low in stocks after another. someone, a rare bird among advisers, told him to cut the crazy tariff policies.

nice drop in vix of 19 points from 52 to 33. apparently all weak longs were done in.

Vic's X/twitter feed

Apr

7

As we write in mid-2002, surrounded by pessimism, our view is that the required return for holding stocks is at levels unseen since 1990, or 1980, or 1950, when memories of depressions or crashes were still hanging in the air. If ever there were a time that investors would only buy risky investments when the anticipated returns were in the 50 percent-and-over area, this time would seem to be now. We see no reason that our expectations will be disappointed. Why shouldn't an improvement in lifespan or the rules of the game of business reap in the next 50 years the kind of results that greeted investors in the past 50?

Practical Speculation, by Victor Niederhoffer and Laurel Kenner, page 215

Apr

6

the most important influencer of all, the stock market was the only indicator that the Fed Chair didn't discuss in his Friday talk to the editors.

one can expect the opposition at the Fed to double down on the unnecessity of lowering rates in order to punch the enemy when he is down and to increase their importance to staying.

left out in the damaging consequences of tariffs is their increase in the likelihood of war only too often lead to open hostility and armed conflict. For historical confirmation of this fact we need but review the Russo-German "tariff war" of 1893, the German-Spanish tariff war of 1894, the Franco-Italian tariff war of 1888-1899 and the Franco-Swiss tariff war, 1893-1895. The Austro-Hungarian tariff barriers to Serbian exports aggravated the nationalistic conflict between Serbia and Austria-Hungary and precipitated the World War. Economic conflicts and divergence of economic interests.

Vic's X/twitter feed

Apr

5

VIX close over 40–without enumerating because there are often a bunch of close dates with closes over and under 40, but all linked etc:

1) 10/87 with VXO adjusted from 150, I'll call 'over 40' on the modern VIX
2) 8-10/98 Russian financial crises and associated other currency collapses
3) 2000 dot com period into 9/11
4) 2008-9 financial crises begin great recession
5) 8/2011 don't know this one even though I kind of recall it don't think this was flash crash….
6) 8/8/2015 not sure could look it up just counts at 40.74
7) 2/2018 this was XIV and vol related highest closing print was 37.32, but I have to think it traded about that day intraday
8) 3/2020 Covid lock downs
9) 2021-2022 during the lock down there were some spikes, don't recall why, but no closes
10) Today, 4 April, 2025

So kind of 8-10 (depending how orthodox one requires) VIX > 40 closes episodes in the last 40-ish years in terms of canes, We all knew about the tariffs coming , but I would say we all knew about the crappy lending in 07 too…. The others, pardon my youth I was in the scouts in 87, but I think had less general knowledge warning.

Some of these periods with VIX > 40 go on for a while. So definitely not a recommendation or a prediction just a comment about the unusually high level today.

Peter Penha comments:

5) 8/2011 was the debt downgrade of the United States from AAA by S&P - It of course led to a collapse in us government yields in the rush to safety as people had to think through it does not matter what you call or rate the safest asset as long as it remains the safest benchmark asset BUT some people said well if a 2nd ratings firm downgrades the USA then everyone who can only hold AAA assets will have to "dump their treasuries”.

6) August 2015 was the end of the tumble collapse of the Chinese Stock Market ~40% that led to a collapse in commodity prices - oil went from $100 to $40 (a Boston buyside technical analyst had $40 as his oil target and we all thought we would be in a 2009 deflation if we ever saw $40 again) - anyway was the fear of Chinese deflation everywhere - Think the Bank of China came in to sell down the volatility and stabilize markets.

I think in that recent YouTube video link I emailed - the speakers were discussing that in 2009 10 Year US Index equity volatility hit 40%.

I do have one anecdote told across the firm from 2008 from someone who made billions (or “more in 1 week than the firm had ever made globally in a year in derivatives”) in an uncapped covariance swap - he took all the capital from all the equity traders at the firm to put on his covariance swap bet at $100mm per 1% for SPX, Topix, DAX up or down - anyway the reason given was that he said that a top seasoned lifelong professional trader with top Sharpe ratio will second guess themselves and lose money in the chop when the VIX is over 34 - I remember this one as your mentioning covid lockdowns reminded me that Alberta Canda Pension lost some $2bn-$4bn in the blink of an eye selling a similar swap.

Apr

5

I'm liking the look of that huge spike down in ES, out of my euro and sterling, that was a crazy move too. Technically it's nice looking low, from a chart perspective. I'm liking the low interest rate and commodity softening posture, I'm pretty damn bullish on equities.

William Huggins responds:

the shock moment is not when the canes come out - those metaphorically come out when the bulls have given up. those are generational moments related to the culling of new speculators who have only known rising markets (ie, anyone who joined robin hood with their stimulus checks in hand). as long as there are people willing to pay x60-100 earnings for hype, i don't think its quite time for a shift in strategic allocation.

this is simply the first serious wakeup call for anyone who thought this administration is doing anything remotely like macroeconomic analysis when it sets policy. according to the executive, there will be more such shocks to come so as many were fond of suggesting in mid-november "buckle up" (your 401k, and the usd, have both been liberated from gravity!)

Steve Ellison comments:

The S&P 500 has not even gone off the bottom of my hand-drawn chart. The move down since yesterday strikes me as more an efficient market repricing of reduced economic prospects than an emotional panic or forced selling.

By contrast, my hand-drawn chart on February 28, 2020.

Adam Grimes states:

Canes? Nowhere close, in my opinion. And the fact that many people think this is a crash is just a lack of perspective (and a misunderstanding of potential.) Again, all in my opinion, which may change with any tick.

UPDATE: Stefan Jovanovich has a shopping list:

The idiot list is the catalog of companies that our model collects on the presumption that their common stocks will be worth more in 5 years than they are now. I publish it when we guess that our stupidity is within the 25% range - i.e. we won't lose more than $1 out of every $4 we invest in those companies if they liquidate. Thanks to the List and others, we have learned not to trade so the publication is, in no sense, a "Buy"; it is simply an indication that prices have gotten low enough that the list has more than 10 companies on it. (A month ago it had 5.)

Apr

4

Milton Friedman on Trade Balance and Tariffs

Why Some People Will Never Admit They're Wrong

• The inability to apologize can stem from trying to maintain an idealized image of oneself to avoid shame.

• Refusal to apologize can result from the misguided belief that we shouldn’t have to since we weren't at fault.

• Conviction that no apology is needed can stem from a lack of self- and relational-awareness.

one of the many virtues of Tredoux's book on Galton is the way he generalizes from Galton's observations to make universal points.

This is a striking instance of the obstructions through which new ideas have to force their way. Plain facts are apprehended in a moment but the introduction of a new idea is quite another matter for it requires an alteration in the attitude and balance of the mind.

the quote is Galton's but my compliment to Mr. Tredoux is true.

Vic's X/twitter feed

Apr

2

Tariffs Are Awful, but the Income Tax May Be Worse

Every fiber of my economic being cries out against tariffs. If they are so good, why doesn’t each state in the US have one against the products of all of the other 49? That is, Ohio could “protect” its industries against the incursions from Arizona. This is obviously silly. One of the important reasons America is so prosperous is that we have a gigantic, internal, free trade area.

[ … ]

So is there any economic case for tariffs, given the foregoing? Yes, paradoxically, there is—in a way, if the alternative is a tax that’s even worse.

Larry Williams comments:

Tariffs are what made America so powerful when instituted by Hamilton. It’s all about what you place them on Hamilton did it with brilliance.

Stefan Jovanovich responds:

I think more credit goes to Thomas Willing, the President of the Bank of the United States. He understood that tariffs would allow the United States to conduct the same wonderful sleight-of-hand that allowed the national Money to be gold and silver coin while the actual currency became bank notes. The Chair's question - if tariffs are so great, why doesn't every state have them - was answered by the Federal Constitution, which took away from the States the power to issue their own bills of credit as legal tender and the power to regulate interstate commerce. As LW and the Chair both note, it was the ability of the United States to have an ever-growing domestic market that made the U.S. so powerful. People were willing to bring their "real" money to the U.S. to speculate in what is still the largest open market in the world AS LONG AS THEY HAD THE ABILITY TO PICK UP THEIR CHIPS AND TAKE THEIR MONEY HOME. Apologies for the SHOUTING but every "crash" has had as its catalyst the threat that the U.S. would impose capital controls - either directly or by depreciating the dollar by executive order.

Vic's X/twitter feed

Mar

31

An insightful section of Mr. Tredoux's Francis Galton's Nature and Nurture: 1822-1865 shows that the poor forecasts and poor scientific methods of Robert Fitzroy, as uncovered by Galton, probably led to his suicide. Let us hope that a similar fate does not await some of the useful idiots and bears recounted in my posts.

Vic's X/twitter feed

Mar

30

The hypothesis is that at the end of a quarter in which bonds are up while stocks are down, institutions need to rebalance their asset allocations by selling bonds and buying stocks.

I found 14 such quarters since 2002, not including the current quarter. In the last 5 trading days of those 14 quarters, SPY was up 8 times and down 6 times, with an average net change of 0.9% with a t score of 0.76–statistically insignificant.

My Python code that I used to obtain the above results.

Big Al responds:

That's an event I hadn't thought about in a long time. It's hard to imagine a lot of big institutions running a simple strategy like that these days, which doubt your study would appear to support. But it does make me wonder if there are other, more complex balances or relationships that big players do manage on a calendar basis.

Alex Castaldo comments:

The general idea of trying to take advantage of "fixed behavior" by others is a good one IMO.

Paolo Pezzutti agrees:

It's like finding regularities end of month or Holiday's behavior or several others. I think there may be many still uncovered. Steve on Github has made public a number of Python notebooks. Very nice work to stimulate curiosity in searching patterns. It's not rocket science based on Artificial Intelligence, but I think this methodology has still value.

Asindu Drileba writes:

The rebalancing edge is real. In BTC for example, I realized that the most consistently active, "high activity" period is the time around 0:00 UTC (Server time). Something interesting is always happening during that period.

It turns out alot of people trade BTC daily and it just makes sense to rebalance the position size at midnight. I too even choose it sub-consciously. I don't think many people are choosing 03:00 UTC , 17: 43 UTC etc. Unfortunately, you need second by second, price quotes over many days, weeks, months and years to investigate this activity further. So I put it on pause. But the "activity" still exists.

Malcolm Lui adds:

Window dressing at quarters end is probably still occurring as well.

William Huggins writes:

several years ago i followed in Markman's steps of investigating the S&P500 drops and additions for irregularities (they did exist but have since been arb'd out). the driving mechanism was that index fund managers were paid to minimize tracking errors, not maximize performance so they would all trade at the same time, causing a secondary effect on the day the change actually took place (there was a preliminary change the day of announcement). it was a pretty basic academic event study but the most valuable part was uncovering "why" big money was doing a thing that created opportunities for fast moving traders (email me if you want it, but the trade doesn't work anymore)

Mar

29

On his blog:

TraderFeed
Exploiting the edge from historical market patterns
Sunday, March 23, 2025
Keys to Great Trading

Peter Ringel adds:

He was also on CWT recently:

Trade Like You: Why Playing to Your Strengths Works Better · Dr. Brett Steenbarger

Mar

28

usually one is accustomed to a political news effecting stocks but now after 50 days form a 20-day high and only 2 pts from a 50-day low at 5579 on march 13, we can expect stocks to effect politics. another decline in sp will create tariff easing.

Single trunks grow at a rate determined by the species of tree and the care it gets. Multi-trunks have seperate root systems and since they are close together, they compete for nutrients. This competition results in slower growth rates….Since they compete, multi-trunk trees grow 30% to 50% slower than singles trunk trees of the same species. Despite a slower growth rate, these trees can still flourish with attention and care.

Heritage Tree Service of Texas

a single trunk tree grows considerably faster than a multitrunk tree. is the same true for stocks? a test will answer this.

Vic's X/twitter feed

Mar

28

The late baseball great studied hitting as closely as a stock strategist studies markets. In fact, Williams' hitting rules can easily make you a better investor.
By Victor Niederhoffer and Laurel Kenner

"Get a good ball to hit."
– Rogers Hornsby to Ted Williams, on the single most important thing for a hitter.

A person, a field, a book. Sometimes they come together with such genius that you wish to carry the lessons around and apply them to everything you do. Such is the case with Ted Williams’ "The Science of Hitting," widely considered the definitive book on the subject. With the baseball season soon starting, the market reeling and investors searching for a rudder, it seems particularly appropriate to learn from the book’s timeless lessons for all fields. But we’ll go even further. We’ll show how to use this method to make a profit by trading IBM (IBM, news, msgs) and similar biggies on Thursdays, when the count is right.

Williams was the last batter to achieve the magic .400 average in a full season — 1941, when he hit .406. (He also had .400 averages in 1952 and 1953, when his seasons were cut dramatically short because of Korean War service.) He is considered one of the three best hitters ever, with Babe Ruth and Rogers Hornsby. “I had to be doing something right,” he said. “And for my money the principal something was being selective.”

His selectivity was unique and inspiring. He divided the 4.6-square-foot batter’s box into 77 zones, and assigned each a hitting percentage. The sweet spot was high over the middle of the plate, where the batting average hit .400.

Rule No. 1: Wait for your pitch

Warren Buffett cited "The Science of Hitting" in his 1998 annual report in a discussion of his favorite subject: How the market doesn’t look good to him. (His most recent annual report, published Saturday, repeats the sentiment.) Buffett said he, like Williams, follows Rule 1 and waits for the great pitches — the great companies — and holds his fire until they arise.

After Rule 1, we will expand the list of hitting rules to 11, drawing from the lessons in Williams’ book.

Read the full article.

Mar

27

Spec roundup

March 27, 2025 | Leave a Comment


Jeff Watson has been watching the CME:
Anyone else notice the increase in seat prices (trading rights) recently?

Big Al found a history lagniappe:

BabelColour
@StuartHumphryes
Travel back in time 117 years to the Russia of 1908. I have enhanced for you this rare colour photo of the Russian writer Leon Tolstoy, regarded as one of the greatest and most influential authors of all time. It was taken in the grounds of his house at Yasnaya Polyana, near Tula, Russia. It is original colour, not colourised.

Steve Ellison provided his own:

Since one might be well advised to beware the Ides of March, here is a picture I took in 2017 of the ruins of the Theater of Pompey.

Asindu Drileba has been reading:

The importance of contrarianism emphasized by Jeff Bezos, from the Amazon 2020 Letter to Shareholders:

Differentiation is Survival and the Universe Wants You to be Typical

Our bodies, for instance, are usually hotter than our surroundings, and in cold climates they have to work hard to maintain the differential. When we die the work stops, the temperature differential starts to disappear, and we end up the same temperature as our surroundings….While the passage is not intended as a metaphor, it’s nevertheless a fantastic one, and very relevant to Amazon. I would argue that it’s relevant to all companies and all institutions and to each of our individual lives too. In what ways does the world pull at you in an attempt to make you normal? How much work does it take to maintain your distinctiveness? To keep alive the thing or things that make you special?…This phenomenon happens at all scale levels. Democracies are not normal. Tyranny is the historical norm. If we stopped doing all of the continuous hard work that is needed to maintain our distinctiveness in that regard, we would quickly come into equilibrium with tyranny….We all know that distinctiveness – originality – is valuable. We are all taught to “be yourself.” What I’m really asking you to do is to embrace and be realistic about how much energy it takes to maintain that distinctiveness. The world wants you to be typical – in a thousand ways, it pulls at you. Don’t let it happen.

Mar

25

We were younger

March 25, 2025 | Leave a Comment

i had the privilege of sitting at the actual Galton desk and a secretary was using it. Jensen and I complained about the sacrilege, and the secretary moved to a modern desk. I noted there in Galton's library a well-read copy of the 1st edition of Wealth of Nations.

we were younger:

Someone in a Tree - Stereo - Pacific Overtures - Original Broadway Cast

Vic's X/twitter feed

Mar

24

Vic's X/twitter feed

Mar

23

Dear Mr. Tredoux : I am now through p. 157 of the first volume of your bio of Galton, Francis Galton's Nature and Nurture: 1822-1865. I have never found a life more interesting than yours of Galton. Even though I had read all books and previous bios of Galton I found new material on every page.(i never know he played fives and could throw)

congrats Mr. Tredoux on the Homeric epic you wrote. I particularly admired the way you followed up every mention of people Galton met until 30 with their subsequent fate and fame.

I am sure Mr. Tredoux that many of my friends now departed (like Arthur Jensen) would have enjoyed and learned from your book as I did ( with many questions and follow up still to be.

Perhaps you will cover it later but I still have not seen the answer to why Galton did not have children. (was it the few moments of Pleasure that he experienced on his Islamid travels at age 25?)

Vic's X/twitter feed

Mar

21

Global Investment Returns Yearbook 2025
(Public summary edition available as free download.)

The Global Investment Returns Yearbook, a body of work assembled by Professor Paul Marsh and Dr. Mike Staunton of London Business School and Professor Elroy Dimson of Cambridge University, has established itself as the definitive source for the analysis of the long-term performance of global financial assets. The 2025 edition, launched today by UBS Investment Bank and UBS Global Wealth Management’s Chief Investment Office, marks something of a milestone, providing us the opportunity to compare the first quarter of the 21st century’s market performance with that of the 20th century. This edition also includes a deep dive on diversification.

Mar

20

WealthWise Relaunch: Jeffrey Hirsch & Larry Williams Unveil 2025-2027 Market Strategies

CrossCheck Media proudly presents the relaunch of WealthWise, now hosted by market expert Jeffrey A. Hirsch, Editor-in-Chief of the Stock Trader's Almanac! In this exciting first episode, Jeffrey welcomes legendary trader Larry Williams, a veteran with nearly six decades of expertise in futures, commodities, and stocks.

Mar

20

I had a reverse shoe shine boy moment to day. A friend, who shouldn't talk to me about markets, talked to me: "Your boy Trump is crashing the markets. My portfolio …." I take such data points serious - in combinations.

Steve Ellison responds:

Similarly, my sister in October 2008 was getting 150 calls per day from clients asking, "Should I sell?" She worked at an insurance company that also offered investment services. My reaction at the time was, "Isn't anybody calling to ask, 'Should I buy?'"

Jeffrey Hirsch writes:

Still hearing a lot of “Should I buy?” Two weekends ago was asked if would come on cable biz Monday 2/24 to say I was buying mega cap tech. I declined and said I did not think is was time. Posted this that day.

Updates:

Nils Poertner writes:

valid observations here. good to pay attention to odd moves, anything strange (eg like bund move recently) - as there may be more odd things coming!! in other words, be like Alexander Fleming - who stumbled on penicillin by chance - and didn't bin the sample as he wasnt looking for it.

Adam Grimes comments:

I obviously understand the shoe shine boy/taxi driver point here, but it's worth considering that market psychology is not asymmetrical.

P. Humbert responds:

Hi Adam. there is high risk, that I initially heard about the old masters from your writings. I agree, that it probably has more weight for tops. I think, that is where you are pointing to? My friend has quite a good performance in being wrong. He called the the Bitcoin top being bullish and some more. He is a nice guy, just not for markets.

Adam Grimes agrees:

Yeah that's always been my thinking–a little more actionable with exuberance at tops. Bottoms tend to overshoot a bit more, on balance, so I think the shoe shine boy cries uncle a bit too soon.

Nils Poertner adds:

sometimes the crowd is right or they have a hunch but they don't connect the dots yet
eg. "a bit of subprime" in early 2008 - as sort of consensus view among your typical investor back them it was high time to position extra cautious.

Bill Rafter comments:

The “crowd” is mostly right, but the problem is that there are usually several crowds, and of course the composition of the crowds change. If you’re lucky, there will only be two crowds, the knowledgeable ones, and those “asleep at the switch”. The trading rule is simple: follow the informed ones, particularly if the uninformed ones are 180 degrees away. A classic example of this is the Commitment of Traders Report. Ideally the reporting specs will be one way, with the non-reporters the other way (and preferably short). Without the benefit of COT, you can identify best- and worst-informed with regression.

Mar

19

A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.

- Robert A. Heinlein

best for stocks, now 20 days since ATH.
UBS Global Investment Returns Yearbook 2024
Leveraging deep history to navigate the future
Elroy Dimson, Paul Marsh, Mike Staunton

one has been reading of the Lunar Society and the early childhood of Francis Galton in the fascinating and magnificent book Francis Galton's Nature and Nurture: 1822-1865. one of my favorite books of all time.

Vic's X/twitter feed

Mar

17

From the first section of:
Fourteen Methods of Operating in the Stock Market
Magazine of Wall Street, 1918

Mar

16

Before last week, the S&P 500 index had 25 declines of 10% or more since 2003. The median of the maximum drawdowns is -14.6%.

Mar

15

Maybe the most fundamental thread on Spec List has been counting/data/figuring things out, so here is a marvelous two-part video by 3Blue1Brown, with Terrence Tao, about how we determined various cosmic distances.

The Cosmic Distance Ladder, Part 1

The Cosmic Distance Ladder, Part 2

Additional commentary and corrections from Prof Tau

Gyve Bones writes:

This was a fascinating lunch lecture. Thank you. I first became fascinated with the story of how science and technology developed with the 1977 PBS series by James Burke "Connections" which told the story, without the aid of CGI graphics in my high school years. I was given the companion book for the series that Christmas by my very thoughtful mom. (It's also the story that launched my falling away from the Catholic faith in which I was raised, my teenage rebellion.)

Here's the episode which details how the Babylonian star tables by Ptolemy used by Copernicus were preserved from the destruction of the Library of Alexandria, found on papyrus scrolls in a cave backup library:

James Burke Connections, Ep. 2 "Death in the Morning"

Asindu Drileba responds:

Connections is so good. I really wish there was a remastered version (in HD at least). One of the things I still don't understand is how government funded broadcast corporations like PBS, BBC and DW make such high quality non-fiction films. I would go to say the have the best non-fiction documentaries. Capitalism doesn't apparently do well when it comes to making non-fiction. What makes them so good? Are they just structured properly?

Gyve Bones replies:

Here is a very well mastered set of the videos for Connections (1978).

Peter Ringel adds:

there is a Conjecture, that astronomers are the more happy and humble people. I guess, this is because, it is all so vast and relative.

Mar

14

Nicholas Wright Gillham
A Life of Sir Francis Galton: From African Exploration to the Birth of Eugenics
Oxford University Press, 2001

Reviewed by Gavan Tredoux, August 2002

This is only the third full-length biography of the eminent Victorian scientist and polymath Sir Francis Galton (1822-1911). Remarkably, it is the first in quarter of a century. Galton was the product of a distinguished lineage, with men of marked ability in every one of ten preceding generations. He had first made a name as an African explorer and meteorologist, active in the affairs of the Royal Geographical Society. Late in life, inspired by his half-cousin Charles Darwin, he went on to found the scientific study of heritability, which soon encompassed differential psychology, anthropology, genetics, criminology, statistical methods, and eugenics. Starting almost from scratch in all the subjects he investigated, Galton invented rigorous intelligence testing, founded experimental psychology in Britain, established the scientific basis for fingerprint identification, formulated the statistical concepts of regression and correlation, pioneered early investigations of genetics, and founded the biometrical school. Financially secured by a legacy from his moderately wealthy father, he might have followed so many of his contemporaries into comfortable idleness. Instead he chose the career of a “gentleman scientist”, and would on his death endow his well-managed legacy to further research in the areas that interested him.

Vic's X/twitter feed

Mar

13

Grok 3 helped me drop my glucose from ridiculous to almost normal in one week

I started talking to Grok 3 last week about some health problems. After just a couple of sessions I came to think of AI as a super-helpful genius friend who doesn’t mind long chats, probing questions, or boring tasks.

Read the full post.

Mar

12

The Invisible Hand, First Edition
by John Eatwell (Editor), Murray Milgate (Editor), Peter K. Newman (Editor)

Covers Smith, Bentham, Hobbes, Hume, Locke, and Mill, as well as collective action, economic freedom, individualism, and property rights.

The Highlite of a trip to Berkeley: Moe's Books

Moe Moskowitz opened the doors of Moe’s Books in 1959, and so established one of America’s preeminent independent bookstores, a favorite destination for book-loving locals and tourists alike. Now boasting an inventory of over 200,000 new, used, and rare selections, Moe’s was noted by the New York Times in 2008 as the bookstore where “those in the know still all head.” Moe revolutionized the predigital used book business by establishing buying policies that ensured a trust with his customers: the highest prices would be assured when they brought their books to his store. Moe may be gone, but his policies and store remain very much alive today.

Vic's X/twitter feed

Mar

11

I think a lot about how attention, like a searchlight, moves around the markets. I like, too, the simple logic that when retail investors are deciding what to buy, they have a huge array of choices, but when deciding what to sell, they are limited to what they own. (Leaving out the idea of looking at thousands of options to try to decide what to short.) Maybe index ETFs simplify this process, but then, before index ETFs we had mutual funds, so maybe not.

All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors
Brad M. Barber, Graduate School of Management, University of California, Davis
Terrance Odean, Haas School of Business, University of California, Berkeley
Advance Access publication December 24, 2007

We test and confirm the hypothesis that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one-day returns. Attention-driven buying results from the difficulty that investors have searching the thousands of stocks they can potentially buy. Individual investors do not face the same search problem when selling because they tend to sell only stocks they already own. We hypothesize that many investors consider purchasing only stocks that have first caught their attention. Thus, preferences determine choices after attention has determined the choice set.

Asindu Drileba writes:

Laslo Barabasi has a model called preferential attachment. His model can simply be defined as "people usually prefer to bet on a horse that is already winning". I hear night club promoters also do this. To pull in customers, you create artificially fake long lines. These long lines make a night club appear popular, and thus make people interested in going in.

For the S&P index for example, index rebalancing algorithms are at times market cap weighted. That is, stocks with a larger cap, get more money than those with smaller market caps. Which will increase their future allocations, as their market caps grow. Retailers and others seeking "Blue chips" cannot invest in the top 500 stocks. They may focus on the top 20, which further distorts the market caps. Barabasi claims that this is partly why stock market caps have a pareto-like distribution. 20% for stocks may hold 80% of the index value market cap. (I am not saying this so what is exhibited it's just an illustration).

Peter Ringel comments:

I hear night club promoters also do this. To pull in customers, you create artificially fake long lines. These long lines make a night club appear popular, and thus make people interested in going in.

This is one of the many cognitive biases of humans. Any group over 5 attracts attention by by-passers. It even works with cutouts of >5 humans. The research papers above immediately bring my thoughts to manipulation. The searchlight is a daily reality in markets to me. But someone is holding it and is pointing it. Wyckoff style manipulation games on and on. For hundred years. I do disagree a little with the paper about retail trader as the main victim. Institutional smart money today - in one corner of the market - is tomorrows dump money in another corner. They are easily also susceptible to the manipulation games.

Mar

10

A few years ago, I read Brig. General Smedley Darlington Butler's War is a Racket (full text). Sample passages:

In the World War a mere handful garnered the profits of the conflict. At least 21,000 new millionaires and billionaires were made in the United States during the World War. That many admitted their huge blood gains in their income tax returns. How many other war millionaires falsified their income tax returns no one knows.

The Nye Committee uncovered some astounding information about the munitions industry, including a confession to profits as high as 800 percent.

Inspired by the book, I looked up publicly listed defense companies and marked out dates for conflicts like the Gulf War, Iraq invasion, Assassinations, Ukraine Vs Russia, Palestine Vs Gaza. While there were some blips on defense stocks, they were not that impressive. So if people say the US defense "complex" is fleecing the government, where exactly is this money going? What doesn't it reflect on stock prices?

Gold on the other hand frighteningly has so many coincidents, when it actually "predicts" aggression. The price of Gold for example went up for a moment before Qasem Soleimani was killed in a drone strike by the Trump regime. Not to mention how it behaved during the previous "Gaza - Israel" & "Ukraine - Russia" conflicts. I also found a similar observation in The Education of a Speculator:

Then, out of the clear blue, from 2 P.M. to 3 P.M., gold jumped $7. No reason for the rise, just technical buying by the funds, we were told. But that weekend, around 4 A.M. on Sunday, U.S. Navy fighter planes shot down a Libyan jet flying over the Mediterranean. This caused tremendous tension, always good in those days for at least a good run in gold. After all, nuclear war in the Mideast was now possible.

— Chapter 4, Subsection (Practical Losses)

Why is Gold way better at predicting political aggression than defense stocks?

Big Al responds:

I find the tricky thing with macro events is being precise enough with dates. Some events, like Fed announcements or other econ data releases, can be timed more precisely. With bigger, geopolitical events, it's less definite. With defense stocks, I would look at their performance in the months before the event, on the assumption that the market would be anticipating rather than reacting. As for strong reactions, look at the chart of Rheinmetall since the start of the Ukraine war and also since the US election.

As for gold, here's an interesting approach, looking at market sectors:

Navigating crises: Gold's role as a safe haven for U.S. sectors

This paper investigates the correlation between U.S. sectors and gold, and whether gold can serve as a safe haven for investors in specific U.S. sectors during the global financial crisis, COVID-19, and the Russia-Ukraine war. We use data from the Standard & Poor's Depository Receipts (SPDR) Select Sector Exchange Traded Fund (ETF) to capture the performance of the respective sectors. Our findings document that gold is a weak safe haven for most U.S. sectors. Gold is not a safe investment for energy, materials, utilities, and consumer staples. Gold does provide vital protection for financial, consumer discretionary, industrial, technology, and healthcare.

Asindu Drileba comments:

Thanks for pointing me to RHM.DE. I didn't even know the company existed. It is exactly how I expected US defense stocks to behave during the Ukraine-Russia & Gaza-Palestine conflicts.

Mar

8

Despite what talking heads may say about Jobs and the current Non-Farm Payrolls Report, there are two items that suggest Recessionary times. The current (daily) Payroll Tax Receipts growth, and the dichotomy between Full-time and Part-time workers (monthly). Click on the charts to open them for full view.

Mar

6

Examples of disruptive behavior in animals

like disruptive behavior in markets.

yale opponent who tried to kill me - ancestors surrendered to George Washington.

Vic's X/twitter feed

Mar

5

"the search for a foolproof system is in vain. there will never be a foolproof system." - vn and tw.

very good advice from bacon and all speculators and gamblers:

Some amateur players carry inconsistency to such a degree that they demand consistency from the horses, while at the same time being utterly inconsistent in their methods of play. It's not the races that beat these players — it's the switches!

Racing is simple. Everything about the game is logical and common sense and elementary. All the figuring and the mathematics and the mechanics of racing can be understood by a child in junior-high school. But the game is decked out in an endless number of minor contradictions and open switches and deadfall traps, in order to lure the average player into doing everything wrong .

If the average player — the public play — kept out of all these switches and traps, then the powers-that-be would have to make the game far more complicated in order to insure the fact that the majority of players (as we learned in a previous chapter) continue to lose and thus continue to furnish money to keep up the game.

The amateurs who play so carelessly and who fall into all the wrong switches, do not stop to consider the percentages of their rightful losses. When an amateur goes to the track and loses nine bets (eight races and a daily double) and loses all his capital for the day, he has lost many times what the percentage calls for. He has no right to lose so much. It's almost as if he did it on purpose!

- Secrets of Professional Turf Betting

and just when you are ready to give up at the bottom or top, get ready for a change.

as you get nearer the King's row, you remember all your victories vividly (whether they happened or not).

ratio of Europeans like dax to sp at an all time hi.

I remember my 6 gold rackets (an important tourney in my day where my opponent tried to kill me by hitting at my head just when he was about to lose) which reminds me of the turn around in sp today.

Vic's X/twitter feed

Mar

5

If your company is a domestic power generator like Constellation (CEG) or Calpine (CPN), the proposed Trump Administration tariffs at the Canadian and Mexican borders could help elevate gross margins. If Canada cuts off electricity altogether, additional margins may become available. While generators may benefit, US consumers will be harmed.

Uncertainty clouds northern US grids amid Canada tariff threat

Canadian premier says he will cut off electricity exports to US ‘with a smile on my face’

Malcolm Lui writes:

It’s my understanding that utilities are generally regulated to provide a steady ROA based return. If so, I don’t believe that they can raise their prices and increase their gross margins, as that would raise their ROA. They can raise their prices though if their costs go up (to maintain their ROA). It’s been a while since I last looked at utilities though. Am I mistaken about this?

Carder Dimitroff responds:

Yes, regulated utilities generally provide steady ROAs. However, some states fully regulate their electric utilities. Other states deregulated bulk power (wholesale power) and the generators that supply bulk power. Most population centers in the US are in deregulated states.

In the deregulated states, the title to bulk power passes to regulated distribution utilities at substations adjacent to transmission lines. Specifically, titles pass to distribution utilities at substations' step-down transformers.

Ontario supplies bulk power to unregulated states (Minnesota, Michigan, and New York). Quebec supplies bulk power to New York and New England. New Brunswick also supplies New England. All three provinces own and operate nuclear power plants. While Canadian transmission lines feed power directly to specific locations within those states, imbalances propagate to other states.

Ontario updated its strategy. They now plan to tax Ontario power exports at 25%.

Steve Ellison writes:

In this video Peter Zeihan says that a hurdle to green energy is that essentially all cost is up front, unlike natural gas plants in which only 20% of the lifetime cost is in construction, and 80% is in fuel costs over the life of the plant. So even when total lifetime cost of green energy is less than that from a natural gas plant, the higher upfront costs make financing more difficult. If true, I would guess cost recovery of the upfront expenses is also more risky in a deregulated market.

Mar

3

Computer Based Horse Race Handicapping and Wagering Systems: A Report
William Benter, HK Betting Syndicate, Hong Kong

Certain authors have convincingly demonstrated that profitable wagering systems do exist for the races. The most well documented of these have generally been of the technical variety, that is, they are concerned mainly with the public odds, and do not attempt to predict horse performance from fundamental factors. Technical systems for place and show betting, (Ziemba and Hausch, 1987) and exotic pool betting, (Ziemba and Hausch, 1986) as well as the 'odds movement' system developed by Asch and Quandt (1986), fall into this category. A benefit of these systems is that they require relatively little preparatory effort, and can be effectively employed by the occasional racegoer. Their downside is that betting opportunities tend to occur infrequently and the maximum expected profit achievable is usually relatively modest. It is debatable whether any racetracks exist where these systems could be profitable enough to sustain a full-time professional effort.

To be truly viable, a system must provide a large number of high advantage betting opportunities in order that a sufficient amount of expected profit can be generated. An approach which does promise to provide a large number of betting opportunities is to fundamentally handicap each race, that is, to empirically assess each horse's chance of winning, and utilize that assessment to find profitable wagering opportunities. A natural way to attempt to do this is to develop a computer model to estimate each horse's probability of winning and calculate the appropriate amount to wager.

More on William Benter

William Benter (born 1957) is an American professional gambler and philanthropist who focuses on horse betting. Benter earned nearly $1 billion through the development of one of the most successful analysis computer software programs in the horse racing market and is considered to be the most successful gambler of all time.

Mar

1

Sampler

March 1, 2025 | Leave a Comment

Carder Dimitroff points to:

Michigan’s Palisades nuclear plant nearing reopening

Michigan’s Palisades Nuclear Generating Station is one step closer to becoming the first nuclear power plant in the United States to reopen. After closing in 2022, the company that was set to decommission the plant has changed course, aided by a $1.5 billion loan from the U.S. Department of Energy to restart operations.

And a new SMR will be added on the same property in about 2030:

Michigan: First nuclear re-start is scheduled for this August

FWIW, the federal regulator (NRC) may be immune from budget cuts. Their licensing and regulatory activities are funded by the industry, not taxpayers.

Asindu Drileba suggests:

Great podcast on LLMs:

What kind of Intelligence is an LLM

[Part 3 of a 6-part series on intelligence in the Complexity podcast series by the Santa Fe Institute.]

Stefan Jovanovich finds:

The best underdog story in professional baseball in US:

The Best Underdog Story of 2025

Payton Eeles #11
St. Paul Saints
Minnesota Twins
Triple-A Affiliate
2BB/T: L/R5' 5"/180Age: 25

Feb

27

Attention Induced Trading and Returns: Evidence from Robinhood Users
Brad M. Barber, University of California, Davis
Xing Huang, Washington University in St. Louis - Olin Business School
Terrance Odean, University of California, Berkeley - Haas School of Business
Christopher Schwarz, University of California, Irvine - Finance Area
Date Written: October 12, 2021

We study the influence of financial innovation by fintech brokerages on individual investors’ trading and stock prices. Using data from Robinhood, we find that Robinhood investors engage in more attention-induced trading than other retail investors. For example, Robinhood outages disproportionately reduce trading in high-attention stocks. While this evidence is consistent with Robinhood attracting relatively inexperienced investors, we show that it can also be partially driven by the app’s unique features. Consistent with models of attention-induced trading, intense buying by Robinhood users forecast negative returns. Average 20-day abnormal returns are -4.7% for the top stocks purchased each day.

Feb

25

Lots of them! And with AI-generated explanations.

Asindu Drileba responds:

Wow. As much as the explanations may be wrong, they logically make sense. LLMs are really getting good. I didn't know they could do this.

Gyve Bones writes:

You can do similar things with astrological cycles and events, I came to realize when I built an ephemeris for the Market Information Machine and coded macros for ways to use the data. You can curve-fit any data to some combination of sinusoidal cycloids and get a 99% correlation, which then falls apart going forward because it was indeed a spurious back-fit with no reasonable causal linkage.

Malcolm Lui suggests:

If you track which countries where I’ve lived, those markets always experienced a bear market. I’m currently in the US. Advise strongly that you bet the farm, take out a 2nd mortgage, and buy out of the money put options the Magnificent 7.

Feb

23

Active Trader Magazine, March 2004
The Volatility-Market Connection
By Victor Niederhoffer and Laurel Kenner

Is everything you know about volatility wrong? Find out what history says about the volatility-market relationship — and what the VIX is saying about the stock market’s 2004 prospects.

Volatility is a crucial variable every market participant needs to consider. For speculators, volatility determines how much money to place on each trade relative to initial stake and stop point. For investors, it determines how much to allocate between stocks and bonds, and how much to invest for a secure retirement. For academics, volatility is one blade of the scissors in the fundamental theorem of finance — namely, that expected return is linearly related to volatility.

The article contains a sidebar that begins, "Dr. Hui Guo is one of the most respected and prolific authors in volatility research. Reading some of his articles sparked our quest." Dr. Guo was a senior research economist at the Federal Reserve Bank of St. Louis is currently at U Cincinnati.

Here is one of Dr. Guo's recent research papers:

Taylor Rule Monetary Policy and Equity Market Risk Premia
Hui Guo, University of Cincinnati - Department of Finance - Real Estate
Saidat Sanni, University of Cincinnati
Yan Yu, University of Cincinnati - Lindner College of Business
Posted: 12 Nov 2024, Last revised: 6 Nov 2024

The Fed mainly uses the federal funds rate (FFR) to achieve its dual mandate of price stability and maximum employment. Recent asset pricing models argue that changes in FFR affect equity market risk premia. Consistent with this financial condition channel of monetary transmission, the Fed's macroeconomic needs estimated using the Taylor (1993) rule negatively predict stock market returns. They are also identified as a crucial equity premium determinant along with the scaled market price and conditional market variance via variable selection analyses. The linear multifactor equity premium model has remarkably stable predictive power, outperforming machine learning and other prediction techniques.

Feb

21

Good day(s)

February 21, 2025 | Leave a Comment

A good day -1.6% to start another break of all-time hi with dax and bonds moving to great support and foundation.

Those were the days:

NY Squash Legend: Victor Niederhoffer, Storied American Player of the 60’s and 70’s
And Steely Rival to International Legend Sharif Khan

A five-time winner of the U. S. Nationals and one of only seven American-born players to capture the most coveted crown of hardball squash, the North American Open, Victor Niederhoffer is very near the top of the list of squash’s most significant figures and intriguing personalities. His rivalry with Sharif Khan during the mid-1970’s defined that crucial era in the sport’s evolution and played a determinate role in the formation and rise to prominence of the professional hardball tour that had such an impressive run in the following decade.

Part of what made Niederhoffer’s ascent to the top echelon of the sport so compelling is the degree to which his background and self-presentation differed from the norm during the era in which he competed. Unlike the large majority of America’s best college and amateur players—almost all of whom by the time they entered college had learned the game either in junior programs at exclusive private clubs or while attending prestigious New England prep schools (and in many cases from fathers who themselves had been active squash players)—Niederhoffer, the son of a Brooklyn cop, had never played squash prior to entering Harvard in September 1960. His sole previous exposure to wall games had been to those that were played at the Brighton Beach Baths, a sports complex located near the Niederhoffer's home near Coney Island. This complex featured more than 20 one-wall handball courts and was known as the mecca for that sport.

Vic's X/twitter feed

Feb

21

Spec sampler

February 21, 2025 | Leave a Comment

Asindu Drileba recommends:

The Count of Monte Cristo was my favourite movie of 2024. I would recommend it to specs as it has a very interesting stock market trading segment. The stock trading segment was brilliant in that it incorporated ideas from poker (previously discussed in this list). It's also a good demonstration Howard Mark's "Second level thinking", and the use of deception in the market.

Also, the best description of the Fourier transform I have seen so far.

Jeffrey Hirsch is on IBD:

How To Trade Trump 2.0 And Why DeepSeek Is Not The End Of The AI World | Investing With IBD

Big Al offers:

Humorous and with many lessons:

How I Helped to Make Fischer Black Wealthier
Jay R. Ritter, Cordell Professor of Finance at the University of Florida

Hillary Clinton wasn't the only person who made money speculating in the futures market during the late 1970s and early 1980s. A lot of finance professors did, including me. However, I used a different strategy than Hillary. Following the advent of stock index futures trading in 1982, many finance professors started playing the turn-of-the-year effect. The most popular approach was to buy the Value Line futures and short the S&P 500 futures. This is what I did. Of course, if there is easy money to be made, prices should adjust as the market learns, and a perpetual money machine will cease to exist. But I figured out a way to still make money. Or so I thought. Unfortunately, there was an unexpected danger in my strategy. In 1986, Fischer Black of Goldman Sachs figured it out and took me to the cleaners.

Feb

19

Finally an ATH after 20 days of feinting and following the intellectual and second handed who hate Wealth.

The Origins of Value: The Financial Innovations That Created Modern Capital Markets is a beautiful and informative book that traces the development of all current financial instruments and institutions to their origins especially in Holland in the 16th century.

From the invention of interest in Mesopotamia and the origin of paper money in China, to the creation of mutual funds, inflation-indexed bonds, and global financial securities, here is a sweeping survey of financial innovations that have changed the world. Written by a distinguished group of experts - including Robert Shiller, Niall Ferguson, Valerie Hansen, and many others - The Origins of Value traces the evolution of finance through 4,000 years of history.

the chapter Origins of the NYSE by Richard Sylla is the best illumination to the forces that led to American Capitalism from the 18th century to today, completely enthralling and informative. The whole book is one of the best I've ever read of the thousands I've read on this subject.

Vic's X/twitter feed

Feb

19

We sent my 2025 annual forecast to the Copyright office. They would not copyright it saying, “it was AI generated so could not be copyrighted.” We replied it was not AI, showing why so were finally approved. This raises an unraised question about AI protection. What is/will be the law??

Asindu Drileba comments:

The purpose of AI regulation is just so the big players can build a cartel and lock in the market. This is why people like Sam Altman say they "welcome it".

Big Al gets conspiratorial:

Not to be too conspiratorial, but…

OpenAI whistleblower found dead at 26 in San Francisco apartment

A former OpenAI employee, Suchir Balaji, was recently found dead in his San Francisco apartment, according to the San Francisco Office of the Chief Medical Examiner. In October, the 26-year-old AI researcher raised concerns about OpenAI breaking copyright law when he was interviewed by The New York Times.

Peter Ringel writes:

I always suspected, that the senator is a robot. His performance is inhuman!

Your work is obviously your work. But, what if one uses AI for ones work, creations and everything? It should be still your IP. We have musicians on this list, who use AI for inspirations and research. I constantly lookup code via AI, b/c I am not a good coder. But the final script is mine. I even run AI models locally. The opensource models like Facebook's LAMA. (for an easy install, i can recommend: msty.app)

There is creativity in asking questions, to squeeze the right results out of AI. Prompt engineering is a thing.

Pamela Van Giessen prompts:

No doubt every single publishers’ lawyers are fighting the ability for AI generated anything to be copyrighted because so much AI is taking from existing copyrighted works, usually without permission or payment. Some publishers are feeding into AI programs with permission/payment (I think my previous employer, Wiley, is feeding at least some content into AI, for instance). This is a lousy deal for the authors and artists. The publishers will make vast sums, much like Spotify, and the content creators (I really hate that phrase) will get less than pennies on the dollar.

Liberals have done a great job of deflecting the real problem with platforms (omg, no content moderation or fact checking, TikTok is spying on Americans, the world will end!). The real problem with platforms is that they steal content, outright theft. And where is your government protecting you from this theft? NOWHERE.

Easan Katir relates:

I sent an unpublished manuscript to an Oxford-educated editor, asking her to edit. She asked if any of it was AI. I replied truthfully that I wrote most of it but I asked AI to add some. She declined the job, I guess making a stand: humans vs. AI. Fortunately or not, we know which is going to win.

Peter Ringel offers:

U.S. Copyright Office says AI generated content can be copyrighted — if a human contributes to or edits it

Pamela Van Giessen comments:

I imagine that the courts are going to get involved at some point. Since much AI is from existing copyrighted material, some (most?) used without permission, someone is going to challenge copyrighted AI that is really someone else’s material.

Jordan Low agrees:

precisely. i have been seeing a lot of content creators complain that their work is just automatically reworded into another article without attribution.

Update: Big Al offers an historical lagniappe:

The battle of Cúl Dreimhne (also known as the Battle of the Book) took place in the 6th century in the túath of Cairbre Drom Cliabh (now County Sligo) in northwest Ireland. The exact date for the battle varies from 555 AD to 561 AD. 560 AD is regarded as the most likely by modern scholars. The battle is notable for being possibly one of the earliest conflicts over copyright in the world.

Stefan Jovanovich writes:

The first written mention of the Battle of the Book occurs in the Life of Saint Columba composed by Manus O'Donnell in 1532. Britain did not have a formal copyright law until the passage of the Statute of Anne in 1710; that gave authors their first ownership claim to their writings. Until then the Stationers' Company had an exclusive right to all printing and publishing in Britain. The term "copyright" comes from the right a member of the Stationers' Company had to copy a written manuscript into print after the text had been registered with the Stationers' Company. The charter for the Stationers' Company was granted in 1557 by Queen Mary and King Philip, then confirmed in 1559 by Queen Elizabeth. The Company had the authority to seize "offending books".

Carder Dimitroff adds:

From March's Library: Early printed books were customized with hand-painted illumination for the wealthy.

Feb

17

Very bullish

February 17, 2025 | Leave a Comment

refusal [on Friday] to go last 20 pts for a.t.h very bull.

The Mountain Shadow, sequel to Shantaram, is a set of contrived incidents of violence and corruption with made up characters. I gave up on it after 500 pages when a ridiculous financial coup involving the fictional Karla was so fake.

Christy Mathewson once beat world checker champion Newell Banks in a game of checkers.  he liked to angle the board after a game and then review the baseball game with checkers being the players.

The Player: Christy Mathewson, Baseball, and the American Century

Vic's X/twitter feed

Feb

16

1. Never try to make money the same way twice in a row.

2. Don't trade inactive markets.

3. Don't assume that the relation between your two favorite markets will stay the same from year to year.

4. Be alert to big minimums on Monday as they tend to reverse.

5. Try not to sell markets that have big drifts upwards like stocks.

6. Try to go with with the central banks.

7. Be one with the idea that has the world in its grip and be on the side of the market that will further that grip.

8. Never go for small profits as the vig is too great relative to your gain as a %.

9. Don't trade when a loved one is very sick.

10. Round numbers will be broken.

11. For example, play the yen to break 100 and the S&P to break 16000 and Apple to swing from below 400.

12. Gold has been a store of value for a long time. When it gets hit hard, think of all the people in the world and the institutions that use it for insurance.

13. Don't sell premium in the grains as they move explosively.

14. Never trade so that you exceed your margin. (You will have to get out at the close unless it moves in your favor and that makes you weak).

15. Don't listen to tips or try to follow fast moving operators as you won't know when they are going to change positions and how strong and on what basis their views are made.

16. Let your profits run after you have a big loss and get back to even sell to the sleeping point.

17. Don't take positions that you plan to extricate from in inactive trading hours.

18. After or just before a major announcement don't use limits.

19. Only buy the worst markets or stocks at the end of a quarter or year.

20. Never trade when you're out of the office or on vacation or on a whim.

21. Beware of trading when the market is going to be closed and you will not be able to extricate from your position like European markets when they close for a month around Christmas.

22. Don't short big up opens.

Okay, that's a start. Hopefully, I am more adept at this kind of thing a trader should know than I am at the things a man should know.

- posted by Vic, 29 April, 2013

Feb

15

See the table for hourly frequency of when highs and lows occurred, on average, across the 28 majors and their crosses. How would you trade the tendencies? Here’s one idea: Lows made almost 12% of the time in the first hour after rollover (16:00 central). Perhaps buy new highs starting in the 2nd hour (17:00 central)?

Big Al comments:

Interesting data, Malcolm. I think in the past others on the list have looked at the distribution of stock index highs and lows during the day. Generally, they follow an arcsine distribution.

Bill Egan writes:

The arcsine distribution is not simple. Professor Feller's text is best: Chapter 3.

Peter Ringel writes:

What would be practical consequences for trading from this? At first glance, it might look depressing. The tendency to close near the High or Low arises only from randomness. I would classify the trading days, the daily bar. The arcsine distribution includes all the small bars, the noisy days. Nice if it closes on the high of a narrow range bar, but that is not what we want.

There must be a threshold of travel of the lows/open, that should be more and more above a level expected by randomness. Or count the noise days within the threshold. I am convinced, that it is good to hold to EOD once a real trend day is going (but rare). How does this relate to the discussed phenomenon?

Feb

14

Losing is Optional: Retail Option Trading and Expected Announcement Volatility
Tim de Silva, Stanford University
Kevin Smith, Stanford University Graduate School of Business
Eric C. So, Massachusetts Institute of Technology (MIT) - Sloan School
of Management
Date Written: January 14, 2025

We document the growth of retail options trading and provide evidence that retail investors are drawn to options by anticipated spikes in volatility. Retail investors purchase options in a concentrated fashion before earnings announcements, particularly those with greater expected abnormal volatility. Comparing across asset markets, we also find retail investors disproportionately trade options over stocks as anticipated announcement volatility increases. In doing so, retail investors display a trio of wealth-depleting behaviors: they overpay for options relative to realized volatility, incur enormous bid-ask spreads, and sluggishly respond to announcements. These translate to retail losses of 5-to-9% on average, and 10-to-14% for high expected volatility announcements.

Feb

13

I paused Asindu-posted link at time-stamp 1.33.30, to turn your attention to 150 years ago - when Silver first got demonetized:

The Money Masters - The Rise Of The Bankers

Below is where we are this decade, at the 90:1 Gold/Silver ounce/ounce price ratio (click to expand):

Silver has a special place in my conscience, since I lost my first million on April 28th, 1987 - having misjudged the magnitude potential of COMMODITY EXCHANGE floor shenanigans, which cost me that much in mere minutes (of failed calendar spread execution) between the Limit-up lock and the Limit-Down lock in the May contract. I then managed to recoup, and by the end of 1989 achieved my goal of heading a COMEX member firm. Memoirs aside: the above Bullish-projecting chart is nailing the fate of Silver - as one of industrial metals of today. Take the above as note of importance to listers in the commodities space.

Stefan Jovanovich gets into the history:

Silver was not demonetized in 1873. Coin continued to be minted in record volumes and used for the China trade. Grant ended the wonderful arbitrage that had made the Treasury everyone's bitch by limiting the amount of metal that the Mint had to accept for exchange. So, no more bringing silver and asking for gold when the market had taken silver lower than the ratio set by the Coinage Act and no more bringing gold and selling it to the Mint to buy China dollars when the ratio was the opposite. The ability of the Congress to issue money was voided by ending all presumption that Federal debt could be legal tender. Greenbacks had to be exchanged for coin whenever presented to the Treasury.

Those remained the rules until 1914 when the Treasury and the Federal Reserve agreed that European central bank IOUs dud not have to be cleared in coin or specie.

Peter Penha writes:

My favorite metal Silver (at these prices) and relative to Gold both for the Gold/Silver ratio long term and in Ag's natural occurring parts per million of ore in mining vs Au. Stefan’s comment about changing les règles du jeu is a reminder that it will happen again as it always does to try to hold things together.

The US Government is adding to our debt at $1 trillion every 90 days. Gold mined annually ~3000 tonnes (~1.9% of above ground reserves) * 31500 ounces * $3000 = $ 283 billion dollars worth - I trust that more than 1/2 of that gold that is mined cannot ever come to market as taken directly by the Chinese government & other central banks directly now to offset that very US treasury printing press. The silver market is 25000 tonnes a pittance in terms of nominal value of $24 billion at $30 an ounce - this is added to our national debt every 2 1/2 days.

I understand the debasement of our national currency is the upside drift in markets this list teaches as the key thing to take advantage of long term via the s&p 500 and equities, but things do sometimes get out of line on a relative value basis.

The world’s 3rd largest producer of Silver is Peru (after Mexico and China) and iI read somewhere as part of a let’s move off the USD for trading commodities, that Peru as part of the construction of the giant deep water port north of Lima built by China/COSCO (with it's potential dual military/commercial use) has agreed to send all its physical silver output to China for processing.

Stefan Jovanovich comments:

I am not qualified to assess the usefulness of The Money Masters documentary to traders. Its description of the 19th century assumes that there was a continuing debate after the Civil War over the rules for "moneyness" - the quality that gives a paper and coin its status as legal final payment - and how much the government would supply. No. On those questions Grant as President won an unconditional victory: the government would have no control over the supply other than the Bureau of Engraving being responsible for printing the notes for each United States Bank. (Grant lost that argument with Senator Sherman; he wanted each bank to have the ability to order its notes directly from the printer because he knew how the Treasury monopoly over printing would reply in a crisis.)

"Gold" would not be the only form of coined money, but the dealers would no longer have the opportunity to engage in serial arbitrage in foreign exchange. The limits on the amount of silver that the Mint would exchange were not a restriction on the domestic money supply (I look to Peter to confirm this based on the amounts of silver dollars that survive to this day). The Panic of 1893 can largely be explained by the market's fear that Congress signalling was about to return the U.S. to bimetallism for foreign exchange - at the very time when the British were ending direct currency exchanges between India (on the silver standard) and the United Kingdom whose banks cleared everything in sovereigns.

Feb

13

Freakonomics podcast: Is Professional Licensing a Racket?

Licensing began with medicine and law; now it extends to 20 percent of the U.S. workforce, including hair stylists and auctioneers. In a new book, the legal scholar Rebecca Allensworth calls licensing boards “a thicket of self-dealing and ineptitude” and says they keep bad workers in their jobs and good ones out — while failing to protect the public.

Feb

12

Squeakers?

February 12, 2025 | Leave a Comment

an interesting study that shows that buying relative strength gives superior returns - consistent with all other studies on ssrn:

Relative strength over investment horizons and stock returns

do similar studies show that betting on squeaker winners in baseball and football are losers? does betting against squeaker winners work in baseballl, football, and markets?

Tom Wisell: "sometimes it is the move you didn't make that beats you rather than the move you did make."

Vic's X/twitter feed

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