Warning: A New Who's Who of Awful Times to Invest

Last week, the estimated return/risk profile of the S&P 500 fell to the worst 2.5% of all observations in history on our measures. This is not a runaway bull market. Rather, it is a market that again stands near the highs of an extended but volatile trading range. I am convinced that the breakdown of the market from this range has been deferred only through repeated and extraordinary central bank actions.

Importantly, the market is again characterized by an extreme set of conditions that we've previously associated with a "Who's Who of Awful Times to Invest." The rare instances we've seen this syndrome historically are reviewed in that previous weekly comment. They include the 1972-73 and 1987 market peaks, and several instances since 1998. The more recent instances of this syndrome are shown by the blue bands on the chart below. Each of the separate instances in the 1998-2000 period were followed in short order by intermediate market declines of between 10-18%, and of course, ultimately by a plunge of more than 50% in 2000-2002. Likewise, the 2007 instance was followed in short order by a correction of nearly 10%, and a few months later by a plunge of more than 50% in 2007-2009. The more recent instances in 2010 and 2011 have also been followed by substantial market selloffs in each case, though with a longer lag in 2011 (due to ongoing QE2 operations). Aggressive monetary policy did not prevent the ultimate declines, though massive central bank interventions have undoubtedly helped to short-circuit the more violent follow-through that occurred in 1973-1974, 1987, 2000-2002, and 2007-2009, at least to-date. 

A word of caution. While a few of the highlighted instances were followed by immediate weakness, it is more typical for these conditions to persist for several weeks and even longer in some cases (for example, the wide blue strip in late-2010 and early 2011). When we look at longer-term charts like the one above, it's easy to see how fleeting the intervening gains turned out to be in hindsight. However, it's easy to underestimate how utterly excruciating it is to remain hedged during these periods when you actually have to live through day-after-day of advances and small incremental new highs that are repeatedly greeted with enthusiastic headlines and arguments that "this time it's different." For us, it's particularly uncomfortable on days when our stocks don't perform in line with the overall market, or when the "implied volatility" declines on our option hedges. 

by John P. Hussman,Ph.D, Hussman Funds |  Read more:

New Worries About Sleeping Pills

Talk about sleepless nights.

Patients taking prescription sleep aids on a regular basis were nearly five times as likely as non-users to die over a period of two and a half years, according to a recent study. Even those prescribed fewer than 20 pills a year were at risk, the researchers found; heavy users also were more likely to develop cancer.

Unsurprisingly, the findings, published online in the journal BMJ, have caused a quite a stir. Americans filled some 60 million prescriptions for sleeping pills last year, up from 47 million in 2006, according to IMS Health, a health care services company. Panicked patients have been calling doctors’ offices seeking reassurance; some others simply quit the pills cold turkey.

Some experts were quick to point out the study’s shortcomings. The analysis did not prove that sleeping pills cause death, critics noted, only that there may be a correlation between the two. And while the authors suggested the sleeping pills were a factor in the deaths, those who use sleep aids tend as a group to be sicker than those who don’t use them. The deaths may simply be a reflection of poorer health.

Still, the findings underscore concern about the exploding use of sleeping pills. Experts say that many patients, especially the elderly, should exercise more caution when using sleep medications, including the non-benzodiazepine hypnotics so popular today, like zolpidem (brand name Ambien), eszopiclone (Lunesta) and zaleplon (Sonata).

“If someone comes to me on a sleeping pill, usually my tactic is to try to take them off it,” said Dr. Nancy A. Collop, president of the American Academy of Sleep Medicine and director of the Emory Sleep Center in Atlanta, who was an investigator in a clinical trial of Lunesta five years ago.

The non-benzodiazepine sedative hypnotics, on the market since the late 1980s, are believed to be safer and less likely to be abused than benzodiazepines or barbiturates. But many people take them for years, even though most are approved only for short-term use and generally their safety and effectiveness have not been evaluated beyond several weeks in clinical trials. (One exception is Lunesta, which was tested for up to six months.)

Some data suggest that the medications do not even do what they promise all that well, said Dr. Steven Woloshin, a professor of medicine at the Dartmouth Institute for Health Policy and Clinical Practice.

by Roni Caryn Rabin, NY Times |  Read more:
Illustration: Jon Han

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Digital Willpower: Will Apps Make You a Better Person?

An ethicist considers the ramifications of using apps to improve our habits. And also whether willpower as we normally think about it even exists.

In article after article, one theme emerges from the media coverage of people's relationships with our current set of technologies: Consumers want digital willpower. App designers in touch with the latest trends in behavioral modification--nudging, the quantified self, and gamification--and good old-fashioned financial incentive manipulation, are tackling weakness of will. They're harnessing the power of payouts, cognitive biases, social networking, and biofeedback. The quantified self becomes the programmable self.

Skeptics might believe while this trend will grow as significant gains occur in developing wearable sensors and ambient intelligence, it doesn't point to anything new. After all, humans have always found creative ways to manipulate behavior through technology--whips, chastity belts, speed bumps, and alarm clocks all spring to mind. So, whether or not we're living in unprecedented times is a matter of debate, but nonetheless, the trend still has multiple interesting dimensions. Let's start here: Individuals are turning ever more aspects of their lives into managerial problems that require technological solutions. We have access to an ever-increasing array of free and inexpensive technologies that harness incredible computational power that effectively allows us to self-police behavior everywhere we go. As pervasiveness expands, so does trust. Our willingness to delegate tasks to trusted software has increased significantly.

Individuals (and, as we'll see, philosophers) are growing increasingly realistic about how limited their decision-making skills and resolve are. Moreover, we're not ashamed to discuss these limits publicly. Some embrace networked, data-driven lives and are comfortable volunteering embarrassing, real time information about what we're doing, whom we're doing it with, and how we feel about our monitored activities.

Put it all together and we can see that our conception of what it means to be human has become "design space." We're now Humanity 2.0, primed for optimization through commercial upgrades. And today's apps are more harbinger than endpoint.

by Evan Selinger, The Atlantic |  Read more: 
Image: Shaun Foster.

Till Math Do Us Part: Sundem/Tierney Unified Celebrity Theory

In 2006, Garth Sundem and I confronted one of the great unsolved mysteries in social science: Exactly how soon will a given celebrity marriage blow up?

Drawing on Garth’s statistical expertise and my extensive survey of the literature in supermarket checkout lines, we published an equation in The New York Times predicting the probability that a celebrity marriage would endure. The equation’s variables included the relative fame of the husband and wife, their ages, the length of their courtship, their marital history, and the sex-symbol factor (determined by looking at the woman’s first five Google hits and counting how many show her in skimpy attire, or no attire).

Now, with more five years of follow-up data, we can report firm empirical support for the Sundem/Tierney Unified Celebrity Theory.

The 2006 equation correctly predicted doom for Demi Moore and Ashton Kutcher; Pamela Anderson and Kid Rock; and Britney Spears and Kevin Federline. It also forecast that Will Smith and Jada Pinkett would probably not make it to their 15th anniversary, in December 2012; so far, they’re still married, but gossip columns are rife with reports of a pending split.

On a happier note, the 2006 equation identified two couples with a good chance to make it to their fifth anniversary, in 2010: Ben Affleck and Jennifer Garner, and Matt Damon and Luciana Barroso. Sure enough, they made it (and are still married).

As impressive as these results are, we believe even more scientific progress is possible. We have refined the equation by drawing on recent data as well as the research conducted by Garth in his fiendishly clever new book, “Brain Trust: 93 Top Scientists Reveal Lab-Tested Secrets to Surfing, Dating, Dieting, Gambling, Growing Man-Eating Plants, and More!”

While the 2006 equation did a good job over all of identifying which couples were most likely to divorce, some of the specific predictions proved too pessimistic. Because Demi was so famous — and much more famous than Ashton — we gave their marriage little chance of surviving a year, but they didn’t split until 2011. We were similarly bearish on Tom Cruise and Katie Holmes (because of his fame, his two failed marriages and their age gap), but they’re still together.

What went right with them — and wrong with our equation? Garth, a self-professed über-geek, has crunched the numbers and discovered a better way to gauge the toxic effects of celebrity. Whereas the old equation measured fame by counting the millions of Google hits, the new equation uses a ratio of two other measures: the number of mentions in The Times divided by mentions in The National Enquirer.

“This is a major improvement in the equation,” Garth says. “It turns out that overall fame doesn’t matter as much as the flavor of the fame. It’s tabloid fame that dooms you. Sure, Katie Holmes had about 160 Enquirer hits, but she had more than twice as many NYT hits. A high NYT/ENQ ratio also explains why Chelsea Clinton and Kate Middleton have better chances than the Kardashian sisters.”

by John Tierney, NY Times |  Read more:

Fun After 40 (Miles Per Gallon)

Ask the hipster waiting in line for a new iPad. Buyers and critics alike are easily seduced — sometimes too easily — by the new.

It’s no different with cars. Last year, a rare battle of the welterweights broke out. Never before, it seemed, had so many new compact models swaggered into showrooms. The Ford Focus, Honda Civic, Hyundai Elantra, Chevy Cruze and Nissan Versa were all brand-new or completely redesigned. Which one would win the compact crown?

Yet while all eyes were focused on the main event, the Mazda 3 was in training. It now comes to market not as a stem-to-stern redesign, like those competitors, but with a transformative new engine and a pair of exceptional new transmissions.

Although the Mazda arrived relatively late, it turns out to be the life of the party. Long the sportiest, most rewarding car to drive in its class, the 3 is now the only one that effortlessly tops 40 miles per gallon in real-world driving.

Let’s repeat that: The Mazda 3 is the best performer in the class, and it has the best mileage. That’s a pretty unbeatable combination.

Since the 1970s, of course, Mazda has worked that niche of affordable Japanese performance, enjoying hits like the Miata roadster, but never quite breaking into the big time. Fuel economy took a back seat, as with Mazda’s prodigiously thirsty, rotary-engine RX sports cars.

But with regulators circling and a 35 m.p.g. standard brewing, there’s no longer any place to hide. Mazda says its new suite of technologies, collectively called Skyactiv, will raise its fleetwide mileage by 30 percent by 2015 with no need for an expensive hybrid system.

by Lawrence Ulrich, NY Times |  Read more:
Photo: Mazda North America

Portishead

Michael Parkes
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A prickly porcupine, arched with quills at the ready to greet a prowling leopard took top honors in the 2012 BP World Ice Art Championships Multi Block Classic competition at the George Horner Ice Park.

The work, titled “Prickly Reception,” is the masterpiece of a four-member Japanese team led by Junichi Nakamara, a master ice artist who also placed first with a partner in the single block competition judged last week.

The Saturday night awards ceremony culminated the 132-hour competition, which ended Friday evening.

For six days, 19 teams of two to four sculptors, using chain saws, chisels, drills, hairdryers, irons and handmade tools, hewed fantastical, artistic forms and figures from 4-feet-by-6-feet-by-3-feet blocks of solid ice, some sculpting around the clock.

by Mary Beth Smetzer, Fairbanks Daily News Miner |  Read more:
Image: Sam Harrel

McNair Evans
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Last Fling of an Octogenarian

Where I grew up, there lived a man named David. He drove a Jaguar, spoke with a BBC accent and dressed only ever in a suit and tie. His air was patrician, which disguised — perhaps this was the point — the fact that as a child he was sent to England from South Africa by a wayward mother and brought up, modestly, by strangers.

Forty years my senior, David at some point turned numerically old, but his energy never dimmed. His business engagements continued, and he jogged barechested in the rain. His beloved wife, however, developed Alzheimer’s. Over time, the disease sealed her world from his and relegated her to a nursing home, where David visited her often, convinced that something still passed between them.

And then, not so long ago, David developed prostate cancer.

Disdainful of impediments, David did not take his condition seriously, and it eventually became certain it would kill him. He continued to live as before, but the physical decline began, at length, to unfold.

Last July I went to visit David at his home with my partner, Monica. He answered the door gaily in his suit and tie; he kissed Monica gallantly and led us to glasses of Champagne. We talked about the state of the world. David was enjoying himself, and still did not look his 81 years.

Finally I said, “I hear things aren’t going so well for you.”

“Not so well as they used to, Rana. I have all this external plumbing now under my suit, which makes life a bit harder. But I’m still working, still getting about. When you get to my age, you know you’re crawling toward the thin end of the branch. At some point it has to break.”

A few weeks after this, my father called me, agitated.

David had telephoned him at 6 o’clock that morning. He rushed across the road to discover David prostrate on the kitchen floor, where he had been lying for six hours, waiting for a decent time to call.

David was a full head taller than my father, who, 73 himself, could not lift him. My mother came to help and, over the next hour, they heaved David up the stairs. David himself could offer nothing: he was physically spent, his limbs shook violently and his eyes were wide with horror. All his sacks burst open during the climb, covering the stairs in urine and feces.

“He’s such a proud man,” wept my father on the phone. “I think his heart broke today.”

It was true. David went into a nursing home the next day, became rapidly delirious, and soon after, he died.

When I think of him now, I cannot forget a story he told during that final encounter.

David frequently hosted meetings in a particular hotel. Over time he became friendly with the hotel receptionist, and one day, in the February before his death, he invited her out to lunch. She was 37.

by Rana Dasgupta, NY Times |  Read more:
Illustration: Holly Wales

Traction
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Is This How to Start a New Chapter in Your Love Life?

You are sitting on a train, and across the aisle someone is reading one of your favourite books.

This person (clearly of taste) happens to be a tall, handsome man. As you stare he looks up, catches your eye and smiles – he asks for your number... Browsing in a bookshop you reach out to pick up a book; so does the person standing next to you. The person happens to be a tall, handsome man. He catches your eye and smiles – he asks if you would like to go for coffee... So run the fantasies of many a book-lover.

Which is why Literary speed-dating is such an exciting prospect for a bookish single. The conceit is that, rather than talk about yourself, you talk about a book you have brought along. It's run of the mill speed-dating made intellectual – more Granta than Hello!. The idea has already taken off across America and Canada, with speed-dating events held at such cultish venues as the Rare Book Room in New York's famous Strand bookstore (which holds an immensely popular literary speed-date every Valentine's Day). Inexplicably, though, literary speed-dating has yet to become commonplace here.

Anxious to try out this 21st-century method of merging reading and romance, I gate-crashed a literary speed-dating event hosted by the London School of Economics' Student Union Literary Society as part of the LSE's Literary Festival. I spent the whole of the week before in the throes of a delightful dilemma – not over what to wear, but over which book to take. "By what book ye bring, ye shall be judged" could be the motto of literary speed-dating. Do not look pretentious, or lightweight, beware a cynical choice and beware a book which takes itself too seriously. A children's book could make you appear immature and an electronic text is a no-no. (I chose Nancy Mitford's The Pursuit of Love and crossed fingers that it wouldn't frighten off potential suitors).

On the night itself a group of about 30 met in a room of the LSE's New Academic Buildings. As we milled prior to the speed-dating kick-off, I asked if anyone had been on a conventional speed-dating night. If they had, no one admitted to it. It was that extra-literary twist which for them, as for me, had proved an irresistible combination. Somewhat predictably the women marginally outnumbered the men (the event's organiser had been inundated with women wanting to take part but had struggled to drum up the same enthusiasm from men).

In spite of the unfavourable odds, I refused to be discouraged and began the evening with high hopes. The men I met brandished books by authors from Franz Kafka to George Friedman, from Aldous Huxley to Richard Bach and from Jonathan Swift to Evelyn Waugh. A few showed off their feminine side by making the case for Kate Chopin's The Awakening and Caitlin Moran's blockbuster How to be a Woman. Three nervous-looking undergrads, attending as a result of a dare, found comfort in the free wine (in fact so unstinted were the quantities that my dates grew increasingly slurred as the evening went on). 

by Miranda Kiek, The Independent |  Read more:

Pulp Shakespeare

Did Shakespeare write Pulp Fiction? No, but if he did, it might sound like this.

Imagine a high school class on the Great Works of Western Civilization, circa 2400. The teacher shows the students a selection of films by Quentin Tarantino, that exalted late-20th- and early-21st-century dramatist who worked in the medium then known as film. The series culminates in Pulp Fiction, perhaps, for modern audiences, the most enduring and accessible example of the master’s art. Yet most of the kids in the room falter on the edge of comprehension, and one eventually explodes in frustration. “Why do they all dress like that?” the student demands, in whatever the English language has evolved into. “And seriously, why do they talk that way? Why do we even have to watch this, anyway?” Then the teacher, returning to his drying well of patience, his face settling into the creases worn by decades of stoically borne disappointment, explains to his despondent charge that Tarantino’s all about the language. “He used English in ways nobody had before,” he says, for nothing close to the first nor last time, “and if you put in just a little more study time, you’d understand that.”

Her Majesty’s Secret Players do seem to understand that, bring as they will a production called Pulp Shakespeare (or, A Slurry Tale) to its West Coast premiere at this summer’s Hollywood Fringe Festival. To view the clip of the show above is to feel at least two senses of odd familiarity at once: don’t I know this scene and these characters from somewhere, and don’t I know these words from somewhere? Were you to watch it without context, you’d probably guess that the dialogue sounded Shakespearean, and in the first few minutes, that guess might even take you as far as wondering which of the lesser-known plays this might be. But Pulp Shakespeare offers not Shakespeare’s words but a pastiche of Shakespeare through which to watch Pulp Fiction, effectively bringing that 25th-century classroom scenario into the present. Rendering Tarantino’s dialogue in Shakespearean dramatic poetry both familiarizes Shakespeare’s style and de-familiarizes Tarantino’s, giving strong hints to anyone looking to understand Shakespeare’s appeal in his day, how history might treat Tarantino, and how the two have more in common than we’d have assumed.

(Note to 21st-century teachers: we nonetheless do not suggest you introduce Shakespeare as “sort of the Quentin Tarantino of his day.”)

via: Open Culture

Merdivenler...by NuriGiray 
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PSA: Clevercat litter box

I was getting tired of our 3 cats kicking litter all over the place. I bought this Clevercat litter box and it has significantly reduced the amount of litter they enjoy spreading around. It's basically a storage bin with a hole in the top for the cat to jump in and out of. My cats had no problem figuring out how to use it. (That's where the "clever" part of the name of the product comes into play. The "cat" part refers to the fact that it's for cats).

Mike Ramberg saw this photo on my G+ feed and pointed out a bonus feature of the litterbox: "We had one of those. Often they'd be using it with their head sticking out of the hole. Looked like they were piloting a spacecraft."

by Mark Frauenfelder, Boing Boing

I Think, Therefore I Choke

It was a chip shot. With just 15 seconds left in the AFC championship game against the Patriots in January, the Ravens' Billy Cundiff faced a 32-yarder to send the game into overtime. Like all NFL kickers, Cundiff uses the scoreboard to keep track of downs and where he should be in his prekick routine. As the Ravens stalled at the Pats' 14-yard line, the Gillette Stadium scoreboard showed third down. Problem was, it was wrong, the Ravens say. Unprepared and probably a bit confused, Cundiff was rushed onto the field by screaming coaches. He hadn't missed a fourth-quarter kick all season. But he got a mediocre snap; the laces weren't quite out. His kick came low off of his foot and hooked left. With his teammates looking on in horror and disbelief, Cundiff had just choked -- badly.

In 2010, Cundiff had booted the football as far as anyone in history, with a record 40 touchbacks, earning a spot in the Pro Bowl. Of the 66 field goals he'd attempted in the past two seasons, he'd missed only 12. Considering that Cundiff had played for eight different teams in the previous seven years, with only 11 touchbacks combined, he'd seemed nothing short of a new kicker.

What very few people outside out of Cundiff's inner circle knew was that he'd become a guinea pig for the new science of clutch. For decades, sports psychologists have been trying to keep athletes from cracking under pressure, with no measurable sign of success. But now a breed of scientists is putting new technology to work for athletes like Cundiff under game conditions. They have a much clearer grasp on why athletes choke and are at least in the ballpark when it comes to preventing it.

If you'd been watching Cundiff on the sideline this past season, you'd have seen him toying with a silver gizmo the size of an iPod. Given to him the previous year by psychologist Louis Csoka, one of his mental trainers, it's known as an emWave, and it measures heart rate variability (HRV). Not beats per minute -- that's old-school. Designed by the research company HeartMath, the emWave examines in real time how athletes are responding to old sports psychology tricks like visualization and meditative breathing. It's the same gizmo used by military elite tactical teams to regulate stress levels before deployment.

Cundiff had been using the HeartMath methods since 2007. A green light on the gizmo meant Cundiff felt confident and prepared, his heartbeats evenly spaced. When Cundiff was nervous or even panicked, however, the emWave flashed red and he knew to focus on his breathing as he'd been trained.

Historically, anyone who dares to give pro athletes mental advice -- be they M.D.s, psychologists or shamans -- often gets the eye roll or the pat on the back. But in an email, Cundiff told HeartMath trainer John White that his hocus-pocus was making all the difference. "Not only were my mental skills continually improving," he wrote, "but they were working in game conditions, not just practice ... I was killing the ball and having a great time doing it. People, in general, don't deal with stress. Moving forward, stress will be the least of my worries."

by Jaimal Yogis, ESPN |  Read more:
Photo: Dan Winters

Geoffrey Johnson, Figures in Blue and Green, oils on canvas
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Why I Pirate - An Open Letter To Content Creators

I once rented a car for work and had an unpleasant experience. When I returned the car, I thought to myself, "I'm never renting from them again." After sitting on it for a day, I realized conducting my own silent protest wasn't going to help me or the rental agency. So later that day, I called their corporate headquarters and told my story to the VP of customer relations. More importantly, I told him what they did wrong and what kind of experience I expect as a customer if he wants my future business.

I would like all the content creators reading this to view this post as though you are the car rental agency. I am a dissatisfied customer who may never buy from you again unless you get your act together. I normally wouldn't waste my time explaining all this, but the content creators on Step2 certainly seem to be going in the right direction so I'm hoping this information will help.

This post isn't my attempt at a debate. You won't hear any mention of theft versus copying, exposure versus lost sales or right versus wrong. All I want to do is give you real-life insight from the file-sharing world. I want to hold your hand and show you how I decide what to buy and what my motivation is to pirate. I will use the terms pirate, download and file-sharing interchangeably throughout this post but they all mean the same thing: to download your content for free.

Some people will read this and think, "I don't care what this guy says, internet piracy is damaging." For those people, I ask you to skip the rest of this post and jump to the bottom section titled, 'In Closing.'

Some of you won't read this entire post and it won't hurt my feelings. You won't understand your customers and we won't buy your content. And don't read this hoping to find out why people download your content in the hopes that you can stop it in the future. You cannot stop file-sharing. It would be like trying to stop people from using electricity. People who have already paid for your content will also be some of the ones who download it.  And they'll share it with others.

by Bobbi Smith, Step2 Insight Community | Read more:
Illustration via: Salon

How To Be Creative

Creativity can seem like magic. We look at people like Steve Jobs and Bob Dylan, and we conclude that they must possess supernatural powers denied to mere mortals like us, gifts that allow them to imagine what has never existed before. They're "creative types." We're not.

But creativity is not magic, and there's no such thing as a creative type. Creativity is not a trait that we inherit in our genes or a blessing bestowed by the angels. It's a skill. Anyone can learn to be creative and to get better at it. New research is shedding light on what allows people to develop world-changing products and to solve the toughest problems. A surprisingly concrete set of lessons has emerged about what creativity is and how to spark it in ourselves and our work.

The science of creativity is relatively new. Until the Enlightenment, acts of imagination were always equated with higher powers. Being creative meant channeling the muses, giving voice to the gods. ("Inspiration" literally means "breathed upon.") Even in modern times, scientists have paid little attention to the sources of creativity.

But over the past decade, that has begun to change. Imagination was once thought to be a single thing, separate from other kinds of cognition. The latest research suggests that this assumption is false. It turns out that we use "creativity" as a catchall term for a variety of cognitive tools, each of which applies to particular sorts of problems and is coaxed to action in a particular way.

It isn't a trait that we inherit in our genes or a blessing bestowed on us by the angels. It's a skill that anyone can learn and work to improve.

Does the challenge that we're facing require a moment of insight, a sudden leap in consciousness? Or can it be solved gradually, one piece at a time? The answer often determines whether we should drink a beer to relax or hop ourselves up on Red Bull, whether we take a long shower or stay late at the office.

The new research also suggests how best to approach the thorniest problems. We tend to assume that experts are the creative geniuses in their own fields. But big breakthroughs often depend on the naive daring of outsiders. For prompting creativity, few things are as important as time devoted to cross-pollination with fields outside our areas of expertise.

by Jonah Lehrer, WSJ |  Read more:
Illustrations by Serge Bloch