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Infinity times zero = zero

January 4, 2010

Ally Bank sent Rocky a letter apologizing for failing to pay interest on Leap Day 2008. Rocky grew excited at his unexpected windfall, until he sadly realized that anything times zero is still zero. And bank interest rates are extremely close to zero!

Rocky was also surprised by the Leap Day interest because his trusty Monroe Bond Calculator (vintage 1986) always assumed 30/360 for interest calculations.

Perhaps the biggest riddle is why the calculation error affects accounts “that were opened or matured between March 1 and December 31, 2008” — since Leap Day was February 29, 2008.

Ally Bank, the retail banking subsidiary of GMAC, last week received an additional $3 Billion in US Government bail-out funds….perhaps for leap day interest payments?

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  1. ND
    January 5, 2010 at 5:11 pm

    Part of me suspects this was a deliverate ruse by Ally Bank to make contact with its customers, showing that it is a human bank that sometimes makes mistakes but endeavours to put them right…

  2. January 5, 2010 at 5:54 pm

    ND: Welcome to Rocky’s blog and thank you for your comment. Your theory is certainly plausible, but Rocky generally favors Hanlon’s Razor in these sorts of situations. See: hanlon’s razor

  3. January 5, 2010 at 8:18 pm

    Fakename is highly confused about the part about Leap Day being on the 29th, and “accounts that were opened or matured between March 1 and December 31”. She can’t wait to talk to a Live Customer Care Advocate, who are so much easier to talk to than the dead kind.

  4. ld
    January 5, 2010 at 10:20 pm

    Rocky: The ride from leap day interest payment of DMV to http://en.wikipedia.org/wiki/List_of_eponymous_laws was certainly an interesting. I enjoyed reading about some of the “laws.” 🙂

    • January 5, 2010 at 11:07 pm

      LD: That’s a great wiki page. However, it’s missing all of “Rocky’s Laws.” For example, “The First Law of Rocky – In every “macro market” (indices, bonds, commodities), all prices WILL be seen at least twice. The only unknowns are: (1) how long it takes and (2) how far prices go, before the price is re-visited.

  5. kim
    January 6, 2010 at 10:33 am

    I wonder when we’ll see Nasdaq 5000 again? Does the First Law only pertain to the period prior to when the sun goes red-giant and envelops the Earth?

    • January 6, 2010 at 10:58 am

      That’s a misinterpretation of Rocky’s First Law (RFL). In fact, the NDX has complied perfectly with RFL — with EVERY PRICE from 1000 to 4815 having been visited at least twice … once up and then once down. Your question is when will the NDX see a NEW HIGH — which is beyond the scope of RFL.

  6. kim
    January 6, 2010 at 11:38 am

    According to Yahoo, QQQQ (Nas 100 etf) reached high of 232.88 only once so far (see 20 high daily-highs below). It hit 232.00 on the way to the top, and again on the way down, but only hit the high once.

    Of course Yahoo is not Yahweh, and since there was probably more than one share traded at 232.88, it fits with universal laws.

    Date High
    03/10/00 232.88
    03/09/00 231.00
    03/13/00 228.25
    03/07/00 227.75
    03/14/00 226.75
    03/06/00 226.44
    03/08/00 224.00
    03/03/00 222.25
    03/17/00 222.13
    03/16/00 218.50
    03/01/00 217.13
    03/02/00 216.38
    02/25/00 215.00
    02/29/00 214.19
    03/15/00 214.00
    02/24/00 213.61
    02/28/00 211.38
    02/23/00 210.00
    02/17/00 206.50
    02/18/00 206.00

  7. January 6, 2010 at 12:53 pm

    Kim: Your observation is astute — and the Bloomberg does not have volume information for 3/10/00. But that is where Rocky’s Second Law comes into play: “The Second Law of Rocky – Rocky always keeps his calculator precision set to two decimal places. Any trade that requires more precision than the hundreth decimal place, is a trade that Rocky leaves for smarter participants.” (See Rocky’s definitions for the complete list.)

    More generally, the 1st Corollary to the RFL addresses situations where the price is more than a particular % away from the asset’s 100 week moving average.

    Most generally, RFL is just a cutesy way of expressing long-term reversion to the long-term mean….of which there have been (so far) no exceptions.

  8. ld
    January 6, 2010 at 5:36 pm
  9. January 11, 2010 at 8:51 pm

    Rocky reports that in today’s mail he received a check from Ally Bank in the amount of $0.01 … seriously!!!

  10. allocator
    January 15, 2010 at 11:52 pm

    A unique prize of dubious monetary value!

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