December 2014


There is currently an +/- 8% spread between the two indices [QQQ/SPY] which would make a good spread trade.



Just bought it today, not this bike, but the same colour scheme. Won’t be ready to pick-up for about a week or so. Very difficult to find any 998’s. I’ll keep my eyes open for one.


A NSW Supreme Court judge has found that art auction house Christie’s engaged in deceit and unconscionable conduct over the sale of a $75,000 fake Albert Tucker painting to a Sydney barrister 14 years ago.

Louise McBride was awarded $118,718 in damages from Christie’s and her art adviser and the dealer who consigned the painting, Fairfax Media reports.

Justice Patricia Bergin ruled that Christie’s is liable for 85% of the damages, consigner Alex Holland of Holland Fine Arts, 10%, and McBride’s former art adviser, Vivienne Sharpe, 5%.

The legal action has brought to light one of the murkier aspects of the art world, where dispute over fake paintings are often settled outside of court.

Sydney Swans chairman Andrew Pridham launched NSW Supreme Court action over a $2.5 million Brett Whiteley painting he bought, but the matter was settled last year without the provenance of the painting being established. The authenticity of the paintings is now subject to legal action in Victoria.

In the McBride case, Justice Bergin found there was misleading and deceptive conduct by the three respondents and that breaches of the Fair Trading Acts occurred.

Christie’s attempted to argue that she was barred by the statute of limitations from bringing the claim and she was not the painting’s owner because the art collector uses a family company, but the judge ruled that the five year time limit only applied from when the fake was discovered. McBride only discovered the problem when she went to sell the painting, Faun and Parrot, and another auction house declared it a fake.

Sydney art consultant Vivienne Sharpe has been accused of being ‘selective’ in her memory of conversations with Christie’s over the provenance of the Albert Tucker painting and deceiving her client, McBride.

In preparing for the case, details emerged of Christie’s staff member contacting Tucker experts over concerns about the number of Tucker paintings from dealer Alex Holland. A Melbourne University panel concluded that McBride’s painting and two others were fakes, but Christie’s auction a second “Tucker” later than year. In 2012, it reimbursed the buyer, the Australian Club in Sydney, $69,000.

Christie’s closed down in Australia in 2006.

Justice Bergin also found against McBride’s art adviser in a separate claim over the sale of a Jeffrey Smart painting to the Menzies Art Brands auction house when the collector was forced to liquidate her collection in 2010. The painting had a guaranteed auction price of $360,000.

After advising McBride to accept the negotiated guarantee, Vivienne Sharpe did not reveal that she would receive a 30% cut of the price paid above the guaranteed figure.

While it’s common practice between auction houses and art dealers, Justice Bergin said it was a secret commission that should have been disclosed. McBride will now receive the commission, which has been kept in a trust fund by Menzies.


Bitcoin will change a lot more than finance. It could also change how software is built and upend a bunch of today’s biggest web companies, argues Joel Monegro of Union Square Ventures.

His argument starts with the block chain, the shared ledger where every Bitcoin transaction is recorded. Validating these transactions requires computing power. When each transaction is validated, a new block is added to the chain, which makes future transactions even harder to compute.

Bitcoin was designed this way to make sure that the same Bitcoin, which has no physical form, isn’t spent twice by the same person. This also gives Bitcoin some inherent value — people or organisations have to spend a lot of money to run the computers that validate transactions, and the complexity of those computations is always increasing as the chain gets longer.

But Monegro argues that these technical underpinnings of the Bitcoin system may have more long-term potential than the currency itself.

That’s because the block chain is not controlled by any one person or entity, and information in it is freely available to other software programs. So programmers are starting to build things on top of the block chain that have nothing to do with digital currency.

For instance, some programmers have developed a protocol called La’Zooz for real-time ride sharing. That could eventually disrupt Uber. Others have created OpenBazaar, a protocol for a a peer-to-peer trading network that could disrupt eBay. Both use the block chain for some basic computing tasks.

Here’s a simple way of thinking about it. The block chain itself is immutable, like bedrock. Bitcoin is like a building on top of that bedrock — it’s got a foundation where programmers have defined some of the basics of how it works, then a bunch of stories on top of that where people interact with it.

But it’s now possible for other folks to build their own buildings on top of the same bedrock.

“The block chain is great at two fundamental things,” explains Monegro. “Distributed consensus, which is basically having a large network of computers agree on a value of something….that’s a key component for any decentralized system. The other thing is time-stamping, holding a chronological order of things happening.”

As new businesses crop up that depend on these functions, they will benefit from turning to the Bitcoin block chain, rather than having to build a similar system from scratch.

This concept isn’t new. Many tech companies have technology platforms that others can build on, from Microsoft to Google to Facebook.

The Bitcoin block chain is different because everything underlying it is published, and there’s no central controlling entity. The whole system works only because all the participants abide by the same set of rules, and any changes are dictated by hard maths rather than a CEO or board of directors.

“Facebook wants to own and store the data that is relevant to their operation,” says Monegro. “So does Google, so does everyone else. The data they store, they control it. The algorithms they run, they control it to serve their own purposes. A system like this, the protocols you build are open, not controlled by anybody. They work like a machine. They don’t discriminate.”

There’s still reason to be sceptical. Bitcoin itself is still in a very early and tumultuous stage, as the collapse of the Mt. Gox exchange earlier this year showed. Speculation has caused some pretty wild price fluctuations — one Bitcoin is worth about $US375 today, down from a peak of $US1,242 in March 2013. That makes it an unreliable store of value, which could eventually drive people away.

Plus, the organisations building on top of the block chain tend to speak in utopian terms that could be a turn-off for outsiders. For instance, La’Zooz describes itself as “a completely decentralized and autonomous organisation. That means that anyone can contribute towards the establishment of its goals in whatever way he or she believes would be the best. Tasks are carried out within autonomous, self-defined circles or teams.”

But that kind of utopian vision is how a lot of open-source projects started, and many of them have grown into essential technology. Take the Linux operating system, which runs most of the computers in the biggest data centres in the world, like your bank. Or Apache, which runs the majority of web servers. Or the protocols that formed the basis of the Internet itself.

Monegro and USV’s Fred Wilson think that Bitcoin could become the same kind of foundational building block within the next 5 to 10 years.

Monegro’s entire post is worth reading if you’re interested in the technical vision. Here’s a graphic showing the different layers of the platform he believes will built on the block chain, which he’s going to detail in a set of follow-up posts:


Many people have heard of the “Marshmallow Test,” Walter Mischel’s famous experiment testing the patience and self-control of preschoolers in the early 1960s. The children were seated next to a table with a marshmallow on a plate, and told if they could wait 15 minutes without eating it they would be able to get another marshmallow. The videos of these cute kids trying to resist the lure of a single marshmallow are as wonderful to watch as they are instructive in how difficult it is to defer gratification; only a third of the children were able to wait long enough to get the second marshmallow.

Interesting for sure but hardly Earth-shaking information. The study would gradually fade into scholarly oblivion and that might have been the end of it for the Marshmallow Test. Then in 2006 Mischel published a follow-up study that tracked the original subjects 40 years later—and those results blew the cover off the ball.

The follow-up study revealed that the children who were able to wait for a second marshmallow ended up with dramatically higher SAT scores, higher GPAs in college, greater earnings during their working life—even lower body-mass indexes—than those children who could not wait. The attributes of patience and self-control were not merely useful in gaining an additional marshmallow, but rather harbingers of a better, richer and more fulfilling life. The Marshmallow Test became a common metaphor for that insight.

In retrospect the lessons seem obvious and self-evident. Given the fact they are ignored regularly by so many people, one would wonder which is more notable—the lessons or the irrational behavior? Of course I am not talking about 5-year-olds. I am talking about full grown adult investors who understand the value of patience and deferred gratification, but are simply incapable of putting into action what they know in their heads.

Being a patient investor does not mean you are absolutely certain about the future or that you have to ignore current events. Being a patient investor means that you are discerning enough and willing enough to accept the kinds of risks whose actualization and ultimate repair exist over time periods that exceed the patience of most other investors, and therefore can be exploited for substantial and recurring profit. Experienced investors commonly refer to this as “time arbitrage.”

Because of the growing popularity of behavioral economics, we now understand that we stand in the way of our own success far more often than we realize. Less well-known, but an equally persistent and powerful enemy to our patience, is a side effect of some of the impressive and useful technology most of us rely upon daily to connect to each other and the world; the same technology that has greatly improved our productivity and our lives.

Tech Effect

I was an early adopter of technology. I bought my first PC in 1983, quickly saw the benefits of email, wireless and the Internet, was the first on my block to get a broadband connection, and became completely paperless before the end of the 20th century. I can say with total confidence that I could not run my business with anywhere close to the flexibility, efficiency or effectiveness that these incredible tools have afforded me—and without question my personal life is better as a result of advances that even to this day amaze me.

Yet with every benefit there’s always a cost—and this particular cost was one I could never have imagined.

I’ve always been an avid reader. About four years ago I noticed that my normal capacity to spend long hours of uninterrupted reading was just not there anymore. I assumed it was because I was getting older. About the same time I read Nicholas Carr’s book “The Shallows.” Carr related that his ability to concentrate wasn’t what it used to be and his long reading spells were becoming non-existent.

He wrote: “The very way my brain worked seemed to be changing…. I began worrying about my inability to pay attention to one thing for more than a couple of minutes…. [M]y brain, I realized, wasn’t just drifting. It was hungry. It was demanding to be fed the way the Net fed it—and the more it was fed, the hungrier it became.”

What Carr was discovering was something that neuroscientists had been observing for years. The brain has plasticity: It can be trained to change—and not necessarily in positive ways. Carr noted that “the more we use the Web, the more that we train our brain to be distracted—to process information very quickly and very efficiently but without sustained attention.”

A 2009 study by Ball State University revealed that Americans spent over eight hours of their day looking at television, a computer monitor, tablet or smart phone—often a few of them at the same time. Carr wrote: “The shift from paper to screen doesn’t just change the way we navigate a piece of writing. It also influences the degree of attention we devote to it and the depth of our immersion in it.” Blogger Cory Doctorow labeled it an “ecosystem of interruption technologies.” The natural result of our spending so much of our waking hours in “screen time” is that our brains are creating new pathways, ones that allow us to feel comfortable and competent in an environment that provides us with quick answers, endless variety and limitless distraction.

Is there benefit to this? Without a doubt. I did my research for this column with incredible efficiency—accessing research, news articles, opinion pieces and data in a few hours; something that previously would have taken days, even weeks. But if I hadn’t taken the time to read Carr’s book—putting it down, letting the ideas settle and then coming back to them—my understanding of the nuances of his arguments, or how they connect to other ideas, could never happen.

Unless we retrain our brains to become accustomed to deeper kinds of thinking, today’s online, on-screen, always connected world will continue to reinforce our brains’ very happy existence in the shallow end of the intellectual pool.

Investment Obstacle

An implication of Carr’s argument for us is clear: It will be increasingly difficult for investors to build the kind of foundation robust enough to withstand the powerful challenges markets inevitably pose to our deepest held convictions. And with our attention spans cut so short, the odds of time arbitrage or any long-term strategy hitting our radar screen seem increasingly remote.

Even if Carr’s argument turns out to be completely baseless, we’re not off the hook. The media regularly bombard us with this recurring and repetitive message: “What is happening right now is really important—and you need to do something about it!” The world we live in incents us to keep our attention squarely on the issue du jour.

Anyone who has been physically active knows that you can’t run a marathon unless you seriously train for it—the strength, the endurance and the aerobic capacity require time and effort to build. And while I can attest to the fact that at some point in the race, it becomes mind over matter, you can’t run a marathon without the physical preparation.

Similarly, the intellectual preparation needed to have the kind of robust patience necessary to execute and sustain a “buy and hold” strategy involves much time and effort—but as we know instinctively and empirically, the effort is worth it. Especially when the all-too-common alternative is the “buy and hope” gambit—and we know how that turns out.