Archive for January, 2008


SARS is trading near all-time lows. It’s been dead money for a few years. Our analysis indicates that a resurgence is due and would lead to an absolute killing for longs, especially when you consider the potential for investor sentiment to become infected with exuberance when institutional money flows in. We think it is highly likely that SARS will really take flight in 2008; don’t be surprised if SARS stock rises so fast you don’t have time to catch your breath.

Recommendation: SARS is raised to “Unhealthy (in an awesome way) Returns”; Avian Flu is maintained at “Ready to Take Flight”. In 2001, we lowered Mad Cow from “Temporary Insanity” to “Zoloft Level Returns”, a rating we also maintain; still no reason to go crazy (yet).

The New Fed Model

Here’s an actual email from my trader Thursday:

Bernanke says 2008 outlook worsened, risks “pronounced”
Bernanke says housing demand “weakened further”
Bernanke says Fed “paying particular attention” to housing
Bernanke says Fed to monitor inflation, price expectations
Bernanke says job deterioration would raise spending risk
Bernanke says Dec job data “disappointing”
Bernake says additional policy easing may well be necessary

Market moving higher, Dow +.42%, Nasdaq +.29%, S&P +.77%

Let’s summarize. Bernanke says that the economy is utter crap. The market interprets these comments to mean the Fed will cut rates. The net result is a market rally. So what can we learn from this episode? Investors only care about one thing: the direction of interest rates.

Therefore, I propose a new Fed Model. From now on, the Fed should cut 25bps at every meeting. Forever. Once this strategy has been announced, and investors can bank on continuous interest rate cuts, the markets will absolutely rip. In fact, the Fed can simultaneously solve the US debt problem by buying S&P futures before its announcement. Last time I checked, there’s no law against the government itself inside trading.*

*Of course, I’ve never checked so who knows.

Quotes Entirely Relevant to Investing 01-13-2008

“Pro forma”. From the latin, meaning “lawyers jerking themselves off.”
-Detective McNulty from The Wire

Past Quotes Entirely Relevant to Investing

Market Clearing Attractiveness

This exchange at Dealbreaker between “girl” and “1-2” got me thinking. By way of background, “girl” and “1-2” had a flirty back and forth with “1-2” putting drinks on the table and girl unexpectedly accepting…and then both reiterating they were serious.

I assume he will show, in the end, no matter what, as he is a guy. But will she show? And what can we deduce about her attractiveness based on whether or not she shows up?

If she doesn’t show up: there is a 32% chance she is really a dude, a 32% chance she is not attractive and doesn’t want to put herself out there, a 25% chance she is average, a 10% chance she is a complicated computer algorithm designed by Russian hackers to add spicy comments to web sites, and a 1% chance she is a smokeshow.

If she does show up: she has enough confidence that her floor would be a 4.5. I’d say there is a 61% chance she is a 6 (pro forma for women in finance, that’s a 9), 8% chance she is below that, 24% chance she is legit hot, and 7% she is a complicated computer algorithm with holographic actualization technology designed by Russian hackers. She isn’t likely to be too hot, because hot women don’t have to meet anyone on the internet when they can meet them…..anywhere.

Distilled to the bottom line
No show: 4 with faux spunk
Show: 6 with genuine spunk

Armed with this, should “1-2” continue his pursuit of drinks? And based on what “1-2” decides, what should “girl” infer about “1-2″…should she continue her pursuit of drinks?

Screw Game Theory. Literally, screw it.

Open Letter to Young Lawyers & Doctors

Dear Young Lawyer and/or Doctor,
I noticed in a recent NYTimes article that some of you are having self-doubts.

To the lawyers:

Many young associates, [a formerly young female lawyer] added, spent their lunch hours making lavish purchases on, just to remind themselves that what they did counted for something.

In case the Neiman Marcus purchases succeeded in lifting your morale and left you with the impression that what you did counted for something, please let me add some critical information: It doesn’t. This is why you are paid, on an hourly-adjusted basis, like a recent (2nd tier) college graduate.

To the doctors:

Increasing workloads and paperwork might be tolerable if the old feeling of authority were still the same, doctors said. But patients who once might have revered them for their knowledge and skill often arrive at the office armed with a sense of personal expertise, gleaned from a few hours on, doctors said, not to mention a disdain for the medical system in general.

The fact that I was able to diagnose my own illness after 15 min on WebMD speaks to the value of your knowledge. Perhaps our relationship would be more productive if you would stop making me wait 3 days for an appointment (and 90 minutes once I get to the office) to diagnose a sinus infection that I already know I have. Give me the antibiotics without the self-importance. I will come see you again when I have something you can actually be helpful with. For instance, after I break my arm trying to carry my bonus home, I will come see you and you can set the cast. Until then, please stop whining.

Mr Juggles

To the consultants:
Stop grinning. You are next.

Quotes Entirely Relevant to Investing 01-06-2008

Experienced happiness, we learned, depends mainly on personality and on the hedonic value of the activities to which people allocate their time. Life circumstances influence the allocation of time, and the hedonic outcome is often mixed: high-income women have more enjoyable activities than the poor, but they also spend more time engaged in work that they do not enjoy; married women spend less time alone, but more time doing tedious chores. Conditions that make people satisfied with their life do not necessarily make them happy.

Daniel Kahneman, 2002 Nobel Prize in Economics Recipient

Past Quotes Entirely Relevant to Investing

« Previous Page