Wednesday, January 31, 2007

Mark Bahner suggests a way for "an honest climate prediction"

The U.S. government should set up a prize fund totaling $400 million, payable in 2031. The prize fund would be open to any U.S. university with accredited science or engineering programs. The fund would be awarded as $200 million for first place, $100 million for second, $50 million for third, $25 million for fourth, $12 million for fifth, $6 million for sixth, $3 million for seventh…and $1 million until we run out of money.
It's more convoluted, I think, than my contracts suggestion from a few weeks ago. Plus, there is the problem of luck of the draw--getting the best estimate does not necessarily mean having the best methodology. Just ask Jennifer Hudson. Plus, I hate taking tax dollars and wasting them on pork like this.

Hat tip to Arnold Kling.

Tuesday, January 30, 2007

Who will educate the economists?

From Arnold Kling:
These folks are assuming (a) that a rise in the minimum wage helps poor people and (b) that the issue is important to adults trying to support a family. If those are their beliefs, then they appear to suffer from economic illiteracy. Russ Roberts occasionally tries to educate journalists about how the economy works. Maybe he needs to hold seminars for economists.

alt="Price for Minimum Wage Increase at"
title="Price for Minimum Wage Increase at" border="0" />

Monday, January 29, 2007

Happy Milton Friedman day!

Here is the PBS site (hat tip Greg Mankiw). And I do recognize the irony, being somewhat libertarian, of linking to a subsidized site.

If only we listened to Friedman more closely, how much more poverty would have been eliminated. But there are still those whose religious inclinations lead them towards greater government intervention, thus keeping the people down.

(Graph courtesy of Yahoo).

Sunday, January 28, 2007

Can this man be stopped?

Federer continues his conquest of global domination by winning the Australian Open and didn't drop a SINGLE SET THE ENTIRE TOURNEY! Read about it Here.

Contract Suggestion: How many matches before Federer loses?

Wednesday, January 24, 2007

Zack's 100K Challenge

Over at Zack's you can test your trading skills over the course of a year. You are given $100k to start with plus buying power to show everybody what you have got. At the end of the year, a panel picks from the top 100 traders one person to come work with them based on their trading and blog. I have yet to do the blog but am currently 33 after todays market close with an 11.6% return so far this year (the actual rankings are out of date for non-registered persons by a day or two; the leader currently has an 80+% return so far, but he is trading penny stocks). One thing that is different about this competition is that one position in your portfolio cannot exceed 25% of the total (though that is fine if your position grows to more than that). If you are interested, sign up here. Good luck.

How about balanced budget contracts?

Some think the US could have a balanced budget by 2008. If tax rates and economic growth rates remain unchanged, I would buy the 2008 contract in size.

If the Democrats roll back the capital gains and dividend tax cuts, then I would sell a little 2008.

The Recessions of 2003, 2004, 2006 & 2006

From today's WSJ (subscription required):

Meanwhile, back at the economy, you may have noticed that 2006 ended without a recession. This follows the recessions of 2003, 2004 and 2005, all of which also never occurred, though they were widely warned about in the press and even forecast by many economists at some point during each of those years.

The big economic story going into this New Year is that growth is accelerating. Jobless claims have dipped, as the labor market stays tight amid a low 4.5% unemployment rate and rapidly rising real wages. Corporate profits continue to defy gravity, growing at nearly double-digit rates some five years into this expansion. Economist Ed Hyman's ISI Group reports that as of last Friday some 57% of companies had beat profit expectations for the fourth quarter.

Then there's the "trade deficit," which was supposed to have produced a crisis any day now but is instead contributing to faster growth as American exports soar. Peppier growth abroad is helping, especially in Europe, assuming Germany's big increase in value-added taxes this month doesn't get in the way. Oil prices have come down, and even the housing slump seems to have stabilized in some parts of the country.

Price for US Economy in Recession at

UPDATE: Apparently, our government revenues are off the charts t00, in light of the capital gains tax cuts. Dan Clifton writes:
The debate about the capital gains tax cut is over. When Congress passed the 15 percent reduction on capital gains all we heard from the naysayers is this will produce massive deficits. When Congress extended the 15 percent rate in 2006 we heard the same tired rhetoric - only louder. Now the new leadership want to repeal this tax cut to generate revenue to the federal government. Based on the new data they may want to reconsider whether repealing this tax cut will generate any revenue to the federal government.

Today's CBO report puts the debate to bed. We were told by the Joint Committee on Taxation (JCT) the capital gains tax cut would "cost" the Federal Treasury $5.4 billion in fiscal years 2003-2006. Thus, the initial CBO forecast (January 2004) forecasted capital gains revenue to be $42 billion in 2003, $46 billion in 2004, $52 billion in 2005, and $57 billion in 2006.

Well in what could now be considered the worst forecast in modern times we find out today capital gains tax collections were actually $51 billion in 2003, $72 billion in 2004, $97 billion in 2005, and $110 billion in 2006. For 2005 and 2006 collections nearly doubled the initial forecast.
Translation = total capital gains tax collections over this period were 68 percent higher than forecasted. But even more important, a loss of $5.4 billion is actually a gain of $133 billion. That is a swing of $138 billion in in just short years since the January 2004 forecast. Oops.
Hat tip to Don Luskin. I conclude with the following:

1) Properly structured taxes (and tax cuts) reduce poverty and distribute wealth.

2) Congressional entitlement programs reduce wealth and distribute poverty.

Please remember this when you vote in 2008. Unfortuantely, neither Dems nor GOPs understand these principles yet.

I have an idea of which I'm proud (does not happen often): legislators should take a economics and law policy test before they can candidate. The test results will not prevent them from being voted into office--the voters have the final say. But the test results will be listed on the ballots. Think of it as American Legislator: American Idol for congress, without the ratings starved judges skewing the phone-in votes.

Monday, January 22, 2007

The Power of Drudge

Ah the power of the internet...Drudge link shuts down senate website here

And just to clarify on why I post some of the posts that I do. I have two brothers serving in the US Army (with one currently deployed) and at times I feel like we are not getting the whole story in the MSM. Maybe I need to start my own blog on that specific subject instead of Cav's, but just trying to give ya'll a sense of where I come from.

Odds and Ends

I have been very busy these past couple of months, but I wanted to quickly make this post. The calm before the storm is ending. As the Super Bowl kicks off our Government is apparently trying to hammer home the point that they will decide what we can and can not do with out money.

In a more positive note for those of you who like numbers and data sets here is a pretty cool website at swivel. It is hailed as the you tube, but instead of sharing videos, you share data sets. Its worth checking out.

Gotta run

Harmony in the markets

A good left-of-center friend, sellSELLsell, told me that he loved a good right-of-center friend, bmili (who is a frequent and intelligent contributor on this blog).

sellSELLsell hates bmili's politics, but loves the fact that bmili consistently makes good trading calls.

It's great to see markets trump politics. I hope we can see more of that in every day life.

Saturday, January 20, 2007

The Long War: A Year-in-Review

Bill Roggio has an excellent military blog that compiles all the latest military news in the Long War from around the world. Here is his wrap-up for 2006 on all fronts.

The year 2007 will be a very critical year in the Long War and I believe will be the decisive year if our fight against global Islamic extremism is to be successful. Most important to our effort is still Iraq (I know there are some who try to separate the war, but I am sorry, if you read the news, analyze the combatants presently there, and read Al-Qaeda's own statements, you will realize that this is not the case). Gen. Petraeus will soon be taking over the head command in that war and there will be additional troops in Baghdad and in Anbar Province. There has been WAY too much rheteoric on this "surge". Critics have tried to argue that there is no change in strategy buut this is not the case at all. Classic counterinsurgency tactics will be now the main weapon in that front. Unfortunately it has taken too long to get this started, but better late than never. The embeds of US military units in Iraqi forces cannot be understated and the same can be said for the troops now living amongst the cleared and secured territory. This absolutely essential in building trust, establishing stability, and growing intelligence networks with the indigenous people. This war has for far too long been politicized, regardless of whether or not you agreed the decision. It is absolutely essential to WIN. Mark my words, if we do not win, I believe the United States military will NEVER be the same. This has nothing to do with Iraq being a part of the war or not. The country's "Vietnamization" has seeped into every armed conflict from the Gulf War, Bosnia, and Somalia. Whatever the next major conflict was (which is now Iraq) and regardless of the cause, the country was going to have to face its fear of Vietnam and deal with it. Instead of half-assed commitments, we will settle for not committing anything ever again. The American psyche will never be the same. Faced with a loss, I truly believe we will not be able to sustain nor commit to a CONVENTIONAL war against an explicity evil enemy that rivals that of Nazi Germany. I hope I am wrong, but I do not believe that is what our nation's history and the "big picture" is telling me.

Friday, January 19, 2007

Federal spending more daunting than global warming?

I posted on Bernanke's speech to Congress yesterday. In a much more impressive post, James Hamilton provides this graph. Read the whole thing.

Losing jobs, wealth, income will definitely lead to lower living standard.

On the other hand, Europeans Flemming Rose and Bjorn Lomborg talk about Al Gore's ducking an interview in which he might need to substantiate some of his claims on climate change (subscription required). An excerpt:

The interview had been scheduled for months. Mr. Gore's agent yesterday thought Gore-meets-Lomborg would be great. Yet an hour later, he came back to tell us that Bjorn Lomborg should be excluded from the interview because he's been very critical of Mr. Gore's message about global warming and has questioned Mr. Gore's evenhandedness. According to the agent, Mr. Gore only wanted to have questions about his book and documentary, and only asked by a reporter. These conditions were immediately accepted by Jyllands-Posten. Yet an hour later we received an email from the agent saying that the interview was now cancelled. What happened?

One can only speculate. But if we are to follow Mr. Gore's suggestions of radically changing our way of life, the costs are not trivial. If we slowly change our greenhouse gas emissions over the coming century, the U.N. actually estimates that we will live in a warmer but immensely richer world. However, the U.N. Climate Panel suggests that if we follow Al Gore's path down toward an environmentally obsessed society, it will have big consequences for the world, not least its poor. In the year 2100, Mr. Gore will have left the average person 30% poorer, and thus less able to handle many of the problems we will face, climate change or no climate change.

Clearly we need to ask hard questions. Is Mr. Gore's world a worthwhile sacrifice? But it seems that critical questions are out of the question. It would have been great to ask him why he only talks about a sea-level rise of 20 feet. In his movie he shows scary sequences of 20-feet flooding Florida, San Francisco, New York, Holland, Calcutta, Beijing and Shanghai. But were realistic levels not dramatic enough? The U.N. climate panel expects only a foot of sea-level rise over this century. Moreover, sea levels actually climbed that much over the past 150 years. Does Mr. Gore find it balanced to exaggerate the best scientific knowledge available by a factor of 20?

Mr. Gore says that global warming will increase malaria and highlights Nairobi as his key case. According to him, Nairobi was founded right where it was too cold for malaria to occur. However, with global warming advancing, he tells us that malaria is now appearing in the city. Yet this is quite contrary to the World Health Organization's finding. Today Nairobi is considered free of malaria, but in the 1920s and '30s, when temperatures were lower than today, malaria epidemics occurred regularly. Mr. Gore's is a convenient story, but isn't it against the facts?

He considers Antarctica the canary in the mine, but again doesn't tell the full story. He presents pictures from the 2% of Antarctica that is dramatically warming and ignores the 98% that has largely cooled over the past 35 years. The U.N. panel estimates that Antarctica will actually increase its snow mass this century. Similarly, Mr. Gore points to shrinking sea ice in the Northern Hemisphere, but don't mention that sea ice in the Southern Hemisphere is increasing. Shouldn't we hear those facts? Mr. Gore talks about how the higher temperatures of global warming kill people. He specifically mentions how the European heat wave of 2003 killed 35,000. But he entirely leaves out how global warming also means less cold and saves lives. Moreover, the avoided cold deaths far outweigh the number of heat deaths. For the U.K. it is estimated that 2,000 more will die from global warming. But at the same time 20,000 fewer will die of cold. Why does Mr. Gore tell only one side of the story?

I suggested some global warming contracts here. I suspect Al would outlaw outright short positions if he had his druthers.

Thursday, January 18, 2007

When will the print media get it?

You would think that the print media would understand the need to develop their internet base and to become more innovative, especially with newspaper circulation dropping drastically over the past few years. Time Warner was expected to lay off 200-250 at most today. Well, try 289....

How Many? 289 Out at Time Inc.
Bureaus Closed in D.C., Chicago, Los Angeles
By Nat Ives Published: January 18, 2007 NEW YORK ( -- Today's job eliminations at Time Inc. totaled 289 mostly editorial posts after all was said and done, including layoffs at crown jewel People, flagship Time and other magazines from Entertainment

Read the whole thing here

This long term bull is turning bearish

Not because of the housing crash (won't happen). Not because of energy consumption (orderly marches). Not because of the current budget deficit nor trade deficit (higher tax revenues with growing economy, and capital surplus to balance trade).

Because of what Fed Chairman Bernanke said today to Congress (subscription required), in line with his predecessor:
"If early and meaningful action is not taken" in reforming programs like Social Security and Medicare, then "the U.S. economy could be seriously weakened, with future generations bearing much of the cost," Mr. Bernanke said in prepared testimony to the Senate Budget Committee. His prepared remarks didn't address the monetary policy outlook or current economic conditions.
When Social Security was borne during the New Deal, the life expectancy was 64 and for every 1 beneficiary there were 45 payees.

Now life expectancy is over 70 and there are only 3 payees for every beneficiary, and the baby boomers have not even started collecting yet. (Check this out paper)

Congress is able to raise spending (and taxes), but their track record shows they cannot cut spending. So by continuing to expand the retirement and medical liabilities for the whole country, the federal government is acting like the Big Three auto companies back in the seventies and eighties. In a few decades, the U.S. will not be able to compete with other nations because of our high labor costs and liabilities. Those of you with Lou Dobbs and disturbed by outsourcing and trade deficits--you ain't see nuthin' yet.

And I am supremely confident that, Congress will continue to ignore the advice of someone who is much more an expert, and that just as our auto industry is bleeding to death today, so our economy and the productivity our of workforce will, too.

Go bears! And Patriots!

UPDATE: Don Luskin had a great cartoon on this yesterday.

Wednesday, January 17, 2007

Dealing with Insurrections

I came across this while on Instapundit this morning from Foreign Policy Magazine:

Insurgencies Rarely Win – And Iraq Won’t Be Any Different (Maybe)
By Donald Stoker

"Vietnam taught many Americans the wrong lesson: that determined guerrilla fighters are invincible. But history shows that insurgents rarely win, and Iraq should be no different."

Read the rest

This article got me to thinking about insurgencies in general and the article coincides with everything I have read lately military & history wise regarding unconventional warfare. While Iraq is still dangerous, the war in Iraq is still winnable (contrary to popular perception). An insurgency's most potent weapon is informational warfare, and unfortunately, they are winning that front. Much of the blame can be laid upon the MSM but at the same time the US has done very little to counter their efforts. The public front is just as important at times as the military front.
Insurgencies to me are to what fear is in the night. That creepy, pit in your stomach feeling that something may be out there or wrong. Only when morning approaches and as relief settles in do you look back in hindsight at the true reality of the night before. Insurgents are the boogie men in your closet and they feed on your fear. When they are no longer feared, they lack power.

If only the Mainstream Media were as passionate as the Sports Media

Yesterday, in posting on the U.S. economy, I asserted:
I think that, since the press continues to give the worry warts plenty of time to share their gloom, it follows that a substantial amount of people will follow (like the sheep in this wonderful film).

The day before, James McCormick said something similar, and aptly used recent football events to nail his point:

Thus my broader view for the day — America will get the MSM it wants when America takes its national security as seriously as its football.

We don’t need “happy hacks” (to quote Mickey Kaus) but we do need media who recognize that they’ve got some skin in this game. That there are things that they do not need to know, immediately, under a system of representative government. That their role in life is not to undermine the effectiveness of the local team. Yes, we want to know the strengths and weaknesses. But winning the game … not exposing how the game is to be won … is what ultimately counts to the fans.

Bill Belichick, Tom Brady, and the New England Patriots move on to the AFC Championship against Indianapolis next week. And the fans couldn’t care less what they discussed LAST week. Thank goodness the media in Pats’ world are actually required to love football more than themselves. Football fans can still dictate how the game is played.

Maybe America needs a few more fans.

Do read the whole thing.

Tuesday, January 16, 2007

17 Straight Winners.....

That's right you heard it here! Mr. Bonds has put together a great team that has already hit 17 straight winners. With a record of 20-5-1 Isn't that just incredible. Not only that, Mr. Bonds it's trying to get some experts on his team. If you guys think you're good sign up with Pregame and show e'm your stuff, and you might be added to the Team. Check out below, just a little taste of what they're picking today. And what it looks like at the forum. Below is a post copied from the forum by Jeff Bonds. I WILL BE POSTING THEIR PICKS IN MY OTHER BLOG. and every once in a while i'll be posting here but check it out these guys are on fire.

17 Straight Winning Selections - Simply Incredible

I'd like to thank all the cappers for taking to this concept and I absolutely chose the right team. Just remember cappers to stay within your conference or region because that was the main purpose of this thread - Cap games like an expert in your area

Forum members: Let them know that you appreciate their efforts by posting in the thread - Every one of them deserves a thank you for their hard work and dedication to the forums!

Team Pregame CBB RECORD: 20-5-1

Jeff Bonds: BIG SKY, PAC-10
Bookie Spanker: WEST COAST
Dommylocks: A-10
Esams: SEC
Hizz Honor: SWINGMAN
Jason Richardson: C-USA UAB +14
Jughead: SEC KENTUCKY -7
Mark Greene: MAC
NBA Powerplays: M. VALLEY
Redneck: BIG 10
Soonerfan: OV, HORIZON, BIG 12


The Washington Post had a nice graph on the current deficit as a percentage of the economy. As you can see, we are currently above the historical norm of 2.2% and as long as the economy continues to grow, revenue will continue to come in above expectations as the tax base gets larger.

Corporate Affairs

Interesting piece:

The 'Corporate Democracy' Oxymoron
The Wall Street Journal
Henry G. Manne
January 2, 2007
They're back! Every 20 or 30 years shareholder democracy ideas come back in vogue, and their
time seems to have arrived again -- with a vengeance.

The SEC is huddling on whether to facilitate direct shareholder nomination of directors through a
new interpretation of its shareholder proposal rule. A prominent professor at Harvard Law
School, Lucian Bebchuk, proposes, among other democratizing moves, amending state
corporation laws to encourage contested elections for board members. There is ongoing
controversy about whether mutual funds are making sufficient disclosure to investors of how
they vote on various portfolio corporate matters. And European corporate governance circles are
in a dither because the EU failed in a recent directive to qualify the usual one-share-one-vote rule
with something approaching one-shareholder-one-vote. The list could be expanded considerably.

Read the rest here

Focusing on a little mole?

From Brian Wesbury:
For almost four years, a pessimistic pall has generated forecasts and press reports suggesting that the economy is due for a substantial slowdown, perhaps even a recession. Some of these forecasts finger the "housing bubble," oil prices, or debt loads as the catalyst. But, lately, the number one crutch of the pessimists is an "inverted yield curve" - the fact that short-term interest rates are higher than long-term rates.

On one point, the pessimists are right: the yield curve has inverted before every recession in the past 40 years. But a closer look at past episodes of inversion and recession suggests that today's economy is different. Our models indicate very low odds of a recession and continue to point to strong economic activity throughout 2007.

I think that, since the press continues to give the worry warts plenty of time to share their gloom, it follows that a substantial amount of people will follow (like the sheep in this wonderful film).

Household incomes and assets are growing really well. Corporate profits too. But instead highlighting everything else, the bears like to draw our attention to a little mole. And so, I am short a few of these, happily selling at these levels:

Price for US Economy in Recession at

Conditional Superbowl victory probabilities


Last of 3 posts, the prior post available here.

Monday, January 15, 2007

Like a school on a Saturday: NO CLASS

January 14, 2007

Roosevelt Colvin (Patriot linebacker): I did a lot of taunting after the buzzer went off.

Shawne Merriman (Charger linebacker):
You’ve won three Super Bowls. You don’t do that. That’s not showing any class at all.

LaDanian Tomlinson (Charger running back):
I would never, ever, react in that way because I’m a very classy person.

Shaun Phillips (Charger linebacker):
We have class. And that’s how classless individuals act. But Shaun Phillips will have a personal grudge against them the rest of his career. If we would have beaten them, we would have taken our hats off to them and moved on.

Alexander Mackenzie (Patriots fan):
Discrimination has been outlawed based on gender, race, national origin, and creed ("Chargers shut out Pats," Jan. 10 ). I find it unimaginable that a public facility, where tickets for entry are sold, can allow discrimination based on the national "location" of citizens. I feel all who can afford to go to San Diego should sue the NFL for allowing this un-American policy to exist in any of its franchises. To allow the dissing of half the fans of any game is shameful, and I am very angry that "America's Game" has allowed it. All Americans should be disgusted, and if any other team than mine was playing, and either team followed this policy, I would make a point of not watching the game.

January 7, 2007
Shawne Merriman (SouthCoastToday): I'm a playmaker," Merriman said. "That is how I classify myself. I don't do just one thing. I don't just rush the passer. I don't just play the run. I'm not just a run-stopper. I drop a lot in coverage and I do everything. I'm a playmaker."
There's another rare aspect to Merriman's game. Of all the prominent athletes who have been accused of using steroids, Merriman is among the few who have actually tested positive for using them.
He missed a quarter of the regular season, four games, to a drug suspension, reportedly for using Nandrolone, an anabolic steroid. Merriman says the faulty test was the result of a tainted supplement, which he thought was legal.
"Like I said from day one, it was a mistake on my part because I wasn't knowledgeable about banned supplements or substances," said Merriman, who dropped an appeal of his suspension. "When you're doing something for so long, you get confident in doing it, even though you don't know it until you get knocked. That's what happened with me. I took my suspension and I moved on."
Merriman issued his first bulletin-board statement of the week when he visited CBS during the halftime of last Sunday's Pats-Jets playoff game, and the broadcast team asked him to pick a winner.
Merriman picked the Jets, because, he said, New York had done a good job keeping the Pats off the scoreboard — even though New England had 17 points and a seven-point lead after two quarters.

October 2, 2005
Marty Schottenheimer (Chargers coach):
"I would have bet a lot of money, if I were a gambler, that with today's system, you couldn't achieve what the Patriots achieved the last four years. I'd never bet against Bill Belichick on anything. I don't know him well, but what he's done here is remarkable. But how much can you take?'"But Patriots quarterback Tom Brady saw those bouquets as roses being left at New England's graveside.Three days after Schottenheimer lauded the Patriots, Brady used his Wednesday press conference to say, "I just assume you talk about your own team. You don't talk about our team. .... He's not our coach. We'll let our coach talk about our team. We'll let our players talk about our team. The only thing we ever do is give respect to the other teams because that's what they deserve. They played a good game. They beat us. That's what it is -- no more, no less. It's one game."

A generation ago ...
Margaret Thatcher: "Being a leader is like being a lady, if you have to go around telling people you are one, you aren't."

CaveatBettor: Yeah, what she said, and I think class is like leadership, you charger ladies.

Thursday, January 11, 2007

Global warming contract suggestion

How about a contract series as follows, based on NASA's Goddard Institute for Space Studies global temperature (C) data for surface air temperature change, using 1950-81 as baseline:

The data series can be found here. Some pretty graphs here.

Don't take those economic forecasts so seriously

Nice WSJ op-ed today (subscription required), by James Grant, on how economic forecasting is close to meaningless ...
Yet, try as they might, the economists can't seem to get fabulously rich.

It's not for lack of attention to detail. "Up" or "down" isn't good enough for them. They want to tell you what a particular rate will be on a certain date, and they want to give it to you to the second decimal place to the right of zero.

"Yields on two-year notes, the most closely linked to the Fed's benchmark, will fall to 4.49 percent from 4.79 percent as of 7:40 a.m. in New York today . . . ," Bloomberg News reported on the first business day of the new year. "Ten-year note yields will end 2007 at 4.62 percent, down from 4.69 percent today. . . ."

Bloomberg was reporting on a New Year's survey of 22 government bond dealers (so-called primary dealers, because they are licensed to trade with the Federal Reserve). It happens every year. Journalists call up the dealers, and the dealers come to the phone. The journalists know that the dealers don't really know. Nobody could. But the dealers pretend.

The ritual lives on because people crave certainty -- especially where it's inherently unavailable. Many years ago, Lee W. Minton Jr., a Philadelphia bond investor, shook his head over these futile exercises in soothsaying. "The hardest price in capitalism," he said about the particular interest rate over which he was then puzzling (but wisely had no expectation of forecasting).

Predicting the track of interest rates sounds easy enough. Determine the supply of, and demand for, lendable funds. Estimate their rate of change. Fix the point at which they will intersect. That is the future rate of interest.

Of course, there are other small considerations, including the world-wide demand for dollars, the inflation rate, the unemployment rate, the economic growth rate, monetary policy and fiscal policy, not to mention the vagaries of human perception. The phobias and certainties of fixed-income investors are forever changing. A 4% rise in the CPI, for example, is compatible with many different government bond yields. In 1984, a 4% inflation rate provoked a panicked run-up to 14%. People doubted that the CPI would long remain so well behaved -- it had reached double digits in the 1970s -- or that, once it flared anew, Paul A. Volcker, then the Fed chairman, would have the heart to beat it down again. On the other hand, a virtually identical inflation rate in October 2005 was compatible with a bond yield of only 4.5%. People just knew that inflation was dead but that, if, by chance, it wasn't, there was no better man than Alan Greenspan, "the Maestro," to bury it again.

Not everyone puts stock in these errant forecasts. Value investors famously don't. They buy (or don't buy) the security in front of them. What may or may not be coming down in the macroeconomic pike is irrelevant to them. As protection against the kind of accident that always seems to catch Wall Street unawares, they insist on investing at low prices. In the absence of such opportunities, they sit on their wallets. So the question that a disciple of Benjamin Graham would ask about interest rates is not, "Where are they going?" but, rather, "Are they high enough to provide a margin of safety if -- just this once -- everything in the macroeconomy doesn't go exactly according to plan?"

The answer is probably no. Interest rates are low, and the premium of risky rates to government rates is tight. True, long-dated U.S. government bond rates have been much lower than they are today. Since 1870, in fact, they have averaged just 3.5%. But up until 1914, there was no Federal Reserve. In that halcyon time, prices tended to fall in peacetime and rise in wartime (or when new gold discoveries augmented the world's monetary base, as they did after 1900). Since the institution of the Fed, inflation has been the rule, in peace as in war. And since 1971, when the dollar was cut loose from the last frayed hawsers of the gold standard, long-term Treasury yields have averaged 8%, a sizable premium to today's 4.76%.

But, for whatever little it's worth, here's what the DOW Dec 31 2007 "on or above 12500" looks like:

Price for 2007 Year End Dow Jones Industrial Average at

Wednesday, January 10, 2007

Edwards on a Roll

I admit I do not know much about who will win the Dem nomination in 2008 but Edwards certainly has been on a roll lately. I am sure his announcement in New Orleans gave him a boost but he already has name recognition, charasmatic/good-looking, and an early start. I saw a recent Investor's Business Daily poll that surprisingly had Edwards giving the GOP the toughest challenge (I will post it if I can find it). I personally think he has a good chance. Here is his chart:

Price for 2008 Democratic Pres Nominee(Others on Request) at

Political Opportunity Yielding Economic Capital

With President Bush set to address the nation tonight, a clear and decisive front runner will emerge to win the GOP 2008 nomination. That man is John McCain. While McCain is already the TS frontrunner (last I saw trading near 50 for the GOP nom), he is one of the Big 3 so to speak (Romney and Guliani being the other two). The reasoning behind my conclusion is this: McCain has been advocating for quite a time now to increase troop presence to restore order in Iraq (which Bush will do tonight- an est 21,500) and will now be looked to for further foreign policy direction on both sides of the aisle. The Long War will be America's #1 priority 2008 and McCain will have already become the transitionary leader to take over Bush's reigns. McCain has earned that position due to trust, the people know where he has stood on Iraq and has not wavered. Romney and Guliani blew any opportunity they had today with Romney's "I'm just a Governor" line and Guliani's non-answer. Barring an Iraq catastrophe, McCain should win easy. It doesn't hurt that the GOP primaries have historically been a formality for the frontrunner.

My "political compass"

Unlike bmili, I try to keep the politics here brief. I theorize that being overly political does not bring liquidity to TS; but the understanding public policies and the politicians who influence them can lead to more advocacy of the greater good (including more predictive information markets).

But following the lead of Steve Bainbridge, I figured it would probably be good to let anyone curious where I stand on this (scales are from -10 to +10):

Economic Left/Right: 4.63
Social Libertarian/Authoritarian: -1.59

which means that I am slightly more libertarian and slightly more right-leaning of the compass center (almost exactly between Angela Merkel and Milton Friedman, if you look at this analysis).

I think it's time that TS listed some global warming contracts

This post, by Arnold Kling, quoting Jane Galt, is what got me thinking this way:

'Jane Galt' writes,

As I read it, the Stern Report basically assumes that there are low diminishing returns to income (it sets the elasticity of marginal utility of consumption, or η, to 1). It strikes me as odd to see the left half of the blogosphere supporting this proposition; I'm fairly sure that John Quiggin, who is a social democrat, thinks it is higher than that.

Once again, I feel the urge to try to get rid of the jargon and the Greek letters and explain what's going on. If person A has $1 million in wealth and person B has $10,000 in total wealth, and you can increase "total" wealth by doing something that takes $10 from B (the poor chap) and giving $11 to A (the rich guy), should you do so?

The position of someone on the Left would ordinarily be, "No." But when it comes to the issue of how much environmental damage we should leave it for our wealthy descendants to clean up, the Stern report is saying "Yes, increase total wealth." See my earlier post. And many on the Left are cheering them on.

Read the whole thing. Suggestions on contract formation most welome in the comments!

Blizzards on the way to the Northeast?

Joe Bastardi, AccuWeather's Chief Long-Range Forecaster, seems to think so:
Bastardi said that the weather pattern from mid-January through mid-February has a chance to mimic the winters of 1965-66 and 1957-58, each of which ended cold and stormy after a warm start. A worst-case scenario would be if this winter plays out as did the winter of 1977-1978.

Similar to this year, 1977-1978 was a winter with a waning El Nino. After a tepid start, the second half of the winter was noted for its cold and remarkable storminess, including back-to-back-to-back blizzards in the Northeast.

"Those who think that winter 2006-2007 is going to remain mild are in for a shock," said Bastardi. "Winter is likely to come with a vengeance. A week from now, we'll start seeing truly cold air across much of the country, and we expect this change to last."

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Tuesday, January 09, 2007

Supply side at its finest:

Here (Hat Tip: Rush)

I briefly caught wind of this chart on Rush's show today. But it dumbfounds me how high the tax rate was during the early 80's when Reagan took office (70% for those earning over $212K). Reagan was successfully able to lower the upper limit next to 50% to those earning $106k or more and left office with the highest bracket at 38.5% for those that made $90k or more. I cannot even fathom having to pay that much taxes on top of trying to borrow during that time period (interest rates were high back then, much higher than our current "neutral" rate). One website I found stated mortgage rates were as high as 15%-16%, could you imagine trying to buy a house? No wonder home ownership is at an all-time high. One can only come to the conclusion that today's economy/market should be extremely grateful for Ronald Reagon. I can not think of another reason as to why our economy has been doing so great over the past 15-20 years.

US Recession Contract Trade Graph

Price for US Economy in Recession at

Hat Tip: Midas Oracle

Monday, January 08, 2007

Latest conditional probabilities for NFL playoff teams

As of noontime Mon Dec 8, the remaining 8 teams' bayesian probabilities looked like this:


I have included last week's probabilities as well. Note that this past weekend's winners' chances all increased, along with the Ravens. The other bye week teams' chances all decreased.

As of 1230pm Thu Dec 4 2007, here's what p (A | B) looked like:


The original post can be found here.

Saturday, January 06, 2007

On the verge of Civil War...but not where you may think

Thats right Palestine....see here. Unfortunately, this is not all too surprising and was actually predicted by Joel Rosenberg in this book. Crazily, he also predicted Yasser Arafat dying, terrorists using planes as missles, and the invasion of Iraq in his fictional books. You won't like what he sees coming in the future, but judge for yourself. Meanwhile, TS Contract suggestion: How long until Abbas is no longer in power?

The CENTCOM Shake Up

Since the capture of Fallujah by the US Marines a year or two ago, this could be the most significant military event to have happened in the Iraq occupation. Much of this can be summed up in Ralph Peter's New York Post article here (hat tip: RCP).
Peter's article pretty much summed up and agrees with everything I have been reading militarily so far. 1) The Big Army is currently still stuck in Cold War thinking 2) The Big Army is still too bureaucratic 3) Bush's problems in Iraq are not due to his policies, its the execution 4) Bush has been too reluctant to change Generals 5) It's time to actually start dealing with the fuel behind the fire (IRAN).
The one key exception to all of this is Peter's belief that the Navy's mid ranking officers are the best strategic thinkers. I would argue that the best strategic thinkers are ALL the services mid ranking officers and NCO's (non-commissioned officers; ie- sergeant). These men see the action on the ground first hand and report to the upper echelon of the military who then determine action/roe (rules of engagement)/policy. Too many of these generals are still stuck in Cold War thinking and mass conventional warfare. While this may be true when facing an enemy such as China/Russia, there is no other enemy military that could provide a significant threat to us conventionally. Peter's most important point in the article goes relatively unnoticed which is that Marines tend to act better locally and think better globally. This is because the Marines rely on their Small Wars Manual. The Marines also have a history of fighting insurrections, peace keeping, and guerrilla style wars in the Pacific Ocean and throughout the world. I believe we are coming to the much needed realization (in the transitionary time period of warfare that we are in) that adaptation is required. It is unfortunate that growing pains/casualties/dissapointments are required but C'est la vie. We are on the right track and we are fighting the "Long War" (I see this term gaining traction in the blogosphere). I believe that Iran is the head of it all through their stated goals of the eradication of Israel, their pursuance of the return of the 12th imam through a global apocalypse, and the desire to establish Islam as mandatory world-wide. The 90's were a break from world history and I think the point can be made that WWI and WWII were the exceptions of war-fare than the standards. If you like reading, check out Robert Kaplan's book Imperial Grunts, while I don't agree with all of his points, it is none the less a fascinating read.

Friday, January 05, 2007

Dallas @ San Antonio

The two big boys from the NBA's Western Conference, Dallas and San Antonio, will meet Friday night on the Spurs home floor. It's the second meeting of the year for the two, with San Antonio having taken the first in Dallas way back on November 2 by a 97-91 score. This time the Spurs are home but come in having dropped two straight, both on the road, to Cleveland and to Minnesota in overtime. The double defeats dropped the Spurs to 23-10 on the season, 2.5 back of the Mavericks pending the outcome of Dallas' Thursday night home match with Indiana. The Mavericks were going for their 12th straight win in that one and if they get it will be 26-7 on the year. They are 10-4 on the road but will of course be at a disadvantage in this one facing the Spurs without rest. San Antonio is 12-5 at home on the season.

Dallas: 31-13 ATS as an underdog
San Antonio: 3-12 ATS at home vs. division teams

JEDI THOUGHTS: San Antonio isn't just simply going to make it that easy. GL to Dallas, because they're going DOWN! Lay the points and be happy after the game.

JEDI PICK: San Antonio -5.5

The Man Who Shook Up Vegas

From today's WSJ (subscription required):

LAS VEGAS -- Veteran sports bettors and bookmakers are not prone to fantastic notions. They like to think that everything new is just something old in a fashionable suit.

But this fall, the stereotype no longer fit. Years of studied cynicism gave way to breathless talk. Las Vegas had a mystery on its hands.

Each Thursday morning at precisely 10 a.m. Nevada time, every major casino sports betting operation in the world from here to Costa Rica was being simultaneously pounded by thousands of bettors wagering millions of dollars on the same few college football games. Odder still, most of these lock step bets were turning out to be winners, costing the casinos a fortune.

To protect themselves, bookmakers broke with protocol and began making unusually large and sudden corrections to their betting lines, or "point spreads." At least one offshore casino disabled its Web site for maintenance and restored it only after adjusting the odds. "The whole thing was unreal and unbelievable," says Robert Walker, the race and sports book director for MGM Mirage in Las Vegas. "In 20 years I've never seen anything like it."

There were rumors. Some thought terrorists were involved, or hackers, or maybe a shadowy international gambling syndicate known as the Asian Group. But as the month wore on, the truth began to bubble up through the Las Vegas whisper pool.

Turns out there was no grand conspiracy. The global business of sports betting was being jolted every week by one person: an obscure 41-year-old statistician from San Francisco named Dr. Bob.

If you've never placed a sports bet in America, you are fast becoming a member of the minority. Since its beginnings at Colonial horse tracks in the 17th century, the amount of money Americans wager on sports has grown to rival the gross domestic product of New Zealand.

From Monday's college-football championship game between Florida and Ohio State through the next calendar year, more than 100 million Americans will wager an estimated $96 billion on sports. Less than $3 billion will be offered legally at Nevada casinos where bettors must be present to wager. The bulk of it -- about $93 billion, according to analysts and law-enforcement officials -- flows through office pools, local bookies and offshore online casinos. While these forms of gambling are illegal under U.S. law, the authorities rarely prosecute individual bettors.

If there's one bedrock law of sports gambling, it's that the people taking bets, the bookmakers, always win. Some of this is due to the haplessness of average bettors, or "squares," who never fail to make dumb wagers. The rest is a matter of design. By taking commissions on bets and using oddsmaking tools like point spreads and bet limits, the world's bookies have engineered the system to their favor.

Gamblers wagering against a point spread must win more than half their bets (about 53%) to make a profit and must be closer to 55% to make a comfortable living. This is no small feat. Experts say there may be fewer than 100 people who can sustain these rates over time. Most of them belong to professional betting syndicates that hire teams of statisticians, wager millions every week and keep their operations secret.

Nearly everybody else is losing money. In 2005, Nevada's casino sports operations, or books -- those rooms at Caesar's Palace or the Mirage that are walled by televisions and tote boards -- earned $126.3 million in revenue, a 12% increase from 2004.

Nonetheless, even the grandest edifices in Las Vegas have a habit of toppling. Nevada's casinos have not been able to match the recent boom in betting at online casinos. Though their operations are illegal under U.S. law, American bettors don't seem to care: In 2005, they made an estimated $47 billion in online sports wagers.

Bookmakers say the popularity of Internet betting, combined with the volume of sports information available online, has made the betting public larger, better informed and less predictable. No one knows what this means for the business, but recent events have raised a new possibility. If the market keeps growing in size and sophistication, smart handicappers may discover that it can be just as lucrative to sell their picks as it is to bet them.


Though he makes a living handicapping college and pro football and basketball, Mr. Stoll rarely visits Las Vegas. He's never placed a bet in one of the city's sports books and hasn't attended an NFL game since he was 9. He does not make a habit of watching sports on TV. "Your eyes can only fool you," he says. Put him in a different setting and he might be running a hedge fund, developing office towers or monitoring the currency markets.

But in the last three months, Mr. Stoll has emerged to become one of the world's most influential sports handicappers. And when it comes to predicting the outcomes of college football games, he is peerless. By his records, which have been tracked by dozens of bettors and bookmakers, the recommendations he's made on college football in the last three seasons have turned out to be winners against the point spread 63% of the time. In 2005 he finished with 51 wins and 21 losses for a success rate of 71%.

While runs like this are rare, they are not unprecedented. In the 1980s, a syndicate called the Computer Group developed predictive models for sports that helped them soak Las Vegas for about $14 million. At other times, professional or "sharp" groups like the Kosher Boys or the Poker Players made off with millions, too.

But what separates Mr. Stoll from these professionals and makes him so frightening to bookmakers is that he's not hoarding his information -- he's distributing it to the public. In fact, anyone who wants Mr. Stoll's advice can visit his Web site,, and buy a subscription package for anywhere from $25 to $2,495. All that pandemonium on Thursdays in Las Vegas was no coincidence: That's the day Mr. Stoll sends an email to his subscribers telling them which college football teams to bet on the following weekend.

This season, as his subscriber base jumped 75%, the money his clients were wagering on Thursdays increased to the point that the casinos could no longer afford to ignore it.

"The amount of money being pushed through the counters -- it's got to be insane," says Mr. Walker of MGM Mirage. "If we're taking $15,000 bets and other [sports] books in Nevada are taking $100,000, there must be millions being bet offshore."


Anyone looking for betting advice does not have to wander far. The Web is thick with ads for sports handicappers, or touts, who offer guaranteed "locks" and claim to have success rates as high as 80%. Their survival is a testament to the gullibility of the average bettor. "It's a very shifty group," says Glen Walker, a veteran sports gambler and line-making consultant for a casino in Antigua. "At least 70% of them misrepresent their records."

While Mr. Stoll has been a tout for 20 years, he does not follow the standard business model. He has no employees. He declines to advertise or swap links with other handicapping sites. In online essays, he says there is no such thing as a lock and advises clients to bet in a disciplined pattern that leaves less than a 1% chance of exhausting their bankrolls. At the height of his hot streak in 2005, he sent clients a message imploring them not to get carried away. "I'm not going to hit 70% every year," he says.

More unusual is Mr. Stoll's enthusiasm for describing his methods. On his Web site, he discusses the tools he uses to analyze football games: a mathematical model that estimates everything from turnovers to the final score, a handful of "fundamental indicators" (good running teams tend to play better at home, for instance) and more than 100 "situational angles" he uses to forecast performance patterns that do not show up in the raw stats. He makes unapologetic use of terms like variances, square roots, binomials and standard distributions. Sports betting, he says, should be viewed as "an investment rather than a gamble."

Though he will not say how many subscribers he has, how much money he earns or whether he bets his own games, Mr. Stoll says he makes his living as a handicapper, not a bettor. By any measure, it's fair to say he makes a good living. If he has 2,000 subscribers paying an average of $500 each, his annual income would be $1 million.

Elihu Feustel, a professional gambler from Indiana, not only bets Mr. Stoll's games, he says most of the biggest syndicates in Las Vegas are subscribers, too. In two years, he says Mr. Stoll has cost bookmakers at least $20 million. "He's the only winning handicapper I know who makes his living selling his information," he says.

As his reputation grows, Mr. Stoll is learning that notoriety cuts both ways. There have been rumors that he doesn't exist, that he's really a front for a Chinese syndicate, or that he's giving out his picks early to some rich bettors (not true, he says). Then came the great battle of wits with the bookmakers.

For years, Mr. Stoll's routine started on Sundays when he would download the college box scores and organize the data. He'd spend two days working with his models and angles and another one writing a blurb on every upcoming game. When his clients received his recommended bets on Thursdays, they would have 48 hours to bet at their leisure.

But in 2005, Mr. Stoll noticed that a few minutes after he sent his advice, the lines on those games would shift slightly. The moves were not big enough to cause a stir, but they did get the phone ringing. One day the principal of a major sports betting syndicate called to offer him a job.

While the line moves were flattering at first, they quickly became a problem. By the beginning of the 2006 college football season, within 30 seconds of the moment he pressed "send" on his Thursday picks, one online sports book would adjust the odds to make his recommendations less likely to pay off. Seconds after that, every other major casino in the world would fall into line. The bookmakers had clearly subscribed, he says, and were trying to change the lines before his clients could make bets. (Representatives for three of the most influential online casinos declined to comment.)

When a stock analyst moves the market with a recommendation, investors who get in early can make money on it regardless of its merits. "It's just the opposite in my business," Mr. Stoll says. When he makes picks, it's as if brokers and traders collude to drive down the price.

As his customers started to complain, Mr. Stoll fought back. Rather than bundling his "best bets" into one Thursday email, he split them into groups of two and staggered them every two minutes. When this didn't work he sent them one at a time every three minutes -- only to discover that clients with slow email servers were getting them too late. Finally, he set up a private Web page where he can reveal the picks to everyone at once. Lately there's a new problem: People are posting his picks on free Internet forums. Some days, Mr. Stoll says, "I want to be anonymous again."


While they make money, Las Vegas sports-betting operations are not especially profitable. A typical Nevada sports book produces about $600 in revenue per square foot -- less than one-third of the revenue generated by slot machines or "pit" games like craps and blackjack. All told, sports books generate only about 1% of the state's gaming revenue. If they weren't such a draw for casino visitors, they might have been paved over by now.

What's not clear is what may happen if their profits continue to shrink at the hands of a talented tout.

The job of defending the casinos falls to the handicappers at Las Vegas Sports Consultants, one of several companies the casinos hire to supply betting lines for their sports books. The company's chief operating officer, Ken White, learned the handicapping business from his father and worked his way up from taking parlay cards at a sports book to opening his own consultancy. He works 70 hours a week and rarely takes a day off.

Inside the black notebooks on his desk he keeps "power ratings" for hundreds of teams ranging from the Dallas Cowboys to the Marist College men's basketball squad. They are based on a mix of algorithms and subjective factors that he calls "70% science and 30% art." He acknowledges that Mr. Stoll and his followers have cost the sports books money lately. He's instructed his staff to study Mr. Stoll's picks.

But over the years, Mr. White says he's seen enough touts get hot to know how the story ends. The more the point spreads move, the less effective his advice becomes. And when the bookmakers figure him out, his disciples will drift away. "He needs to enjoy this while it's going on right now," he says.


Bob Stoll's handicapping career began at Berkeley when he entered a $2 NFL pool and, after doing a few minutes of simple math, won $100.

From then on, his statistics classes became excuses to feed football data through campus mainframes. After winning 63% of his bets in three years, he quit school to become a tout.

He built his business by publishing a betting guide, advertising a 900 number, writing columns for gambling publications and appearing on radio shows. He also waited tables. In 1998, as 900 numbers began to fall out of vogue, he made a desperate move: He equipped his Web site to take credit cards. Over the next six weeks he made $30,000, he says, "and that was that."

For most of his career, Mr. Stoll handicapped teams by looking for situations or "angles" that had a way of predicting future results. If a college football team was favored by seven points or more in a minor bowl after losing their last game, for instance, Mr. Stoll would know that the last 36 teams who met that criteria had covered the point spread only eight times. If one of these strong angles applied to a team, he would bet accordingly.

But after a losing season in football in 2003, Mr. Stoll decided to add another layer of rigor. For NFL games, he'd built a mathematical model to project how many points each team was likely to score in a coming matchup. With three years of data and hundreds of hours of tinkering, Mr. Stoll built a math model for college.

As well as these methods have worked, they have done nothing to cut his workload. In the months when basketball and football overlap, Mr. Stoll works 18 hours a day nearly every day, sleeping in bursts of no more than four hours. The carpet below his desk chair has been worn bald. "I tell him to stand up so he doesn't get blood clots in his legs," his wife says.

Much of his time is spent making tiny adjustments. If a team lost 12 yards on a running play, he checks the game summary to make sure it wasn't a botched punt. He compensates for the strength of every team's opponents. It takes him eight hours just to calculate a rating he invented to measure special teams. Trivial as this seems, Mr. Stoll says the extra work makes his predictions 4% better.

Despite his mathematical bent, Mr. Stoll does not discount psychology. If his records show that military teams tend to play their best in bowl games, he'll incorporate that into his analysis, too. "Being creative with numbers is more important than being the best at analyzing them," he says.

All the work culminates on Thursdays when Mr. Stoll sends out his college football "best bet" selections. There are usually four or five of them, all weighted from two stars to five depending on how much his projection differs from the point spread.

For the recent Alamo Bowl, Mr. Stoll's analysis ran 557 words -- covering everything from the likely number of Texas turnovers to the potential impact of Iowa defensive back Adam Shada. While the sports books listed Texas as a 10-point favorite, Mr. Stoll said his math model favored them by only five and his situational angles favored Iowa. Moreover, he wrote, Iowa would likely be more motivated to play in this minor bowl game than Texas, the defending national champs. He told his clients to bet on Iowa, meaning Texas would not cover the point spread.

The moment he sent this pick to clients last month, the bookmakers were waiting. Within 78 seconds, 10 casinos moved the point spread by as many as two points in Iowa's favor. In the end, the move wasn't big enough. Texas won the game by just two points, confirming Mr. Stoll's prediction.

No handicapper is immune from rough spells. Mr. Stoll has now had two consecutive losing seasons in the NFL. And while he was right about Iowa, his current record in this year's bowls is 1-4. Some of his most recent subscribers are already venting on gambling forums. "So far all he has done is torch my money," writes one.

It's a story Mr. Stoll says he's heard thousands of times from clients who don't look at the long term. Even good bets lose 40% of the time, he says, but some clients don't grasp that. "They think I'm either hot or I'm cold."

If the bookmakers ever put him out of business, Mr. Stoll says he'd be happy to manage his stock portfolio, raise kids, coach sports and maybe run for school board. One thing he won't do is become a professional gambler.

"I'm not flashy by nature," he says. "I don't need three houses and a boat. I just like to handicap. For me, it's about problem solving."

Thursday, January 04, 2007

Easy Money

If you want easy money from your friends or family next year during bowl season, all one must do is get everyone to pitch in a fixed sum of money and have a pool to pick every winner for each bowl game. This is the second time I have participated in this particular pool (I can't remember how I did last year), and I am currently in first place with 21 games out of the 29 games played picked correctly (72%). Ok, one must rhetorically ask, how is this easy money? Well, if you picked a straight card of all Vegas favs, you would have picked 20 games (69%) and tied for 2nd place in my pool. That is almost guaranteed money by playing against the public, use your skills to pick an upset here and there and you are golden. Let me just show you how well the average joe in my pool did: (names omitted)
21 correct (72%) - 1 (me)
20 correct (69%) - 2 (gets some money)
19 correct (66%) - 3
18 correct (62%) - 3
17 correct (59%) - 3
16 correct (55%) - 6
15 correct (52%) - 7
14 correct (48%) - 3
12 correct (34%) - 1
8 correct (28%) - 1 (gets his/her money back)
TOTAL - 30
Interesting to see how this plays out next year and how the last 3 games turn out. One might ask how to use this to his advantage come March Madness time, unfortunately this technique may only be useful for the first round (assuming you have to submit fully completed brackets ahead of time)

Contract for US Recession in 2007

Back around Thanksgiving, I suggested that TS post a contract on the odds of a recession at Midas Oracle.

TS has done just that today, but be warned, the contract rules are rather vague. I would contact them before taking a position. For instance, I clearly specified the advance, preliminary, and final GDP numbers, where the contract rules do not. As some have said: caveat emptor!

Hat tip to Chris Masse!

For those NFL fans who also subscribe to Bayes

Tradesports provides probability markets in Super Bowl and Conference victories. It logically follows that a team can only win the Super Bowl if it wins its conference, i.e. p (B | A) = 1. Bayes' Theorem provides the probablity of a team winning the Super Bowl upon winning its conference, i.e. p (A | B).

As of 1230pm Thu Dec 4 2007, here's what p (A | B) looked like:


Note the high AFC prospects relative to the NFC teams. The JETS are a bit surprising at the bottom of the list; I think they could beat any of these NFC playoff teams in the Super Bowl (and I'm from New England).

Wednesday, January 03, 2007

Information Markets as an Emergent Phenomena

Are you really buying and selling consciously, or was it already embedded in your subconcious before you clicked the mouse?

Hey all you philosophers, you should open some Tradesports accounts ... from today's NY Times (registration required):
These so-called emergent phenomena, like brains and stock markets, or the idea of democracy, grow naturally in accordance with the laws of physics, so the story goes. But once they are here, they play by new rules, and can even act on their constituents, as when an artist envisions a teapot and then sculpts it — a concept sometimes known as “downward causation.” A knowledge of quarks is no help in predicting hurricanes — it’s physics all the way down. But does the same apply to the stock market or to the brain? Are the rules elusive just because we can’t solve the equations or because something fundamentally new happens when we increase numbers and levels of complexity?

Tuesday, January 02, 2007

Initial thoughts

Part of me is upset that there is added division. I was once very hopeful that this unjust law was something that we could successfully fight. That we did not have to create alternate means to continue doing what we are doing. I also believe that there is a correlation between a larger division between sports traders and non-sports traders, and harming our overall cause to do with our money as we wish so long as we harm no one. That side of me is very upset to see that TS has decided otherwise.

The other part sees the logic. Moving from non-sports to sports accounts should be no problem, and legal attacks on the non-sports accounts should be no problem. It is obviously the sports accounts that we are keeping out eyes on. So if the US law forbids US financial institutions from depositing money into sports accounts, who is to stop an Irish financial institution (in this case the non-sports network) from moving money into a sports account (tradesports).