I need my ring mold, squeeze bottles, and Larousse...

In America, first you cook the vegetables, then you throw out the water, then you eat the vegetables.
In France, first you cook the vegetables, then you throw out the vegetables, then you eat the water.

I was told there would be flying cars. Now they say I can’t have a car at all. This is not the future, but the numbers keep going up anyway.

"There's nothing that can stop us because that's God's intention."

"We are not a collection of red states and blue states. We are the United States of America."

...in a similar vein, I had a great conversation the other day about the three major world religions: Christianity, Judaism and Islam.

I hear a lot about the flyover states. The Americans in London tend to be of that school of thought. The more extreme ones talk about breaking the country in two and going separate ways, showing a respectable disregard for the geometry of the country and the globe.

One of my favorites involves pro-solar environmentalists talking about covering the four corners area in solar panels (enough to power the entire US) because "nobody lives there." Having lived most of my life there, I usually find that a little odd.

So, I figured I'd do a little breakdown to see just how insignificant the less populous wasteland of the interior US is. The numbers are from Wikipedia and reflect the 2007 population of the continental US. Spreadsheet data is here.

The real states are defined on a somewhat ad-hoc basis. It's impossible to do anything else since the idea itself is so mind numbingly stupid. That said, most proponents of the flyover state view of the world don't tend to think there's anything in California other than LA and San Francisco. Washington and Oregon don't typically make their radar... and South Carolina, Georgia and Florida don't typically figure highly on the list of states to retain within the revised union.

Wikipedia then gives the population of the continental US as: 299,654,291.

The real states come to 138,596,729 and the flyover states are a paltry 161,057,562. These means that only a mere 54% of the population of the US lives in the flyover states. Though, I would suspect the percent of people that ought to be flown over is somewhere in the high 80s to low 90s.

I've attached a helpful map with the stupid states colored in a traditional and helpful red, indicative of the political views of everyone within that state. Their more advanced, ocean faring cousins, are colored in a traditional soothing blue indicative of their more civilized political tradition.

...and senators. This is fun.

Hi,

I’m writing to thank you for your speech to the House on the 23rd. While I live in your district, I’m currently over in London working with the English banking industry. I’ve been appalled by the recent news from the states.

My money is going toward countless doomed bailouts. Freddie and Fanny I can understand. AIG I cannot. Still more galling is the idea of taxpayer money being used to bail out Goldman, Morgan and rustle the ashes of Lehman.
If I, as an individual investor, am unwilling to take on the toxic equity of Morgan and Goldman, what could possibly motivate my country to do so? Propping up these failing institutions will only ensure greater inefficiencies develop in the future while costing every American thousands of dollars.

In an ideal world, I would hope to see Glass-Steagall reinstated in some form. These problems were brewing long before the subprime crisis and stem from systematic deregulation combined with the profit driven short sightedness of publicly held companies. Sydney Weinberg’s Goldman would not be in this situation, and would never have put the country here.

In short, I don’t want to bail out doomed investment banks. I don’t want equity in those banks. I want them to thrive on their own merits, or fail if they have none. Please vote against these ridiculous bailout measures.

Thanks,
James Lackey

My model just died a flaming horrible death. This has happened before. My first love, BEA was devoured. Then CFC ate it. I recently got something about the shareholder suit for that one. It's funny, I don't think I ever lost money on CFC, even though I was long 10 or 15 times on the way down. Hurrah for volatility!

Yesterday my bucket was:
symbols=['C','CS','DB','GS','LEH','MER','RY','UBS','WB', 'HBC']

Happily, I'd been short a bunch of WB from Friday. Suffice to say my bills have all been paid today, and I now have a budget surplus, along with a cushion over that day trading limit for once.

Of course, looking at that list, you may notice a slight problem: namely that MER and LEH are for all intensive purposes gone. So, once again, it's time for a new model.

I'd like to avoid the bucket approach, since it requires a bunch of cross validation to pick the bucket, and then the bucket usually dies before too long. The banking one up there I picked something like 2 months ago. Not the most long lived model...

So, my new plan is to build games on ETFs. We'll see how this goes. First I've got to get rid of the GS I was short on today (whoops).

It's (mostly) good to be short! All my variables are growing inside a loop... too much Python lately.

My current favorites, in order of favorititude:

http://www.redfin.com/WA/Seattle/100-1st-Ave-S-98104/unit-18/home/28197
http://www.redfin.com/WA/Seattle/909-5th-Ave-98104/unit-1001/home/12542461
http://www.redfin.com/WA/Seattle/611-Post-Ave-98104/unit-7/home/21902
http://www.redfin.com/WA/Seattle/1609-Summit-Ave-98122/unit-401/home/12510396

Anyone know anything about redfin, or have feelings on the matter? 30 year fixed rate mortgages are the way to go, right? Yay for fantasies...

I don't understand options. I'm looking at the for Lehman Brothers right now. The underlying stock was trading at 16.17 at close on Friday.

The option chain for puts expiring September 8 looks like:

Option Symbol

My first problem with this is the symbols. They are supposedly formed something like: optionSymbol = "+" + stockSymbol + monthCode + strikePriceCode

So, let's decipher "+LYHUM." The stock symbol is "LYH." The month code is "U." The strikeprice code is "M."

Of course, the actual symbol for Lehman Brother on the NYSE is "LEH." Part of the problem is that NASDAQ ticker symbols are all four characters, while options symbols have three for the stock, so each NASDAQ symbol must lose a character. Of course, this doesn't explain why the venerable Lehman Brothers didn't get to have "LEH."

"U" means this is a put expiring in September. While this doesn't make a lot of sense, at least the convention is consistent across options symbols.

"M" is the code for the strike price. It happens to mean 19. This is based on what the price of the underlying stock was when the option was created. Of course, there are only 26 letters, and for very volatile stocks you run out of letters. This is why some option have multiple stock symbols mapping back to the same underlying stock symbol. For instance, options on the terrifyingly volatile Ambac financial group (NYSE:ABK) start with "GIY," "YZL" or "ABK."

For more on this awful naming convention, which is apparently going away next year, wikipedia may be enlightening:

http://en.wikipedia.org/wiki/Option_symbol
http://en.wikipedia.org/wiki/Option_naming_convention

Pricing

The bid and ask prices shown above are for 1 share. However, an option contract is actually for 100 shares. So, while I can't buy anything for $3.8, I can buy +LYHUM for $380 (plus miscellenaous fees). Owning one contract of +LYHUM entitles me to sell 100 shares of Lehman for $19 a share ($19*100=$1900 in total).

Because this is an American option, I can exercise it (make that sale described above) at any time before the expiration date. If it were a European option, I could only sell it on the expiration date. If it were an Asian option, I could only sell on the expiration date, subject to something about the average price over the life of the option.

Say I buy +LYHUM for the current asking price. This costs me $380. The current stock price is below the stike price, so I can exercise the option. That is, I buy 100 shares of Lehman Brothers for $16.17 each: $16.17*100=$1617. I then sell 100 shares of Lehman to someone for $19 each: $19*100=$1900. So, I've made $1900-$1617=$283 from exercising the option. Of course, the option cost me $380. So, I've lost: $380-$283=$97 from this little endevour.

So, now my question is: why on earth would I want to buy this option? That's more or less answered in the little graph I made, shown below:

Of course, this ignores all the complexities about the time value of money, but I'm still struggling with basics here. Basically, by buying a put for $380, you are expressing with certainty that the price of Lehman will dip below $15 before the thing expires on September 8th.

Going Forward

It looks like I can grab options data from Yahoo. Of course, historical data is unavailable, but the current day might be useful anyway.

Ideally, I'd like to model the option directly, as if were just an extremely volatile stock. A couple advantages to this:

(1) It's fairly odd, and not the prefered way of doing things.
(2) I wouldn't have to change anything I already have.

But, to do that I would need historic open, high, low, close data. It looks like I can buy that for a couple hundred dollars, but I would really need a server for that to be a viable approach.

So, I suppose I take the other approach: model the underlying stock, then pick options which are well priced according to my odd notion of volatility. This is going to be a pain though, because it involves a major rewrite. I also don't like it because I'm going to end up with something pretty close to Black-Scholes, which everyone is already using to value their options.

I tried to do something clever. First I was thinking I'd attach the motherboards to plywood, but Collin's experience said that was not so thrilling an idea. I tried to skewer them like little kebabs over my fan, but the contraption I built from bar stock and threaded rod would have fallen on the fan and been devoured.

Then I tried the Gulliver's travels approach: a thousand pieces of string holding the motherboards to the surface of the fan... but the motherboards started buckling under their load... so I went out and bought some cases... cheating, I know.

My power supplies glow blue Star Wars.

Biologists note that competition for food results in a stable evolutionary equilibrium characterized by multiple strategies. When competitors meet at a food site, they can either fight over the prize and risk injury – the "hawk" strategy – or withdraw and lose the food – the "dove" strategy. If every individual fights, a mutant who withdraws would eventually have a greater probability of procreating than the average fighter because of the risk of injury and the fact that only one fighter can win. (The dove occasionally finds uncontested food.) On the other hand, if every individual followed the dove strategy, a single fighter would gain a lot of food. The evolutionary equilibrium can be shown to involve either (a) part of the population always follows the hawk strategy and the complementary part follows the dove strategy or (b) every individual follows a randomized strategy, sometimes behaving as a hawk and sometimes as a dove. We can definitely rule out a world in which everyone follows the same fixed strategy.

The analogy to market efficiency is immediate: investors compete for the most "undervalued" asset. The hawk strategy is conducting security analysis. The dove strategy is passive investing: expending no effort on information analysis. Clearly, if everyone analyses securities, the benefits will be less than the costs. If everyone is passive, the benefits of analysis will be tremendous. The equilibrium is that some analyze, some don’t. Does it sound familiar? Note that the final equilibrium is characterized by a situation in which it is not worthwhile for the marginal passive investor to begin analyzing nor for the marginal active investor to cease conducting security analysis.

Something very odd has been happening with requests. BLF has been getting a ton recently. It appears to be crippling the server. When I request nonplatonic from the UK, it often times out. I have no idea what to do about this.

...this one has a fireplace.