Monday, August 23, 2010
Pilot Peak
Pilot Peak, located in northeastern Nevada, is a relatively unknown mountain with both historic and geographic significance. The mountain rises to 10,720 feet, and sits at the western edge of the Great Salt Lake Desert.
The mountain has always served as an important landmark for travelers attempting to cross the salt desert into the Great Basin region. In his pathfinding expedition across the salt flats in 1845, John C. Fremont spied the peak from the Cedar Mountains far to the east and sent Kit Carson ahead in the direction of the mountain. Carson crossed the desert and lit a bonfire at the eastern base of Pilot Peak signalling his successful passage.
The infamous Hastings Cutoff, which led California-bound pioneers around the southern shore of the Great Salt Lake instead of north of the lake, also passes right along the southern base of Pilot Peak. In 1846 the Donner Party followed Hastings Cutoff in their attempt to make California. After a grueling salt desert passage, they camped at the springs at the base of Pilot Peak to recuperate.
Pilot Peak is also noted by geographers and mountaineers for its prominence. While not comparatively high in absolute terms, it is quite high relative to the surrounding terrain. This relief characteristic of mountains is known as topographic prominence. At 5,276 feet, Pilot Peak ranks 32nd on the list of most prominent peaks in the contiguous United States. This makes it more prominent than other better known mountains, including South Sister in Oregon, Pikes Peak in Colorado, and Mt. Nebo and Mt. Timpanogos in Utah.
Climbing Pilot Peak can be a rewarding but challenging expedition for the motivated peakbagger. There is no established trail or single route to the top, and the mountain is noted for expansive boulder fields, cliffs, scree, and talus that make ascent difficult and descent potentially treacherous. There are no reliable water sources in the area in summer and fall. The mountain is very isolated. There is no cell phone coverage available except at the summit, and many days or even weeks can pass without another person in the vicinity. By reviewing the summit log it can be estimated that perhaps 10 people climb the mountain every year.
The most common route up begins at Miners Canyon, on the southeast side of the mountain. A dirt road runs north-south along the east side of Pilot Peak. This road can be accessed off Interstate 80 by turning north at Utah exit 4 east of Wendover. Right before crossing a second cattleguard on this road, a jeep trail turns off to the left and winds almost 5 miles up into Miners Canyon. This jeep trail is quite rough, and may require 4-wheel drive briefly and high clearance. The road passes an old mine shaft on the left and a spring on the right as the canyon is entered.
A northwest climb from this point allows access to the south ridge off the summit, which is traversed to the top. Numerous cliffs and obstacles must be passed around on this route, and the west side of the summit ridge traverse can be steep in places. Bighorn sheep and antelope might be seen during the climb. At the summit there are numerous rock cairns, and a mailbox with some summit registers. The most recent register was placed years ago by the Sierra Club Desert Peaks section, but other registers record entries back to 1963. It occurred to me that an excellent project for a motivated individual, including an Eagle Scout candidate, would be to retrieve the registers and digitize the entries before they become completely unreadable with age. Some of the entries make quite entertaining reading. It is apparent that some people have ascended routes on the east and west sides of the mountain instead of up the south ridge. These alternative routes appear quite challenging.
The view from the summit is, of course, amazing. On a clear day one can see all the way across the salt flats to the Wasatch Mountains in the east. To the west lays the expansive basin and range country. There is a settlement that can be seen in the valley to the west, which is Pilot Peak Ranch.
Descending the mountain can be exceedingly difficult, given the seemingly endless scree, talus, and boulder fields. If returning to Miners Canyon, it is important to stay relatively high on the south ridge and avoid dropping down too quickly into the large S-shaped canyon on the southeast face of the mountain. This is a large boulder rockfall canyon with a cliff on its southern edge that prevents a crossing over to the Miners Canyon trailhead until one is well beneath the destination. Descending this rockfall is exceedingly difficult; I was left with mangled hiking boots and poles, lost sunglasses, torn ligaments, and a broken toe to show for this mistake in descent.
Overall, climbing Pilot Peak can be a fun and rewarding experience on a remote desert mountain with both historic and geographic significance.
Southeast face of Pilot Peak.
Avoid descending the large S-shaped canyon in the middle of the photo. This is a boulder rockfall canyon that is very difficult to descend.
Boulder field rockfall on Pilot Peak. This stuff is seemingly endless on this mountain. Needless to say, it makes for a treacherous ascent and even more difficult descent.
Wear sturdy boots. The endless jagged boulders can mangle hiking boots. Perhaps bring an extra pair just in case.
To the east from Pilot Peak summit. On a clear day, the Silver Island, Cedar, Oquirrh, and Wasatch ranges in Utah can be seen.
At the summit of Pilot Peak. Some rock cairns help with shelter from the strong winds at 10,720 feet.
Miners Canyon Trailhead. Looking east at dusk, Pilot Peak casts a shadow on the western face of the Silver Island mountains.
Miners Canyon. Parked at trailhead.
To the south. This is the ridge to be climbed to the summit. The hills in the middle left of the photo are the Leppy Hills. Wendover is on the other side of these hills.
Pilot Range. To the north, into Idaho.
Summit of Pilot Peak to the west. Basin and range country.
The mountain has always served as an important landmark for travelers attempting to cross the salt desert into the Great Basin region. In his pathfinding expedition across the salt flats in 1845, John C. Fremont spied the peak from the Cedar Mountains far to the east and sent Kit Carson ahead in the direction of the mountain. Carson crossed the desert and lit a bonfire at the eastern base of Pilot Peak signalling his successful passage.
The infamous Hastings Cutoff, which led California-bound pioneers around the southern shore of the Great Salt Lake instead of north of the lake, also passes right along the southern base of Pilot Peak. In 1846 the Donner Party followed Hastings Cutoff in their attempt to make California. After a grueling salt desert passage, they camped at the springs at the base of Pilot Peak to recuperate.
Pilot Peak is also noted by geographers and mountaineers for its prominence. While not comparatively high in absolute terms, it is quite high relative to the surrounding terrain. This relief characteristic of mountains is known as topographic prominence. At 5,276 feet, Pilot Peak ranks 32nd on the list of most prominent peaks in the contiguous United States. This makes it more prominent than other better known mountains, including South Sister in Oregon, Pikes Peak in Colorado, and Mt. Nebo and Mt. Timpanogos in Utah.
Climbing Pilot Peak can be a rewarding but challenging expedition for the motivated peakbagger. There is no established trail or single route to the top, and the mountain is noted for expansive boulder fields, cliffs, scree, and talus that make ascent difficult and descent potentially treacherous. There are no reliable water sources in the area in summer and fall. The mountain is very isolated. There is no cell phone coverage available except at the summit, and many days or even weeks can pass without another person in the vicinity. By reviewing the summit log it can be estimated that perhaps 10 people climb the mountain every year.
The most common route up begins at Miners Canyon, on the southeast side of the mountain. A dirt road runs north-south along the east side of Pilot Peak. This road can be accessed off Interstate 80 by turning north at Utah exit 4 east of Wendover. Right before crossing a second cattleguard on this road, a jeep trail turns off to the left and winds almost 5 miles up into Miners Canyon. This jeep trail is quite rough, and may require 4-wheel drive briefly and high clearance. The road passes an old mine shaft on the left and a spring on the right as the canyon is entered.
A northwest climb from this point allows access to the south ridge off the summit, which is traversed to the top. Numerous cliffs and obstacles must be passed around on this route, and the west side of the summit ridge traverse can be steep in places. Bighorn sheep and antelope might be seen during the climb. At the summit there are numerous rock cairns, and a mailbox with some summit registers. The most recent register was placed years ago by the Sierra Club Desert Peaks section, but other registers record entries back to 1963. It occurred to me that an excellent project for a motivated individual, including an Eagle Scout candidate, would be to retrieve the registers and digitize the entries before they become completely unreadable with age. Some of the entries make quite entertaining reading. It is apparent that some people have ascended routes on the east and west sides of the mountain instead of up the south ridge. These alternative routes appear quite challenging.
The view from the summit is, of course, amazing. On a clear day one can see all the way across the salt flats to the Wasatch Mountains in the east. To the west lays the expansive basin and range country. There is a settlement that can be seen in the valley to the west, which is Pilot Peak Ranch.
Descending the mountain can be exceedingly difficult, given the seemingly endless scree, talus, and boulder fields. If returning to Miners Canyon, it is important to stay relatively high on the south ridge and avoid dropping down too quickly into the large S-shaped canyon on the southeast face of the mountain. This is a large boulder rockfall canyon with a cliff on its southern edge that prevents a crossing over to the Miners Canyon trailhead until one is well beneath the destination. Descending this rockfall is exceedingly difficult; I was left with mangled hiking boots and poles, lost sunglasses, torn ligaments, and a broken toe to show for this mistake in descent.
Overall, climbing Pilot Peak can be a fun and rewarding experience on a remote desert mountain with both historic and geographic significance.
Southeast face of Pilot Peak.
Avoid descending the large S-shaped canyon in the middle of the photo. This is a boulder rockfall canyon that is very difficult to descend.
Boulder field rockfall on Pilot Peak. This stuff is seemingly endless on this mountain. Needless to say, it makes for a treacherous ascent and even more difficult descent.
Wear sturdy boots. The endless jagged boulders can mangle hiking boots. Perhaps bring an extra pair just in case.
To the east from Pilot Peak summit. On a clear day, the Silver Island, Cedar, Oquirrh, and Wasatch ranges in Utah can be seen.
At the summit of Pilot Peak. Some rock cairns help with shelter from the strong winds at 10,720 feet.
Miners Canyon Trailhead. Looking east at dusk, Pilot Peak casts a shadow on the western face of the Silver Island mountains.
Miners Canyon. Parked at trailhead.
To the south. This is the ridge to be climbed to the summit. The hills in the middle left of the photo are the Leppy Hills. Wendover is on the other side of these hills.
Pilot Range. To the north, into Idaho.
Summit of Pilot Peak to the west. Basin and range country.
Wednesday, July 21, 2010
Why Western History Matters
Western civilization was not the result of some inevitable process through which other cultures will automatically pass. It emerged from a unique history in which chance and accident played a vital part. The institutions and ideas that provide for freedom and improvement in material conditions cannot flourish without an understanding of how they came about....
At the same time, the foundations of freedom have also come into question. Jefferson and his colleagues could confidently proclaim their political rights as the gift of a "Creator". By now, however, the power of religion has faded, and for many the basis for a modern political and moral order has been demolished. Nietzsche announced the death of God, and Dostoevsky's Grand Inquisitor asserted that when God is dead all things are permitted. Nihilism rejects any objective basis for society and its morality, the very concept of objectivity, even the possibility of communication itself, and a vulgar form of nihilism has a remarkable influence in our educational system today.
The consequences of the victory of such ideas would be enormous. If both religion and reason are removed, all that remains is will and power, where the only law is that of tooth and claw. There is no protection for the freedom of weaker individuals or those who question the authority of the most powerful. There is no basis for individual rights or for a critique of existing ideas and institutions....
--Donald Kagan, "Why Western History Matters", 1994
At the same time, the foundations of freedom have also come into question. Jefferson and his colleagues could confidently proclaim their political rights as the gift of a "Creator". By now, however, the power of religion has faded, and for many the basis for a modern political and moral order has been demolished. Nietzsche announced the death of God, and Dostoevsky's Grand Inquisitor asserted that when God is dead all things are permitted. Nihilism rejects any objective basis for society and its morality, the very concept of objectivity, even the possibility of communication itself, and a vulgar form of nihilism has a remarkable influence in our educational system today.
The consequences of the victory of such ideas would be enormous. If both religion and reason are removed, all that remains is will and power, where the only law is that of tooth and claw. There is no protection for the freedom of weaker individuals or those who question the authority of the most powerful. There is no basis for individual rights or for a critique of existing ideas and institutions....
--Donald Kagan, "Why Western History Matters", 1994
Wednesday, June 30, 2010
The Treasury Bubble Bulges
A prominent characteristic of free-market economic systems is the periodic expansion and collapse of so-called bubbles. These bubbles can form in any environment where the free exchange of currency and goods exists. They are characterized by an extraordinary rise and elevation in the price of a certain good or sector relative to its baseline, and a subsequent collapse of this price. An historical example of a speculative bubble is the famous Dutch tulip mania of the 1600s, although a bubble of some sort can almost always be found in some capital market at any time. Recent financial bubbles include the technology bubble of the late 1990s, the real estate bubble of the mid-2000s, and the oil price bubble which burst in July 2008. Economic bubbles are fundamentally driven by human psychology. This is an interesting topic which is beyond the scope of the current post.
The most prominent bubble in financial markets today is the US Treasury Bond. Treasury bond prices in the last few years have seen extraordinary elevations in prices as governments, institutions, and individuals seek the perceived relative safety of this investment. As T-bond prices have been bid up, the yield on these instruments has fallen to historical lows. One must go back in history to the early 1960's to find Treasury bond yields this low.
One characteristic of financial bubbles is their persistence; they can last much longer, and grow substantially larger, than what rationality would dictate. However, this bubble, like all such bubbles, will collapse one day as bond yields rise and prices fall.
We have started to anticipate this trend change by shorting the US Treasury Bond market. We entered a large short position in Treasury bonds on April 27th 2010, and added to the position June 28th 2010. The positions are, of course, underwater already as of this writing; this is what one would expect, since betting against bubbles is always a losing investment in the short term.
There are very few sure things in trading the financial markets; one virtually sure thing at this point is that Treasury Bonds will eventually fall substantially lower than their current prices. We are prepared to wait for that to happen.
The most prominent bubble in financial markets today is the US Treasury Bond. Treasury bond prices in the last few years have seen extraordinary elevations in prices as governments, institutions, and individuals seek the perceived relative safety of this investment. As T-bond prices have been bid up, the yield on these instruments has fallen to historical lows. One must go back in history to the early 1960's to find Treasury bond yields this low.
One characteristic of financial bubbles is their persistence; they can last much longer, and grow substantially larger, than what rationality would dictate. However, this bubble, like all such bubbles, will collapse one day as bond yields rise and prices fall.
We have started to anticipate this trend change by shorting the US Treasury Bond market. We entered a large short position in Treasury bonds on April 27th 2010, and added to the position June 28th 2010. The positions are, of course, underwater already as of this writing; this is what one would expect, since betting against bubbles is always a losing investment in the short term.
There are very few sure things in trading the financial markets; one virtually sure thing at this point is that Treasury Bonds will eventually fall substantially lower than their current prices. We are prepared to wait for that to happen.
Monday, May 17, 2010
Hedging Equities with Volatility
The recent pullback in capital markets sparked by fears of a debt-ridden Eurozone collapse demonstrates the need to be hedged against market volatility. One of the ways to accomplish this is to simply purchase long positions in the VIX during periods of hope and complacency.
The VIX volatility index rises during periods of fear, panic, and uncertainty, and falls during periods of hope, greed, and stability. Since the VIX will never fall to zero, purchasing long positions in the VIX when it is low is a relatively safe strategy. Conversely, since the VIX is not a value-producing asset, it must be actively traded, and therefore it must be sold when volatility spikes and fear returns.
We recently used this strategy with some success. On February 26 2010 we entered a long position in the VIX via the VXZ exchange-traded note. The entire position was sold on a panic volatility spike which occurred May 7 2010. The trade yielded a 25% gain over 6 weeks, which provided a welcome hedge against the degradation of long positions over the same time period.
The VIX volatility index rises during periods of fear, panic, and uncertainty, and falls during periods of hope, greed, and stability. Since the VIX will never fall to zero, purchasing long positions in the VIX when it is low is a relatively safe strategy. Conversely, since the VIX is not a value-producing asset, it must be actively traded, and therefore it must be sold when volatility spikes and fear returns.
We recently used this strategy with some success. On February 26 2010 we entered a long position in the VIX via the VXZ exchange-traded note. The entire position was sold on a panic volatility spike which occurred May 7 2010. The trade yielded a 25% gain over 6 weeks, which provided a welcome hedge against the degradation of long positions over the same time period.
Wednesday, February 24, 2010
EW bullishness
One Elliott Wave practitioner recently switched his long term market characterization from "bear" to "bear/bull inflection point".
Which begs the question, if EW sentiment is tilting bullish, is that bearish for the market?
Which begs the question, if EW sentiment is tilting bullish, is that bearish for the market?
Tuesday, February 23, 2010
TO VXX OR NOT TO VXX
An important concept in financial markets is volatility. The most common measurement of market volatility is the CBOE volatility index, which has a ticker symbol of VIX. While the details of how volatility is measured can be complicated, it can generally by thought of as a measurement of perceived market risk going forward. If the VIX is high, it implies that market participants believe the chance of a falling market is high, and therefore they drive up the price of protective options. In other words, if the VIX rises, it implies an anticipation of falling stock prices.
It is not possible to invest in the VIX directly; however, Barclays has two exchange-traded notes which attempt to follow the VIX via a daily rolling long position in VIX futures contracts. The VXX tracks the forward 1-2 months of VIX futures contracts, while the VXZ tracks the 4-7 month contracts.
How closely do these instruments track the VIX? The answer is, not well.
From January 2009 through February 2010, the VIX fell ~55%.
Over the same period, VXX fell 74% and VXZ fell 32%.
What about performance during a shorter time period, when the VIX was rising?
From 11 January 2010 to 5 February 2010, the VIX rose 73%.
Over the same period, VXX rose by 19% and VXZ rose by 9%.
The conclusion is that neither instrument follows the VIX closely. VXX could be used for short term hedging applications, as Barclays suggests. VXZ is probably more appropriate for medium term time cycles, and appears to underperform the VIX in both the short and longer term, and when the VIX is both rising and falling.
It is not possible to invest in the VIX directly; however, Barclays has two exchange-traded notes which attempt to follow the VIX via a daily rolling long position in VIX futures contracts. The VXX tracks the forward 1-2 months of VIX futures contracts, while the VXZ tracks the 4-7 month contracts.
How closely do these instruments track the VIX? The answer is, not well.
From January 2009 through February 2010, the VIX fell ~55%.
Over the same period, VXX fell 74% and VXZ fell 32%.
What about performance during a shorter time period, when the VIX was rising?
From 11 January 2010 to 5 February 2010, the VIX rose 73%.
Over the same period, VXX rose by 19% and VXZ rose by 9%.
The conclusion is that neither instrument follows the VIX closely. VXX could be used for short term hedging applications, as Barclays suggests. VXZ is probably more appropriate for medium term time cycles, and appears to underperform the VIX in both the short and longer term, and when the VIX is both rising and falling.
Monday, December 21, 2009
Linear thinking
It is undoubtedly true that the human mind is predisposed to linear thought; not just linear thought, but pattern recognition.
Some of our distant ancestors recognized animal migration patterns, and took advantage of that knowledge to survive. Others recognized crop and weather patterns, also to a comparative advantage. Those who did not recognize such patterns did not leave descendents.
The problem with technical analysis, however, is that it plays upon this intense evolutionary tendency by tricking the mind into thinking it is recognizing predictable pattern in what instead is an instrinisically chaotic and unpredictable system.
Those lines, bands, waves, and algorithms give the mind a false sense of security; the mind wants to see the pattern, because it thinks it can thereby avoid pain and gain pleasure. Technical analysis tricks the mind into believing it can achieve that aim.
But the stark reality is that security markets are chaotic, unpredictable systems, not amenable to predictive pattern recognition. That is why no trading signal, algorithm, or technical pattern, when examined rigorously via statistical methodology and stripped of hindsight and other bias, has ever been demonstrated to work better than a random signal.
Some of our distant ancestors recognized animal migration patterns, and took advantage of that knowledge to survive. Others recognized crop and weather patterns, also to a comparative advantage. Those who did not recognize such patterns did not leave descendents.
The problem with technical analysis, however, is that it plays upon this intense evolutionary tendency by tricking the mind into thinking it is recognizing predictable pattern in what instead is an instrinisically chaotic and unpredictable system.
Those lines, bands, waves, and algorithms give the mind a false sense of security; the mind wants to see the pattern, because it thinks it can thereby avoid pain and gain pleasure. Technical analysis tricks the mind into believing it can achieve that aim.
But the stark reality is that security markets are chaotic, unpredictable systems, not amenable to predictive pattern recognition. That is why no trading signal, algorithm, or technical pattern, when examined rigorously via statistical methodology and stripped of hindsight and other bias, has ever been demonstrated to work better than a random signal.
