Three dimensional animation of the "Streams of Story" introduced by Salmon Rushdie in Haroun and the Sea of Stories.

...He looked into the water and saw that it was made up of thousand thousand thousand and one different currents, each one of different color, weaving in and out of one another like a liquid tapestry of breathtaking complexity...and as all the stories that have ever been told and many that were still in the process of being invented could be found here...

The ideal electronic medical record creates a 'Plane of Events" consisting of all possible nouns and verbs that occur at a specific time; creating a confection of many visual events; enforcing visual comparison; and presenting an argument combining the real and imagined.

Concept adapted from the ideas of Edward R. Tufte expressed in his book Visual Explanations.

As of October 9, 2008 the DOW has officially become an AUDIBLE based on my personal theory of the markets. If my theory is correct the DOW will reach a low within 27 days (November 6, 2008) using the equations provide in a previous post. This date is now only 13 days away. I have already started moving my money back into the market investing in small chunks of DIA and QQQQ. If anyone is planning on investing based on my recommendation please be advised that the recovery of the market will take a considerable amount of time. I would not expect the market to recover its original strength for another 3 to 5 years at best.

Tags: Stocks, Investments, DOW, AUDIBLES

Have you ever noticed that drinks often taste better from a thin rimmed glass? Baby carrots are sweeter and more flavorable than regular sized carrots. Thinly sliced cold cuts are tasteier than thick sliced cold cuts. Miniature hotdogs and sliders are better than large hotdogs and hamburgers. Small thin cookies taste better than large thick cookies. Maybe the French are on to something?

Women next time you see a guy with small hands remember my blog post!

Tags: size, thickness, importance

I have been trying to go on a diet  for awhile and invariable find myself in a situation where I get invited to go out for dinner. There is absolutely no way to win in the scenario where you don't want to eat but yet you are obligated to be social. I find that this is one of the most awkward circumstances to negotiate without looking like a complete jerk. Let me briefly explain.

First off for some unexplained reason people are offended if they don't eat together and even more bizarre at the same time.  Second your helping has to be comparable in size so if you just eat a small salad or soup and finish before everyone else it is considered rude. You will find yourself sitting and watching everyone eat trying not to talk so much why people get upset when you ask them a question when they have food in their mouth. Even if you order a regular sized portion and decide not to eat it then everybody really gets offended about how wasteful you are being. 

Second everyone assumes that you are cheap if you don't order a main course.  You get treated like you are trying to skip out on the bill or something. I once went out to dinner with a bunch of guys at a nice restaurant in New York City. I was not feeling that great after a few drinks so I ordered a lobster bisque soup. Everyone else ordered brontosaurus sized steaks. In the end they decided to split the bill and stiffed me for $80. The most expensive soup I ever had.

Third the waiter gets all offended because he thinks his tip will be smaller.  I barely can get the waiter to pay attention to me if I don't order a normal sized meal.

There is just no way to win if you are not hungry and you are expected to go out. My advise is to play sick and stay home.

Tags: etiquette, dining, hunger, awkward

I often wonder how is it that human factors engineers never considered standardizing the buttons within an elevator. An elevator is one of the most used transport mechanism next to an escalator in the world.

In the United States...
-There are an estimated 700,000 elevators and 35,000 escalators.
-Over 325 million riders take an elevator daily.
-Over 245 million riders take an escalator daily
-About 210 billion riders travel on elevators or escalators each year in the North America.
*Source: National Elevator Industry, Inc. Website (March 2007)

Yet, every elevator has a unique and often confusing way to display the buttons within the control panel.  I wonder if the Elevator Escalator Safety Foundation has ever looked into this? (Yes this organization actually exist.)

Is it some sick twisted joke to increase the anxiety and fear of individuals like my wife who already have Clautophobia or Claustrophobia? Try finding the "open door" button in a last second scramble when somebody starts running toward the elevator to join you. This happened to me the other day and I truly could not find the button in time. Now I am embarrassed every time I run into that person. He probably thinks I faked the effort so I could continue on my way without delay. (Not to say that I have not done this in the past.) To illustrate my point and the "Elevator Button Chaos Theory" I have included  some real-life examples of button arrangements I have found:

This elevator must go sideways? Oh and look there is a special button for handicap riders. I wonder what that does?

Just incase you can't read the numbers on the button this elevator has a great labelling system. I wonder how many people push the black label instead of the button every day?

 

At least some elevator engineers have figured out that if you put the label on the side you can conserve vertical space. By the way what does the "Star" next to the first floor indicate? Did you notice that it was on the third floor in the first picture? My guess is that it indicates the ground level or the floor where most of the action occurs. I am not sure but I have seen this indicated in the past by the G, L, M, or LL buttons. Anyways I think by now you are ready for the ultimate elevator button test. Look at the next elevator control panel below and answer the following questions as fast as you can. (Hint: this elevator has two doors one in the front and one in the rear.)

1. What button do you push to get to the first floor?
2. How many floors are there on this elevator?
3. What does "L" stand for?
4. What does "P" stand for?
5. Where is button "4"?
6. Which button opens the door?
7. What is the difference between the alarm and the help button?
8. How many people try to cancel a cell phone call by pushing the "Call Cancel" button?

Elevator Button Chaos Theory states that when designing a control panel for elevators never take into consideration what other engineers have done in the past. In this way, the human race can always evolve the elevator button console into something different but not significantly better in the future.

Tags: elevator, chaos, standards, engineering

My wife and I have been considering buying property now that the housing market appears to be bottoming out (at least in Miami).  We have been struggling for a long time on the decision whether or not to continue renting. I have done the math on both sides of the equation and have used over a half dozen "rent vs buy" calculators available on the web.  As expected, based on my preliminary calculations, the result is tightly coupled with the model assumptions regarding "Home Appreciation Rate" and "Number of Years Expected at Property". If you are interested in performing these calculations for yourself a good example can be found at the following link Rent vs. Buy Home Finance Calculator .

I am amazed at how polarized people are on this topic as it sparks the same kind of emotion surrounding discussions about abortion, politics, or religion. An interesting debate to illustration my point can be found at the following two websites.

• Rent Vs. Buy Myths That Ruined the Housing Market
• The Nonsense of “Rent Vs. Buy Myths That Ruined the Housing Market 

After doing months of research and exploration into this topic I have developed a Theory which I call "The Three Fives" or 555 theory.  The 555 theory is purely based on mathematics and does not take into consideration personal preferences or obligations.  The following assumptions were made in the development of the 555 theory. The 555 theory assumes that the monthly mortgage payments are equal to or less than 30% of your combined monthly income. The 555 theory assumes no association fees and an average monthly maintenance cost of less than $300 a month.

If any one of the rules listed below evaluate to false than consider seeking financial consulting from a trained professional before making a decision to rent or buy property.

1. First Five - If you are going to live in a location greater than 5 years consider buying.
2. Second Five - If you can acquire a loan with an annual percentage rate of 5.x or less consider buying.
3. Third Five - If the difference between the Minimum Annual Expected Appreciation Rate of the House and the Current Inflation Rate (www.inflationdata.com) is greater than 5% then consider buying.

Additional Rent Biased Information

Wall Street Journal: Your Home Isn’t the Nest Egg That You May Think It Is
New York Times: A Word of Advice During a Housing Slump: Rent
New York Times: Is it better to buy or rent? (graphical calculator)
The Motley Fool: The Worst Investment Ever
SmartMoney.com: Renting Makes More Financial Sense Than Homeownership
CNN Money: Stocks vs. Real Estate
Priced Out Forever: Renting vs. Purchasing

Additional Buy Biased Information

ABCNews.com: Five Ways to Get a Good Deal on a Home

Tags: Renting, Investments, Buying, Home Owner

This one of my favorite investment strategies. The box position was historically used to delay taxable events. I have discovered an alternate use for this position to realize huge gains if used in conjunction with trailing stops when a significant change in the stock price is expected (i.e. quatrerly earnings reports, result of a legal case). Before I get into my trading strategy lets take a closer look at the definition and prior use of this technique.

Definition

The act of short selling securities that you already own. This results in a neutral position where your gains in a stock are equal to the losses. For example, if you own 100 shares of ABC and you tell your broker to sell short 100 shares of ABC, you have shorted against the box. An alternative to short selling against the box is to buy a put on your stock. This may or may not be less expensive than doing the short sale.

Historical Reference and Explanation

Also known as "shorting against the box".
 
Investopedia Says...     Before 1997, the sole rationale for shorting against the box was to delay a taxable event. According to tax laws that preceded 1997, owning both long and short positions in a stock meant that any papers gains from the long position would be removed temporarily due to the offsetting short position. All in all, the net effect of both positions is zero, meaning that no taxes need to be paid.

Let's say that you have a big gain on some shares of ABC. You think that ABC has reached its peak and you want to sell. However, the tax on the capital gain may leave you under-withheld for the year and subject to penalties. Perhaps the next year you expect to make a lot less money, putting you in a lower bracket and causing you to want to take the gain at that time. However, the Taxpayer Relief Act of 1997 (TRA97) no longer allows short selling against the box as a valid tax deferral practice. Under TRA97, capital gains or losses incurred from short selling against the box are not deferred. The tax implication is that any related capital gains taxes will be owed in the current year.

Short Against the Box for a Profit

Here is an example of how I use this technique to realize gains surrounding a significant change in the price of a stock. A significant change in the price of the stock can occur in either direction as a result of a earnings report, a media event, or volatile market condition. In the case of the stock depicted below I established a short and long position of equal weight at $39.00 per share. A bad earnings report was released after hours followed by a dive in the stock price the following day. Trailing stops were placed at 5% on both the short and long position establishing a 10% no profit channel. The long position stops out at 5% loss and profit starts on the short position. Cover the short at anytime after the stop out to capture profit. See figure below for further details.

Note: Most brockerage firms will not allow a box position to be taken on a stock. You may need to setup two separate accounts to handle this type of transaction (i.e. long position with TDAmeritrade and short postion with Scottrade). Also beware of the risk if the trailing stop is to close to the short and long position price (i.e. 2% on both sides). This may result in the stock oscillates in both directions stopping you out of the long and short positions. There is also a risk that the stock price may gap the next day resulting in the trailing stop activating at a much higher percentage of loss than expected. For example the stock price could have gapped and opened at $31.50 resulting in a trigger of your trailing stop for the long position at 21% rather than 5%. This technique is best played when the change in stock price occurs during market hours.

Tags: Stocks, Investments, Short Selling, Box Position

"Knowledge is proportional to the speed of processing of information surrounding any event, and is limited exclusively to awareness of such events. Therefore, if an observer is not aware of an event or does not have the ability to process the information surrounding the event, faster than it has occurred, then the observer is unable to see beyond the - knowledge horizon."

- Jeffrey Austin White

Tags: Knowledge, Information

After a half of decade of researching investment strategies, I have finally developed a highly predictive model for short-term stock trading with small reproducible positive gains. I have tried all of the popular stock trading strategies without success including: Chart Patterns, Delta Phenomena, Adam Theory, Moving Average Crossovers, Technical Analysis, etc... Although the more traditionally technical analysis techniques were helpful, I was never able to achieve reproducible results.

One day I was reviewing chart patterns on some of my most miserable purchases, when I serendipitously noticed a re-occurring chart pattern. For six months I collected stocks charts with a similar pattern and progression. After several weeks of mathematical analysis I discovered a real-time technique for finding and trading these types of stocks. I had given a name to the stocks that exhibited this behavior - Anomalous Unsolicited Directionally Indicated Breakdowns in Long-term Executing Stocks (AUDIBLES). I will dedicate several blog post to explain the techniques for investing and realizing short-term gains with AUDIBLES. Below is a typical price chart pattern for AUDIBLES along with the CCI, ADX, and MACD indicators.

Notice the sinusoidal wave pattern of recovery occurring after the 17% drop in stock price in the chart below.

See if you can apply the theory below to determine the buy and sell time of the stock in the chart above.

AUDIBLES Theory

The basic theory of AUDIBLES is that the frequency response of the stock is proportional to the price of the stock before breakdown given the following five criteria:

1. Stock price decreases more than 10% within single day of trading. (Preferably at the beginning of the trading session.)
2. Stock price between $3.00 and $25.00 with an average trading volume greater than 500,000.
3. ADX greater than 30 and less than 70. (Directional Movement System)
4. DMI- crosses above DMI+, coinciding with drop in stock price.
5. Stock price must show a positive trend with minimal volatility for greater than 1 year. (Linear regression slope > 0.1 with R2 > 0.5)

Buying and Selling AUDIBLES

• Purchase stock at 0.25*Period of Audible Frequency (T1) and Sell stock at 0.75*Period of Audible Frequency (T2) if CCI goes above -60 and continues in upward direction.
• Audible Frequency is calculated as -0.12*LN(Stock Price in Dollars)+0.4821 (The Audible Period is 1/Frequency)

NOTE: Release of negative news or earnings report within 5 days of stock drop is a poor indication.
NOTE: Heavy insider trading, particularly sales, within 1 month of stock drop is a poor indication.

Derivation of AUDIBLES Frequency

I was able to derive the AUDIBLES frequency by obtaining a representative number of stocks that have exhibited the behavior described above with the given criteria. I then determined the frequency using the period and length of the wave from the price chart. By plotting the stocks price before drop against the stocks frequency I was able to determine the dependent relationship depicted below. The red equation is the linear regression best fit and the blue equation is the logarithmic best fit.

"In a nutshell, I am able to predict with a high degree of accuracy when the high and low of the stock will occur from the AUDIBLES frequency only by knowing the price of the stock before it drops."

By now you are probably thinking that I am crazy. I could not believe it myself, especially after seeing the strength of the trend (R² from Pearson's linear regression). I will explain examples of use and why I think this phenomenon occurs in later posts.

Tags: Stocks, Investments, Technical Analysis, Chart Patterns, AUDIBLES