A terribly sad day . . . .

A day that ends with me feeling quite sad about everything.

This Christmas period has been quite different to any that have come before - principally because Emma is now working and only arrived home the day before Christmas Eve. Instead, the run up to Christmas was dominated by the visit of Linda's parents for 6 nights.

But around the time she came back, Emma suggested that she would probably prefer to stay a few more days with us. One of her friends was having a New Year's Party at her home in Winchester and Emma thought it would be best if she went there from Oxford this Friday, returned here Saturday, and then we all went up to London on Sunday. So she would be here for a couple more days.

Given that I wouldn't really seen her much over Christmas, I was rather pleased with this change of plan. We talked of doing some cooking together, watching some movies, going into Oxford for a look round the bookshops. Sadly, by a gradual process, plans have been changed today and none of this will now happen. I have not been able to avoid feeling deeply saddened by this.

Instead we are back to plan of Emma returning to London on Thursday. One of her flatmates will be back and they can go to the Winchester party together. Then she can go to her gym, maybe see a couple of her other friends, and so on. No doubt this is a better plan for her.

My sadness is compounded by Linda and Emma making their plans today for various things they are doing together in 2011 - their Spa day in January, where my role is to drive Linda to London for a 10:00 start and then drive her back home at 4:30 - apparently plans for us all to have dinner together afterwards have been shelved. And their week's holiday together in late April. The limit of my hopes had been that we would make paella together this Saturday, but this isn't happening any more.

It would have been better if the original plans had never changed and that we were simply returning Emma to London on Thursday. But the change of plans, first in a way I am pleased about and then the reverse, is clearly worse. The looking forward to something and then have it taken away . . . .

Thinking back to the distant past, I can remember the period just after Christopher died (June 1974). In this period, mum decided to become an antique dealer and dad and I started to follow Speedway. But a few year's later and I was off to University and the start of my career. It occurs to me now that my Dad must have found that a very sad process, just as I have over the last few years. I rarely have any regrets about how my life has gone, but this is one of them. I would have liked to have spent more time with my Dad - all of those times he would ask me if I fancied going to the Lake District for a few days with him and I was too busy. It breaks my heart to think of this now

(Some time ago I was looking through an old album of dad's photos of the Lake District and stumbled across some pictures of Alcock Tarn. He has captioned the pictures "Perhaps the last time I will see Alcock Tarn". When my Dad died, I scattered his ashes as Easedale Tarn - I was looking at the photos I took of this the other day, a panoramic picture with Emma sitting on a rock to the right and the bay where Dad is to the left. I wonder if he would have prefered to be at Alcock Tarn instead?)

Easedale Tarn from Blea Rigg - Dad's ashes rest in the bay in the upper right

Alcock Tarn - a tiny secluded tarn to the east of Grasmere

It is a sad irony of parenthood that the more successful one is in bringing your children up to be confident adults, the less that want to spend time with you.

My favourite story of 2010

The papers are full of reviews of the year and there is no doubt that my favourite story of the year was the Anna Chapman spy story. I was reading somewhere ealier in the year that spies now have to have very detailed identities created and these have to include facebook accounts, long histories online, and so on. Yet the idea of a spy being exposed and everyone being able to view what looks like a perfectly normal facebook account, with all the normal tourist photos, etc, is all very odd. Of course it helps the story enormously that Anna Chapman was so gorgeous - with even the US Vice President commenting that it hadn't been his idea to deport her!



And afterwards, there is the really odd idea that an exposed spy could pose for a men's magazine in provocative underwear and playing to the spy image. I think this is all terribly postmodern and thoroughly enjoyable in the light of the rejection of meta-narratives that it symbolises

So this is what a modern spy looks like!

The strange case of Suzanne Divers

A strange legal case has just completed in which a 26 year old woman has been sentenced to 3 years for coercing a 14 year old boy into having sex with her. There has been much comment on whether the offence is the same as when a 26 year old man coerces a 14 year old girl. The law seems to have said that it is - I am not so sure.

I have to say - when I was 14, if a 26 year old woman wearing shiny white hot pants, boots and fishnet stockings had wanted to have sex with me, there would have been no coercion involved! And I believe that is probably true of most 14 year old boys - it is therefore simply bad luck that she seems to have picked on one of the tiny minority of boys who are the exception to this rule!

Christmas 2010

A stranger run up to Christmas this year, in particular, Emma was working right up to the evening of Thursday. So we didn't have the leisurely run up that we are used to. Instead Linda took a couple of weeks off before Chrsitmas and we had her parents to stay for six nights.

Also, for the first time ever, we had the family to us on Boxing Day - so much more food planning than normal. Some highlights:

Jerome came to see us on Boxing Day accompanied by his dog and stayed overnight. We had time to do some work and he provide a nice contrast with the various family members

Emma decided to get Linda and me more presents than previous years as she is now a workinjg girl - so I get the new Bardo Pond cd and four really nice books - Wolin's The Wind in the East (about Maoism in sixties France), Pettegree's The Book in the Renaissance, Eco's The Infinitiy of Lists and Morris's Why the West rules - for now.

Some really nice food - Linda's Christmas Day meal, her beef bourgignon for Boxing Day and my two tagines

Playing board games - Emma wins Cluedo. But no opportunity to play Grateful Dead Monopoly

And the Christmas Doctor Who - not enough of Amy Pond in her policewoman's outfit, but a thought provoking story idea nonetheless.

Captain Beefheart RIP

Sad news of the death of Captain Beefheart - perhaps the most polarising artist that rock music has ever seen. I was surprised to see that he was only 69. I remember the release of his last album in the early 1980s and his subsequent abandonment of music for art - so he was only 40 then. Amazing.

I first came across him via John Peel of course. Tracks like Moonlight in Vermont and Big Eyed Beans from Venus were often played. Indeed I remember Peel playing the whole of Trout Mask Replica one track at a time over several weeks - I don't thing he ever did that with any other record.

Looking at Amazon.com and the reviews of Trout Mask Replica, there are currently 423 reviews and it is this that shows the deeply polarising aspect of his work. 236 are 5*, 34 are 4*, 24 are 3*, 5 are 2 * and 124 are 1*. So people either really love it or really hate it. I doubt any other artist has such a distribution of reviews. In our household, 1 person rates it 5*, the other two 1*

It is a few years now since I saw The Magic Band play the Zodiac in Oxford and what a treat that was. The world is a lesser place for the absence of people such as Captain Beefheart

10-in-a-row competition - a win, but not a big one

For the last week or so I have been waiting to hear from the spread betting company that was running the ten-in-a-row competition as to how much I had won. The word was that there have been quite a few winners, so my expectations had been somewhat reduced from the idea that I might have won the whole £100,000.

It turns out there were about 185 winners for £540 to each. In some ways a bit of a disappointment - even with the news that there were a lot of winners, I had hoped that this might mean less than 50.

But for us there is a greater significance. When I was looking at trading systems that might have a large percentage of small MFE wins, I strumbled across a whole family of systems that I had first looked at in the 1990s and which still seem to have great possibilities. Indeed the work of these systems has been most of my work for the past month and starting January 3rd, they will form the major part of what we will be trading. We have very high hopes that this will work out well.

So out of a £540 win, might come something much bigger. I can hardly wait to see what happens!

Venetian Masks

Inspired by the very erotic dancers at Hawkwind, I have been looking at some photos of the Venice Carnivale, where many, if nor most, of the participants wear masks. There is definitely something very erotic about this but I have no idea what it might be.

I has been reminded about a scene in the controversial current version of Spartacus where the very glamorous young wife of the local senator has Lucy Lawless arrange her a night of love with a gladiator made us as a statue. Both she and the gladiator (who turns out to be Spartacus) where masks, and the scene is very odd as their "faces" remain expressionless throughout the encounter.

It turns out that Lucy Lawless has set up glamorous bored wife in a case of mistaken identity. I haven't seen all the episodes of this series - but that one scene did stand out rather

All very erotic it seems to me

Hawkwind in Oxford

A bitterly cold night as we made our way to Cowley for the Hawkwind show. We had hoped to have something to eat in the burger place where we sat next to Calexico a couple of years ago. However that seems to have disappeared and we settle for something else.

We arrive at the venue in time for the last three songs by support band, The Jokers - two own compositions and a cover of The Beatles' Helter Skelter. Not impressed at all - and the guitarist is particularly ridiculous.

The first sign of Hawkwind is the appearance os a huge fat guy who I thought I recognised as the bassist - identifiable as not being a roadie by his jaunty US army helmet with attached video cameras. Then there is a strange moment as 6 relatively old blokes wander on stage who turn out to be the band. Dave Brock is now nearly 70 years old (but actually looked quite well, though he did have a couple of breaks during the show - perhaps for a lie down?)

The music is a sequence of longish jams with a surprisingly modern 90s / 00s trance feel. I recognise three or four tracks - for instance, Angels of Death and Spirit of the Age. Some moments were certainly extremely good, but the overall sound reminded me of Ozric Tentacles - no bad thing of course

But the highlight of the show for me were the two dancing girls. Initially appearing dressed in Metropolis-style robot outfits with elaborate headresses, they appeared a further half dozen or so times. Three times this involved them on stilts. In each case, the outfits were really good. I especially liked the green bikinis and headresses that they wore for an indian inspired dance, and the white masks and white robes they wore another time. Overall this was really excellent I thought.

Overall, a pretty good night out - our first for a while

Dancers of stilts

The very erotic white masks

One of the current publicity photos - the girls in their green bikinis and headresses. Their Kali-style Indian dance was perhaps the single highlight of the evening

Yet another remarkable trading innovation

As a result of the deep thinking that was necessary for the 10-in-a-row competition, I have been examining a number of trading approaches that I used to use in the 1990s for long-term trading. I have converted some of these into general models of certain types of market more and have loaded this with masses of stop loss and limit exit tests. The results have been remarkable - for instance, a pair of systems with a combined Sharpe Ratio of 19.5.

Apparently the worst day in a three month period would have been -45 pts, while the average profit is 71 pts per day. This seems ludicrous on first view. For instance, if we are willing to lose, say, £1,000 on a losing day, then the average day would be +£1,600 and more than 9 out of 10 days would be profitable.

I am setting a tentative roll out for this in the first week of Jan 2011 with last testing throught the Xmas period - but what are the implications for the very good (but not ludicrously good) current systems? On first go, it would seem that the newest ideas completely dominate the existing systems. And given that they have a number of other features that are attractive, it might be that we switch a considerable weighting to the newer stuff

As always, much work is required to assess if the profit is real or has some hidden problem lurking in its actual workings.

Latest trading ideas

The main focus of my trading research over the past few weeks has been equity curve management. This can produce some pretty odd "meta" principles for trading. For instance, there may be principles of trading at the meta-equity level that are not applicable at the non-meta, market level. I remember having a long talk with one of my hedge fund investor friends about this and us getting very confused. Back then, I had applied a trend-following trading system to the results of trading a portfolio of markets using a trend-following system and was claiming that I could avoid some of the drawdowns that apply to trend-following by using the meta-principle to reverse our approach - so we would be trend followers then the equity curve was up and counter-trend traders when it was down. But this is a pretty confusing overall methodology and is very hard to set up as you have to record what you would have done trading the way you currently aren't doing.

One idea that does seem valid for counter-trend trading is a limit exit for each day's trading. For instance, if we were 75 pts up for the day, it seems that the most common outcome is not that we add 30 pts more, but that we lose some proportion (even more than 100% on occasions) of the day's gains. So a limit exit locks in a profit for the day.

A second idea has been that of a limit exit decay curve - something like the time value for an option. So at 3:00pm, we still seek x points, but by 7:00pm, our limit exit would be lower. This might stop us being fully invested as the evening progresses to the close, when there are often odd moves to do with position-squaring.

Finally, I have just acquired a copy of Ralph Vince's The Mathematics of Money Management, which is a long work on Kelly Optimal f trading. I expect to put in quite a bit of time reading this over the coming weeks

There was a show on TV last night called The Joy of Stats - I hope to see this later on today. I can see that quite a lot of my future research will be to do with statistical testing. Maybe it is time I had a refresh of my knowledge of basic statistics e.g. how to test whether two samples come from the same overall population.

Echo and the Bunnymen in Oxford

In theory, I am very opposed to bands going out on tour playing entire "classic" albums. Yet quite a few bands I like have succumed to this. Sonic Youth played Daydream Nation, the Stooges have been touring Raw Power, last week Primal Scream were out playing Screamadelic. All of which could be fine. Yet I feel somewhat negative about the whole idea.

So it is with some trepidation that I go and see Echo and the Bunnymen playing the whole of Crocodiles and Heaven up Here, at the O2 in Oxford (the old Zodiac). At a certain point in 1981, I would have said that these two albums were perhaps my all time favourites. I saw the tour for Heaven up Here, the one with all the netting and camo gear and it was stupendously good. I loved the third album, Porcupine, but absolutely hated Ocean Rain, and more or less gave up on the band then. I have little idea what they have done in the meantime. Such a short time period between being my favourites and being uninterested. I put it down the sort of dark, brooding phase that teenagers go through. I even owned a donkey jacket!

An old memory from the distant past: It is Easter 1982 and my parents (and dog) have gone to the Lake District for a week and I have the house to myself. My new friend Jude has been visiting. She is a year older and me and in her second year studying Philosophy and Literature at Keele University. We have hit it off immediately on meeting. She likes David Bowie and we both love Crocodiles. We listen to music and talk about philosophy and literature. We get drunk on red wine and (sometimes) port. We watch movies (Diva is a favourite). And if she has visited her sister in Coventry, we are sometimes able to spend the days getting stoned. We play Crocodiles repeatedly. When McCulloch sings "I've been up to Villiers Terrace" we reply loudly, "We've been in a daze for days" and fall about giggling. Happy times . . . .

Another memory of Jude - once a group of us were in the Wine Bar in town and, during a brief lull in conversation, Jude announced that her pubic hair had been styled into a heart shape and when this was greeted with some scepticism, I was asked to vouch for her. I confirmed the fact and suggested that it was actually quite romantic!

And so to Echo and the Bunnymen last night. Actually the gig is really good in a hugely nostalgic way. From the first guitar effects from Will Sargeant, there is a deep rich sound (an extra rythmn guitarist and keyboard player help). Going up, Stars are Stars, are quite wonderful. A short while later, the sequence Crocodiles, Rescue, Villiers Terrace, and Pictures on my Wall bring back many happy memories. The band are shielded by banks of dry ice, but are dressed exactly per the 1980s show I last saw. Ian McCulloch remains pretty odd. "What is going on in his head?" asks someone near me - who knows, it is very unclear.

Then onto Heaven up here. A great rendition of Show of Strength, a blistering title track, and a poignant The Disease. All my Colours and (especially) Turquoise Days also stand out. A short break, then an encore of other material. Lips, which I quite liked, and a fine The Cutter.

So my fears were perhaps allayed. True it is total nostalga - a glance back at a life I had 30 years ago. But perhaps that is no bad thing once in a while. Now perhaps the original line up of Siouxsie and the Banshees might reform and play The Scream?

Trying to win 10 times in a row

Having thought about the questions posed by trying to win ten times in a row, I have reached the conclusion that the best strategy is to use some form of very short term breakout system. From what I remember from the peak periods of system testing that I have done in the past, these systems have a very high chance of producing at least a small favourable excursion.

So armed with a number of such systems attached to various markets (Euro and sterling versus the US dollar, the DAX and crude oil), I strung together my 10-in-a-row from the first 11 trades I put on, in the space of 5 hours. A couple of stressful moments, but all ok.

The prize is £100,000 shared between the winners. So how many other winners are there? I have tried to think of a way to estimate this but the range of answers I get is too wide - anything from 5 to 500. I would be quite annoyed if it was 500. £200 each for all my thought and effort. If I am the sole winner, I might be tempted to buy my Ferrari for £40k.

Two of the sexiest pictures I have ever seen

Sorting through the garage in my latest clearout, I came across a box of various press cuttings that I'd kept, including the following two pictures which I had kept as they were two of the sexiest pictures I had seen. The first is the front cover of a magazine I saw on a newstand in New York. I have always been a huge fan of asian girls and the girl on the cover is as beautiful as any I have seen. I have had a look for the movie, Blue Dreams, on the internet but have failed to find it, so I have no idea how she gets into this predicament.

The second picture is also a magazine cover that I bought in a newsagents in Leytonstone in the early 1980s. The girl certainly has a very 1980s hairstyle! I have always been a big fan of french maids and this is about as good a picture as any. The magazine itself was pretty odd, and did feature the girl in other outfits, but overall, it wasn't my sort of thing.

"10-in-a-row" spread betting competition

One of the spreadbetting companies is seeking to attract new business by offering a £100,000 prize to those people who can get 10 winning bets in a row during the period ending December 10th. It has taken me a week or so to actually focus on this, but it now seems to me that this is worth pursuing. As an existing customer, I can also enter.

The main issue is that although getting 10 wins in a row is very low probability on a random basis, I am certainly aware of plenty of trading systems where the chances of at least a small "Favourable Excursion" are very good

The detailed rules disclose plenty of small print. A winning bet only counts if it is more than 5 pts for instance (and that is post spread). So on a random basis, I think the chances of any given sequence of 10 random trades being "winners" as defined is something like 10,000 to 1 against. Another clever rule is that trades must be consecutive i.e. bet two starts after bet 1 finishes. This stops you placing multiple bets in the same market and then waiting for one move in your favour before cashing them all out.

The overall prize of £100,000 is split if there is more than one winner. But there is also a rule for the case where no one gets 10 - it is shared between those who get 9, then 8. So maybe they don't think many people will get 10. One other rule is giving me pause for thought. This says that the company may void any application where it feels that bets have been made in "bad faith" or outside the spirit of the game - whatever that means. One strategy I had looked at was placing a sequence of stop and limit orders in one direction and then hoping for a big move. That might be caught by such a rule.

So I am now set up with a number of markets and a number of systems, so that my 10, if I can make it, will be in a variety of markets and at different times and some long, some short. Such a pattern would presumably not fall fowl of this other rule.

One other consequence of this competition is that a whole family of trading strategies that I used ot use years ago have come back into my thinking. I am pondering on whether I could trade these with one spreadbetting company, while Jerome trades our other stuff with the other. That could be another interesting area to add on to what we are doing currently

Marci in "Californication"

One tv show I have recently returned to after some while is Californication. I rather liked series one of this but Linda thought it was really silly (the two episodes we watched together) and so it rather fell by the wayside. But I have kept up my occasional viewing and have recently watched quite a few. One character I have grown rather fond of is Marci, the long-suffering wife of David Duchovney's manager. She has had some great scene over the years, but I also think she is actually rather a sad character. And when I looked up the actress who plays her, it turns out she used to voice Billy in King of the Hill - which was rather a surprise.


The very-sexy Marci in typical pose

Of course I also rather liked Danica in series one - funny how my secretaries were never like her.


Danica about to be punished for some secretarial misdemenour

Gorecki programme & Rodrigo and Gabriela

It is years since we first heard Gorecki's third symphony. It seemed to burst onto the music scene rather out of the blue. I think it was an article in The Sunday Times that first alerted us to it. As many have found, it is a remarkably moving piece. Yet I had never actually looked at the detail of what it is actually about. Often I prefer to just hear the sound. As John Peel used to say, for all I know they could be singing "I am waiting for you dancing pool, my arms, my arms".

But there was a programme about Gorecki on BBC four the other day, featuring a short interview with the man himself (who died quite recently) together with an interspersed performance featuring Dawn Upshaw, who sings on our copy. Scenes of Auschwitz retain their immense power - including some really disturbing scenes of skeletal bodies being cast into mass graves. So I now know what the words say, and very moving they are too.

Afterwards, I am forced to watch a performance by Rodrigo and Gabriela at Glastonbury. Their exurberance is quite compelling. Amazing virtuoso performances

Jane Fonda blog

There is a long article in one of the weekend papers about Jane Fonda. Now in her early seventies, she is apparently still producing exercise videos, among many other things. Indeed she said she is really just producing videos for her original 1980s audience, who are getting old with her. She has a regular blog as well and I have been reading some of the entries. I am quite a fan of Jane Fonda. Of course my earliest encounter is seeing Barbarella last one night on tv when I was about 16. Now that had a definite impact! But Cat Ballou is also one of my favourite films as well. I think she would definitely be someone worth knowing more about.

And it gives me a good excuse to look up some of my favourite photos of her

My favourite outfit from Barbarella - the tail is great

A very popular pictures from the 1970s I seem to remember

She really did have gorgeous legs (and probably still does for all I know)

Perhaps it is time to see the film again - what a classic!

Yet another major trading innovation

Another idea has come from re-reading Sweeney's Campaign Trading, this time the idea of reversing into stop losses. i.e. to examine all cases where a stop is hit and assess the stop's effectiveness. Afterall, if a stop is effective, it is because it saves you money. So if you reverse at a stop point, you should make the money that is saved.

So I have been looking at some of the recent results on days when our equity stop loss point is reached. What if we reversed at such points and became trend followers? The answer is that we would improve the profitability of the overall trading by quite a substantial amount. This Wednesday's result would have been a massive extra gain. So now testing is in full swing on this regime-switching model. In theory, this would mean that we would no longer fear the really big move which causes us so much grief at the moment

One other question is praying on my mind, namely how many more big ideas can we generate that have such huge effects? This is about the 8th!!

Recent reading has been focused on Ed Thorp's long paper, The Kelly Criterion in Blackjack, Sports Betting, and the Stock Market. This is pretty complex, but does have some extensions of other results which I am keen to pursue - so far, the 42 page paper has taken me 3 days of study to get through.

I have also ordered Ralph Vince's book on Optimal f - I used to own this years ago and am not sure that it is actually any good, but we'll see.

Throbbing Gristle - the death of Peter Christopherson

Today's Independent has an obituary for Peter "Sleazy" Christopherson who has died suddenly. Coming into serious music in the late 1970s, there was always one band who were really right on the edge, Throbbing Gristle. I arrived in London just after they had broken up but would have definitely wanted to see them live. I remember going to see the film Journey through a Body to which they had done the soundtrack - very intense.

TG have been back together over the last few years. A couple of albums and some live shows. I have heard one or two and have quite enjoyed hearing Hamburger Lady with modern equipment. But my main interest in Peter Christopherson was always his band Coil. They produced some really way out stuff that I have been working through slowly over the past few years. Excellent stuff

It says that he was currently working on a new TG album - a cover version of Nico's Desertshore. As this is one of my favourite albums, I would have been extremely interested in a TG cover version. I wonder if that will ever appear.

Performing with TG at the Coachella Festival in 2009

A very early shot of TG - Christopherson is on the left!

The first TG record I ever bought - such a great title and cover. I wonder how many people mistakenly bought this (maybe for an older relative who they thought liked jazz!)

Hawkwind and Echo and the Bunnymen shows

Walking to the dentist across Gloucester Green this morning I paused briefly at an advert for the O2 academy - the former Zodiac in Cowley. Two bands catch my eye. Firstly, on December 16th (when Linda will be free and before Christmas visitors arrive), Hawkwind are playing. Linda used to really like them and I am a great fan of some of their live stuff. Both of us agree that Space Ritual is a supurb live album

One of the greatest "double live albums" of all time?

And then also Echo and the Bunnymen who are touring with a performance of their first two albums, Crocodiles and Heaven up Here. Once upon a time, these were my two favourite albums. Though theoretically opposed to such tours, I have decided to go and see this one.

One of the most vivid dreams I have ever had

I am in a room described as being a temple, but it is really just a normal room in a suburban house. It is decorated in various drapes and furnished with just a futon mattress covered in cushions. I am there with two girls. The older (late twenties) is very curvaceous and is dressed in a flowing black robe. The other is younger (early twenties) and slimmer, dressed in a jewel encrusted mini-dress with glitter round her eyes. She reminds me of someone but I can't think who

(Addendum later - She looks like the singer of the band Bats for Lashes)

Natasha Khan of Bats for Lashes

The two girls have been sent to look after me for the night. They take turns in feeding me various exotic fruits and generally cater to my ever need. No sex is involved but it is a very sensual experience

Such a change to have a really vivid dream for a change

An old video of Abba

Occasionally I come across repeats of Top of the Pops from years ago. Some have even gone back to the late 1960s, but most seem to be late 1970s to early 80s. I have just been watching one from November 3rd 1977. The Jam kick off with This is the Modern World, The Carpenter's Calling Occupants of Inter-planetary craft, the quite appalling Barron Knights, Queen with We are the Champions, Legs and Co dancing to something I don't recognise, Status Quo, David Bowie performing Heroes, but without the Robert Fripp guitar track, and then the truly awful Showwaddywaddy.

But then, at number one, comes Abba's The Name of the Game, in my view one of the finet records of all time. The greatest statement of the existential horror that would underlie all of Abba's greatest songs.

But I think I can see in your face, there's a lot you can teach me - what can she mean?

They are, of course, playing ludo in the video

Ginsberg's Howl and some Kerouac recordings

A long article in the weekend papers on Allen Ginsberg to mark an imminent movie about the Howl trial. I haven't read this for years, but have listened recently to a recording of Ginberg reading it. I was rather surprised by this. I had expected a vitriolic performance, but actually it was quite low key. One or two other Ginsberg recordings in the same set, including Kaddish Pt 1, which I now aim to listen to soon

He was always a fun sort of guy!

I have also got some recordings of Jack Kerouac delivering some of his poetry - mainly fragments of San Francisco Blues. And a recent(ish) documentary on Kerouac that I remember seeing when it was on tv years ago and which I'd quite like to see again

Also lurking somewhere is an audio book of Ginsberg reading The Dharma Bums - by far my favourite Jack Kerouac book. Like virtually everyone else who reads this, I am completely taken with the character based on Gary Snyder. He is probably the last of the Beats to remain alive. I was somewhat shocked to discover the other day that I have about 20 books of Snyder's or about Snyder.

Not my favourite cover art for The Dharma Bums!

More trading developments

Over the last couple of weeks, I have been reading Poundstone's Fortune's Formula - a book about the Kelly Criterion for position sizing in betting. We watched The Sting the other night and I was struck by the comparison between the situation set up in this movie and the generalised problem of bet-sizing. In The Sting, Robert Shaw's error is to believe something with certainty, which causes him to be willing to bet big. But if you generalise from this movie setting, the issue becomes one of assessing your bet size when you aren't absolutely certain. This leads into information theory, and so on.

And so much of this leads back to Ed Thorp. There were one or two clues in this book about some of the ways that Thorp had applied the Kelly Criterion for trading in the 1970s and 80s in the fund Princeton-Newport. This made in excess of 20% per annum at an SD of about 4% - a most remarkable result. The occasional example has allowed me to ask the question of how to apply this to our trading

Ed Thorp playing blackjack in the 1960s

But the remarkable thing today was that I finally had the necessary insight to work out how to apply the Kelly criterion to our results to date. Our combined trading system has made 17% so far. By calibrating off one day's particular loss, I was able to re-cast the data into other possible results based on different levels of leverage. This allowed me to generate the humped-back curve that characterizes the Kelly Criterion and it revealed that our maximum return would have been made at a leverage of 21x our current position size!

.

Of course, no one would actually trade full-Kelly in case they were wrong about their so-called edge. So I am looking at various fractional Kelly positions, focusing my current research on 1/10th Kelly. This would have returned 4% a week based on our trading results to date, with a worst drawdown of 10.2%, a perfectly acceptable situation.

.

Moving on from the overall model, I was able to use the Kelly model to calculate position sizes in the four markets we trade, and also a basis for increasing and decreasing our position size day-to-day.

.

Jerome and I spoke for a couple of hours about all this and are amazed that yet another possible huge development has arisen from our research. Our goal is to now deliver the core trading result and to increase position sizing slowly to 1/10th Kelly by January and possibly as high as 1/5th Kelly by Easter. If we were really sure of the results, 1/5th Kelly suggests possible returns of 5% a week. The ludicrousness of this figure suggests that we err on the side of caution though. Such a return is not necessary for us!

MSc results are out early

For the first time in ages I had a look at my LSE email account. This reveals that my MSc result is out - indeed it has been available for the last couple of weeks. This reveals that I have obtained a level of "distinction", the highest awarded for an MSc and the equivalent of a First at undergraduate level.

The paper on which I only spent a week of work - Philosophy of Economics - was a high merit grade, which just shows you how you still achieve a good result without doing any of the necessary work. So only 1 lecture attended, one class, no essays produced, only one-third of the reading list even looked at. Quite a good result I feel.

But there is also a sense of deflation. I had hoped that by now I would have started my PhD. But it looks like my MSc might be the only return to academia that I manage. And that is all rather sad I feel. So really this result is of little significance and I shall put it out of my mind and concentrate on other things

Wobbles in the trading - two poor days, etc

Tuesday - -800 to -350 to -800pts

Wed - -150 to +150 to - 80

Thursday - limit orders - "delta" as price approaches limit - 1pt "risk" vs gain

Helping Emma

So Emma arrived at Didcot late afternoon in time for an Indian meal with us and the start of a movie before falling asleep around 9:00 - the shock of a week's work no doubt.

Sunday morning she exercises, then we set to on her work's case study. My aim was mainly to try to teach her something about model making, so I work at a very general level and show her how monthly models can allow the flow of a business to be recognised. Emma and I have a somewhat chequered history of collaboration on projects and there are one or two moments of friction today, when I feel Emma is getting too bogged down in details, while Emma thinks I am being too general. But we make progress in the end.

While I watch the last Grand Prix of the year, Emma spends some more time running through the model we've created and getting a feel for how it all hangs together. Overall she seems very pleased. She has a couple of days in the office doing more training, then has a full day she can work on the model more. So hopefully that should all be fine. We want her to shine in her first weeks at work.

Linda and I were both rather pleased to have had this visit. Linda has done all Emma's washing (apparently their washing machine has broken) and Emma has a rough working model for her case study. She heads back to Didcot late afternoon. Next week she goes onto the team for her first project and in a couple of week's time is off to Germany for more training. So it is all go.

Might not see her again till Christmas now, though she briefly mentioned it would be nice if I could have lunch with her maybe in a week or two's time.

Bongwater

Working through "B" on itunes this morning I reach Bongwater, one of my all time favourite bands yet one that I feel seriously under-achieved. A truly great album was surely in them. Yet, unusually, it was their last album - their fifth - that was their best. The Big Sell Out is perhaps the ultimate postmodernist record, and the culmination of what they had been building up to - the strange take on modern celebrity, the odd narrative sections that Magnusson reads. Perhaps Celebrity Compass is the finest track. I can't believe it was 1992 that this came out - extraordinary stuff.

The back of the CD prominently features Ann Magnusson's breasts, but in an ironic, postmodernist way - so that's ok then

The penultimate cd - highlights include Great Radio, Nick Cave Dolls and Connie

I saw Bongwater just once in concert - somewhere in Camden, the Electric Ballroom perhaps. They included a cover version of In the Court of the Crimson King from what I remember

Emma's Case Study

Emma started work this week. We got the feeling that perhaps Monday had been a little overwhelming with the many things she has to learn. She got her laptop and blackberry, plus her business cards. Just awaiting her Amex card.

Later in the week she and her other three newbies have been given a little case study to look at. Emma sent me a copy a day or so ago and I have been working through it. For me it is pretty easy - the standard case study set for business people, full of tricks and gaps in data - indeed a little unfair for someone like Emma compared to the two MBA students who joined on the same day as she did and who will, one would think, find this sort of thing pretty straightforward.

Emma sent me her first version and she had not started well in my view. I made a few comments about how to approach this. Then on Friday I received a few emails in which Emma seemed very confused about how best to go about the project. So much to our surprise, she has decided to come home for the weekend and I will give her a hand with it. She needs to have a presentation ready for Friday and that will be pretty easy. I feel a little concerned. On the one hand I want Emma to do well on her first job, but I also think she needs to really put alot of effort in herself. Perhaps she has done and is just on a steep learning curve. But its the fact that two of her fellow newbies have MBAs that has caused me to want to help her. I don't want her first project to not go well.

Another trading week

The last week or so I have been looking at equity-curve risk management. This can be an odd topic as it is based on a meta principle approach. I remember years ago raising something like this with one of my hedge fund shareholders and he was very puzzled. The stumbling block is that at the "meta-level", one might trade in ways that are actually in conflict with the way one trades in the actual markets. For instance, we tend to lose money when a solid trend occurs intra-day. As counter-trend traders we add to our position as things go against us and so are maxed out in a trend and lose heavily if that trend continues. Yet equity risk management would chop that position just when the underlying trading would expect a rebound. The Sharpe ratio impact of this is so dramatic that it is worth doing though, no matter how hard it can be to exit positions for equity curve risk management purposes

Also this approach suggests a limit exit when things go well - which is also rather counter-intuitive. But research suggests that a limit exit at +2.5% intra-day is the soundest policy.

So I have been preparing MAE and MFE data for the trading system equity (something that can take me 2 hours per day to work out as we haven't got adequate information to work it out more easily). And we have a tentative equity risk-management policy coming out from this.

Interesting this also suggests that some parts of the trading system aren't pulling their weight, one of which is the core trading signals that power the Martingales. So oddly enough, we might end up trading a martingale system but without the systems from which the Martingales are derived.

John Cale - Autobiography and an old recording

Now I have finished Bockris's biography of Lou Reed, I have moved onto John Cale's autobiography (written with Bockris), What's Welsh for Zen? This is a superb book - exactly what an autobiography of a musician should be like. I particularly enjoyed the early chapters about the pre-Velvet Underground stage when Cale was working with La Monte Young. Once again, I was inspired to listen to some of these recordings, but they are extremely hard going.

I once saw John Cale in concert at Ronnie Scott's Jazz Club in Soho. This was when I had my Sony Walkman Pro tape recorder and used to try and smuggle this in to all the show I saw. I went to this show with Steve Cleary, who lived just round the corner from me in Leytonstone. He was a real fan of John Cale and had most of his albums. He was then able to identify all the tracks on the tape I made. We sat at a table about 10 feet from Cale, who performed more or less solo. This certainly made recording difficult, though the end product was really good. It was definitely one of the best I ever made. A year or two ago I transferred the show to digital and posted it on a file sharing website.

So encouraged by my reading, I have been looking out for a few John Cale live shows. And much to my surprise I stumbled across a new upload of my Ronnie Scott's show. I have no idea where my copy of this now is, so was rather pleased to download it again. What I surprise. I left a comment for the newest uploader. In his view, this is another good reason why people should share their recordings - you never know when you might want to hear something you yourself recorded!

Emma's first day of work (and mine)

So Emma enters the "real world" today with her first day of work. For the first two weeks she is going to be in her office doing various training exercises. She rang me from the Starbucks on the corner to tell me she had arrived in plenty of time and was looking forward to her day

I remember my first week at Ernst and Whinney. I was sent to Nottingham for my induction course with just a few people from the London office - Jeremy Owens and Debbie Thomas, spring to mind. The detail of the week escapes me, though we did play some sort of business game at the start of each session, based around setting the price of gas, and quite a lot of drinking went on. What I remember most is the social aspect.

I really fancied Debbie Thomas and had thought this week had layed a good foundation for us going out together. We played squash together one afternoon - she looked great in a short skirt and trainers! We had drinks together in my room. And, perhaps most memorably, we played a practical joke on Jeremy that involved Debbie and I getting up at 4:00 to knock on his door and tell him the first session was just about to start. Sure enough, he dressed in a panic and rushed downstairs.

But Debbie turned out to be something of a party animal, out virtually every night with friends. We did manage one date when we went to see Diva at the cinema. Soon after she started going out with a friend of Jeremy's from Cambridge (a bit of a prat I thought). Then she failed her first year exams and quit E&W. Wonder what ever happend to her?

The Saturday Times - The Truth about Women and Sex

Day out in London with Emma

Emma moved to London a week and a half ago, but has two weeks there before starting work next week. Linda went to see her last week (for a mother-daughter shopping trip), while I have gone to see her this week, mainly, it seems, to help her get her bearings a little more. So our plan is to have a long walk round the local area, so Emma knows where everything is.

First stop is Borough Market, less than 10 minutes walk from where Emma is living. She actually does know where this is but is keen to take me there so we can have a good look round on a weekday (when it is less busy). It is like a really big version of the Oxford Covered Market, but without the shoe shop! We treat ourselves to mulled wine, and cakes, while Emma also buys one or two things for the house. Then looping round the back of the market, we go to a Sainsbury's for Emma to pick up more things, then back to the house.

But our main expedition is to Covent Garden, about 25 mins away (and which could provide the route for Emma to get to work if the tubes continue to be on strike occasionally). It is a really nice walk along the south bank from Blackfriars bridge to Waterloo. We mainly talk about the things Emma has managed to sort out while in London. She seems to have taken on most of the admin duties for the house and so has been organising all sorts of things like council tax, internet access, tv, and so on

There is a food market in progress at Covent Garden, but Emma is keen to sit down at one of the cafes, so we can chat. A string quintet is playing classical music outside one cafe and we settle there. Talk moves on to starting work and the few tips I still have to pass on before the big day on Monday.

From Covent Garden, we walk to Leicester Square and Piccadilly, from which point Emma would be able to find her office. She pops into Boots and we print loads of photos off a USB stick so Emma can make up some new photo frames. While there, Jerome rings to say that after yesterday's best trading day ever, today's is the worst so far. Another new research project - is there an equity stop that makes sense?

Next stop, Camisa's Italian deli in Old Compton Street, then Blackwells, where I buy Emma a slightly tongue-in-check book on Management Consultancy. Then we find the Cake shop near the English National Opera, which we went into once last year.

And so it begins to get dark and I leave Emma on the Strand, from where she is confident that she can find her way home. I walk back to Marble Arch to get the coach home. Lots to think about - yet again, a strange feeling of melancholy (and not at all because we have lost 500 pts trading!)

Update on Trading

Back in the summer, I had thought that I had a pretty good outline of what it was that the trading would consist of. But what has surprised me is that we have been able to develop entire research programmes out of the basic model, and some of these are now ready to roll out into our trading. Dozens of these research programmes are currently in the works

A book I have been glancing at recently is a biography of Casanova. For traders, he is famous for his use of so-called "Martingale" betting systems - the familiar "double your bet if you lose, till next you win" strategy for 50/50 gambles. These fail as they require huge capital resources to make the next bet whenever there is a long losing sequence. And Casanova lost the fortune of the nun he was hoping to break out of the convent using just these methods. Such is life - haven't we all been in this situation. You seduce a nun, gamble away her fortune in an attempt to raise the money to buy her out of her convent, move on . . . .

I rather enjoyed the recent Heath Ledger movie

But one idea that does fall out from this is the idea of increasing a position if you have more reason to suppose that a favourable event can come out (something the original Martingale doesn't do). For instance, a counter-trend trader might open a position using a particular system and then, if the trade's open losses reach a particular level, a new position is opened, adding to the initial. This is not just doubling up a losing bet. It is more like a planned staggered entry into a trade, where the loss on the first trade is itself supposed to indicate that the probability of success with the second is now greater.

One area in which this sort of thing can become apparent is when you try to assess stop levels. Often it turns out that a trading system has no effective stops. For every stop that effectively avoids a large loss, there are trades that are losing at some point, but then rebound into profit and which are caught by the stop. Counter-trend systems are particularly prone to this sort of trade pattern - initial loss followed by rebound (while trend following often produces initial profit followed by give back). Indeed some potential stop points actually do worse than not doing anything, and these are the elusive new trade points.

We have been studying this issue in detail and are now splitting our trades into several pieces with the aim of adding the additional trades after the first has made losses. In honour of Casanova, we are calling these trades "Martingales", but actually they aren't really - there are just a form of progressive trade entry

Another new type of trade are our so-called "Taleb trades" (named in honour of Nassim Taleb, whose books I have been re-reading). We have decided that a very small part of what we do will be trades anticipating possible "Black Swan" events - huge moves well beyond our view of what is likely. So we have been buying massively out of the money crude oil calls and DAX puts. These have been set to cost us 2-3 pts a day. But if Israel bombs Iran and the Arab nations decide to withhold oil from the West, then the DAX could drop 20% and oil could rise $40. In this scenario, we would make around 200% in a day!

And well worth it at 2-3 pts a day when our daily gains continue to average around 40 pts a day.

Neu at the Barbican

Reviews have appeared in the papers of a show at the Barbican by a band calling itself "Hallogallo". This name is, of course, a track off the first album by Neu!, stupendously great krautrock band from the 1970s. It turns out that this new band is the guitarist from Neu! together with Steve Shelley of Sonic Youth and someone else on bass, and they are playing a set of old Neu! tracks. As the reviews say, this could have turned out really badly, but actually, Steve Shelley may be the perfect "motorrik" drummer.

A bit of searching finds me a recording of the show, which turns out to be truly wonderful. I have played it through at least 6 times today and it gets better and better. I especially like track 3, which I am currently unable to put a title on. No doubt it will come to me.

Is this great or what?


"Hallogallo" live in concert

Three days in Wales

To follow Emma's leaving home, we have decided to have a few days in Wales, visiting, for the first time in 7 or 8 years, the Hotel Maes-y-Nauedd near Harlech in the North-West. This time last year, we had our week in France, with much gourmet food consumed. This aspect of the trip will be the same this year, with the hotel offering 8 or 9 course meals (though 4 of these are the mini desserts they serve)

We are away at the civilised hour of 10:00 as the Grand Prix is delayed and neither of us feel in a rush anyway. Up the M40 and M6, then across passed Telford, Shrewsbury and Welshpool, then the final cross country leg. The weather is actually really good, more or less clear skies, and we are tempted to stop near a town on the coast called Barmouth, which neither of us has ever heard of before. We spend an hour wandering around on the beach - precisely the fresh air and walking that Linda wants to spend the trip doing. I, meanwhile, am endeavouring to take some nice photos

The river estuary above Barmouth

Rocks on the beach at Barmouth - with some rearrangement, it occurs to me that this could be made like Robert Smithson's Spiral Jetty which I admire so much

This looks very Smithsonian

More abstract views of sand, water and sun

The railway bridge at Barmouth. A steam engine crossing that would look excellent in my view

.

We arrived at the hotel late afternoon ready for the cream tea that is part of our package. Then an hour or so spent reading and getting ourselves ready for the first of our three dinners. This is our third or fourth time here, and the food remains at a brilliant standard. Champagne in the bar, the chef's tiny taster starter followed by the proper starter, a fish course, a main, then the four desserts, all washed down with an Argentinian Merlot. An excellent first night

.

Monday

.

After a full Welsh breakfast to provide the fuel for the day, we are off to a nature reserve on the coast at Harlech. Oddly enough, there has been a heavy frost overnight, which gives the air a freshing bite. Our target is the Morfa Harlech Nature Reserve which is unusual in that it is a huge area of sand dunes. Our plan is to walk down the beach to where it turns inland and forms the estuary on which the oddly styled town of Portmeirion (where the 1960s series, The Prisoner, was shot). The skies are clear, the sun is out and the wind is blowing (but not too much) - ideal for a few hours walking we feel

Linda in bird-watching gear

Linda viewing Pied Wagtails

The dunes marking the edge of the nature reserve

Linda examines a jelly fish - we assumed it was dead, but someone told us later that it might just have been waiting for the tide to come back in

A very contented flock of seagulls

After our walk of several hours, we travelled back down to Barmouth where I had three drinks in the cafe, and where we tried to find out if any of the boats were still doing seal or dolphin watching trips - they weren't. So instead we did a 30 minute river trip up the estuary - not quite the same as viewing wildlife on the high seas, but the best we could do.

.

From there we visited Shell Island, a rather odd campsite compex set in the dunes just down from Harlech. Someone had crossed out the "S" on the road signs leading up to it, which is slightly unfair. But it was the last week of the season and the campsite's central facilities had that end-of-season feel. More sand dunes to walk around.

Linda at Shell Island

.

A leaflet in the cafe notes that a sight-seeing boat runs long trips out from just up the coast and if the weather is good tomorrow, that is what we will try to do.

.

Tonight's meal is another mammoth blow-out. We had resolved to maybe skip the fish course but didn't, though tonight we did avoid having every portion we could have had from the "Grand Finale" dessert.

.

Tuesday

The weather has changed on us. Heavy rains overnight and a forecast of this continuing throughout the day. So our birdwatching boat trip seems off. Instead we drive up to Portmadog, which looks rather drab in the rain, then up to Caernarfon, on the off chance that it has some shops for Linda to wander round (esp an M&S). Sadly it doesn't, but at least the rain stops for a while and we can have a wander round. Linda says there were waste bins for drug addict needles in the public toilets and we did see one or two people in town who could easily have been drug addicts!

.

We travelled back cross country, close to the Welsh Highland railway which was running steam engine trips this week for half-term. The rivers we passed were in full flood and looks great possible venues for white-water rafting.

.

Back to the hotel mid afternoon for some quiet time before the onset of our third and final gourmet banquet. I reach bursting point during this meal!

.

Wednesday

.

We could perhaps have tried to have a final full day in Wales, but the weather remains a bit bleak and with a long, unbroken car journey, we could get back home in time for Linda to see her mum and dad who have been house sitting for us.

.

Not a bad trip overall. But not quite last year's French excursion either

.

And I have to admit that I was keen to catch up with Jerome and find out how the trading was going this week. I have tried to avoid logging on while away, though I have also read Taleb's Fooled by Randomness, so it is not as if I have been completely avoiding everything to do with markets.