A few things to note about this rally:

• The volume is absurdly light– even for August;

•Today is an expiration day, with the bias to the upside;

• Professionals are fully invested; Individuals are mostly under-invested;

• Markets are now 53% up from the March lows;

Yesterday, I did an interview with Yahoo Tech Ticker going over why I thought this is now a dangerous rally — but one that can continue for some time. (Video Here)

Category: Technical Analysis, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

188 Responses to “Rally Time Items to Watch”

  1. cvienne says:

    Hey BR…

    Where’s the Friday LINKS thread?

    I had a great article on the “World Air Guitar Championships” that I was going to post!

  2. cvienne says:

    @ahab (3:03)

    why do you think?

    BTW – “Pecora” means “sheep” in Italian…as in “We the sheeple”

  3. Mannwich says:

    @ahab: The CEO’s will admit guilt when they’re necks are on the guillotine.

  4. ben22 says:

    Pat,

    I could be wrong too man! I’m going against people in charge of way more money than me, it’s a contrarian view being long the dollar if there ever was one. I don’t think Barry is bullish on the dollar either. I don’t disagree about the dollar in the long run when you say it’s going lower above, just thinking that’s not a near term threat. Like I said, in 6 months we’ll be able to put it to rest.

    @ahab,

    you are talking about huge money managers but for most managers, at least the way I see it, there is huge personal financial risk in managing opm when thats how you are paid, if you do a bad job, and they take assets from you, you lost income or your job completely.

    @manny,

    I can tell you as someone that does it, managing opm is not always what it is preceived to be, when I lose my own money, I don’t have to answer to anyone, when it’s someone elses….

  5. ben22 says:

    @Manny,

    you are right, I can’t argue with that 2:59, I think I’m coming at this more for someone like me. I didn’t make $100 million in any year since I started doing this. lol.

  6. Mannwich says:

    @ben22: I hear you and know what you’re saying, but try answering to your wife when you lose your own money! ;-) I’m sure already have to do this, as I do! My frustration is aimed at those who’ve been bailed out and are playing with WTS (We The Sheeple) OPM, not the kind of OPM that you manage.

  7. DeDude says:

    Ben22;

    I am an investor not a trader. But I think you have to use the psychology of the market for anything short term. In March I handed in the paperwork to double the monthly contribution to my Roth401K. Its allocation is about 1/3 foreign stocks, 1/3 US stocks and the rest mostly bonds with a little bit in money market. It was a move to reduce my rate of accumulation of CD’s (currently about 25% of all my investments. In October 2008 I purchased a 6 acre plot of land (with utilities at the road) as a hedge against inflation (and a place to grow potatoes, need be ;-) I had lowered my contributions to the stock marked (401K accounts) in early 2007 and was a little uncomfortable with the amount of cash I had build up by late 2008.

  8. leftback says:

    @Mortimus: “That’s why when those bonuses start getting dished out during “Hand-Me-Down Christmas” you can bet that will initiate the “Pitchfork Signal” out into the Gotham sky.”

    Indeed. That’s about right, very evocative. The more pitchforks are brandished, the less chance of further bailouts. Some time ahead of us the rubber is going to meet the road, and CV is going to be in the right place on the farm.

  9. beagle says:

    >> Their rationale; there are still more people working than aren’t.

    Yes… and no. The picture gets muddy when you start to think in terms of households.

    If a person is employed but their spouse is laid off, are they going to be spending freely?

    Add to that everything that is happening with smaller/erratic hours, salaries, bonuses.

    Now take those and multiply by connections between peoples… spouse, parent, children, sibling. Meaning, parents worried they’ll be bailing out their children, children worried they’ll be bailing out their parents, etc.

    Oh yeah, extended family now includes strangers with an energy-inefficient car (fridge? washer? plasma tv?)…

    Bottom line, imho, the impact of under/unemployment is not linear, it increases due to interconnectedness.

  10. Cohen says:

    here comes the pump

  11. Mannwich says:

    Glad I woke up for the regularly scheduled final hour pump. Ho hum. Same thing every day for what, 5 straight months now?

  12. ben22 says:

    @manny,

    lol, lucky for me my wife works with me, we make the inv strategies together so we lose together too. Again though, I totally agree about firms that were bailed out, etc.

    @DeDude,

    Well, along with all the other posters here you completely avoided everything, you da man! Sold several months before the peak and bought in at the lows. You did even better than Barry and Kevin probably. You must really love your job because you have to know you could make a lot more money trading if you were always that good. And yes, pshychology, as I’ve posted a million times, is always something that needs to be monitored via DSI and others to make investment allocations.

    I’m not trying to be rude man but I have to be suspect about the fact that almost everyone on here has that same story.

  13. Mannwich says:

    Looks like in the future I should just pay attention to the markets at the open and then at the close. Everything in between a waste of time.

  14. ben22 says:

    As of the end of June the U-6 unemployment rate was 16.5%, more than twice the level it was at the end of the GD. You can spin the data all you want but the job market here sucks. Period.

  15. Mortimus says:

    @Lefty

    Agreed. That’s why when Bernanke declares at 2010′s Jackson Hole confab that
    “One year ago “there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse”

    I will shed a tear like that “Crying Indian PSA” while picking up the remains of ‘hope’ in this country….with my pitchfork

  16. call me ahab says:

    lb-

    agreed- another bailout would be political suicide- I think there is extreme pent up anger over how this all played out- that now- the push is to get people to “believe” that it’s all patched up- no harm,no foul- it couldn’t be helped- etc,etc,etc-

    that shit won’t fly for most

  17. cvienne says:

    @beagle

    Good points ALL beagle

  18. cvienne says:

    @ben22

    “You can spin the data all you want but the job market here sucks. Period”

    Who needs a job when all you have to do is elect leaders whose intestinal fortitude is to mortgage the entire future, to extend your unemployment benefits?

  19. Mortimus says:

    @ Cvienne
    I never buy lottery tickets but I’m going to follow you with your mega-millions lottery purchase.

    For some reason, that now sounds like the smartest investment I can make

  20. leftback says:

    “no harm,no foul- it couldn’t be helped- ” Right. It’s not like the boyz ramped it up – then shorted it and got paid.

    LB has joined the ZSL crowd for the weekend, also holding DZZ and some other “stronger dollar” trades. Take care all – apart from those people who were being d*cks today, and to those who never made a bad trade, LB salutes you.

  21. cvienne says:

    @Mortimus

    …on the “lottery ticket” subject…

    The amusing thing to me (on rally days like this), is watching the one “lottery ticket” I own (a penny stock)…Fly up 80%…

    It’s a joke…I didn’t expect those shares to pay out for 20 years…or pay ZERO…

  22. cvienne says:

    @LB

    Re: ZSL

    I hope to be joing you Monday on ZSL…

    I simply bought a few more dollar calls today, & otherwise enjoyed the conversation.

  23. call me ahab says:

    yeah dedude’s pretty cool- has it all figured out- and i am sure the ladies love his suave self- and that he never made a bad trade- well- why would he?- you either have it or you don’t

  24. bubba says:

    what!? it’s ok to call out bullshit on this board? who knew.

  25. cvienne says:

    @ahab

    I’m liking DeDude more than ever now…

    My man bought 6 acres…All I can say is as a compadre on that end is…RESPECT ;-)

  26. Cohen says:

    added a little short exposure…we’ll see what happens

  27. cvienne says:

    I wish they would just pump this “glamour boy” [the market] to 1044-1054 into the close…

    Then I could just “short” it there and go down and join the I-Man for some tasty waves…

  28. Cohen says:

    that’d be too easy

  29. cvienne says:

    @Cohen

    …at this point, IMO, it’s not even painful to sit on losing “short” positions…

    Back in May it was…not anymore…

  30. bubba says:

    speaking of lottery…

    here’s a thought question (for the ben22′s out there, this means hypothetical): why is it that people flock to buy a lotto ticket when the prize goes up…the more it goes up the more people buy?

  31. Mortimus says:

    Wait people on this board are bullshitting now?
    You mean I might have been the only one to load up on those AIG $25 August calls 3 weeks ago?

  32. Cohen says:

    “the more it goes up the more people buy?”

    sounds like the stock market

  33. Joe Retail says:

    Personally, I have never made a bad trade (that I talked publicly about afterwards).

  34. call me ahab says:

    bubba-

    as it goes up there is more hype- new stories, word of mouth, etc so it draws in the folks who do not generally buy lotto tickets

  35. DeDude says:

    “but many of these “geniuses”- never seem to be able to repeat their past success- so much of it is just sheer luck”

    However, if you can harvest 100 million on being lucky just one time, that would be enough to live comfortably for the rest of your life.

    Ben22@ no actually because I am a long-term investor with regular contributions to my retirement account I did not do that great. To get the most out of it I have to increase the monthly investments during (or across) the low periods and decrease them during the high market periods. Because I have been making the changes at the inflexion point the results have not been much better than if I had put the same amounts in every month regardless of what happened in the economy. Only traders benefit from picking the absolut tops and bottoms.

  36. call me ahab says:

    joe retail-

    funny stuff- many people on this board though have talked about a trade that bit them in the ass- myself included-

    I wish i could be as perfect as my man dedude

  37. cvienne says:

    @bubba

    I’m not a lottery player…but…back to math…

    Your odds of having a winning ticket off of “x” randomly selected numbers are the same…

    So regardless of how many people participate, your odds remain the same…

    The difference, is that you MAY have a different distribution if more than one person wins…

    So for a dollar, WTF cares? You’re going to tell me that you WANT to win a 5 million jackpot BY YOURSELF, but you object to splitting a 50 million jackpot 5 ways?

  38. call me ahab says:

    dedude Says-

    “However, if you can harvest 100 million on being lucky just one time, that would be enough to live comfortably for the rest of your life.”

    that makes my point though- why not go all out for the big score- everything to gain and nothing to lose

  39. cvienne says:

    @bubba

    I’m wondering if you bet sports…(I’d love to be your bookie)…jk ;-)

  40. manhattanguy says:

    My bet is that we will likely see 1100 (+or-) on S&P before we see 900. Selling will start when traders return from Hamptons in Sep. I will be looking to short AIG and oil at that point. Until then I am going to watch the market (aka circus show) from the sidelines.

  41. ndmaster says:

    i know nobody has asked, but getting short this late day pump.

    this is ridiculous…

  42. bubba says:

    @ahab,

    “as it goes up there is more hype- new stories, word of mouth, etc so it draws in the folks who do not generally buy lotto tickets”

    i’m actually quite fascinated by this phenomenon. it says a lot about human psychology. particularly, it’s these folks who normally don’t buy that jump in, say when it reaches 100, 200 million that fascinates me. i’d like to know what there rationale is. i mean the odds of them winning haven’t changed. surely they know this?

  43. cvienne says:

    @bubba

    Bubba…knock, knock…(3:48)

  44. Joe Retail says:

    @bubba: The number of people who actually understand basic probability is amazingly small. Drop by any casino for evidence.

  45. bdphil says:

    I missed Bernanke’s comments today; did he say the economy is on the verge of a recovery, or on the verge of recovered? That old “the recovery is near” bit get’s them every time. I thought it was a little interesting how his comments hit the wire right before the real estate numbers. Bernanke’s version of a one-two punch for the bears. Sort of reminds me of last fall when they knew they didn’t have any good news, but if they could time it right the market reaction would make it look like good news.

    Right at a fairly meaningful resistance level on the S&P’s this morning and BAM, “the recovery is near”. Fundamentals are a coin toss and technicals anger Washington. What a mess.

  46. bubba says:

    @cvienne,

    sorry, just saw your 3:48 comment as I was typing mine. i’m not sure you answered my question though. so let me ask you, why was the gas station dude able to conned you into buying one this time?

  47. Mortimus says:

    Probably something along the lines of: “at least our winners aren’t the most connected people in the country”

  48. call me ahab says:

    the stock market is a manipulated scam- that the large players aren’t called out on it except in financial blogs just shows you that it is a complete set up-

    just like when they did the inquiries into the oil speculation last year- congress should investigate- however- the oil specualtors were seen as bad guys driving up gas prices- there is zero impetus for anyone to look into the stock market charade-

    even though it is a sham

  49. cvienne says:

    @bubba

    “why was the gas station dude able to conned you into buying one this time?”

    I dunno…I suppose it was just one of those weird things…I seriously haven’t bought a lottery ticket since the 80′s…

    I was driving to the pumps…and the pump that I came too had an OUT OR ORDER sign on it…I rolled my eyes, drove around two islands to get to the one that was free…It TOO had a sign on it (which was starting to get my blood to boil), but instead, this sign said “lottery MEGA MILLIONS jackpot, some odd x millions”…

    I walked in to pay the cashier for a fillup…I really was only planning to do that, but the cashier said (in his Pakistani accent)…”Do you want to buy a mega millions ticket”…I pulled out my roll of 20′s (I was putting $40 in – my truck also runs on nat gas, but I have a switch that either goes nat gas, or gasoline, & my “gasoline” was empty)…I happened to have a loose $1 on that roll so I went for it…

    That’s it…

  50. franklin420d says:

    @ cvienne; The other day the lotto was $174 million, I bought a ticket and that ticket own me $3, but like a fool I did not take out my original $1, I let the sucker ride I am all in the Mega millions for $3, so if I win I will buy you a tractor , but it has to be painted purple.

    @bubba, I let the gas station dude con me because, the dude was a dudette and a cute one at that – The gas station person could careless and are not out pushing the sale of tickets and imho it is a cheap fantasy.
    I know I will never win, but when it gets above $100 million a $1 purchase gives me 3-4 days of fantasy, heck you couldn’t get that kind of deal by going to the movies.

  51. DeDude says:

    cvienne;

    I am not as far with my plot of land as you are; but I may sign up for your next course on “The Little Farmer that Could” and heck if the S&P goes down below 700 again, I may even sign up for the “How to Build a Machinegun Perimeter” course.

    PS: just yanking your chains with the dis fibo stuff ;-)

  52. cvienne says:

    @franklin420d

    Your dudette story sounds more interesting than mine…Hell, if it had been a “dudette”, I probably would have forgot about the $1 and gone all the way up to $20…or, gotten 3, and used the seventeen singles, for, um…well…

    and as far as a PURPLE tractor is concerned…I’m a Baltimore Ravens fan, so purple is just fine with me!

    @DeDude

    Trust me, I’m fine with the fibo…

    Do you have a well on that 6 acres? Everything starts with drilling that and getting it operational…

  53. ben22 says:

    @bubba,

    re: lotto tickests.

    I know tons of people that only buy when it goes over $100 mil on the power ball.

    As for why it happens, beats me, greed. People think it’s a better “value” to spend $1 to buy a ticket that can pay you $100 million than it is to spend $1 to win $5 million. Prechter wrote a paper about it but I doubt you’d be interested in anything he has to say about socionomcis and besides, I’m just a dunce. I’m sure as someone involved with science you could figure it out if you wanted to, you already know the answers to all of the Earth’s other mysteries.

  54. bubba says:

    @cvienne

    but had the jackpot only been 5 million, you’d likely passed. no? the fact that it was 200 made you do it right?

    @F420
    “I let the gas station dude con me because, the dude was a dudette and a cute one at that”
    bubba would have asked the cute dudette if she’d give him the same slutty wink if instead of wasting a $1 on a sure loser, he can buy a twix bar instead.:)

  55. DeDude says:

    No well, but a small pond (and city water at the road).

    PS: if it all comes down before I am ready, maybe I can man your machinegun perimeter – you can pay me in potatoes and eggs.

  56. DeDude says:

    With a lottery ticket you are bying entertainment. For one buck, and wasting less than a minute of your time, you get to entertain yourself with the ideas of what you would do if you won millions. A daytrader has to spend a whole day, and often lose thousands, for the same entertainment. I would never daytrade (way to expensive for my budget), but I did buy a lottery ticket, once, back in 2005.

  57. bubba says:

    @ben22

    psychology is not a science, ben. so i don’t even pretend to have answers.

    @dedude

    “With a lottery ticket you are bying entertainment. For one buck, and wasting less than a minute of your time, you get to entertain yourself with the ideas of what you would do if you won millions.”

    ok, I agree it has entertainment value. how does this explain why someone who normally doesn’t buy a ticket, but would always seem to when the prize goes up. there doesn’t seem to be a rational explanation for this and yet people do it. i wonder if it has anything to do with guilt?

  58. cvienne says:

    @bubba (4:25)

    as always…your logic is way more profound than mine…

    @DeDude

    “No well, but a small pond (and city water at the road)”

    You ought to seriously look into seeing what kind of well you can drill…If there’s a pond, there’s likely a well under your property somewhere…If you’re going to live on land it doesn’t do much good without water…If you’re going to grow food, or have animals, city water can’t be your source…The costs would outweight the benefits…

    Back to bubba…Did you hear that? DeDude has a pond on his property…I have a pool & a pond…

    Bill Murray (Carl Spackler): “You got a pool over there?”

    Chevy Chase (Ty Webb): “We have a pond in the back. We have a pool and a pond. The pond would be good for you.”

    CADDYSHACK

  59. franklin420d says:

    @bubba
    You at 5:01pm in responce to DeDude
    “ok, I agree it has entertainment value. how does this explain why someone who normally doesn’t buy a ticket, but would always seem to when the prize goes up. there doesn’t seem to be a rational explanation for this and yet people do it. i wonder if it has anything to do with guilt?”

    You at 5:01pm in responce to Ben22
    “psychology is not a science, ben. so i don’t even pretend to have answers. ”

    Just wondering which way you want it?

  60. Whammer says:

    Actually, I’m pretty sure it makes sense, if you’re going to buy a lottery ticket at all, to only buy it when the pot has reached some huge value.

    Your odds of winning remain the same, but your expected value increases because the payout is larger. This is offset by the fact that more people are likely to behave the same as you, and thereby increases the odds that you’ll need to split the pot. So, if the actual behavior is that you are equally likely to win $10 million by yourself and to win $100 million split among 15 people, then I’m wrong on this front.

    But when the pot is large, you are effectively benefitting from all the previous poor dumb ba—rds who already lost their money. So it seems to me you’re getting a little kicker in that area in your favor, in terms of the ultimate payout.

  61. Whammer says:

    Actually, while we’re on the subject of lotteries, you can improve your odds of *not* splitting the pot by only picking numbers above 31 — that way you avoid everybody who picks their lucky birthdays, anniversaries, etc.

    Also, pick things in sequence — “what are the odds that the powerball will go 1,2,3,4,5,6″???? Exactly the same as any other combo…… Better to pick 44,45,46,47,48,49 though, to my earlier point.

  62. DeDude says:

    It is actually a lot more entertaining to imagine what you would do with 150 million than what you would do with 5 million (split 4 ways with my luck).

  63. dead hobo says:

    BR noted:

    • Professionals are fully invested; Individuals are mostly under-invested;

    reply:
    ——–
    Damn right, buddy. I’ve got a big pile of cash under my mattress. It wont see a stock market until prices rightsize and, hopefully, Bernanke says goodbye to public service.

  64. cvienne says:

    @dh

    Unless, of course, the big “O”(rganizer) picks Larry Summers…

    I frankly don’t know what to do then…I’m just glad I have farmland…

  65. Whammer says:

    @cv, I can’t see Summers getting nominated, they’d need to go through that whole “women are bad at math” thing again……

    I’d like to see Summers out of govt altogether, but no luck there.

  66. Cohen says:

    if he somehow picked Volcker, that’d be better than the lottery

  67. cvienne says:

    @Cohen

    I agree…That would be GREAT…But please, just give me a day’s notice to get out of the half positions on TLT I still haven’t closed :-)

  68. cvienne says:

    @Cohen

    You know though…KNEE JERK would be to fade Treasuries…But think about it…What would that do to flow? And what would be the individual reactions by other central banks…chain reaction wise?

    Instead of being a RUSH to devalue the currency…It might end up to be a RUSH to save the value of your own currency…

    Therefore, the DOLLAR might be king (and I’ve just initiated long dollar positions)…

    Boy…am I a lucky son of a gun, or what?

  69. bubba says:

    @f420

    i’m not sure what you mean. where’s the inconsistency in my post?

    @whammer

    interesting analysis. i’m not a math guy, but i think the whole “expected value” is a fallacy when it comes to the lottery and especially if we’re just talking about an irregular player who only jumps in when the pot is huge. any math whiz here please school me if i’m talking out of my ass, but doesn’t expected value only apply to games where there’s repetition (ie black jack etc).

  70. bubba says:

    @whammer

    btw, same argument applies to your point about avoiding splitting the pot.

  71. cvienne says:

    @bubba

    Let me simplify this…(in CAPS)…

    I DOUB’T ANY LOTTERY PLAYERS FALL INTO THE MATH WHIZ CATEGORY…

    There…itza WHIM…itza WTF moment of molecular chemistry in brainwaves…

  72. bubba says:

    touche, Cvienne. say, good luck with that lotto tix.

  73. DeDude says:

    Lets say that there are 1 billion different combinations of numbers to chose from. Then each ticket gives you a 1 in a billion chance of winning the lotto. If the pool is 5 million you get a 1 in a billion chance of winning 5 million, if the pool is 150 million you get a 1 in a billion chance of winning 150 million, both for 1 $. I would consider the latter a “better value” simply because the 1 in a billion chance of 150 million is intuitively more attractive (if someone told me I could have either for free that is what I would choose).

  74. cvienne says:

    @bubba

    I’m telling you…

    If I do win…I’m going to divvy up the profits in some way (TBP posters – you – included)…but don’t expect more than a thousand bucks or something…I’m not THAT generous…

    It’s a joke…While I was walking out of the station, I was thinking more about the contribution I’d made to either someone’s fortune (or the tax structure for whoever reaps the taxes), than I was about winning…

    Kind of like when I “short” equities…I think of the benevolent contribution I’m making to philanthropic souls like Lloyd Blankfein whose spiritual being exists to enrich the throes of humanity!

    I feel sainted!

  75. Whammer says:

    I’d like to slightly modify cvienne’s point about math whizzes and lotteries. You can be a math whiz and play the lottery, but you certainly don’t do it “because” you are a math whiz. And, one reason I don’t like lotteries is that I think they prey on people who don’t know better.

    That being said, “expected value” is not limited to multiple transactions. If you can win a dollar on a coin flip, your expected value for that flip is 50 cents. Therefore, you should not pay 60 cents to play that game. If you can play that game for 40 cents, go for it.

    In DeDude’s example above, a one in a billion chance to win $5 million has an expected value of $0.005. A one in a billion chance to win $150 million has an expected value of $0.15. In both of those cases it is “mathematically dumb” to pay a dollar to play each game. It is just less dumb to play the bigger payoff game.

    You might be thinking about the “house advantage” in blackjack or roulette or whatever. That is somewhat different, but certainly related, because it talks to the long-term advantage that the house has for a large population of transactions. Essentially, casinos make money by not paying the true odds on any given bet. So do lotteries. Sports bookies try to set the line so that they will get 50% of bettors on either side of the line, and they take 10% “commission” in effect.

    In lotteries, though, there is no chance, none whatsoever, of someone “getting hot” and winning more money than the lottery takes in. You get a better deal from most illegal gambling, frankly.

  76. bubba says:

    @dedude

    intuitive, yes. but is it rational?

    @cvienne

    mrs bubba would like her cut too. :)

  77. beagle says:

    @Bubba,

    Would you spend $1 to draw at an inside straight? Depends if the pot is $2 or $200, right?

    - Okay, say you have 1 in 100,000,000 million chance to win lottery, starts at $20 million.
    - Nah, wait a week.
    - Nobody won, the pot grew, but you have same odds vs. $30 million jackpot (1/2 rollover).
    - To keep it clean, let’s say the same number of people play this week, before any hype builds.
    - Your $1 wins… $20 million last week or $30 million this week, same odds to win -and- split.

    The key is the dead money.

    (yeah, big pots are not so simple as more people play, buy more tickets per person, yadayada)

    Not that this explains WHY anyone actually plays, because the lottery is still going to be -EV…

  78. franklin420d says:

    @Bubba, 7:07pm

    “i’m not sure what you mean. where’s the inconsistency in my post?”

    You are correct that psychology is not a science and you nor I nor anyone has the answer, we can only make wild ass guesses. But in your next sentence you are asking for someone to answer a psychological situations.

    If there is no answer how can your question be answered?

    Seems a little inconsistent to me.

    @cvienne, ok if I win the mega millions you will get a purple tractor, but had I known you were a Baltimore fan, I would have said Black and Silver color tractor (0r the colors of whatever team you dislike the most.)

  79. DiggidyDan says:

    I’m a big fan of the lottery. Dumb man’s tax. It put me through college for free. Also, I have bought a ticket on a whim at a huge jackpot. The clerk asked me if i wanted to buy extra for 5 times the payout or something. I was like, dude, if i win 100 million, the extra 400 million ain’t gonna make a difference.

  80. spoonman says:

    Ben,
    This is what I was referring to about the “quality” of a bullish sentiment reading the other day
    http://pragcap.com/bullish-sentiment-among-individual-investors-plummets

    All it took was one sharp down day and everybody craps their pants – it doesn’t seem like they’ve fully believed in the rally yet…
    On the other hand, if you measure bullishness by how willing people are to part with their money:
    http://pragcap.com/record-mutual-fund-inflows-for-july

  81. bubba says:

    @beagle

    here’s where i think the expected value argument breaks down when we’re dealing with the lottery or anything with astronomical odds. let’s assume the jackpot reaches to level where EV is actually positive, what would it take for you to realize this positive expected value…you would have to buy up all the possible combinations (it’s unlikey, but lets assume no pot splitting), your odds with one ticket haven’t changed. in other words, what does it matter if the EV increases if your chance of realizing it is negligible.

    now, getting back to the poker analogy, betting on an inside straight with positive pot odds makes sense, not because your chances of winning that hand are somehow better than if it were with negative pot odds, but that on average with many hands played you would come out on top.

    so getting back to my original point, i still don’t see a rational reason for people to play the lotto only when the jackpot goes up.

  82. bubba says:

    @f420

    “You are correct that psychology is not a science and you nor I nor anyone has the answer, we can only make wild ass guesses. But in your next sentence you are asking for someone to answer a psychological situations.

    If there is no answer how can your question be answered?”

    I think we have a misunderstanding here. in my reply to ben22, i meant that i’m a scientist, and since i don’t think psychology to be a science, i don’t have answers to psychological questions….not that there aren’t psychological answers.

  83. cvienne says:

    @bubba

    I know where everyone is going with the poker argument, but even that has a lot of variables…

    What GAME are you playing…

    The reference with regards to the example seemed fitted to 5 card draw…

    But instead, if it were NO LIMIT hold’ em, you’d be looking at other outs, the cash pile of your remaining opponent(s), your ability to bluff, your cash pile, the standings of the game (in terms of getting to the next table – if it were tournament), what was exposed, where you were related to the button…

    …all kinds of things…

  84. DeDude says:

    DiggidyDan; I am aginst the lottery for the same reason you are for it – it’s a dumb man’s tax. I don’t think we should tax something that people are born with and cannot do much to change (red hair. big noses, green eyes, lack of intellect or hairy balls). On the other hand those lacy asses that “make a living” of other peoples hard work, we should taxed the hell our of them. We should start by making day trading very hard to profit from with a 90% tax on any gain from an asset that was held for less than 3 months. With commodities it should be a year.

    bubba; what you are doing in your rationale is to make almost zero the same as zero. That is mathematically incorrect. As long as the chance of winning is above mathematical zero, EV does matter. So if cvienne had a ticket to the lottery from a week with a 5 million pot and a ticket to one from a week with a 150 million pot, and offered to give one of them to me for free – I would ask for the second ticket any time. Since he didn’t I will just ask that he put a well on my land if he wins.

  85. bubba says:

    @dedude

    “what you are doing in your rationale is to make almost zero the same as zero. That is mathematically incorrect. As long as the chance of winning is above mathematical zero, EV does matter. ”

    let’s be clear, the statistical logic of EV is sound, i’m not denying that. i would argue there IS a point where we should realistically treat almost zero as zero. here’s an example, ask any quantum physicist and they will tell you there’s a non-zero probability that you can punch your way through a solid steel beam with your bare knuckles. if i give you positive EV, would you take the bet?

    ” So if cvienne had a ticket to the lottery from a week with a 5 million pot and a ticket to one from a week with a 150 million pot, and offered to give one of them to me for free – I would ask for the second ticket any time. ”

    dude, look up false dilemma (or pascal’s wager).

  86. beagle says:

    @bubba

    You might be mixing the objective calculation of EV with your subjective ideas about particular propositions.

    People will value the same (EV) proposition differently due to their unique circumstances, beliefs, math skills…

    if you wanted to rationalize it:
    people are willing to accept some level of negative EV for entertainment
    a larger jackpot = higher entertainment value + smaller perceived -EV
    pot increases $, crosses the threshold of perceived value for (x) people

    tho’ the most accurate reason is probably… bigger the jackpot, people can imagine doing bigger/crazier things…

  87. DeDude says:

    bubba; it has nothing to do with Pascal’s wager or a false dilemma. I am simply taking the issue of “certain loss” out of the equation. If there is no loss of money involved (or if the entertainment value is presumed to completely cover the loss of money); what is then the most rational choice.