## Tuesday, August 30, 2005

### Look At It From A Different Angle

I haven't had many puzzle posts on this blog. So, I was chatting online today with a friend of mine, and he was curious what it was that I did at work (besides chatting online, surfing the web, disrupting others, and making coffee). After describing to him a problem that I had to face recently at work, we deemed it interesting enough and generic enough to merit a blog entry. Without further ado, here's the problem. I've taken the liberty of remapping the problem so that the general audience can appreciate it more readily.

Say we have two points each with a tail angle from 0º to 360º. For example, let's say we have Point A with a tail angle = 5º and Point B with a tail angle = 25º. The average angle is 15º. Likewise, if we had Point A with angle 10º and Point B with angle 280º, then the average angle would be 325º. We want the average angle to be taken from within the more acute angle formed by the two tails. Simple. No issues at all.

What if we had N angles? For example, N = 3, and we have the following angles: 88º, 268º, and 2º. Then, the average angle would be 359 1/3º. Now, what if we want not only the average angle, but also some measure of coherence. Let me clarify this a bit. If all N angles were in a tight range from 0º to 10º, then the coherence would be very high. If the N angles were scattered fairly uniformly from 0º to 250º, then the coherence would be quite low. So, the question is... what's a good way to go about obtaining an average angle and a coherence value given N angles?

There are many ways to go about this. At work, we came up with numerous ideas and methods. Some methods were rather novel, but unfortunately were inefficient. Others were straightforward and efficient, but produced faulty results. The method we ultimately settled on worked well for our needs, but I'll keep that method hidden... for now.

One final note... for now, pathological cases can be ignored. An example of a pathological case would be where N = 4, and the four angles were 0º, 180º, 5º, and 185º. In this case, the average angle could conceivably be either of two possibilities. Have fun with the problem.

### Finish Him... Fatality!

I can't blame Katrina and the Waves for the dismal Finish Line (FINL) earnings and guidance released this morning. FINL got crushed and I'm thoroughly dissappointed. The market has turned south, which makes sense now that the hurricane damage can really be seen by everyone. There ain't no sunshine to be walked upon, instead we have a fatality.

## Monday, August 29, 2005

### Quick Update

Well, I am completely surprised by the market today. Last night, I went to bed thinking that today would be bloody. Instead, it was a solid up day across the major indices. I took this opportunity to exit completely out of my EBAY trading position at 39.38. For now, I will be watching and waiting for the right time to enter into a new trade. At this juncture, I'm a bit skittish on the market to put it mildly.

## Sunday, August 28, 2005

### The Weekend

The weekend started off with an awesome party with the Norwegians, who are all on their way back home today. Even the Swedish girls we met at the party last week were there to say their good-byes. Anyway, the fun started out at the giant hot tub at their apartment complex. The tub is large. While the sign posted at the clubhouse stated a maximum capacity of 13, the tub easily held 20 comfortably. At around midnight, the party moved into one of their rooms, and that's where the party was taken to a whole new level. Drunken conversation spanned a wide array of topics, including Norwegian-based Communist rap and its similarity to the music of G-Unit. Also, a lot of business talk... after all they are all aspiring entrepreneurs. As great as the party was, the mood was bittersweet as many good friendships were established here, and all of them come from all different parts of their country.

Saturday was completely set aside for recovery. Except for the occasional meal, we slept. We did manage to have a midnight snack at a restaurant specializing in Shanghai cuisine. That was certainly enjoyable.

This brings me to a horrible meal I had tonight. We were going to try a new sushi bar in Mountain View, but unfortunately, we learned that it was closed on Sundays. So, we drove around and decided to try a place we drove past in the vicinity called Ariake Sushi. This place was absolutely horrible. Simply put, the sushi was not fresh and the temperature inside was nearly unbearable since they did not have any air conditioning. The best part of the meal was that we decided smartly to do a small test order first. So, we ended up ordering about one third of our usual order before we decided to pay the bill and leave. Absolutely horrible.

And, well, I'm no longer on poker break. Been running better. Hope it continues. Currently clearing a fresh new bonus on Paradise Poker. That's all for now.

## Friday, August 26, 2005

### Sentence Redundancy

So, I'm listening to CNBC on my way home today while stuck in some minor traffic. Anyway, a guy comes on and says the following two lines in order.

Last year, I went to Australia 14 times.

I went more than once a month.

Clearly, the second sentence contains redundant information. The question I have is, had he said the two lines in the opposite order, would this be more acceptable and no longer considered redundant? I found it interesting that order might play a role in qualifying the nature of sentences.

## Thursday, August 25, 2005

### Supply, Demand, and the Slippery Slope

My mind wandered off a bit today during a lengthy stretch of meetings at work. I pondered a bit about supply and demand curves and pricing. Supply and demand curves themselves are unaffected by price. However, the quantity demanded or supplied is clearly sensitive to it.

Say we have some good selling for \$N, and that N is large. Then, tiny changes to the selling price should not affect the quantity demanded. By using the slippery slope argument, all selling prices would yield the same demanded quantity. Even though we know that the slippery slope is a common fallacy, I think it's interesting to discuss a slightly more complex supply and demand model that would accomodate the slippery slope argument, yet not fall into its trap.

If instead of hard and fast supply and demand curves, what if we had blurred curves that represented the probability that quantities would be supplied or demanded at various price levels. Say that you would certainly buy a particular car if it costs \$25,000. Now, let's apply the slippery slope to this example. So, we find that at \$25,000.01 you're obviously still a buyer. However, for every price movement, the probability that you'd still buy it, at that very instant in time, would change. Even the tiniest changes in price would result in the tiniest change in this probability. For example, at price \$0, there would be a 100% chance that a rational person would buy. But, even at \$0.01, the probability would no longer be 100%.

Let's not forget that the actual curves would account for all the population and produce an aggregate distribution (the blurred lines). So, now the slippery slope would fail (I think), because at any given point you are merely given a probability that certain quantities would be demanded.

Anyway, I think that adding a simple probability component into the simplest supply and demand model provides a better view of reality. Maybe this is all obvious, maybe it's ridiculous, or maybe it's quite wrong. But, I do know that this topic is what kept me occupied during the string of uneventful meetings I had today.

## Tuesday, August 23, 2005

### Do The Market Hokey-Pokey

You put your right foot in...
You take your right foot out.
You put your right foot in...
And you shake it all about.

So, after the Intel Developer's Conference produced nothing but a ho-hum, I exited the Intel (INTC) in the 25.80s for a tiny profit. I swapped back into EBAY at the close of the day at \$39 on the nose. I figured I'd go ahead and take the discount that it's giving me.

In other news, Harrah's (HET) announced last night that it bought the Imperial Palace for \$370MM. I'm a bit surprised that they made their purchase so soon after their mega-acquisition of Caesar's. But, this is a tiny purchase for a monster like Harrah's, so maybe it's not such a big deal.

## Sunday, August 21, 2005

### The Weekend

So, this weekend was pretty fun-filled. Friday night, we hit up the latest ERR party with three of the entrepreneurial Norwegians (two of them, incredibly stunning women, and one of them, an extremely outgoing guy). The party absolutely rocked, and the Norwegians were certainly a hit. There was some competition as a group of Swedish au pairs were also in attendance. However, the only male Norwegian that made it to the ERR that night really wowed them. No one else there had any chance, as he really stole the show with them. This was partly due to his charisma, and also because he could communicate with them. The Norwegian language is similar enough to Swedish that cross-language communication was entirely possible. Anyway, it was quite obvious everyone had a great time, and even more obvious that some had too good a time.

Last night, I went to play some poker at Bay101 with couple of other Norwegians (looks like I'm on a Norwegian kick right now, since they all leave in a week and they've all been wonderful people). As we all know, I am on a self-imposed poker break due to a nasty slide earlier in the week. So, I chose to play some low limit poker. And, my slide continues. At least it wasn't too bad a loss, not even 12 bets. That's poker.

One thing that's really lame about the City of San Jose is their active involvement in making life hard for card rooms. For example, the tables at Bay101 are nice, and they area all equipped with auto-shufflers, which help speed up the games. However, every so often there is a jam and a red light goes off. The dealer is not allowed to fix the jam by law; it is illegal for them to do so, and so a floorman must be called over to rectify the problem. How ridiculous is that? Seriously. Despite this kind of stupidity, live poker is still a blast. I am thinking that I should play more live and less online, even if online is much more lucrative.

On Friday, I sold off half of the EBAY position at 40.10 and swapped the proceeds into Intel (INTC) at 25.73. The markets have been weak lately with the Nasdaq closing down for the third week in a row. I'm still holding the Synaptics (SYNA) looking for at least \$18 before I unload my first block. On the China radar, I have added two stocks: KhongZong (KONG) and Linktone (LTON). Both are highly speculative, but worthwhile to keep an eye on, in my opinion.

## Thursday, August 18, 2005

### 80's Theme Song Fun

As I drove home from work tonight, I heard some old TV theme songs on XM Satellite Radio's 80s channel. This got me thinking that it might be fun to throw up a few theme songs from the 80s and have you all try guessing the show. No poker tonight, so I have some free time. Anyway, here are 5 theme songs from the 1980's. Some are easy, and I think at least one of them is tough. See how many you can identify.

Theme Song #1

Theme Song #2

Theme Song #3

Theme Song #4

Theme Song #5

### It's A Mystery

We're having a company potluck luncheon tomorrow. In order to avoid the "everyone brought dessert" problem, there's a sign-up sheet. When someone really is unsure of what to bring, they usually put down don't know yet, not sure, or something similar. However, I noticed something odd today. One person listed their item as mystery. Now, this is just odd since the word mystery carries a negative connotation when used in the context of food. But, that's not the point of this post.

So, after seeing this, it occurred to me that mystery can have a positive, neutral, or negative connotation, depending on the context. Mystery meat is clearly negative. When used in most contexts, the word is neutral. And, the word can even have a slightly positive connotation such as in the phrase, man of mystery.

I haven't thought about this much at all, but what other words can be positive, neutral, or negative? It doesn't seem that words that possess this trait are all that common.

## Wednesday, August 17, 2005

### Break Time and Vegas

I'm officially on a poker break... at least online, anyway. The last couple of nights have been rough. Dropped a good amount playing in the online 15/30. I know everyone hates bad beat stories... but, I'll throw one out regardless. So, last night I had QQ in a 4-way pot that was capped pre-flop. The flop came Q73 rainbow suits, and I capped it against a donkey (the other two players wisely folded). The turn brought a second spade, and again it was capped. The river brought a Jack of spades, and again we capped. Yes, I lost to a 6 high flush. Ok, end of the lame bad beat story.

Tonight, I watched a re-broadcast of a CNBC special, On Assignment: Las Vegas, Inc. It was pretty good actually, and I enjoyed it. The program highlighted three different casino powerhouses and their different approaches to the gaming business. This was really quite interesting and informative.

The first person shown in the program was Steve Wynn who recently opened up the Wynn. In his interview, he really showed his gift. The man is absolutely amazing when it comes to the psychology of style and design. He did a great job talking about all the little things that are considered when a casino is designed.

The next guy interviewed was Harrah's CEO, Gary Loveman. He used to teach classes at Harvard Business School, and one day he decides to give 'real' business a try. His approach to the gaming business relies heavily on datamining technology, which gives him an edge when it comes to assigning values to people. Like a great stockpicker, he is able to find value where others were not looking. He then invests in these undervalued people by offering them comps and deals.

Finally, they talked to one of the Maloof brothers who operate The Pams Casino. They target the younger crowd using sex. Because, well... sex sells; it always has and always will. They talked about their media-based marketing strategy including their MTV's Real World connection, Celebrity Poker Showdown, and their recent licensing agreement with Playboy.

One final fact of interest was that slot machines produced lower percentage returns in terms of dollars wagered compared to various table games at the casinos. This means that people must play horribly at the table games, or the figures include the additional comps made to slot players that aren't given to table game players. The show quoted a whopping 12% edge in blackjack and only a 6% edge in slots. But, slots still provide a better return on investment, since they cost nearly nothing to operate.

All in all, it was a neat special on Vegas. It was nothing like the boring Vegas shows that can be seen on the Travel Channel.

## Monday, August 15, 2005

### Weathering the Market's Storms

Been a while since I last wrote about the markets. A respite was due after that Cryptologic (CRYP) nightmare. In any case, the markets have been a bit indecisive lately. Down one day, up the next, and down again. We've pulled back a bit from our early August highs after facing higher oil prices and dissappointing results coming from both Dell and Cisco.

On the bright side, EBAY is holding its own above the \$40 mark, and Synaptics (SYNA) has moved to a new closing high since its crash. Still looking for \$18-20 on it. The current plan is to unload half at 18, and decide what to do with the other half based on how it trades in that range. Their VP recently picked up a quarter million dollars worth of it at \$15.29 (yes, he got a better price than me, damnit!). It is usually a positive sign when an insider places a decent sized bet. Insider buying is much more useful than insider selling. There are a ton of reasons why an insider would sell stock... diversification being the main reason, but buying usually means the company is worth more. We'll see how it all turns out soon.

Just to come full circle... Today, I came across an old paper from 2001 (download here) that examines the relationship between weather and stock market returns. Not the most interesting paper, but I think their findings provide strong evidence that the market is far from efficient.

## Friday, August 12, 2005

Well, the topic of the new commemorative state quarters came up today in conversation. And, that whole subject kind of sat in the back of my mind while I was working. Then, it hit me... How awesome would it be if Microsoft ponied up some serious cash to the Washington State government to put the Windows logo on the back of the Washington State Quarter, which is slated for release in 2007. I mean, seriously, the state probably wouldn't allow it, but what an amazing way to advertise. This ad would run for the next 40+ years for a one time fixed cost. Hell, if GoldenPalace.com had Microsoft's money, you just know they'd up for it.

## Thursday, August 11, 2005

### If McDonald's Were Run Like A Bar

Just had a random thought today about America's growing obesity problem after reading about New York City's recent Anti-Fat campaign. The NYC Department of Health has begun urging restaurants in the area to voluntarily eliminate certain types of cooking oils that contain a lot of trans-fat, which really increases fattiness and heart disease risk.

Anyway, I was thinking about how different everything would be if fast food chains adopted a policy that is in effect at bars today. What if an obviously obese person were to walk up and order a Super-Sized value meal at McDonald's, and the cashier said, "Sorry, you're cut off. You're too fat, and we're not going to promote this self-destructive behavior. But, we can let you have a chicken salad and some lite dressing." Surely, restaurant revenues would decrease by quite a bit. But, what if the government subsidized the loss of revenues, since they would certainly save a fortune in health care costs further down the line.

I know that this would never happen, but I think it's interesting to think about. Also, while the obese of the world might find this practice discriminatory, I don't see how it's all that different from cutting someone off the alcohol at the bar. This of course assumes that the person in question was not going to drive, which could potentially lead to injuring another individual.

Interested to hear your thoughts on this. It's radical, but I am willing to bet that it's effective. I do not believe that we would have widespread obesity if it wasn't so easy to get a hold of really fatty foods.

## Tuesday, August 09, 2005

### A Couple Tahoe Pics

Emerald Bay

Eagle Falls

The weather in Tahoe was great, and the air was nice and clean. On Monday, we hiked from the top where the first picture was taken, down to the lake, and on to Eagle Falls.

### The Axe

Got the axe... so, I was on vacation, and I had planned on dumping the Cryptologic (CRYP) position upon my return. Well, as luck would have it, it fell sharply this morning as the company announced that it might lose one of its major customers. The position was small, but the drop was so large that I definitely felt the sting. Taking a nasty 30% loss on that position... ugh. That's some serious sewage on my head. It isn't the first time I was in a stock that took a major dump, and it certainly won't be the last.

## Saturday, August 06, 2005

### Tahoe and Life

I'm off to Tahoe for a few days... but before I leave, let me ask this.

How enjoyable is life? When you read a really good book, you can read it over again. When you've watched a great movie, you can watch it repeatedly. When you play a fun game or video game, or maybe even complete it, you can play it again and again.

Now, say that you've done extremely well in life... you built an empire up from nothing. Think of those like Bill Gates, Oprah Winfrey, or even Snoop Dogg. If they could, do you think they'd allow some magical djinni to zap them back to being a total nobody, and try life again? It's obvious that they "beat" the game already, and they are all still fairly young... but, was life enjoyable enough and fun enough that they'd want to try it another time, which certainly would result in a new outcome? Or, is life itself not really enjoyable and fun. And, this is why you strive to get to the top, so you simply don't have to deal with "life" in the same way as the masses?

## Thursday, August 04, 2005

### A Real World Efficiency Problem

So, here's a question that I'd like input on. It has to do with efficiency, measured in terms of total time for project completion. Let me describe the problem and some pros and cons of a couple of paths.

We have 25 participants who need to go through a data collection process. The data is being collected under 6 different environmental settings. The environments are being created for us, since the data collection is taking place inside a large temperature / humidity chamber. In this chamber, there are 3 data collection stations: A, B, and C. Data collection on Stations A and B takes approximately 4 minutes of time on each. Data collection on Station C takes approximately 2 minutes of time. Some of the environments are harsh, meaning that prolonged exposure could cause some serious discomfort. Assume that a person feeling serious discomfort cannot work as quickly to complete data collection. Each participant needs to have their data collected on all three stations at all 6 environmental settings. When this occurs, the data collection project is deemed complete.

Some people will take longer than others, sometimes twice as long, on certain stations. However, we do not know how fast each person will be a priori. Only when all the data collection has been completed at a given environmental setting will the chamber be re-configured to simulate a new environment. Adjusting the environment takes approximately 15 minutes of time.

Now that I've furnished you with the background information... I'll propose two different ways to handle this data collection process, as well as provide pros and cons of both. I'd like to hear what you think, and what other adjustments could be made with the end goal being the total time it took to complete all the necessary data collection.

Path 1: Line up stations in order as Station C, B, then A. Form a line outside of the chamber. The Person #1 goes to Station C. When he completes it, he moves onto Station B, and Person #2 goes to Station C. As soon as each person has finished at a station, he will move to the next spot as soon as it becomes available. So, we basically form a queue and move everyone serially through the three stations. We repeat this for each environmental setting.

Pros: Very organized method -- should be a single pass and we're done. Also, less overhead due to participants not knowing exactly which station they should go to, or if they've already finished on one.
Cons: Less efficient use of each station if there is a slow person causing a bottleneck. Could increase the average time of exposure to each environment, causing additional slowdown.

Path 2: A line will form outside of the chamber, just like in Path 1. However, Persons #1, #2, and #3 will enter the chamber. The first one that completes the data collection at his station will wait until a new station opens itself up. He will immediately fill any open station with which he has not yet collected data. Only after a person has collected data on all three stations in the chamber will he leave the chamber to allow another person inside. At all times three people at most will be inside the chamber.

Pros: Seems to keep station utilization at near 100%.
Cons: An organizational nightmare. Could force us to re-collect data when participants miss a station or collect data on the same station twice. Bottlenecks will still cause similar problems as Path 1, but to a lesser extent.

Which of the above paths do you think would be the better one? In Path 1, does the ordering of Stations A, B, and C matter? Practically speaking, is there that much time to be saved by taking Path 2... data re-collection can be quite time consuming. What if we ignored potential data re-collection time... how much time are we likely to save by forgoing organization? What other factors should be considered?

## Wednesday, August 03, 2005

### Quick Earnings Play

Just to add a little gamble in my life... I picked up a small position in Cryptologic (CRYP) at 27.80. This is a stock that was first put on my radar back in May (click here). Anyway, they release their earnings tomorrow morning. This is strictly a trade... I'll exit the position early next week at the latest.

## Tuesday, August 02, 2005

### Quizno's Combinatorics, Spam, and the BDI

I hit up Quizno's for an after workout meal tonight, and I noticed a rather large sign there touting the flexibility of their combination meal deals. In bold letters... OVER 18,000 COMBINATIONS!! Now, there are three different types of combos offered there. These are (Sub, Soda, Chips), (Sub, Soda, Salad) and (Sub, Soda, Cookie/Brownie). I figured there are 30 different types of subs; this is probably an overestimate. At this location, there are no more than 10 different soda choices, and the same goes for chips. There are exactly 6 different types of salads offered. I have no idea how they came up with 18,000 combinations.

Using the above assumptions for what is offered, I calculated: 30*10*10 + 30*10*6 + 30*10*2 = 5400 combinations. I know that I could be off on my estimates of how many different types of subs, chips, etc. are offered, but I don't think I'm that far off. Maybe they are factoring in different types of breads for their subs. I suppose that additional difference would get us over 18,000 combinations, but that sure seems like cheating. Anyway, onto Spam.

Spam... No, not that kind. I'm talking about Hormel Foods (HRL), the makers of Spam, the meat product. From what I've read recently, many are forecasting a decrease in hog prices. According to CSFB, if this decrease materializes Hormel could see a boost to their earnings by as much as 5%. This is one of the big reasons why they were recently upgraded by them. Hormel also sports a nice 2% dividend, and their operating cash flow continues to be fairly strong. I'm adding this to my watch list as a potential long-term position. And, just to be absolutely clear on Hormel... Spam is not a major source of revenues for them. I believe Spam accounts for 2% or less.

Today, Dryships (DRYS) reported its earnings. By now, you've all heard about my DRYS woes. I added it to my long-term portfolio recently, and it's down a decent amount. Why? Shipping rates have plummeted, as can be seen by taking a look at the Baltic Dry Index, or BDI. This isn't a widely known index, but for shippers, it is the index. The BDI is a weighted index that includes shipping rates for the three major classes of dry cargo ships: Handy (smaller), Panamax (medium), and Capesize (large). Anyway, the BDI dropped sharply in recent weeks, and the market punished the shippers. Despite this drop in the BDI, DRYS earnings this quarter were spectacular. This should hopefully stop the bleeding. In time, the BDI should recover, and when it does, DRYS (and other shippers, too) should be worth a good deal more than the current market valuation.

## Monday, August 01, 2005

### Current State of Market Internals

Is the market sick? Does it need any medicine to get better? I've been wondering this lately. I personally have many watch lists of individual stocks, and lately, maybe in the last month or so, the stocks I watch don't paint the same picture as the overall market. It's quite possible that the stocks on my watch aren't enough of a sampling, and it is just aberrant observation. Well, today I run into a commentary (click here) that seems to cover this question of mine.

I found it to be an interesting read. Maybe it is time to re-evaluate the market's condition. Perhaps this divergence between the Russell 2K and the other major indices can be played as a pairs trade using index ETFs. Or, maybe this is just another doomsayer trying to rain on the bull's parade. Looking at other writings of his, it does not seem like it, but anyone can be deceived.