Parisian Family Office, CEO. Began Wall Street, 82. Founded investment firm, CHIPPEWA PARTNERS, Native American Advisors. Member, White Earth Chippewa Tribe. Was NYSE/FINRA arb. Conservative, raised on Native reservations. Pureblood, clot-shot free. In a world elevated on a tech-driven dopamine binge, Dean trades from Ghost Ranch, on the Yellowstone River in MT, TN farm, Pamelot or CASA TULE', his winter camp in Los Cabos, Mexico. Always been, will always be, an optimist. Chase your dreams!

Wednesday, July 27, 2005

We're not talking shotgun shells here.........

With utmost respect to the Chair, to share the thoughts of the worlds finest squash player is an honor.

7/26/05 What We Can Learn from Shells, by Victor Niederhoffer:

Shells and mollusks have been around for 500 million years, and they are the second most numerous family of all in nature. The shell provides the protection and stability for relatively slow moving species and how it evolved and its function would seem to provide some guidelines for survival and success stories in markets and life.
The book Shells by Cheryl Claasen is very helpful in understanding the uses and abuses of shell research. Her passage on predation as a contest between prey and predator among shells makes you particularly skittish about the direct approach to investments. Shells change their colors, their size, their opening thickness and space, their curvature, their carried baggage, their depth, their shape and their speed, all to avoid being swallowed, enveloped, suffocated, trapped, drilled, thrown to the ground (the otter is a master at this), cut open, hammered, crushed, speared, poisoned, parasitized, nibbled or "killed by forced entry from non-human predators." They use all their senses to preclude dying as a meal for a day by escape, and over evolutionary time by developing the ideal mechanisms for such defense, a defense that Claussen emphasizes again and again is mainly against their natural predators such as birds and fish rather than humans.
The shell is mainly for protection, but also to prevent dehydration and the mollusks manipulate the shells by "strength, resistance to dissolution, thickness, projections, colorations, narrow apertures, hinge teeth and crenulations on margins and repair, often affixing stones, shells and other detritus to provide camouflage". Particularly clever are the many mollusks that arrange when ingested to close up tightly, thereafter emerging healthy and unscathed through the digestive tract of their predator weeks later.
I am always amazed, after reading something about how a slow moving species like the mollusk or a moth is able to use all types of deception, that anyone could believe that markets and the human actors within it don't make it equally hard to survive with a simple strategy of eating them "raw, squawking and fully feathered" as the great MFM Osborne liked to say.
The two main kinds of structures for animals are the skeleton and the shell. The skeleton hangs the organs around an internal framework, and the shell puts them in a box. The skeleton is much more adaptable, but the shell provides rigidity and protection, a nice alternative. The most intelligent mollusks, the cephalopods, like the octopus and the squid, have given up their shells so that they can be more mobile and flexible. The companies that try to protect themselves with a rigid structure through regulations that preclude competition, or heavy non-reproducible fixed costs, like the mining companies, are like the shells. They can maintain it for so long, and certainly everything they do to create a fixed structure for protection is to be applauded. But I wonder if the companies that are more skeletal, such as eBay and Google, can maintain flexibility as well as providing a fixed barrier to entry and dehydration? May I mention MERC in this context, as having the best of both worlds
As an additional note, the boys in the office are generally averse to a wager because we don't like to gamble, but when we read that you can drop an abalone shell from a second floor window and it won't break, the gloves came off and many nickels changed hands. We dropped it and the oak floor chipped but not the abalone. The abalone has amazing strength, 3000 times stronger than the minerals it's made of. The secret is that it has a crystal formation called aragonite that lays down calcium carbonate between sheets of protein in a regular pattern. Another amazing example of how nature has a million designs that can teach us about engineering. They can also teach us about how to make a stock strong, and I hypothesize that the layering of ups and down in a path, with for example a five point move consisting of 25 points up and 20 points down, is much more resilient than a straight up 5 points.

No comments: