Friday, November 4, 2011

Bloodbath In The Northwest Territory

November 4, 1791:
At dawn on November 4, St. Clair's force was camped near the present-day location of Fort Recovery, Ohio, near the headwaters of the Wabash River. An Indian force consisting of around 1,000 warriors, led by Little Turtle and Blue Jacket, waited in the woods while the men stacked their weapons and paraded to their morning meals. The natives then struck quickly and surprising the Americans, soon overran their perimeter.
Little Turtle directed the first attack at the militia, who fled across a stream without their weapons. The regulars immediately broke their musket stacks, formed battle lines and fired a volley into the Indians, forcing them back. Little Turtle responded by flanking the regulars and closing in on them. Meanwhile, St. Clair's artillery was stationed on a nearby bluff and was wheeling into position when the gun crews were killed by Indian marksmen, and the survivors were forced to spike their guns.
Colonel Drake ordered his battalion to fix bayonets and charge the main Indian position. Turtle's forces gave way and retreated to the woods, only to encircle Drake's battalion and destroy it. The bayonet charge was tried numerous times with similar results and the U.S. forces eventually collapsed into disorder. St. Clair had three horses shot out from under him as he tried in vain to rally his men.
After three hours of fighting, St. Clair called together the remaining officers and faced with total annihilation, decided to attempt one last bayonet charge to get through the Indian line and escape. Supplies and wounded were left in camp. As before, Turtle's Army allowed the bayonets to pass through, but this time the men ran for Fort Jefferson.  They were pursued by Indians for about three miles before the latter broke off pursuit and returned to loot the camp. Exact numbers of wounded are not known, but it has been reported that execution fires burned for several days afterward.
The casualty rate was the highest percentage ever suffered by a United States Army unit and included St. Clair's second in command. Of the 52 officers engaged, 39 were killed and 7 wounded; around 88% of all officers became casualties. After 2 hours St. Clair ordered a retreat, which quickly turned into a rout. "It was, in fact, a flight," St. Clair described a few days later in a letter to the Secretary of War. The American casualty rate, among the soldiers, was 97.4 percent, including 632 of 920 killed (69%) and 264 wounded. Nearly all of the 200 camp followers were slaughtered, for a total of 832 Americans killed. Approximately one-quarter of the entire U.S. Army had been wiped out. Only 24 of the 920 officers and men engaged came out of it unscathed. Indian casualties were about 61, with at least 21 killed.
The number of U.S. soldiers killed during this engagement was more than three times the number the Sioux would kill 85 years later at Custer's last stand at the Battle of Little Big Horn. The next day the remnants of the force arrived at the nearest U.S. outpost, Fort Jefferson (then Fort Hamilton), and from there returned to Fort Washington.

NCAA Trophy Games-November 5 Edition

Texas and Texas Tech play for the Chancellor's Spurs:

Cincinnati and Pittsburgh play for the Paddlewheel Trophy:

Yes, that is a monstrosity.

Cal-Poly and UC-Davis play for the Golden Horseshoe (I think it was a kid's Vo-ag project):

Knox (IL) and Monmouth (IL) play for the Bronze Turkey:

Oh, and Alabama and LSU are playing this century's third or fourth Game of the Century.

Awesome Pass

Via Grantland:

That is pretty sweet.

Using Math To Find Speculative Bubbles

Science Blog, via nc links:
The key characteristic in determining a bubble is the volatility of an asset’s price, which, in the case of bubbles is very high. The authors estimate the volatility by applying state of the art estimators to real-time tick price data for a given stock. They then obtain the best possible extension of this data for large values using a technique called Reproducing Kernel Hilbert Spaces (RKHS), which is a widely used method for statistical learning.
“First, one uses tick price data to estimate the volatility of the asset in question for various levels of the asset’s price,” Protter explains. “Then, a special technique (RKHS with an optimization addition) is employed to extrapolate this estimated volatility function to large values for the asset’s price, where this information is not (and cannot be) available from tick data. Using this extrapolation, one can check the rate of increase of the volatility function as the asset price gets arbitrarily large. Whether or not there is a bubble depends on how fast this increase occurs (its asymptotic rate of increase).”
If it does not increase fast enough, there is no bubble within the model’s framework.
The authors test their methodology by applying the model to several stocks from the dot-com bubble of the nineties. They find fairly successful rates in their predictions, with higher accuracies in cases where market volatilities can be modeled more efficiently. This helps establish the strengths and weaknesses of the method.
I tend to think things are in a bubble when the price chart appears to go parabolic.  Also, when mainstream media outlets are full of reports about wonderful ways to make easy money with little or no risk of price decreases, you're in a bubble.  I usually call the bubble too soon, but I thought it was pretty easy to tell something was wrong, both in tech stocks and real estate.  Today, I think we are somewhere along the lifecycle of bubbles in commodities, farm land prices, shale oil and gas field investment and all things China.  Don't ask me when they'll pop, but I think they will sometime.  Just a random guess, I'll put commodities peak in late 2012, farm land in early to mid 2013, China in mid-to-late 2013 and shale energy in 2014.  Technically, they are all linked, and may come down from peak at about the same time, but I think the latter two will see more bargain-hunters swooping in to keep them going longer.

Don't Run Your Boat (or Old Car) On E-15

Des Moines Register:
A blend of 15 percent ethanol and gasoline caused so much damage to boat engines during a government-funded study that the testing of two of three motor types ended early. The ethanol made the engines run hotter, and a rod bearing broke, destroying a 200-horsepower engine that was being tested, lawmakers were told Wednesday. Testing of a 300-horsepower version had to be shut down early when its valves cracked or broke. A third, smaller engine finished the test but also had problems.
Mercury Marine, an engine manufacturer, did the research under contract with the U.S. Department of Energy in coordination with the National Renewable Energy Laboratory.
Most ethanol gasoline now contains 10 percent corn ethanol, but the Environmental Protection Agency is moving toward allowing the sale of 15 percent blends for model year 2001 and newer cars and trucks. The increase is aimed at expanding the market for ethanol to ensure that refiners can meet the government’s annual mandates for use of biofuels.
E15 won’t be allowed for sale in older vehicles or in boats and power equipment, but car and boat makers worry that consumers may use the new blend in engines for which it isn’t intended. (emphasis mine)
How on earth would they prevent owners of old vehicles from using E15?  This is a public relations nightmare, for EPA and the ethanol industry, just waiting to happen.  Hopefully, somebody with a little sense will put an end to this nonsense.

Glossary Of Behavioral Biases

At the Psy-Fi Blog, via Ritholtz.  Here's a sample:

  • Barnum Effect: we see insightful information in random rubbish: see Your Financial Horoscope.

  • Beauty Effect: we attribute qualities to people based on their appearance: see Trust is in the Eye of the Beholder.

  • Benford's Law: in finance numbers starting with 1 are more frequent than those starting 2 and so on: see Forensic Finance, Benford's Way.

  • Bystander Effect: people waiting for others to take the lead when someone else in is trouble: see A Lollapallooza Effect: Capitalism & The Death of Wang Yue.

  • Choice Overload: too much choice makes us indecisive: see Jam Today, Tyranny Tomorrow?

  • Clever Hans Effect: we give off unconscious cues that are unconsciously picked up on: see Market Confidence, Tricks and Placebos.

  • I would say this is one of the more valuable references out there.  Now I know where to go to look for my own blind spots.

    Update: Here is Interloper's take on the list:
    Conspiracy theories are not the only area where the human brain has been empirically proven to make us bad investors. The unchallenged king of sources for detailing them is the Psy-Fi blog. I can virtually guarantee that anyone who has made more than 20 trades in their lives can read Psy-Fi’s list of most common investor mistakes HERE, and recount making at least half of them. Don’t even bother emailing me if you think you haven’t – I’d sooner believe you’ve never had a craving for sugar or sex.  In short, no investors’ education is complete without reading this list or a similarly detailed explication of investor psychology.
    I couldn't agree more.

    Thursday, November 3, 2011

    Breeders' Cup

    Tomorrow and Saturday are the big days in horse racing.  The Breeders' Cup will be at Churchill Downs this year, with six races, with five for the ladies on Friday, and eight more races on Saturday, including the $5 million Breeders' Cup Classic to end the racing card.

    In 2009, the Breeders' Cup was at Santa Anita, where I first got to see the downhill turf track.  It is pretty unique, with the downhill slope, a slight right turn, then a left, where they cross the main dirt track before finishing on the regular turf course.  Here is an aerial photo (downhill course starting near Colorado Street) , along with a video of a race on that course from a couple of weeks ago. This year on Breeders' Cup Saturday, they are hosting a Juan Manual Marquez sparring match prior to his fight next week against Manny Pacquiao. Nothing like combining two more of the major sports from the Roaring Twenties.

    Having A Good Time

    Matthew Yglesias reports from Paris:
    I was a little bit taken aback to realize yesterday that a large share of French businesses were closed for All Saints Day. It put me in a mind of some some old Weberian saws about Protestant work ethic and prosperity. That, in turn, reminded me of the fact that for Eurocrisis purposes, one of the main “southern” European countries is Ireland, which if you look on a map is actually the second-most-northerly (after Finland) of Euro member states.
    The ECB turns out to have a new paper (PDF) on precisely this, which looks at Switzerland and compares Catholic jurisdictions to Protestant ones. They find more inequality in the Protestant areas and also harder working people: “Our empirical results suggest that ceteris paribus in a Reformed Protestant electorate support for increasing leisure time will be about 13 percentage points lower than in a Catholic electorate, and that support for government intervention will be about 11 percentage points lower.”
    This reminds me of the Simpsons, when Marge goes to Protestant Heaven and Homer and Bart go to Catholic Heaven.  Give me Catholic Heaven, please.  I couldn' find that footage, but here's a few clips from that show, in an interview with the Simpsons producer after the Vatican claimed Homer as a Catholic:

    This Land Is Your Land

    From the Dish:
    A reader writes:

    If you're going to talk about "America the Beautiful", it's probably time to bring up "This Land is Your Land", Woody Guthrie's 1940s folk-ode to the country. It's far superior to "The Star Spangled Banner", in my opinion. But the story behind Woody writing the song is not well known (it was a sarcastic response to Irving Berlin's (still) terrible "God Bless America"), nor have most people ever read the additional/alternate lyrics to the song. Read this 2004 New Yorker piece for a pretty good rundown on Woody, and also the Wikipedia page for the song.

    I didn't know that. On a related note, I am extremely tired of Major League Baseball playing "God Bless America" at the seventh inning stretch. That was fine for a few weeks in 2001, and they can do it every game in New York, but why should it be played in St. Louis during the World Series? Baseball is so tied to tradition, but this has no roots in the history of the game. I think maybe the majority of people who enjoy baseball are also the crazy conservatives who would like to see the United States return to the 1920's, coincidentally, when baseball was king (along with horse racing and boxing).

    Borrowing and Saving

    David Frum points out that Germany has benefited greatly by having the Eurozone, locking in the periphery as customers, who borrowed from the Germans:
    By folding all of Europe's currencies into the euro, Germany prevented its neighbors from reducing their costs — thus enhancing German exports and preserving German jobs.
    In the decade from 2000 to 2010, Germany's share of world trade rose by almost 9 percent (most of that being exports to other European countries).
    The same currency that made German exports more competitive also made the exports of other European countries less competitive. Their shares of world trade declined over that same decade — in France's case, by a spectacular 23 percent.
    But the less competitive countries did get something out of the euro: Lower interest rates. The currency arrangement that enabled Germany to sell more enabled Greece, Italy, Spain, and France to borrow more.
    Germany got the jobs. Greece and the others got the debts.
    It is much the same in China.  For a country to run a trade surplus, they have to provide credit to their customers.  If you keep providing the customers with credit, they eventually won't be able to pay it back.  If you cut off the credit, your economy will tank.  It's a trap, and both nations are in it.

    Will Europe Drag Down the World Economy?

    Macrobusiness ponders the effects of a looming European recession (h/t nc links):
    The good news is that the EU has a less pronounced cycle than the US. Owing to its stronger trade union base and more collaborative relations between capital and labour (like Germany’s kurtzabeit system), the EU inventory cycle is less severe. Thus downturns tend to be less precipitous and upturns less spectacular.
    But the cycle still exists and the EU economy imported $282 billion worth of stuff from China in 2010. It also had $170 billion in imports from the US and $65 billion from Japan (and remember Japan’s latest good trade data was largely driven by an unexpectedly high EU result). These are wide channels for economic contagion to spread into already weak or weakening other large economies. I expect all three to show negative impacts in their export sectors for the next few months at least. The danger is, if these trade drops are severe enough, that the US and China also start losing jobs, threatening their own inventory cycles.
    So, even without a renewed financial shock, the world is facing a very nasty period ahead in which external demand is subdued at best and probably falling.
    I thought the more collaborative relations between capital and labor part was interesting.  As for what will happen if Europe goes into a very steep recession, I'm still extremely bearish.  So far, my calls for a double dip have been wrong, but I'm afraid it may just be that the timing is off.

    Inflation Where It Hurts

    From the Big Picture:

    It's going to keep going up for a while.

    Wednesday, November 2, 2011

    Prairie Home Companion Sounds Artist Tom Keith Dies

    Washington Post:
    Tom Keith, 64, the virtuoso sound-effects man who for more than 30 years was a one-man band, zoo and noisemaker on Garrison Keillor’s popular radio program, “A Prairie Home Companion,” died Oct. 30 on the way to a hospital in his home town of St. Paul, Minn.
    The cause of death was cardiac arrest, said his twin sister, Terry Green.
    Mr. Keith was a constant creative presence on the Saturday variety show, which first aired in 1974 and is distributed by American Public Media on 600 radio stations.
    For the 4 million weekly listeners who tune in to hear about the news from Lake Wobegon, the travels of the philosophizing cowboys Dusty and Lefty and the misadventures of the hapless detective Guy Noir, Mr. Keith was not a technician but a comedian in his own right.
    Here he is at work:

    If you haven't seen the 2006 movie, A Prairie Home Companion, and you have some free time this winter, I recommend you watch it. Mr. Keith shows off his stuff, John C. Reilly and Woody Harrelson are hilarious as Lefty and Dusty and Lindsay Lohan is in the higher end of her range between The Parent Trap and the current continuous train wreck of her life.

    How The Rice Market Blew Up Due To Fear And Hoarding

    Planet Money looks at the global screwup in the rice market in 2007 and 2008:
    Nothing is more basic and simple than food. Yet it comes to us courtesy of a long, complicated supply chain that spans the globe.
    That chain delivers food cheaply — but it can break. Four years ago, it blew up in most spectacular fashion, affecting hundreds of millions of people who rely on rice for sustenance. That crash — the great rice crisis of 2008 — was a true disaster for some of the poorest people in Asia and West Africa.
    And the most frightening thing about it is that no one can guarantee that it won't happen again — because the decisions that created it were all, somehow, perfectly reasonable.
      This crisis started with a simple cost-saving decision in India.
    The Indian government decided to buy more rice for its food distribution programs, instead of wheat. (Wheat was really expensive at the time.)
    To make sure there was plenty of cheap rice on hand, Indian officials made it illegal for most Indian rice to leave the country. In October 2007, they blocked exports of all non-Basmati rice.
    The whole article is fascinating, but it seems surprising that people can be surprised that rational, personally beneficial decisions can ruin markets.  I'm pretty sure Keynes and numerous other folks have trod over this territory for years.  What is the paradox of thrift, but almost the exact same thing.  Sometimes, some player in the markets must do what seems irrational at the time, to break the cycle.  In the rice market, it was the U.S. allowing the Japanese to sell the rice the W.T.O. makes them buy off of the U.S. 

    I'm sure the conservatives will blame all this on government interference, but if there is one thing we know, it's that business does just fine screwing up the markets.  Also, this is my last public radio agriculture post of the day, I swear.

    Post-default Argentina

    Actually, most economists agree that Argentina's recovery since the crash has been nothing short of miraculous. New money is being flaunted in the gleaming waterside cafes that didn't even exist eight years ago. There's been a big boom in domestic production. But when it comes down to it, Argentina owes its recovery overwhelmingly to one thing: The humble soya bean, being sown in countless thousands of spring fields here. It's being exported on unprecedented levels -- largely to China.
    And the opportunity for profit here in the vast fertile flatlands of the Pampas -- where there are two harvests a year -- is big. So big, that cow-herding gauchos could soon be a thing of the past.
    Jorge Piran's family has been farming this land for more than a hundred years.
    Jorge Piran: Price has increased a lot, farmers changed from cattle. I think it's good for the country. It's a pity that part of our culture is missing.
    Two harvests a year?  I didn't know that.  Also, it says soya bean because some BBC folks were contributing to Marketplace today.

    A Pleasant Surprise

    We had a pretty productive day today, shelling 20 acres of corn before switching over and running almost 50 acres of beans after first-cutting hay and double crop beans after wheat.  The pleasant surprise was that the beans after hay made about 35 bushels per acre and the double crop made about 28.  Approximately 1400 bushels at $11.59 isn't anything to sneeze at.  Besides that, the second-crop beans outyielded our single-crop beans on the droughty gravel ground.  Not too shabby. 

    Monday, October 31, 2011

    Infrastructure Bill Coming Due

    Bloomberg, via Ritholtz:
    The disrepair of U.S. surface-transportation systems cost businesses and households about $130 billion last year, according to the American Society of Civil Engineers, based in Reston, Virginia. Of that, $32 billion is related to travel delays, it said in a report issued in July.
    The average U.S. bridge is 43 years old, while the average useful life is generally about 50 years, according to the highway agency. The agency said in 2006 that it would cost $140 billion to immediately repair every deficient bridge in the U.S. That’s more than three times what the U.S. government receives in taxes annually to pay for road, mass transit and bridge projects.
    The story covers the closing of the Sherman Minton Bridge, which carries Interstate 65 across the Ohio River, after inspectors found large cracks in the structural steel.  Over thirty years of investing less than required to replace aging infrastructure is catching up with us fast.  And now we don' have the extra money to spend.  This will cost us badly.

    America's Largest Private Corporation

    Fortune profiles Cargill:
    Cargill's roots lie in the ancient, risky business of buying, storing, and selling grain. William Wallace Cargill, the second son of a Scottish sea captain, started with a single warehouse in Conover, Iowa, in 1865. Conover is a ghost town now, but Cargill still deals heavily in grain. Wherever it grows and wherever it goes.
    Cargill ships other commodities too: soybeans and sugar from Brazil; palm oil from Indonesia; cotton from Asia, Africa, Australia, and the Deep South; beef from Argentina, Australia, and the Great Plains; and salt from all over North America, Australia, and Venezuela. The company owns and operates nearly 1,000 river barges and charters 350 oceangoing vessels that call on some 6,000 ports globally, ranking it among the world's biggest bulk shippers of commodities. "In one sense, you can think of Cargill as just a big transportation company," says Wally Falcon, deputy director at the Center on Food Security and the Environment at Stanford University. "Their game is: extremely efficient, high volumes, low margins, and just being smarter and quicker than anybody else."
    Sometimes the same ship that picks up a load of soybeans at Cargill's deepwater Amazon port in Santarem, Brazil, after unloading in Shanghai, will carry coal from Australia to Japan before rinsing out its holds and returning to Brazil for more beans. In fact, Cargill's ocean-transport business moves more coal and iron ore for third parties than it does foodstuffs, oils, and animal feeds for itself, by a factor of two. "From places of surplus," to quote the Cargill mantra, "to places of need."

    Harvest Continues

    We're coming along on the corn.  We've got about 150 acres left.  We got into a field which was yielding very well today, so that felt pretty good.  I don't think many of the rest will do as well.