Having rented a beach house on Martha’s Vineyard, a highly improbable quirk of scheduling left Rocky and the entire Humbert Clan as President Obama’s neighbors for the week. As a “proud American”, Rocky did not complain when his tea (and tee) time were delayed by the Secret Service.
However, far more onerous than the Presidential Motorcade is Rocky’s experimentation with his vacation house’s Subzero Ice Machine.
Upon arrival, the beach house ice machine was set to “thick ice,” with cubes ideal for gin and tonics. But as Rocky likes to live dangerously, he changed the setting to “thin ice.”
Several hours later, Trophy Wife asked Rocky, “What happened to the ice machine? There’s no ice.”
Sure enough, the ice was so “thin,” it was entirely gone. Chastised for his irresponsible adventures, Rocky restored the settings to “thick ice,” and retired for the evening….
[Disclosure: Rocky has noticed that the markets experience high volatiltiy when Rocky is away from his trading screens. Rocky currently has high speed internet, and so long as the internet remains functional, Rocky expects a quiet week in the markets. But if his internet connection goes down, then there will be huge price movement.]
Bloomberg news reports that “Climate Central” released their 2050 weather forecast for the Big Apple. Using “established scientific methods,” Climate Central predicts that in 2050, New York’s August will be substantially hotter than Atlanta’s current temperature.
For the Bloomberg story, click here: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aV8f4NsP6hos
For the Climate Central website, click here:
Several years ago, Rocky’s broker called him with an offering of General Motors 40-year bonds, which would “resolve GM’s pension liabilities once-and-for-all.” Rocky’s response was a polite “no, thank you.” Rocky thinks beach-goers should treat Climate Central’s forecast with similar skepticism.
In particular, he notes that “established science” also predicts that the quarter-mile-wide Asteroid “Apophis” may collide with earth in 2036. If this happens, it will release 100,000 times more energy than the Hiroshima nuclear blast, and probably put the earth into another ice age. See: http://www.guardian.co.uk/science/2005/dec/07/spaceexploration.research
[Disclosure: The General Motors 7.375% of May 2049 are in default. On matters of weather, Rocky always keeps an umbrella, water bottle, and reflective thermal blanket in the trunk of his car. So he's fully hedged]
Washington bluntly labeled Florida as the “worst performing state” because they’ve been the slowest to spend highway stimulus money. See: http://transportation.house.gov/News/PRArticle.aspx?NewsID=984
In Washington’s Bizzaro world, cautious spending of taxpayer money is bad. Very bad.
Rocky notes that Washington also appears unaware of the unusual highway conditions in Southern Florida:
Rocky hears that highway crews are currently stuck in traffic on the Florida Turnpike. Local residents report that the highway crews are flashing high-beams and honking at a group of slow-moving white Taurus sedans moving 20MPH in the passing lane. The Taurus drivers seem unaware that they should move over to the right lane, so the asphalt spreaders can pass.
Alarmed that Obama’s error could drastically curtail the demand for leg amputations, the American College of Surgeons immediately issued a press release:
“President Obama got his facts completely wrong. He stated that a surgeon gets paid $50,000 for a leg amputation when, in fact, Medicare pays a surgeon between $740 and $1,140 for a leg amputation. This payment also includes the evaluation of the patient on the day of the operation plus patient follow-up care that is provided for 90 days after the operation. Private insurers pay some variation of the Medicare reimbursement for this service.” The full Surgical Press Release is here: http://www.facs.org/news/obama081209.html
Although $1,000 for a leg amputation ”feels” like a good price, Rocky wonders whether the Surgeons might consider offering an amputation volume discount? Or, how about, “buy one, keep one free!”
[Disclosure: Rocky admits that he is prone to hyperbole and exaggeration. He now realizes that the President may be guilty of the same offense. The primary difference is that the White House website lacks the proper disclaimer. See: http://onehonestman.wordpress.com/mea-culpa/ ]
GM says that its new Chevy Volt gets 230 miles per gallon (using EPA test methodology). Using the same methodology, Rocky’s wheelbarrow gets over 1,000,000 miles per gallon.
Statistics don’t lie. Or do they?
Here’s the math (converting electricity to gasoline).
The Volt’s 350 pound battery pack generates 16 kwh or 57,776,000 Joules.
One gallon of gas = 1.3 x 10^8 Joules, which converts roughly to 0.444 gallons/hour (energy equivalent.)
So, if you are driving 50 miles per hour, the electricity consumed equates to about 22.2 miles per gallon of gasoline.
The Volt’s retail price will be about $40,000. And average electricty prices are 15¢ per kwh. So the electricity bill will be about $2.40 for every hour of operation.
It’s reasonable to expect that the Volt’s cost will decline, and its efficiency will improve over time. It’s also reasonable to expect that if electric cars become popular, gasoline prices will decline and electricity prices will rise… creating a less favorable equilibrium.
Rocky concludes that absent an important breakthrough in battery technology (or massive government subsidy,) the Volt will be an expensive novelty — and not a commercial success. Even if it gets 253 miles per hour. See: Bugatti Veyron.
[Disclosure: Rocky drives a car that gets 32 mpg on the highway, and his desk chair gets really good "gas" mileage too. Toot, toot.]
Something happened today which Rocky has never seen before in nearly three decades of trading. The front (August 2009) contract went limit DOWN, at the same time that the next month (February 2010) contract went limit UP. And the spread then stopped trading at more than a 3-sigma differential (February over August).
Rocky was ready to rent a freezer truck, fill it with frozen pork bellies, and park it in his front yard for six months to exploit the 50%+ price differential. Unfortunately, the commodity exchange does not permit “last year’s” bacon to be sold as “next year’s” bacon, so the arbitrage cannot be exploited.
More importantly, Trophy Wife was none too happy about the prospects of an eighteen-wheeler loaded with tons of unkosher, artery-clogging vittles driving over her petunias.
So…Rocky has no “belly” position, the bizarre mispricing remains — and bacon lovers should get ready to stock up their home freezers, as supermarket bacon prices will probably be much higher next spring.
Rocky carefully tracks his coin-based trading. The shiny penny with Honest Abe’s countenance (that sits heads-side-up on Rocky’s desk,) performs better than the new quarters with attractive state images (which sit tails-up on his desk.)
An intriguing academic paper explains this — finding that Rocky’s coin toss is biased towards bullishness!
“We analyze the natural process of flipping a coin which is caught in the hand. We prove that vigorously-flipped coins are biased to come up the same way they started. For natural flips, the chance of coming up as started is about 51%.”
The paper is entitled “Dynamical Bias in the Coin Toss,” from statistics professors Diaconis and Holmes at Stanford University, and the full paper can be viewed here :
Rocky’s 51% bullish bias is consistent with the long-term upward drift of prices, but there are more sinister implications for football fans.
In the most recent professional football season, the winner of the overtime coin toss won more than 70% of the games, and since 2002, the coin toss winner is more than 60% victorious. This means that there is the possibility for manipulation, and ceteris paribus, a gambler should always bet on the team that “calls” the outcome of the toss.
Conclusion: A 1% bias is huge. In coin-tosses and in life, things ain’t fair!
[Disclosure: Rocky just tossed his penny, and found that crude oil will rise today. But his quarter says that crude oil will decline today. Accordingly, he took the day off.]