## Saturday, March 16, 2013

### Engaged...................................

Winning is important to me, but what brings me real joy is the experience of being fully engaged in whatever I'm doing."
-Phil Jackson

### Fifty years ago..........................

Tommy Roe...................................Everybody

### Victory.............................

"There is a kind of victory in good work, no matter how humble."
-Jack Kemp

### Every chance I get......................

Life Tips 101:  "Decide to see more sun-rises, sun-sets, and the moon."
-Nicholas Bate

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all photos courtesy of mme scherzo

### Opening paragraphs.............................

Aristotle contemplating the bust of Homer thought often of Socrates while Rembrandt dressed him with paint in a white Renaissance surplice and medieval black robe and encased him in shadows.   "Crito, I owe a cock to Asclepius," Plato has Socrates saying after he had swallowed his cup of poison and felt the numbing effects steal up through his groin into his torso and approach his heart.  "Will you remember to pay the debt?"
-Joseph Heller,  Picture This

### Does anybody believe this trend will hold...?

"The Fed has been clear that their 2% inflation target is not a ceiling, and that they will tolerate some short term increases in inflation as long as the unemployment rate remains elevated and inflation expectations remain 'well anchored'."

Surely these nice people, who didn't believe there was a problem with the housing/mortgage markets in early 2006, can be trusted to keep inflation well-tamed.  Can't they?

Full story and enlargeable chart is here

### Repeat after me.............................

Life is good...............................................

thanks

## Friday, March 15, 2013

### Carry on......................

Matchbox 20............................You Won't Be Mine

### Brings........................

"Money wealth rarely brings true freedom.  But thinking wealth, does."
-Nicholas Bate, as excerpted from

### School daze..........................

I tell my kids on a regular basis "that ALL parents wound their children."  Whether by omission or commission, it just can't be helped.  I figure it gives the kids something to sort out for the rest of their lives.  Parents aren't alone.  Teachers do a fair bit of wounding too.  The quote below is Jeff's story, not mine, but as my kids can attest, as they now know the stories by heart, I've got a few such scars myself.  If I were to wax philosophical, I might suggest that life is the process of wounding and healing, but maybe I'll save that for some other time.

"I think it was back around 4th grade - so I was 10 years old - we were given a math quiz of 10 questions. When the teacher handed back the results of the quiz - I did pretty well if I remember - she said that on one particular question, only 4 out of 30 kids got it right. She asked those who got it right to stand up. I was one of them. She turned to me and asked "So how did you arrive at the proper answer?" I used no specific math formula - just an instinctual set of logic and inner permutations. As I was halfway thru my explanation, the teacher let out a huff, waved me off, and commanded me to sit down. The other 3 correct students got their chance and explained their common formula. I've never forgotten that. I was right. And I was wronged....."

-quote lifted from here

### Remember....................

Remember the small stuff.  As it is big stuff to somebody else.
-Nicholas Bate, as excerpted from here

### John Cox......................

is a "painter, cartoonist, and illustrator for hire."  His blog is here. I'm liking his work.  Enjoy a few samples:

### Fifty years ago...................

Bob Dylan..........................Blowing In The Wind

### Culture...........................

with friezes of nymphs.
We have coffee mugs with ads
for farm equipment!

-Ted Kooser or Jim Harrison, as excerpted from
Braided Creek:  A Conversation in Poetry

### Dealings...........................

"We must have no carelessness in our dealings with public property or the expenditure of public money.  Such a condition is characteristic of undeveloped people, or a decadent generation."
-Calvin Coolidge

### Opening paragraphs.....................

Christmas came once a month in the Open-Unsolved Unit.  That was when the lieutenant made her way around the squad room like Santa Claus, parceling out the assignments like presents to the squad's six detective teams.  The cold hits were the lifeblood of the unit.  The teams didn't wait for callouts and fresh kills in Open-Unsolved.  They waited for cold hits.
Michael Connelly, The Drop

### Picture perfect......................

Twisted Sifter offers 50 pictures taken from the perfect place, at the perfect time, and with the perfect angle. A few samples:

## Thursday, March 14, 2013

### Every so often, you just need a little fix of Spirit...

Spirit.......................................Nature's Way

### Spam and binary options.......................

If it wasn't for spam, I'd get hardly any comments at all.  As with many things in life, spam is simultaneously interesting and frustrating.  The interesting part is trying to decipher messages prepared by either computers or by people possessing only a passing familiarity with the English language.  The frustrating part is, well, it's spam.   By sheer volume, my most frequent spammer advertises a web site about binary options.  Clicking on that link, or going to that web site, is not on my agenda.  However, my curiosity has been stoked.   What exactly is a binary option?   The Oracle Google was consulted.  Wiki here.  Fun cut-and-paste excerpt, that makes perfect sense to me, is here:

A binary call option is, at long expirations, similar to a tight call spread using two vanilla options. One can model the value of a binary cash-or-nothing option, C, at strike K, as an infinitessimally tight spread, where $C_v$ is a vanilla European call:[page needed],
$C = \lim_{\epsilon \to 0} \frac{C_v(K-\epsilon) - C_v(K)}{\epsilon}$
Thus, the value of a binary call is the negative of the derivative of the price of a vanilla call with respect to strike price:
$C = -\frac{dC_v}{dK}$
When one takes volatility skew into account, $\sigma$ is a function of $K$:
$C = -\frac{dC_v(K,\sigma(K))}{dK} = -\frac{\partial C_v}{\partial K} - \frac{\partial C_v}{\partial \sigma} \frac{\partial \sigma}{\partial K}$
The first term is equal to the premium of the binary option ignoring skew:
$-\frac{\partial C_v}{\partial K} = -\frac{\partial (S\Phi(d_1) - Ke^{-rT}\Phi(d_2))}{\partial K} = e^{-rT}\Phi(d_2) = C_{noskew}$
$\frac{\partial C_v}{\partial \sigma}$ is the Vega of the vanilla call; $\frac{\partial \sigma}{\partial K}$ is sometimes called the "skew slope" or just "skew". Skew is typically negative, so the value of a binary call is higher when taking skew into account.
$C = C_{noskew} - Vega_v * Skew$

### Local art.......................

Dave Ghiloni's cat has that look in his eye..........

### I am not a trained economist......................

........I'm not even untrained.   But, unless someone cares to point out my mistake - in which case I will apologize, it is thinking like this that gives professors a bad name.   Post being commented on is here.  Lead off is here:

### Why not worry about the deficit right now?

Because if I did my math right, Federal Government interest payments are at a long-term low relative to GDP.

Chart is here:

Professor Green says, "Note that interest rates would have to double for us to be in the situation we were in the late 1980s, the end of the (ahem) Reagan Administration.  Do we ultimately need a steady state in which debt to GDP doesn't rise?  Absolutely.  Just not tomorrow."

Just two of many possible comments:

First, with interest rates currently at historic, and probably unsustainable, lows it is fairly easy for this professional borrower to imagine rates more than doubling in the not-so-distant future.  It wasn't all that long ago (1985) that 10% interest rates looked like a good deal.   When rates do move, they tend to move in a hurry.  Can you imagine the impact of the government's interest costs when rates get to 8%?

Second, doubling down on debt just because the interest payments are artificially low ignores the fact that sooner or later some, or all, of the principal needs to be repaid.   Focusing on low debt service (interest only) payments tend to obscure the lurking danger of every increasing debt.

Debts, even governmental debts,  are affordable until, all of a sudden, they aren't.  Just saying.

### Speaking of debt.....................

"Remind yourself you need a damn good reason to get into debt.  And nice shoes isn't it."
-Nicholas Bate, excerpted from here

### This can't be good news................

“For a typical North American, their fat tissue is their biggest organ,”

Never heard it put that way before.  Full story, from whence the quote came, is told here.

thanks craig

### Fifty years ago.....................

Frank Sinatra..........................Call Me Irresponsible

### Opening paragraphs........................

Fort Bragg in August is so hellish, you can smell the sulfur in the air.  Actually, though, it's not the sulfur, it's 98 percent humidity, mixed with North Carolina dust, mixed with the raunchy bouquet of about thirty thousand men and women who spend half their lives scurrying about in the woods.  Without showers.
Brian Haig,  Secret Sanction

### A primer on how to ruin an economy...........

Victor Davis Hanson is feeling a bit cranky - here.  Opening salvo here:

It is not easy to ruin the American economy; doing nothing
usually means it repairs itself and soon is healthier than before a recession.

But don’t despair: there are plenty of ways to slow down even an inherently strong economy. History offers plenty of examples. But as more contemporary models, take your pick of successfully ruined economies — the Venezuelan, the Cuban, the North Korean, the Greek, the Italian, the Portuguese, or pretty much any from Mediterranean Africa to the Cape of Good Hope. There are certain commonalities about why and how they fail. Let’s review some of them.

### Me neither..................

HENRY: I don’t like explaining my thinking. I like answering multiple choice and that’s all. Mrs. Smith [his third grade teacher] makes me explain my thinking all the time.

Excepted from a wonderful piece of writing, as Mom interviews 9 year old Henry.  Whole story is here, courtesy of the always interesting McSweeny's blog.

## Wednesday, March 13, 2013

### Fifty years ago...............................

Music...............................

The Beatles released their Please Please Me album in March of 1963.  Twist and Shout, written by Phil Medley and Bert Russell, was included as one of the fourteen songs.  More info on that album is here.

### Fifty years ago.....................

Comic books..................................