New Radiohead In Rainbows physical CD ad

Not yet released (I don't think) ad for the physical copy of In Rainbows.

read more | digg story

Cafepress Gift Certificates: Easy and Original

CafePress.com just started their new gift certificate program and it's a great way to give a CafePress.com gift without having to pick one of the millions of products available. From what I understand, you purchase the gift certificate and then it's emailed directly to the recipient so you don't have to wait for shipping or anything like that. If you're looking for the perfect last second gift, this is it.

Top 10 things NOT to do as a tourist in New York City

As someone who lives and works in New York City, I firmly believe that a set of rules, or guidelines, should be handed out on all arriving flights into Newark, JFK, and LaGuardia. I understand that people visiting don't know any better, but tourists annoy the hell out of us and if we could supply some simple tips, maybe our lives, and their visits can be more successful.

Below is my contribution to what this NYC Tourist guideline pamphlet might look like:

1) Don't stop in the middle of the sidewalk. Unreal as it may sound, even though you're on vacation, everyone in NY doesn't stop working for the week. We have places to go and we don't like wasting any time getting there. This is really the most simple rule. Be aware of the people around you and make sure not to get in our freaking way.

2) Don't stop in the middle of the sidewalk. (yes, it's important enough to mention twice). Yes, the buildings are big....stare from somewhere else.

3) Don't casually stroll down the middle of the sidewalk. If you want to move slowly, move to the side, or be prepared for a very rude "excuse me" and people pushing you out of the way.

4) Don't walk with your entire family side by side. I know you all want to walk together, but generally, walking together breaks rules 1-3 and pisses off everyone trying to use the same sidewalk as you.

5) Stay to the right on the escalator if you plan on just standing there. The left side is for walking up and down the escalator. If you plan on standing on the left, be prepared for a very rude "excuse me" or the homeless man on 53th and 5th to yell at you while he tells sexist jokes.

6) Don't stop at the top of the escalator. Amazingly, even when you get off, the escalator continues to move and other people need to get off.

7) Don't stop at the top of the subway stairs. I know you're lost, but I'm not, so move the hell out of my way.

8) Instead of just yelling two street names at me, try asking me politely for directions.

9) Don't go out to eat in Times Square. If you do, be prepared for an expensive shitty meal. Eating at the Red Lobster in Times Square does not equal fine dining in NYC...even if you do have lobster.

10) Don't think that New Yorkers are rude because of these rules. Chances are, you don't live in a place where tourists come which means you have NO idea how annoying it really is. Maybe next week I'll come to your city and drive 2 miles an hour in front of you during your entire commute to work. Then maybe you'll know what it's like having your entire family block the sidewalk on my way to work.

11) Make sure to come back real soon! We love having you here!

New PSA - A Must See

New Poll - Which fulfillment company do you think is best?

Check out the awesome new poll on the top left hand side of the blog. Vote for your favorite and if you have comments as to why you picked who you did, leave a comment here and let us know what you think. What are the pros and cons of one vs the other? Thanks!

Bill O'Reilly returns to the Late Show

Great clip from Bill O'Reilly's return to the Late Show with David Letterman:

Dear Red States

I found this here: http://cronus.com/redstates/ and I think it's awesome...so I'm sharing it here on my blog.

Dear Red States

We're ticked off at the way you've treated California, and we've decided we're leaving. We intend to form our own country, and we're taking the other Blue States with us.

In case you aren't aware, that includes Hawaii, Oregon, Washington, Minnesota, Wisconsin, Michigan, Illinois and the entire Northeast. We believe this split will be beneficial to the nation, and especially to the people of the new country of New California.

To sum up briefly: You get Texas, Oklahoma and all the slave states. We get stem cell research and the best beaches. We get Elliot Spitzer. You get Ken Lay. We get the Statue of Liberty. You get OpryLand. We get Intel and Microsoft. You get WorldCom. We get Harvard. You get Ole' Miss. We get 85 percent of America’s venture capital and entrepreneurs. You get Alabama. We get two-thirds of the tax revenue; you get to make the red states pay their fair share.

Since our aggregate divorce rate is 22 percent lower than the Christian Coalition's, we get a bunch of happy families. You get a bunch of single moms. Please be aware that Nuevo California will be pro-choice and anti-war, and we're going to want all our citizens back from Iraq at once. If you need people to fight, ask your evangelicals. They have kids they're apparently willing to send to their deaths for no purpose, and they don't care if you don't show pictures of their children's caskets coming home.

With the Blue States in hand, we will have firm control of 80 percent of the country's fresh water, more than 90 percent of the pineapple and lettuce, 92 percent of the nation's fresh fruit, 95 percent of America's quality wines (you can serve French wines at state dinners)

90 percent of all cheese, 90 percent of the high tech industry, most of the U.S. low-sulfur coal, all living redwoods, sequoias and condors, all the Ivy and Seven Sister schools, plus Harvard, Yale, Stanford, Cal Tech and MIT.

With the Red States, on the other hand, you will have to cope with 88 percent of all obese Americans (and their projected health care costs), 92 percent of all U.S. mosquitoes, nearly 100 percent of the tornadoes, 90 percent of the hurricanes, 99 percent of all Southern Baptists, virtually 100 percent of all televangelists, Rush Limbaugh, Bob Jones University, Clemson and the University of Georgia. We get Hollywood and Yosemite, thank you.

Additionally, 38 percent of those in the Red states believe Jonah was actually swallowed by a whale, 62 percent believe life is sacred unless we're discussing the death penalty or gun laws, 44 percent say that evolution is only a theory, 53 percent that Saddam was involved in 9/11 and 61 percent of you crazy bastards believe you are people with higher morals than we lefties.

By the way, we have all the good pot, too. You can have that dirt weed they grow in Mexico.

— Anonymous in California

Great Dennis Kucinich video

It's great to see a candidate out there who is not afraid to speak his mind:

Security Guard: 'God Guided Me And Protected Me'

I don't know what's more interesting. The article? or the comments about the article on Digg.

See for yourself and let me know what you think:

Security Guard: 'God Guided Me And Protected Me'

Digg link: http://digg.com/world_news/security_guard_god_guided_me_and_protected_me/all

There's a lot of people on Digg screaming, yay 2nd amendment! this is why more people need to be armed! This user pretty much summed it up for me:

"I love how the fact that the gunman can so easily get his hands on an automatic weapon and a thousand rounds of ammunition is a rallying cry for more people to carry guns.

Does anyone else see the irony there?"

3 Days left for Standard* shipping

Better place your orders now if you want to receive your t shirts by Christmas!

Enjoy this stuff? Forward the email to a friend!

*For delivery by Dec. 24, please order by 11:59 p.m. EST on:

Shipping Method
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Order deadlines apply for all items except books which have a longer processing time. Delivery dates are not guaranteed and may include extra transit time in case of unforeseen delays. Late deliveries are always a possibility, but CafePress will do its best to ensure late deliveries are as infrequent as possible.

For Mets fans, and all sports fans, it's natural to root for

"I remember back in the early and mid '80s when the Mets were getting a bit "white" under Frank Cashen's rule. Personally, I did not like that, but compared to what Omar Minaya is doing today, that was nothing! Minaya is simply looking for the best Latin players available, not the best players available."-- A recent blog posting by a Mets fanClick "read more" below to see the full article.

read more | digg story

White House Reveals Bush Lied: Was Told In August

On Tuesday, President Bush said he was never forewarned by the intelligence community that Iran had suspended its nuclear weapons program in 2003.Now the White House is revealing that wasn’t true. The White House statement released by Dana Perino Wednesday night also states McConnell told Bush...OK, they are not even covering for him.

read more | digg story

Report Exposes the Billions Wasted by Homeland Security

The Department of Homeland Security is an embarrassment that would be comical if only our national security were not at stake. The agency and its leadership must be held accountable for its failures and pushed to do better. This is a shocking and disturbing report. The American people deserve far better from their government. Much better.

read more | digg story

Enjoy some Say Anything

Enjoy this Say Anything video while you wait for fun new posts :)

Blast from the Past

I was just re-reading this old post: http://burntees.blogspot.com/2006/02/our-first-hate-mail.html which I had totally forgotten about. It ended up being the only piece of hate mail that we ever received for our Jesus Saves design (http://www.cafepress.com/burntees/1039318) which is too bad :(. We just put up this new Jesus Shaves design (http://www.cafepress.com/burntees/4173852)...if we're lucky we'll get some new hate mail and I'll be able to write another funny blog about it :).

I'm on Strike!

Crazy Carl - Nastiest IM Ever?

This conversation just happened between me and Crazy Carl (these are not our real screen names):

Crazy Carl: i seriously have no idea what to get anyone for christmas yet
Me: lol
Me: you can get me anything you'd like
Crazy Carl: whats your address?
Crazy Carl: because i'm going to take a shit in a box and mail it to you
Me: xxx East xxth Street, apt xx, NY NY 10016
Me: make sure it's a nice box
Crazy Carl: a massive wordclass dump after going to Arthur's or Jose Tejas
Crazy Carl: hahahahahahahahaha
Crazy Carl: dude, didn't you know it was a trick?
Crazy Carl: why did you give me your address?
Me: cause i want presents
Crazy Carl: even if its a massive dump taken by me?
Me: i'll send back something worse
Crazy Carl: i can't think of anything worse
Crazy Carl: except maybe a dogs head
Me: then that's what you'll get
Me: and it'll be covered in my poo
Crazy Carl: i'm laughing so hard right now
Crazy Carl: i wonder what the shipping on something like that is
Crazy Carl: are you going to send it fedex so you can track it?
Mathew Jason: lol sure
Crazy Carl: i'm think i'm going to start taking pictures of my massive dumps in the toilet bowl with my camera phone, and sending them to people
Crazy Carl: i dont know if you have a camera phone, but i guess i'll find out soon enough
Me: i did that once...sent it to jane and chris
Me: it was so amazing,i had to share it with someone
Crazy Carl: awesome.
Crazy Carl: i wanted to send one to chris one day, but i didn't have his number in my phone
Crazy Carl: it was what i call a Bode Miller Shit
Crazy Carl: it was 2 identical huge logs right next to each other parallel.
Crazy Carl: they looked like a set of skis
Me: nasty
Me: should i post this convo on the blog? lol
Crazy Carl: if you'd like... but i think it reflects poorly on both of us
Crazy Carl: hahahahaha
Me: lol, i know, but it's funny
Crazy Carl: go ahead. everyone knows i have issues anyway
Crazy Carl: however, won't jane or your brother be shocked that you are threatening to mail me a dogs head in a box?
Me: lol

Universal's CEO Once Called iPod Users Thieves. Now He's Giving Songs Away.

But digital strategies are important these days, and Morris has become entangled in them whether he wants to be or not. Over the past several years, he has been one of the most staunch and vocal proponents of aggressive copyright enforcement, at one point publicly blasting MP3 players as merely "repositories for stolen music."

read more | digg story

New Political Section at BurnTees.com

It's hard to believe, but election time is upon us and that means that it's time to support your favorite candidates. In order to help you do that, BurnTees created a Politics / Election 2008 section for all your political needs.

The new Politics / Election 2008 section contains t shirts, buttons, magnets and all other types of gear and apparel to help you support the candidate of your choice. Whether you're looking for a Hillary Clinton shirt, a Barack Obama button, a John Edwards magnet or even if you're just looking for general Democratic or Republican apparel, BurnTees.com has it all.

Friends & Family save $15 off $50

Friends & Family of BurnTees Get $15 off $50*

Start shopping at BurnTees, http://www.cafepress.com/burntees

* Excludes Gift Certificates, bulk orders, taxes and shipping fees. Cannot be combined with any other offers, discounts or coupons. Valid through November 27, 2007 at 11:59 p.m. (PST).

Free shipping for the perfect gift

* Free Economy or Standard shipping for purchases of $75 or more, excluding shipping charges and applicable sales tax. Delivery address must be within the United States. All orders will be Economy shipping unless, the order is not eligible for Economy shipping (e.g., order exceeds Economy weight restrictions). Coupon code must be entered at check out. Promotion starts on November 17, 2007, at 12:00 a.m. (PST) and ends on November 21, 2007, at 11:59 p.m. (PST). See Shipping Information for additional shipping options. Cannot be combined with any other offers, discounts or coupons.

Church rejects interfaith service on its property

from: www.statesman.com

Hyde Park Baptist says it didn't realize Muslims were leading annual Thanksgiving event.

Austin Area Interreligious Ministries, the city's largest interfaith organization, announced Thursday that its annual Thanksgiving celebration Sunday had to be moved because Hyde Park Baptist Church objected to non-Christians worshipping on its property.

The group learned Wednesday that the rental space at the church-owned Quarries property in North Austin was no longer available because Hyde Park leaders had discovered that non-Christians, Muslims in particular, would be practicing their faith there. The event, now in its 23rd year, invites Jews, Muslims, Christians, Hindus, Bahais and others to worship together.

Organizers had booked the gymnasium at the Quarries in July and made the interfaith aspect clear to Quarries staff at that time, said Simone Talma Flowers, Interreligious Ministries' interim director.

Several Muslim groups were acting as this year's hosts for the event. Kent Jennings, associate pastor of administration at Hyde Park, released a statement Thursday that said church leaders received a postcard about the service Monday and only then realized that it "was not a Christian oriented event."

The postcard also "promised space for Muslim Maghrib prayer and revealed that the event was co-hosted by the Central Texas Muslimaat, the Forum of Muslims for Unity, and the Institute of Interfaith Dialog," according to Hyde Park's statement.

"Although individuals from all faiths are welcome to worship with us at Hyde Park Baptist Church, the church cannot provide space for the practice of these non-Christian religions on church property," the statement said. "Hyde Park Baptist Church hopes that the AAIM and the community of faith will understand and be tolerant of our church's beliefs that have resulted in this decision."

Central Texas Muslimaat and Forum of Muslims for Unity are local Muslim nonprofit groups that promote charitable works and education. The Institute of Interfaith Dialog holds regular interfaith gatherings that aim to teach non-Muslims about Islam.

With hundreds of people expected to attend and only a few days to find another site, Muslim organizer Shams Siddiqi said they couldn't find another facility. That's when leaders at Congregation Beth Israel, Austin's largest synagogue, offered to host the celebration.

"Symbolically, that's a very good thing," Siddiqi said of the joint Jewish-Muslim endeavor.

Of Hyde Park's decision, he said it was "unfortunate that people still feel this way in this day and age."

Some Christians object to praying with people of other faith backgrounds or allowing those people to worship in their sanctuaries.

Hyde Park Baptist, an evangelical megachurch at West 39th Street and Speedway, is not a member of Interreligious Ministries, and church leaders were not planning to participate in the service, Flowers said.

Every year, a different faith group hosts the Thanksgiving event, which typically includes food, prayer, song and dance. Last year, St. Louis Catholic Church hosted. This year, because the Muslim groups did not have their own space that was large enough, they decided to rent the Quarries, a 58-acre property near MoPac Boulevard (Loop 1) and Duval Road that the church has owned since 1984.

Flowers said she was disheartened by the church's decision. "As a Christian, my first response is, what would Jesus do in this situation?" she said.

She also stressed the importance of respecting all beliefs and said Beth Israel's involvement is a blessing.

"They said, 'It's an honor to be able to provide the space, especially knowing our co-hosts are Muslims,' " Flowers said.

Synagogue leaders said they would arrange space for Muslims to make their evening prayers, Flowers said. "What a great testimony of inclusion."

WHAT IS WRONG WITH PEOPLE??!

Is it any wonder that people in Iraq hate us?

I think this is disgusting.

24: The Unaired 1994 Pilot

This is great, if you're a fan of 24, you'll enjoy it.

familly guy spoof on mad tv

It's Monday Morning.....

And that means a few things. First off, hats off to the Giants who stunk it up again. 3 quality delay of games by Eli Manning...way to step up under pressure! Second, it means its time to check Post Secret. If you don't know about post secret, I don't know where you've been, but check it out. And lastly, time to update you on some BurnTees stuff.

1) Current Sales:
Save $5 off $50
use the code ATOMSBEAUS at checkout
Expires 11/15

Nothing good right now, but you missed some GREAT sales last week. I've also heard rumors of some awesome upcoming promotions from CafePress. Here's the first one I just read about: "Just a heads up. Starting November 12th we will be running a special "gift-with-purchase" promotion on the Marketplace. All orders over $75 will receive a free "retro alarm clock."" And the 2nd one is even better: "Dates: November 17-21, 2007
Offer: Free shipping with minimum purchase of $75*
Coupon Code: FREESHIP75"

Hope everyone has a great week!

Bad Day at the office! (HILARIOUS)

The Office is Closed

Um.............................

I don't even have anything to say here, just check out the link:

http://www.republicansexoffenders.com/

Save $10 on Gamer Gear

Click the banner below to see more products featured in CafePress's latest promotion. And also make sure to use the coupon stated below when you check out : Save $10 on a purchase of $50 or more, use the code HOLI2007

See this design on 4 different products	See this design on 3 different products	See this design on 25 different products
See this design on 41 different products	See this design on 2 different products	See this design on 5 different products
More gamer designs

um.....HUH!?!?!

Watch this video...let me know if you have any idea what they're talking about. Kinda reminds me of that cardgame Magic...I never got that either.

Exclusive Holiday Offer, $20 off your purchase

This is an awesome offer but act now because it's only going to last for 3 days. Use the code shown below to get $20 off your next purchase of $75 or more! Just click the banner below to see a HUGE selection from CafePress.com. You can also visit BurnTees.com and use this coupon there!

9 creative staircases

Some cool photos of "not so normal" staircases. Very cool design ideas. All I need now is to buy the apartment above me and then I'll actually HAVE a staircase and then maybe I could use one of these cool designs.Click "Read More" to see the article.

read more | digg story

Being a flower girl or ring bearer is NOT easy work!

Cassidy - "B.A.R.S. The Barry Adrian Reese Story"

I just finished listening to the new Cassidy album (yes, I put it on as soon as I was done listening to that shitty Aretha Franklin CD), and something I didn't expect happened: I liked it.

I'm not a huge rap fan, but this was a good album. I especially like the last track, "All By Myself" and the current single, "My Drink N' My 2 Step" is a great track as well.

Overall, I definitely recommend this CD. Click the banner below to purchase it on Amazon.com.

Stewart To Pay His Writers Out Of Own Pocket During WGA Strike

This is why Jon Stewart rules. Article from http://www.huffingtonpost.com/2007/11/05/stewart-to-pay-his-writer_n_71164.html

In a show of solidarity with his fellow scribes, the Daily Show host has told his writing staff that he will cover all their salaries for the next two weeks, according to a well-placed source. He has also vowed to do the same for writers on The Colbert Report. A Comedy Central spokesman referred my inquiry about this to Stewart's personal publicist, who has yet to respond.

Stewart's intention, says the source, is to ensure his writers will face no financial hardship should the strike, which kicked off at 3 a.m. local time, conclude within that time frame.

Shop for Election apparel!

Now is the time to show your support for the candidate of your choice. Click the banner above to check out the HUGE selection of Election 2008 apparel that's available on CafePress.com.

Aretha Franklin: "Jewels In The Crown: All-Star Duets With The Queen"

I just finished listening to this album, and, well, honestly, I thought it sucked. I have to say that I'm surprised because there are some great appearances on this album: Whitney Houston, Mariah Cary, Mary J. Blige, John Legend, and Elton John to name a few.

The one song that stood out to me was the duet with John Legend, "What Y'all Came to Do" which isn't even the single!

Anway, don't listen to me, give it a try for yourself. Click the link below to buy the CD on Amazon.com.

Barack Obama on Saturday Night Live

My favorite part of the video has to be Bill Clinton dressed as Mystery from VH1's "The Pickup Artist". So awesome.

Brian Williams Corrects Uneducated FOX Viewer

Gotta love Brian Williams.

Absolut Disco - Dance like no one's watching

PREDICTION OF THE FUTURE IN TRADING

It is a general knowledge that the future cannot be predicted. Nobody knows exactly what will happen tomorrow let alone in a year. This fact leaves us with a very uncertain feelings and no surprise that a deep drive to try to control the environment and the future.

This can be seen in almost every field where humans operate: from production processes in factories to climate change models. Also traders face the challenge of dealing with the future.

Various methods exist to control and to get grip on the future and all of them are used by traders. Indicators, chart patterns, the use of regular cycles in one or other way (Gann), astrology and so on.

A good starting point to value these methods is to understand that future prices of assets cannot be predicted in general and the only way to deal with this is to use a concept of expectation of the future. An example with throwing a dice naturally comes in mind here.

Everyone knows that throwing a fair dice enough times will result in equally divided amount of the faces coming up. This is the same as saying the probability of a one, a two etc. is exactly 1/6. Our expectation of throwing a fair dice is 1/6 and so we know the future of this dice throwing process fairly well.

There is only one key assumption made here: a dice has to be a fair one. This is crucial. The consequence of using a fair dice is that it can be shown in a mathematical way that the expectation of throwing a fair dice is 1/6. This concept is used in our daily lives over and over again and used by traders. But here is also a big bootstrap.

Mathematics is not physics. Though the assumption of a fair dice maybe in reality a fairly good one (in fact, the contrary is assumed, if throwing a dice is not coming with our expectation of it, we assume the dice to be not fair). We are never sure if a dice is a perfect dice in a way that no imperfections exist with its faces which would result in unexpected results. Even when we know that such small imperfections exist we also know that it may not lead to in a different outcome when throwing it.

The understanding of this has consequences for our daily lives and the understanding of our evolution as human and so philosophical implications too.

Two examples from Traders of February may clarify my thoughts about this. The first one is about a so called Delta phenomenon from Marko Graenitz and the second from Tomasini and Jaecle about the use of indicators.

The Delta phenomenon is proposed to predict the future moves of commodities. The author shows how this delta is performing when used for the FDAX and the FTSE. It shows a fairly good forecast at the end of 2005 to 31 December 2006 for both of them compared with the actual chart. Without going into the question how good these predictions are (goodness of fit), two remarks have to be made here.

The apparent good prediction for these two index futures does not necessarily mean much if you realize that these are made over the same period of time because many if not all index futures showed the same strong upward movement the last year and the Delta would produce the same result for all of these indices used over the same time span.

The second critical remark is the following: whenever a prediction is made about the future that afterwards proved to be accurate what does this say about other predictions over other timeframes in other circumstances? When something seems to work here, does it still work there and there and then?

Think about the predictions of soccer games on Saturday or Sunday: there will be once in while someone who predicts all twelve games correctly, as there will always be somebody who predicted in the past the current oil price and so on. In the same line, always something can be found that predicts at a certain time fairly good a price in the future.

Another example is proposed by Tomasini and Jaekle. They propose a system based on a short period indicator and a filter of a longer period to obtain trade entries. The result is a very promising equity curve based on serious performed back tests over more than 600 trade entries during 3 years.

The question is off course, does the system produce the same results in the future.
This question is basically this: are results from a certain period in the past significant for a bigger period, a period also including the future in terms of expectation? In a way this can be stated as follows: is finding a good back testing result the same as finding a fair dice?

What I missed in these tests is at least a so called out of date test (sometimes referred as a forward test), a simulation of the system in real time. It will not be the first a time a good back testing does not result in good forward testing which is sometimes partly due to wrong interpretations of the back testing or partly to other factors. Also and very important the period which was tested may just not to be significant for the overall performances o the system.

CONSEQUTIVE LOSSES

In two lucid and interesting articles in Traders of January two subjects were discussed, subjects I studied extensively. Luca Barberis tried to give an answer to the question how trading of various markets can enhance the equity curve without optimising individual trading systems. Optimising hides the danger of curve fitting. Though his results are very important a few aspects remains to be answered before applying his method: how many contracts do you trade the various markets, which is not a matter of classical position sizing matters and the question of a possible trade system correlation and what effect this has on risk.

Risk is the main subject of Philip Kahler in Traders. He treats various possible types of risk in trading, especially risk due to consecutive losses and emphasizes its importance to understand how consecutive losses can influence trading results. When studying consecutive losses in series of trades a huge field opens up: many different theoretical frameworks can be set up to master this phenomenon of trading.

There is a clear relation between the win ratio of a trade system and the length of consecutive losses. In an earlier post I stressed the importance of the win ratio in a different context. But it also plays an important role in the existence, the length, and the amount of consecutive losses.

In general can be said that the higher the win ratio the higher the chance becomes for a series of losses of a certain length. In his article Kahler gives some examples and a graphic which can be used to determine 5 or 10 consecutive losses for a given win ratio. It has to be said that these probabilities occur for a given amount of trades performed and will change negatively when the total trades increases.

Though interesting to know the chance for a series of losses it would be even more interesting to know a distribution of series of losses, e.g. the probability for all possible series of losses and moreover the maximum length of consecutive losses (maximum streak) you might expect for a given win ratio.

Below you can see a figure which gives the relation for the maximum streak and the probability of a loss (loss ratio). Total trades is 500, confidence is 0.998%.




From this figure again can be seen the importance of the loss ratio: the higher this becomes (the more losses)then the maximum strak increases exponentially. E.g when q, the probability of a loss is 35% then the maximum expected streak willl be 6 but when increasing to 70% the maximum streak increases to 17 consequtive losses in a row!

LUCK AND CHANGE ON THE MARKET

My partner and I spent the week around Christmas in Mumbai, India. Mumbai is the financial and economic centre of India. The Bombay Stock Exchange (BSE) had a splendid year behind with a year output of more than 33%.

From local newspapers a moderate hosanna mood can be felt. Also internationally India got much attention in the last year. It is particularly the growing middle class that forms the driving force behind the economy and which gets attention of foreign investors.

With an increase of 33% the BSE is one of the best performing markets in the world. Of course it must immediately be said that almost all markets performed very well. The phenomenon that markets are moving more or less in the same direction is called correlation.

Correlation between markets is high: data which I have collected on 15 minutes basis of the futures on the FDAX and the DOW JONES appear to have a correlation of more than 90% over the past 2 years. This is almost complete correlation.

Now the question arises if a result such as that of the Bombay Stock Exchange can be attributed to well performing of the Indian economy or that also chance may play a role in it. It cannot be denied that chance and luck play an important role on the markets.

Let’s have a look at this without going into this matter to deeply. Suppose that an invisible hand would assign the different markets worldwide a return around a certain average. Then you may expect these returns to be divided normally.

A quick lookup at the financial site of Yahoo reveals the following. Of the 17 most important markets there is not one with a negative output over 2006. The output diverges from 10% (London) up to 55% (Moscow) with an average of rounded 24%. The spread, standard deviation amounts to 23%. This means that if the 17 markets are representative for all markets in the world, about 66% of all markets will show an output of 1 standard deviation above or below the average (therefore 24% ± 23%). Of all 17 markets there are only 2 outside this range.

We can look at this also in a different way: we can consider the return of an individual market as an estimate of the world average and look at how well such an estimate would be.

It is known that such an estimate will have a standard error that equals to σ/√T where σ is the annual volatility and T the number of years:

STD = σ/√T (1)


From formula (1) it follows that the standard error of an estimate of the world average decreases with the square root of the number of years.

Let’s take Mumbai as an example. The excess return or α, of this market above the world average is 33-24 = 9%. Though in general the term α refers to the excess return of a fund with respect to the benchmark, it may also be used for the excess return of a market.

To be convinced that an excess return is the consequence of a better performing of the economy and not to pure chance or luck then the return must be bigger than the world average with a significant size. In a one-sided test at the 95% confidence level the difference between the two must be greater than 1.65 standard deviations.

Suppose the volatility to be around 20% on an annual basis for the Bombay market then the standard error according to (1) will be 20%/√1 = 20%. The 9% above the average of the market is clearly smaller than one standard deviation above the average, clearly below 95% confidence level. It lies approximately at 50% what means that 50% of the return of Bombay falls to pure chance. In fact you can say that the 33% return of Mumbai is a good estimate of the world average.

We can carry out this calculation also differently and perhaps it will even become more clearly then. We saw that the standard error of an estimate of the average decreases with the square root of the number of years taken into account.

We know that: α =9% = 1,65* STD. It follows that STD, the standard error, equals 9/1,65 = 5,45. This value substituted for the STD in formula (1) gives √T = 23% /5,45 = 4.22 ==> T = 17,8 year.

This means therefore that the Bombay Stock Exchange for at least 17 years in succession must show a return that 9% or more lies above the world average to be able to say that for 95% this is due to a better performing of the economy and only for 5% to chance.

Around these days various funds present their performances. Some will show better results than others. From the previous it must be clear that luck may play a large role besides skill of the fund managers and in any case is much larger than they will admit. Think to that.