Friday, December 22, 2006
Stock Tips
Should I acquire United Panhandle at $34.75 or Throw Pillow International at $14.25?
E. F. Jones
Stock Market Predictions
I am often asked to use my great intellect to give stock advice, but I hope my answer below will discourage any further such requests. Not that I disapprove of making money, far from it. I believe, rather, such questions stem from a misunderstanding of the nature of intelligence. Allow me to explain.
Stock Markets: Irrational?
Now I admit that to a degree the stock market loans itself to rational analysis. Whether or not a particular security seems likely to provide a healthy return, given that company's earnings history, history of dividend payouts, the soundness of its management and its share of the market, and compensating for fiduciary risk, risk from debt, risk to capital, risk of diminished market share, global political risk, and given, as a backdrop, a certain overall forecast for the industry and for the economy in general, including interest rates, money supply, money supply rates, M2, M3, and M5, is surely a rational inquiry worthy to be taken up by the man of sense.
But such a qualified answer, I'm afraid, would inevitably disappoint my readers of the stock-picking type. For they see that the intelligent investor, cautiously analyzing his investment, can only anticipate earning modest, boring returns for himself. On the other hand, even the most pea-brained idiot can make a grandiose fortune just by stumbling into the early stages of the investment world's next fit of madness, where money pours in against all reason. Seeing this, the stock-picker wonders: Where can I get in? What will be the next mania? What bit of seeming junk today will tomorrow be an object of frenzied desire for the great mob of moronic investors? In short, what the stock-picker craves is not wisdom but a sort of barometric reading of the sentiment of the crowd.
But are the crowd's periodic fits of madness predictable? Are the dark secrets of collective madness things that can be revealed by the light of intelligence? It is my contention that they are not. Although many men have tried, none have ever succeeded in solving the riddle of the crowd, and many have ruined themselves in the search. Let the following anecdote be a word of caution to my readers.
Theory of a Random Wall Street: Its Rise and Fall
Years ago, an economics professor, name of Smiley, became a sort of minor celebrity by arguing that the thousands of dollars paid to brokers and stock analysts in commissions were so much money wasted. None of them, he argued, had ever shown that they could consistently forecast the movement of the market or particular stocks. To prove his point, he began his own fund, choosing stocks at random. Pasting a copy of the stock listing on the wall, he threw darts at it to determine his portfolio. At the end of the year, his collection of random picks outperformed more than half of the high-priced managed funds, a feat he duplicated the next year and all the years his fund operated. These results at first startled the investment world. But, year after year, as his random picks were seen to do just as well as the experts, his theory gained more and more converts.
In fact, the professor's success began to dampen the whole spirit of rampant speculation that had made Wall Street its home. Crowd chasing was given up as futile. The market was seen as less important. Interest in it lagged. As a result, its luster began to fade. The romance of the Street began to wane.
The Sparky McEnters Fund
The professor's downfall came, however, when another fund, also using dart throws to pick stocks, burst onto the scene. It had a healthy year, in fact outstanding year, results that, we might expect, should have helped further sober the public, but for one difference. Heading this fund was no stuff-shirted, ax-grinding academic, but the three-time Great Lakes dart champ, Jim "Sparky" McEnters.
Something Else Entirely
Now here was something else entirely. No two fund managers could have differed more. Professor Smiley was a thin, slightly frail man; whereas Sparky McEnters was a 200-pound, barrel-chested, striped-shirted, dart-throwing machine. Professor Smiley sheepishly lofted his darts at the board in a way that, even his supporters had to admit, frankly betrayed his amateurishness. McEnters, in contrast, was, in the realm of darts, the consummate professional. He glared at the board like an eagle. He stood in classic North Enfield style, knees bent, arms akimbo, looking like a young Zeus about to dispatch a thunderbolt. As he stood, dart in hand, the crowd around him buzzed with anticipation, and when the dart exploded from his hand like a crack of thunder, dissecting the board like a surgeon's scalpel, well, there wasn't a single man in the room who could say he wasn't impressed. Although the professor argued that the similarity of their picking methods should have been all that mattered, the public laughed at him. He was driven back to academia in disgrace, as a new chapter of speculation was begun.
Public Goes Crazy
Let me admit here, that in spite of all my philosophy, having myself witnessed McEnters display of investing prowess, I fell under his spell. I immediately sunk everything I had into his fund, a decision at the time that was regarded without objection as the very essence of wisdom. He beat the Dow by 18 points in his first year, then again by 25 the next, and 36 the next. Throwing off the shackles of forbearance, and made giddy by my growing portfolio, I was able to marry the first Mrs. Knowledge and commit other imprudent acts now painful to recall. Yet I wasn't the only one seemingly out of his mind. Thousands were pouring cash into these dart-throwing funds, which were growing exponentially and threatening to make the traditionally managed fund extinct.
These were the heady days of the dart-throwing wunderkinds on Wall Street that so captured the public's imagination. Amongst the giants of that era were men like Mike "The Hammer" Woscinski, the five-time Southern New England champ, who leapfrogged men 40 years his senior to take over the reigns at Smith Barney, and Eddie "Money" Mallroney, who scored record returns at Lehman Brothers before striking out on his own. Let us also remember Brian "The Beef" Burmeister, who had in his former life scored that perfect 9-dart 501 game at the Tulsa Open before becoming the scourge of the corporate world. At the height of this madness, the era of the dart-throwers seemed like it would never end. At the great brokerage house, the troupes of old, loyal, respected stock analysts could not be kicked out the door fast enough to make room for the new breed. Things were at a fever pitch.
The Fall
But the fall was inevitable, and when it hit it hit hard. A series of throws had placed Sparky knee deep in the carry trade for Brazilian bonds which, when the market took an expected turn, unwound, caught Sparky in the lurch, and ruined him in an instant. When the final tally was added up, McEnters found himself in debt to the tune of what would be a respectable GNP for a decent-sized country. The McEnters Fund was crushed. The others met similar fates.
I too had to pay a steep price for this lesson in humility. I suffered gravely, financially and emotionally. But since this is an advice-dispensing blog and not a heart-on-the-sleeve type, I will spare my readers such details. Those interested, though, may want to visit my new blog, "The Sorrows of Young Dr Knowledge." You know, if they want.
Thursday, December 7, 2006
More on Christmas Carols
I would be grateful if you could tell me something about my favorite carol, "Silent Night"?
Hillary Belloc
Silent Night
As every school kid knows, late in the last century this carol was at the center of a firestorm of controversy that toppled the very foundations of Caroldom. This all began in 1875 when the then Dean of Carols at Oxford, perhaps influenced by the new German textual Carol criticism, publicly declared in the infinitely respectable Carol Quarterly that he was "unsure who or what is 'round yon virgin.'"
Controversy in Britain
This pronouncement set off shockwaves of indignation. Surely this was blasphemy to question the coherence of such a great carol. Yet, astoundingly, prominent Carolists in Kent, Cornwall, Bath, Liverpool, Aberdeen, and Cork, among others, declared themselves similarly agnostic. Carol lovers across the island were thrown into confusion.
Carol fundamentalists launched a counter-attack. "Obviously it is the mother and child who are around the virgin," they declared. Yet none could explain how the mother, being also the virgin, could somehow be around herself. Some then took to arguing that the carol implies that there is something like a halo or mist or some spiritual light around the heavenly pair. But they were stumped on the question of why the text does not mention a halo or mist or anything like it.
Canterbury Falls
The harshest blow to Carol fundamentalism, however, came when the Great Dean of Carols at the Canterbury Carol Seminary, long considered a bedrock of fundamentalism, stated that he, for one, never knew what to make of that "Sleep in heavenly peace" line.
"Is it a statement of the fact that the mother and child are sleeping? Or is it a command that they should sleep? Or is it just the child who should sleep? Or should we the audience sleep? Or is it the night or the nearby village or the whole scene that should sleep or is sleeping?"
Howls of protest followed, but once again attempts to bring this question into orthodoxy found Carolists lining up all over the spectrum. The country was fast heading toward complete chaos. Civil war was inevitable.
Holland Compromised
Meanwhile, across the sea, a Dutch Carologian, speaking at the Carol Convention in Rotterdam, publicly called into question the understandability of the line "Holy Infant so tender and mild." "Hadn't the song," he asked, "just mentioned the child? Now who is this Holy Infant character then? Is he someone else entirely?"
The country was immediately up in arms; however, many Carolists came out publicly to declare that they thought the carol did not for certain rule out the possibility that in addition to the Christ Child there was also a Holy Infant present at the scene. Some even went so far as to call for a reexamination of Carol sources to try and discover additional mentions of this Holy Infant, to see why he was in Bethlehem at the time, and perhaps gain some idea of his philosophy, if he had one.
We all know what followed, the war, the devastation, the horror. Yeah, it was too bad.
Monday, December 4, 2006
Christmas Carols
I love Christmas carols. What can you tell me about my favorite carol, "Oh, Little Town of Bethlehem"?
G. K. Chesterfield
Oh Little Town of Bethlehem
Curiously this song had no Biblical connotation in its original manifestation. The Bethlehem referred to then was Bethlehem, PA. The song, written by Hap Silverstein and debuted in the Broadway production of "Annie on the Town" in 1939, was first sung by a young woman from small-town Pennsylvania, Annie (played by the voluptuous Ana Hovana) who, having recently moved to New York City, enjoys the attention of the sophisticated and worldly Rodney while being pursued by the earnest yet slightly dull Johnny, all as she tries to keep her married, oversexed boss, Mr Bielefeld (played to rave reviews by the legendary Broadway comedian Jackie Stewart), on a string. In the song, Annie comments wryly on her life's complications and with tongue firmly in cheek pines for a simplicity she left behind. The song was a typical send up of small-town life written for the amusement of big city audiences, containing such lines as, "The traffic moves so slow there," and "the people are so square." Audiences howled over it as long as the show ran.
With the country entering the war in 1941, however, its songwriters and creative talents were called on to aid the war effort. Almost overnight a whitewash of respectability was slapped on over the tawdry lights of Broadway. In cooperation with the Roosevelt administration in what was labeled Operation Holier Than Thou, Broadway writers agreed to switch production to exclusively homely, Christian, and smalltown-celebrating songs, in order to convince American fighting troops from the hinterlands that their leaders were just as virtuous, Bible-thumping, and apple-pie-eating as they ought to be. As part of this plan and with "Annie" now closed, the slightly stale but still serviceable "Bethlehem" was reintroduced to the public, with its gawking and guffawing yokels, however, replaced by pious shepherds, its sleepy downtown an Eastern village, and its narrow and vindictive town fathers now wise Oriental kings. It was recommissioned as a timeless, pious Christmas classic, and the public, notoriously short memoried, accepted this as gospel, and the rest is musical history.
Dear Dr Knowledge:
That's interesting. Now what about "Joy to the World"?
Rev. Henry Witherspoon
Joy to the World
Another example of the inestimable debt we carol listeners owe amateur songwriters, "Joy to the World" was written by a humble bellhop named Guisepie Verdini. Far from being hindered by his lack of formal musical training, Verdini positively benefited from it. For undoubtedly, the most charming aspects of the song are when Verdini intermixes the celebration of Christ's birth with rich bellhopian imagery. Take, as an example, the truly sublime line: "Let every heart prepare him room." Obviously no "professional" composer would try and sneak such a clinker past the public. Yet it a credit to Verdini's humble genius that the line works.
Explaining his inspiration for this line, Verdini wrote in his autobiography Mya Life ina ze Muzic (Buenos Aires, 1896) [translation mine]: "One time I a-think, as I'm a-cleaning uppa de rooms and carrying uppa de bags, what if de Lord, he show up here ata dis hotel. Well, the manager, he woulda say to me, 'Guisepie, Go prepare the Lord him room. He's a tired. Want to lie down.' Something alike dat he would say. And I woulda say 'Yes, I willa prepare the Lord him room.' Anda that's awhere I getta the idea to a-write this songa."
In fact, Verdini's original draft of the carol was riper with bellhopian imagery. For example, in place of what would eventually become, "The nations prove the glory of his righteousness," he had originally written, "The Lord wants an early wake up call." And then "Let Heaven and Nature sing," had originally been, "Make sure and make his phone ring." Unfortunately, one by one Verdini was persuaded by so-called competent musical authorities to remove these lines and replace them with blander, more conventional imagery, to the detriment of the work, in my opinion. In fact, it is staggering to note that the glory that shines through this carol is only a fraction of what was originally invested in it by its author, the great bellhop caroler, Guisepie Verdini.
Friday, December 1, 2006
Bridge Problem
I am playing the South position. West is the dealer. I open with one heart. My partner responds one spade. I bid two clubs, and he tries two diamonds. Our opponents pass. How should I proceed?
Bridge Junkie
Bridge philosophically considered
In approaching the game of bridge, as in all activities, it is important to reduce the situation to its most basic propositions. Ask yourself: Why do I play bridge? The answer: To win. Then ask yourself: What do I win? And the answer, if you are playing for money, is: Money. So, obviously, following this methodology, combining what propositions we can be absolutely certain of and placing them in the most rational and straightforward way, the question then becomes: How do I get my opponents money? To which then the simplest answer is: To shoot them and take their money.
Yes, but how?
Shooting your opponents, while you hold two clubs with the bid before you of two diamonds, is a most difficult matter requiring strategy, forethought and execution. West, with three aces, five hearts, and the queen of diamonds, passed both rounds. This shows he is the reckless, gambling type, liable to try and make a hero out of himself the moment your intentions are made known. It is imperative, therefore, that you at least wing him before he can do any damage. Your partner, with the six, five and three of clubs, plus his three of hearts and bid of two diamonds, has given every indication of possessing a stout and game character. Count on him to follow up your first shot with a lead from either a bottle or a knife. But beware, West still holds the nine, four and two of clubs, meaning this will not be a cake walk. Do not get too anxious to do it all. Attacking firmly yet cautiously while letting your partner take up the slack would be the best way to proceed.
East is another matter. Obviously, having passed after your one spade bid and having the eight and seven of both diamonds and clubs, he is clearly of a craven and cowardly character. More than likely your first attack will fill him with terror. He will be struck dumb, but then he will run. But where to? Again, consult the cards. He held the nine and three of diamonds and yet passed on a diamond bet. This means he doesn’t trust his legs. Additionally, holding the six and three of spades, means he will seek safety in a confined place. So, obviously the way to proceed then is to have your partner cover the exits while you seach the house for him. No doubt he will be found hiding in something like the linen closet or behind the bathroom curtain. My hunch would be the pantry. Having located him, now is the time to be aggressive. Do not let it deter you that he still holds three trumps in his hand. Your trumps cover him. Blasting away at the door, completely emptying your magazine, will be the best policy here.
Aftermath
Once you and your partner have completed this gambit, help yourself to all the money you can find and then go out and try and strike up another bridge game.
Cindy Williams (US Bridge Champion 1997-2002)
Wednesday, November 29, 2006
Cloudy Swimming Pool
Cloudy pools are the scourge of civilization. This blight results from particulate matter, usually carbonates and sulfates, being forced out of solution by imbalanced water, perhaps worsened by the introduction of high temperatures, low humidity, intemperate winds, driving rains, excessive electrons in the air, boron gas escaping from the earth, high alkalinity in the surrounding soil, etc. Discovering the particular culprit in your case would be a worthy subject of study, but undoubtedly you lack the initiative. You people are all the same. You want a quick fix now. Heaven forbid you should exercise some of your own power. But, no matter, for the situation boils down to one of filtration.
The conventional wisdom in dealing with this problem has been to use clarifiers, or chitin products, which work to coagulate smaller particles into larger, filterable clumps, so they can be trapped by the filter. At least this has been what the pool-cleaning establishment has been peddling. Yet those fools are blind, blind with power, blind to new ideas.
The dust-eating fish (or kabou-eatto) has long been cleaning pools for the people of Southeast Asia, who show a real penchant for these type of things. A member of the tarpin family, the fish actually lives on dust, consuming up to 120,000 micrograins per hour. These fish had previously been unavailable in the United States but now can be had for around $9000 a piece. This may seem steep at first, but the fish will more than pay for himself over the years as he delivers you sparlkingly clear pool water.
Kabou-eatoo (piscientus axstybnium)
Can an animal really live on only dirt?
The kabou-eatto's digestive system is uniquely designed to process dust. Unlike all other fishes, the kabou-eatto's mesentery leads right into its muscularis mucosa, which is buttressed by an unusually large longitudinal muscle, which in turn continually contracts the serosa into the submucosa at an astounding rate of 50 mbrs/min (see figure below). This extraordinary stomach gives the fish the ability to extract its vitamins and minerals right out of the dirt it consumes. Now, traditional science will tell us this is impossible, but it says a lot of things that we quite rightly ignore. It shouldn't prattle on so, with its constant pronouncements on all and sundry, if it wants us to take heed of what it says.
Where does the dust go?
Every 4 to 10 days your kabou-eatto will rid itself of undigested dust accumulated from your pool in the form of silver-dollar sized rocks. These can be picked up and disposed of once the kabou-eatto has deposited them in your pool. The rocks are harmless and sterile, being mostly of the limestone family. Unfortunately for the fish, the depositing process is long and difficult. Once the rock forms in the rectum it often takes days to make its way out of the anus and only after much anxiety and many false starts in which the fish is made to feel mopey and unproductive. (see figure below)
The unhappy life of the dust-eating fish
Kabou-eattos, although beneficial to man, do not make good pets. Owners report that they are often sullen, moody, emotionally distant, have trouble interacting with others. They are often touchy, sometimes brooding alone for hours. Accosted, they are likely to fly into a rage. This is not the kind of fish to give young children, especially those who crave a lot of attention or who are looking for something to bond with, having just lost a puppy or something like that. But, if you have a dirty pool and are willing to put up with the kabou-eatto's moods, this may be the fish for you. He requires virtually no maintainance. If you will just occassionally throw your fish a few old magazines, the sports section, what have you, you will go a long way towards attenuating his misery.