Market Curiosity: Exploring Markets And Systems

December 25, 2011

Zenith expressions of joy are universal, pure, and innocent; best romantic framework known…

Filed under: Editorials, Favorite Posts, Peak Moments — Tags: , , — Jeff Fitzmyers @ 3:54 pm

The universe is made of stories, not atoms. — Muriel Rukeyser
The grass is greener where you water it. — Ted McGrath

A recipe for appreciating someone: Plan, make, or give:

  • Something they will love.
  • Something they don’t yet know about.
  • Something that illuminates their essence.
  • (possibly) Something which lightly acknowledges and accepts one of their challenges.

Then plan a event, etc. After they think, “Well, that was fun”, unveil the real offering. Enjoy their delight in being unconditionally loved and wanted.

Not only did she not “see” her ring, she did not really see anyyone around her for a while.

Did she even look at her ring? Fun ending.

If the skies the limit why are there are footprints on the moon? —??

Dr Will Joel Friedman: The Full Bounty Of Love Is Available For Those Who Grow [Being in like –> Falling in love –> Being in love –> State of loving –>] ‘LOVE INHABITS US AND WE EMBODY LOVE’: This highly mature, spiritual love is sometimes called ‘agape’ or brotherly and sisterly love. It transcends earthly limitations, incorporating an abiding spiritual relationship to all living things, the earth and the Divine. Living this humane stewardship, an appreciative reverence grows along with a communion of the spirit blossoming into our true nature. Ineffable and beyond expression in mere words, when love inhabits us and we embody love with another person it shows itself as two souls silently rhyming in brotherly and sisterly fulfillment.

One does not fall “in” or “out” of love. One grows in love. — Leo Buscaglia

The essence of love is getting out of yourself and lightly near others while mirroring be-ing whole. When we care less about our feelings, our perceived rights, our happiness, our security, etc., and concern ourselves with the essence of others, we become whole. — ??

Recipe for a loving relationship:

  • Call when you say you will (reduce uncertianty)
  • Follow though with what you say you will do, or make amends (increase trust)
  • Sends thank you notes (show appreciation)
  • Plan a nice time with her interests in mind
  • Never gossip
  • Come up with supportive ideas that further her goals (show proactive attention)
  • Give her (and others) complements in front of other people

Related:
10 Ideas About Dating Almost Nobody Wants To See, Hear, Or Know

March 6, 2011

Scientific basis for the evolution of cooperation

Filed under: Favorite Posts, Systems — Tags: , , — Jeff Fitzmyers @ 2:02 pm

Another investigation which has strongly influenced the artificial life community is Robert Axelrod’s game theoretic simulation of the evolution of cooperation. By letting different strategies compete in a repeated Prisoner’s Dilemma game, Axelrod (1984) showed that mutually cooperating, “tit-for-tat”-like strategies tend to dominate purely selfish ones in the long run….

Reciprocal Altruism
The “prisoner’s dilemma” may be overcome by a strategy of “tit-for-tat”, which reciprocates to cooperation by cooperation and to defection by defection. This makes it impossible for selfish individuals, who defect, to gain long-term advantages from reciprocal cooperators, since these will only cooperate with those that cooperate themselves. Yet two “tit-for-tat” players will spontaneously start to cooperate thus reaping the benefits of continuing synergy (Axelrod, 1984).

Critique: at the first encounter, none of the players knows how the other one will respond. In order to have a chance to start a cooperative exchange the reciprocal altruist must start with a cooperative move, which can be taken advantage of by a defector…

Can’t avoid exposure to not nice people.

The strategy only starts to pay when there are repeated encounters with the same individual, so that the gains of continuing cooperation outweigh the losses of first-time encounters with defectors. It also implies that players should recognize different partners and remember their last moves toward a given partner in order to choose the appropriate next move. This is insufficient to explain a complex ultrasocial system, where many encounters are first-time.

Thus the need for “reputation”.

This scheme is very simple to learn: use “cooperate” as a default initial condition, and further just mimic the behavior of the partner. If the partner uses the same scheme (or an even more altruistic one) a mutually beneficial cooperative relation will develop. If the partner defects, the exchange will stop before much harm is done. Such a cognitive strategy will therefore in general be beneficial to the partners, and thus be repeated. This means that others, observing the beneficial behavioral pattern, will tend to imitate it, taking over the cognitive scheme. That by definition makes a meme.

The strategy only pays off if one can distinguish partners and remember whether they cooperated or defected during the last encounter. Otherwise, every encounter is like a one-shot prisoner’s dilemma, in which it pays to defect. In small groups, where interactions tend to be repeated often, a pure tit-for-tat strategy might flourish, as there would be little demands on memory. In larger groups, however, where many encounters happen for the first time, or are repeated only after a long interval in which the memory of the previous encounter might have faded, a different rule would be needed to avoid invasion by defectors.

A rule is not needed when persistent, transparent, and verifiable “memory” is available: reputation. Which then negates the usefulness of punishment:

As memes tend towards homogeneity within communicating groups (and towards heterogeneity between non-communicating groups), we might expect that after a while most members of a group G would follow the same general “tit-for-tat-like” strategy. It would then be more efficient not to distinguish between different individuals X1 or X2 in the group, but use the general rule of ingroup altruism:

– If X belongs to group G, then cooperate
– If X does not belong to group G, then defect, since encounters with other groups will tend to be one-shot, it would pay to defect, and thus we could expect a complementary rule of outgroup hostility to evolve as a generalization of “defect from defectors”:
– If X belongs to group G and X defects, then punish X. Finally, the retaliation inherent in the original “tit-for-tat” strategy, as a means of protection against invading cheaters.
– What is considered “defection” will evolve to encompass gradually more diverse and complex patterns of behavior (e.g. lying, stealing, cheating, tresspassing rules, murdering, adultery, incest, etc.).

Update December 26: Also, punishment is superseded by shunning.

February 28, 2011

Wonderful story of lady making money directly publishing her own stories on Kindle

Filed under: Favorite Posts — Tags: , , — Jeff Fitzmyers @ 9:56 am

Stories like this inspire me!

Thanks to Xiphos Trading for re-tweeting 26-Year-Old Is Making Millions Cutting Out Traditional Publishers With Amazon Kindle

Amanda Hocking is the best-selling “indie” writer on the Kindle store… She gets to keep 70% of her book sales — and she sells around 100,000 copies per month. By comparison, it’s usually thought that it takes a few tens of thousands of copies sold in the first week to be a New York Times bestselling writer… by lowering the prices, she can make more on volume, especially impulse buys. Meanwhile e-books cost nothing to print, you don’t have to worry about print volumes, shelf space, inventory, etc.

… [she] published stories on her blog before turning to Kindle… out of the top 25 best-selling indie Kindle writers, only 6 were previously affiliated with a publishing house.

She clears up a few things via Misinformation & Corrections

References
+ Mauboussin’s excellent “Blaming the Rat: Incentives, Motivation, And How They Interact”

January 26, 2011

Sell ECA puts (+90%) on backtest of triangle breakout, partial profit on calls +116%

Filed under: +76 to +100%, +Over +101%, Favorite Posts, Long Calls, Mistakes, Short Puts — Tags: , — Jeff Fitzmyers @ 12:00 pm

Sold ECA FEB 28 puts for $68 per contract.

– 3 distribution days the last week.
+ Tested the 34 EMA twice and closed higher.
+ Rising monthly and weekly CCI’s.
+/- Price is in a triangle and probably won’t close below the lower trend line without at least a bounce.

While looking at the chart I had a feeling I was missing something. I was. Here is the first chart I was looking at:

Here is a better accurate chart:

Drawing correct trend lines is critical. This new line makes the situation more bullish: Price is backtesting a breakout. It’s actaully time to consider buying the stock, or in the money puts, or even calls.

I like how Trader Vic draws them:

In analyzing a trend on the charts, the most useful tool is the trendline. One of the biggest mistakes made by amateurs and professionals alike is inconsistently defining and drawing the trendline. To be useful, the trendline must accurately reflect the definition of the trend. The method I have devised is very simple and very consistent. It fits both the definition of a trend and the inferences drawn from Dow Theory pertaining to the elements of a change in trend… For an uptrend within the period of consideration, draw a line from the lowest low, up and to the highest minor low point preceding the highest high so that the line does not pass though prices between the two low points… While this method is quite simple, it is extremely consistent and very accurate. The slope of this trendline is a close approximation of the slope you would get by doing a linear regression analysis on the price data over the same time period. Unlike other methods, it prevents you from drawing a trendline to suit your purposes — it prevents you from imposing your wish onto the trendline. It also provides the basis to graphically determine when a change of trend has occurred.

UPDATES:
Jan 12th: bought April 30 calls for $1.25 Lessons: Don’t buy calls in the first 30 -60 minutes of trade. It’s called amateur hour for a reason!

Jan 13th: Decided not to take partial profit yet since the move seems rather strong.

Jan 18th: Took partial profit of $2.79 / option for +120%.

Jan 22: According to Rick Ackerman, passing 2 past left peaks (circled) is bullish.

Jan 25: Covered the short puts at $0.07. +90%
Very well might close out the rest of the calls soon.
– Daily RSI > 70 and that rarely happens in this stock. Occasionally price can go up more, but in the data I have, RSI > 70 always lead to a pullback to the 34 EMA (or so).

Jan 28: Sold calls for 2.65 +112%.

January 23, 2011

“Stability is destabilizing”: Is this why consolidations lead to trends?

Filed under: Favorite Posts, Long Calls, Short Puts, Systems — Jeff Fitzmyers @ 10:55 am

Supposedly there is a rule of thumb that stocks spend their time: 70% consolidating, 20% trending up, and 10% trending down.

That could be why:
– Selling puts is profitable about 90% of the time.
– Put sellers can experience drawdowns that are infrequent, but high amplitude.
– Put sellers are well advised to cover for seemingly small reasons.

Macroeconomic Resilience blog: …a period of stability induces behavioral responses that erode margins of safety, reduce liquidity, raise cash flow commitments relative to income and profits, and raise the price of risky relative to safe assets–all combining to weaken the ability of the economy to withstand even modest adverse shocks.”

Why save for a rainy day when it hasn’t rained lately?

Is that also why the volatility Index is basically inversely correlated with the stock market?

Does shorting puts on value stocks and buying momos (IBD Top 50 stocks) both work for the same underlying reason: stability is destabilizing?

January 6, 2011

Efficient tax, regulation and representation systems

Filed under: Favorite Posts, Systems — Tags: , , , — Jeff Fitzmyers @ 10:19 am

Does a politician ever contract: “Elect me to do XYZ within 1 year or else I will pay half my net worth to the SmileTrain charity within 30 days”?

The obvious solution to social challenges is: opportunities –> competition –> contracts –> reward success; amend failure. The real challenge: is the milieu mostly efficient (transparent yet private, mutual agreement) or inefficient (parasites, corruption)? Power or force? “The question is,” said Humpty Dumpty, “which is to be MASTER — that’s all.”

The belief that a plethora of rules, laws and supporting taxes are required for life if false. As ilustrated below, life progresses EVEN WITH of all that inefficacy.

Contracts: Do all you say you are going to do; do not encroach on other people or their property (Richard Maybury). NOT ten octillion indecipherable and conflicting laws, rules, regulations, etc. Contracts specify: who, what, where, when, amendments, renegotiation, conflict resolution, rewards and amends. Since that is a complete system, superfluous regulations specify who is not minding their own beeswax.

TAXES The current system of multiple bureaucracies and multiple hierarchies steals money by force. It’s confusing, inefficient (so it costs more) and offers desultory representation. Bureaucracies can’t be held accountable efficiently by small groups of people with few resources. Consequently about 4,500 PAC’s using $100’s of millions have manifested to fill the niche of who representatives listen too.

Efficient tax system: People contract through local representatives to live in a county (forcing contracts to be clear and fair). The county collects ALL taxes via ONE sales tax, and contracts out all work. There is no property tax. The county then negotiates contracts (not passes yet-more-laws) with the state to use some tax money to pay for state offerings. The state does the same with federal offerings. An efficient and respectful system allows for all parties to directly manage finances by:
+ Direct and manageable representation at all 3 levels
+ Bureaucracies contract with other bureaucracies and so actually preform to avoid loss of money and reputation.
+ People can move to a county where the % tax and allocations suits them.
+ Property will be private, which is a basis for prosperity.
+ Businesses already have to manage sales taxes. It’s inefficient to have people duplicate the effort.
+ Savings grow which provides investment capital. (Right now gov’s provide much of the “investment capital” at near zero percent interest. Being able to rent money for free is what produces malinvestment.)
+ It is better to have a nation’s wealth spread out and stewarded by the people who have the most stake. Gov’s don’t have much stake since they are not really answerable to anyone creating situations where other entities can “own” too much of a nation. The US owes China and Japan about $1.8 trillion.

REGULATIONS, “SELF REGULATION”, AND COURTS The poster child is Commodity Futures Trading Commission judge says colleague biased against complainants.

“On Judge Levine’s first week on the job, nearly twenty years ago, he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that we would never rule in a complainant’s favor,” Painter wrote. “A review of his rulings will confirm that he fulfilled his vow,” Painter wrote… “Judge Levine, in the cynical guise of enforcing the rules, forces pro se complainants to run a hostile procedural gauntlet until they lose hope, and either withdraw their complaint or settle for a pittance, regardless of the merits of the case.”

Judge Painter’s Notice and Order is posted below. It gets better:

… a CFTC spokesman declined to comment… An attorney adviser to Levine, Thaddeus Glotfelty, said that the official position of the CFTC press office was to decline comment and that “Judge Levine has determined to go along with that.”… Levine was the subject of a story 10 years ago in the Wall Street Journal, which said that [basically] Levine had never ruled in favor of an investor…. former senator Phil Gramm (R-Tex.), said he would pass along a message but added, “I doubt she’s going to want to get involved in this.” … [Mrs.] Gramm was head of the CFTC just before president Bill Clinton took office. She has been criticized by Democrats for helping firms such as Goldman Sachs and Enron gain influence over the commodity markets. After leaving the CFTC, she joined Enron’s board.

How is a single person or small group going to mange the gauntlets? Unlikely, unless they have resources.

Bernie Madoff’s $50 Billion fraud is partly a result of the SEC utterly failing:

Concerns about Madoff’s business surfaced as early as 1999, when financial analyst Harry Markopolos informed the U.S. Securities and Exchange Commission (SEC) that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. He was ignored by the Boston SEC in 2000 and 2001, as well as by Meaghan Cheung at the New York SEC in 2005 and 2007 when he presented further evidence. He has since published a book, No One Would Listen, about the frustrating efforts he and his team made over a ten-year period to alert the government, the industry, and the press about the Madoff fraud.

Enron happened in a “regulated” market — regulated by bureaucratic rules and laws instead of supply, demand and skill in managing the two forces. Free markets by definition “self regulate”. Bureaucratic “regulation” is just another tax and does not “regulate”.

Gobbledygook from the head regulator of a nation’s money supply:

“Although our asset-class analysis of detailed disaggregated data is still at an early stage, preliminary examination finds that the data are consistent with the hypothesis of differential spending propensities by asset type and by whether or not capital gains have been realized.” – Alan Greenspan

Translation: “This is too complicated for you. We experts will help out by taxing you to sort it all out. Run along and play.”

UNION BUREAUCRACIES [New York] Snow cleanup was a budget protest

…Sanitation Department bosses from the snow-slammed outer boroughs ordered their drivers to snarl the blizzard cleanup to protest budget cuts — a disastrous move that turned streets into a minefield for emergency-services vehicles [a baby reportedly died waiting 9 hours for an ambulance]…

What’s going on with this system? 2 bureaucratic bosses with 2 different bureaucratic responsibilities. The mayor is supposed to keep the roads clear, the union is supposed to keep wages high. This creates inefficiency.

RATING AGENCIES Typical sentiment: “What good is a rating anyway? Everything is rated AAA until after it blows up.”

Inefficiencies can be manipulated via campaign promises that have no consequences:

Where are the calls to sic [the President’s] Justice Department on Big Oil to hold the oil companies accountable for “market manipulation”? Why aren’t we hunting down the amoral “oil speculators” responsible for repealing the law of supply-and-demand in order to line their pockets?

Inefficiencies have psychological consequenes:

…The sheer amount of stupidity, learned helplessness, and outright WHINING from the general population that I’ve seen being down here during the blizzard has been COLOSSAL. … I’ve had to push out multiple cars full of people GOING TO THE MALL in the blizzard, shoveled out crosswalk curbs while the neighbors [complained] that “no one has cleared the curb snow yet”, read newspaper articles of people trapped in railroad stations and bus terminals complaining about how no one came and brought them food… One couple got stuck at the Amtrak station … saying “It was more traumatic than the deaths of our parents”. WHAT. THE. [HECK]. … This place is a gigantic clusterflock and it’s not just the unions. It’s a large portion of the population who has learned to be so reliant on government that they can’t pick up a [freaking] snow shovel on their own…

BASIC LAW ENFORCEMENT The Dead Sign Affidavits – Nationwide

“Some regulators complain that the use of Ms. Kunkle’s name reflects an epidemic of mass-produced, sloppy and inaccurate documentation in the debt-collection industry.” Complain? Sloppy? Inaccurate Perjury is a felony! … “When you see corner-cutting like this, it’s alarming,” Minnesota Attorney General Lori Swanson said about the Kunkle case. … The State Attorney General for Minnesota calls this corner-cutting?

Since “leaders” are not enforcing the rules, the people who are not victims are going to accurately think, “Why should I?” And that can lead to mayhem on many sides. It is much more efficient to use a system that enforces contracts, rather than a rule and force (slavery) based system where over feeding parasites are messily shucked off when things get dire.

Examples are ubiquitous. The Ticker Guy reports that Mrs. Warren says the solution to not enforcing laws — that have been admitted to being broken in courts of laws — is to have more laws. Failure of law enforcement, regulators, judges, and leaders all paid for with taxes. The umbrella “Consumer Financial Protection Bureau”, will probably fail, and then the plea will be for smaller, independent bureaucracies. “It’s just a game” said the Merovingian.

Ugly example:

She says she shouted at [the police], “What are you doing? We’re your brothers and sisters!” and that they were ashamed – but they followed their orders…

MEDIA Fox News Wins Lawsuit To Misinform Public – Seriously

… charged she was pressured by Fox News management and lawyers to air what she knew and documented to be false information … [that] … cows in Florida were being injected with RBGH, a drug designed to make cows produce milk – and, according to FDA-redacted studies, unintentionally designed to make human beings produce cancer… Fox lawyers, under pressure by the Monsanto Corporation (who produced RBGH), rewrote her report over 80 times to make it compatible with the company’s requests…

BUREAUCRACIES IN GENERAL The epitome:

An early push … requiring every bill cite its specific constitutional authority failed in a … conference meeting…

To paraphrase the Ticker Guy’s take, Congreass couldn’t even manage to wait for one day before repudiating … The Constitution.

A more efficient and respectable system is to have local representatives contract with law enforcement providing companies to handle contract enforcement. Everyone would know the rules. And if broken would be held accountable with amends (partly provided by insurance companies) There would be competition to select the best fitting “contract” enforcers. All parties would love to have cameras around then to prove they were following the contract. And in the process making money and enhancing reputation.

How are efficient taxes paid? The universal default is mass of gold or silver. Or both parties can agree on different competing free market currencies, some of which might be fractional reserve. But no fiat currencies, that just creates inefficiencies.

December 26, 2010

Apparently real weather forecasting! (up to 85% correct)

Filed under: Favorite Posts, Systems — Tags: , , — Jeff Fitzmyers @ 10:13 am

“Meteorologists” are incorrect most of the time. They can’t even correctly forecast temps in sunny mid California a day ahead most of the time. So why would anyone listen to them for short or long term forecasts?? They obviously don’t understand the system. A breath of fresh air: Apparently Piers Corbyn of WeatherAction does!

“Standard meteorology models ignore solar and lunar factors and are associated with the failed science and falsified data of the CO2-based warmist view of climate and are bound to fail again and again.”

And he getting recognition with this month’s snow and cold forecast made in May 2010.

[Piers Corbyn] seems to get it right about 85 per cent of the time and serious business people – notably in farming – are starting to invest in his forecasts. … He looks at the flow of particles from the Sun, and how they interact with the upper atmosphere, especially air currents such as the jet stream, and he looks at how the Moon and other factors influence those streaming particles. He takes a snapshot of what the Sun is doing at any given moment, and then he looks back at the record to see when it last did something similar. Then he checks what the weather was like on Earth at the time – and he makes a prophecy.

Notice the theory is readily understandable, makes sense, and lists an accuracy number. Informative slide show.

Weather models typically use some of the most expensive computer systems and have low accuracy rates. While this person apparently does things with a laptop and public domain data and produces high accuracy rates. The irony! Also, points out a seeming tendency that once a system is understood, it does not take heroics to manipulate it.

Feb 27: Scientist spells out new theory of world temperature fluctuations This comment is fascinating:

…said Piers to the dinner guests in what must be one of the shortest scientific papers* in one of the most celubrious locations around…

Most things are conceptually simple, although in practice, after iteration, potentially complex appearing. So when a theory can be stated in a few sentences and seems reasonable, it’s time to pay attention. And again the “60 year cycle” idea crops up.

December 5, 2010

Timber: An Excellent Retirement Vehicle (update 3, Oct 23)

Filed under: Editorials, Favorite Posts, Short Puts — Tags: , , — Jeff Fitzmyers @ 12:26 am

Assuming markets exist and patience, the apogee retirement vehicle is:

The #1 Investment of the Iron Chancellor The 50 years in Germany following [Bismarck’s] death featured hyperinflation, depression, war and defeat. Timberland held its value better than any other investment… Most people don’t know that timber beat all major asset classes over the last 30 years.

You Need to Consider This Crisis-Proof Investment Timberland is a crisis-proof investment because the growth of the trees does not move in step with economic cycles. You don’t have to harvest when demand is soft. Let them grow, bigger trees equal more dollars.
+ Growing scarcity of quality of timberlands.
+ Global demand should increase.
+ Growing institutional interest in timberland.

The Ideal Investment to Own, Based on History Timber, for example, has a history of high, stock-like returns with low, bond-like volatility. Using the same time period in the table, timber had a compound annual return of 11.8%, with risk (annual volatility) of only 7.9% – for a Sharpe Ratio of 0.96. That is hard to beat…

People keep wondering where to put value if there is a big appreciation in silver and gold prices: timber (PCH, PCL, maybe WY, maybe RYN).

What does the “helpful” MSM thinks of timber as of August 2009? Timber prices could be vulnerable to a decline of as much as 50% in coming years… “The reality is the underlying cash flow is highly dependent on cyclical industries like housing, paper and newspapers…” What happened in the 2 years since publishing? The break even point could have declined to $19/share. In 3 more years the beak even point could decline to $13/share — SmartMoney’s 50%. So even if PCH did drop 50% in 5 years, the overall value was flat, and it’s still chugging out dividends and income from selling options. So far the risk was very little and the reward might have been 40%.

A very safe and profitable way to buy timber shares: Sell puts on down drafts to enter and sell calls on spikes higher. Number from early 2010.

PCH ($30/share) $2/share dividends = 6% gain / year.

Add selling options conservatively 5 times per year for about $40 contract = another 5% per year.

Starting with 100 shares and reinvesting dividends and option sales at 11% per year:
5 years on : possibly 150 shares worth maybe $4,500 generating $500 in dividends and option sales per year.
10 years on: possibly 250 shares worth maybe $7,600 generating $840 per year.
20 years on: possibly 720 shares worth maybe $21,000 generating $2,300 per year.

Say you add $3,000 per year:
5 years: possibly 620 shares worth maybe $18,000 generating $2,000 per year.
10 years: possibly 1,670 shares worth maybe $50,000 generating $5,500 per year.
20 years: possibly 6,400 shares worth maybe $190,000 generating $21,000 per year.

Starting out with $100,000:
5 years: possibly 5,000 shares worth maybe $150,000 generating $12,000 per year.
10 years: possibly 8,500 shares worth maybe $150,000 generating $28,000 per year.
20 years: possibly 24,200 shares worth maybe $725,000 generating $79,000 per year.

Update June 2012: The Most Accurate Investment Forecast Ever “Grantham … predicts that managed timber will be the best-performing asset class, followed by emerging-market stocks.”

Update 3, October 2012:
+ A Safe Land Investment That Can Protect You from the Dollar Crisis

Update 4, January 2015
One of the Best ‘Hard Assets’ to Own in 2015

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