Air Quality Part 1: Introduction

(related video)

When Northern California was burning, and I saw articles about the Bay Area’s air quality being “worse then Beijing”, I started to wonder… What does that mean? How is it measured? Can I measure it myself? Can I mitigate it?

This will be a short series of posts to do a brain dump on what I found. This introduction will provide a few definitions and some plausibility arguments for why you might care.

“Air quality” can mean a lot of things, but when talking about fires the main concern is particulates (unless you are standing so close that you are inhaling the burning plastics, in which case you have bigger problems).

The unit of choice in this context is the micron, aka. “micrometer”, which is defined as \(\frac{1}{25400}\) of an inch. (The autistic voice in my head — you have one too, right? — is screaming at me that ACTUALLY, it would more accurate to define an “inch” as 25400 microns. But here in Trump’s America, we use the Queen’s units, dammit.)

Right, where was I?

The US EPA provides this handy graphic:

micron illustration

Larger particles — 10 microns and up — are not a huge threat for two reasons:

  1. Your body reacts to them by making you cough, sneeze, etc. This is your body’s way of trapping and expelling these particles before they reach your lungs.
  2. Your body reacts to them by making you cough, sneeze, etc. This makes you aware that something is wrong and encourages you to be somewhere else.

In short, we evolved to handle particles on this scale; our ancestors had hay fever, too.

We did not evolve to handle the output of an internal combustion engine.

Between 2.5 and 10 microns, particles are called “coarse”, and they make their way into your lungs. Between 0.3 and 2.5 microns, they are called “fine”, and they pass through your lungs and into your bloodstream. Below 0.3 microns are the “ultrafine” particles that get everywhere, including your brain.

None of these are perceptible. When you vacuum your carpet, for instance, you capture most of the larger make-you-sneeze particles. But the smaller ones pass through the vacuum’s filter and bag like they are not even there. All your vacuum does to fine and ultrafine particles is stir them up… And you cannot even tell. Those little paper masks do nothing. Same for the filter in your HVAC system, probably.

And yes, tiny particles are bad for you, especially in the long run. Long-term effects are always tricky to prove, but the evidence of nasty connections (e.g. between ultrafine particles and dementia) seems to grow every year.

OK, that will do for an introduction. The remaining parts will be about how particulates are measured, how you can measure them yourself, and what you can do about it.

Yes, Virginia, the Bitcoin contango is a mystery

Lots of people are saying that massive contango in the Bitcoin futures is no surprise, because the contracts are cash settled.

For example:

“If you’re doing a cash-settled future, it’s just a bet,” said Aaron Brown, a former managing director at quant hedge fund AQR Capital Management who invests in the cryptocurrency and writes for Bloomberg Prophets. “If that’s not related to any underlying physical transaction, the only people who want to do it are gamblers.”

Or N. N. Taleb:

I think they are wrong.

Let me start with some background since my readers (if I have any) are not all finance types. A futures contract is conceptually very simple. Example: You and I agree right now that at noon four weeks from today you will give me $6000, and I will give you 100 barrels of oil. That is the contract. Our trade four weeks from now is the settlement of the contract, and my delivery of the barrels is called physical settlement.

Physically settled contracts are useful for hedging; e.g. if you are a transportation firm that actually needs the oil in four weeks but wants to price some tickets for sale today. Physical settlement is also open to arbitrage: If oil today is much cheaper than $60/barrel, I can sell you those futures, purchase 100 barrels of oil, then simply hold them for four weeks until I deliver them to you. Of course, during those four weeks I have to store the barrels and forego any interest on the cash I paid for them; these represent the “cost of carry” and give rise to the contango.

Now, it is very possible that you do not really want the oil, but merely want to speculate that oil will cost more than $60/barrel four weeks from today. In that case, you might agree that instead of giving you barrels, I can give you the cash equivalent based on the price of oil at that time. Or for simplicity, one of us will give the other the difference between that amount and $6000. This is called cash settlement, and most (all?) futures either allow or require it.

An important detail is defining “the price of oil at that time”. I am sure you can imagine ways based on some recent bid, offer, or transaction in some market. And I am sure you can also imagine someone with a large futures position badly wanting to manipulate that bid, offer, or transaction.

Even absent such manipulation, cash settled futures are less useful for hedging and less open to arbitrage, because they depend on that future market price.

When I wrote my prior post, I wrongly assumed the CBOE Bitcoin futures were physically settled; i.e. that they required delivery of actual Bitcoins (which are not exactly “physical” but never mind).

In fact, those futures are cash settled. But to understand the implications, you have to look at how the settlement price is determined:

The Final Settlement Value of an expiring XBT futures contract shall be the official auction price for bitcoin in U.S. dollars determined at 4:00 p.m. Eastern Time on the Final Settlement Date by the Gemini Exchange (the “Gemini Exchange Auction”)

The Gemini Exchange is a Bitcoin trading platform owned by the Twinkletoes Twins.

Gemini describes its auctions like so:

The final auction price for every auction is established as the price that executes the greatest aggregate quantity across both the auction and continuous order book. A desirable property of this auction design is that it approximates the results of the Walrasian tâtonnement process used in standard economics textbooks to describe how the forces of supply and demand determine prices and market clearing quantities. Within this auction design, the market is open to accepting bids and offers until the time the auction algorithm runs. This auction mechanism is similar to the auction mechanisms used by NYSE Arca, Nasdaq, Bats, and other large stock exchanges throughout Europe and Asia.

Lots of fancy terms, but the bottom line is that this is a double auction where anyone can participate and everyone pays/gets the same price. So the arbitrage goes like this:

  1. I sell you the overpriced futures
  2. I buy Bitcoins at spot
  3. I participate later in the actual auction determining the settlement price, entering a limit sell order for all of those Bitcoins at $0
  4. I use the proceeds to settle the contract in cash

Note that in step (3), the amount I receive for my Bitcoins is exactly what I need to settle with you in cash, by the definition of the settlement price. It does not matter what anybody’s “sentiment” is. It does not matter if you also participate to “push the price higher”. Since I can participate myself and sell all of my Bitcoins at the settlement price, this is a perfect arbitrage (less the Twinkletoes’ cut).

Perhaps I am not Gapishing something, but my guess is that the futures premium will collapse as bigger players get this arbitrage machinery spun up. Also January 17 might be an interesting day for Bitcoin.

Update: Ta-da!

Bitcoin futures

I hope I am not too immodest if I feel like my Bitcoin series has aged pretty well.

I do have a long-ish follow-up post percolating in my head, but I need some time to pull it together and research a few questions first (e.g. did anyone at the FT ever manage to make a true statement about this topic?)

But I had to get this one off my mind. Tonight, ZeroHedge (I know, I know, bear with me) is tracking the CBOE’s Bitcoin futures contract that just launched today. And they present this rather interesting chart:

bitcoin chart

This shows the Bitcoin futures rocketing higher than the spot price. I find this interesting for two reasons.

First, I am not sure exactly what “spot” means in this context. Anybody can exchange Bitcoins with anybody else for anything at any time. Unless there are deep, well-arbitraged markets out there, it is not clear that “spot” is even well-defined.

Second, and more interestingly, there is simply No Way for the futures price to get much higher than spot for something like Bitcoin. Because if it did, anyone could perform the arbitrage: Sell the futures; buy actual Bitcoins; deliver them at expiration. Bitcoins have no cost of carry, so whence the contango? (always wanted to say that)

I do not claim to be an expert, but I am pretty sure there are only two possibilities. Either (a) the “spot” price is a fiction, and our hypothetical arbitrageur(s) cannot actually acquire Bitcoins so cheaply; or (b) the poor retail punters who decided to call a top on BTC tonight and go short are getting a call from Mr. Margin.

Well, now we know why Trump fired Comey

First Interaction

“Am I under investigation?”

“No, sir, you are not”

“Could you maybe let everyone know that?”

“I’ll see what I can do”

Second Interaction

“Look, if anybody on my team did something wrong, they need to be held to account. But I know I did nothing wrong, and you told me I am not even under investigation. Is that still true?”

“Correct, sir, you are not under investigation”

“Could you please find some way to say that in public?”

“I’ll see what I can do”

Third Interaction

“One more time: Am I under investigation?”

“No, sir, you are not”

“Then, as we discussed, could you please let the people know that?”

“Maybe you should talk to the Deputy AG”

Fourth Interaction

Letter to the Director

Source: Comey’s written testimony

Statement by President Donald J. Trump, Friday, July 6, 2018

My fellow Americans:

Our nation remains in a state of shock over Wednesday’s horrifying, horrifying attacks. We again offer our deepest sympathies to the families of the victims at this time of unimaginable grief.

But as our shock and horror turns into anger and determination, we know that we owe these families more than our sympathies.

Since my first days in office, I have issued many Executive Orders related to immigration and national security. Several of these Orders were blocked by the decisions of activist liberal judges. A few of those decisions were ultimately upheld, in part, by the Supreme Court in votes as close as 4-to-4. 4-to-4! Split decision.

The investigation of Wednesday’s attacks is still ongoing. But it is already clear that the attackers never should have been allowed into the United States. In fact, had my Executive Orders been in full force, this atrocity would not have happened and those children would be alive today. Alive! Right now.

Now, I have the greatest respect for our Judiciary. No one respects our Judiciary more than I do, believe me. But their first duty, like mine, is to protect the rights and lives of American citizens. American citizens, first and foremost. Some judges have forgotten this duty. I have not.

Therefore, effective immediately, I am reinstating and expanding all of my previous Executive Orders regarding immigration and national security. I am directing all federal agencies to ignore any ruling by any court — any court — that blocks, delays, or interferes with these Orders in any way.

I do not take this action lightly. I fully understand the gravity of this situation, both for our government and for me personally. But I can not — I will not — allow our children to be sacrificed on the altar of globalism. I will not allow our citizens to remain in danger because a few activist judges think the so-called “rights” of non-citizen terrorists are more important than our children’s lives. Can’t allow it. Not on my watch.

In addition, I call on all members of Congress — especially those up for re-election this year — to state publicly and clearly where they stand on this issue. The American people have a right to know, and they have a right to express their own views loud and clear at the ballot box in November.

This is it, folks. The security and future of our country is at stake.

May God bless you, and may God bless these United States of America.

More election musings

A little closer to the bottom of the barrel…

  • Trump has shattered not one but both major parties. Looking forward to the internecine fighting.
  • Mike Pence is going to be the most powerful VP since… Dick Cheney, I guess. Trump has essentially zero knowledge about the mechanics of government and legislation. Pence has been both a Congressman and a governor. Trump will set the direction (CEO), but the operations of the Trump Administration will fall to Pence (COO). I hope you like him.
  • Trump should use reality TV contests to select his cabinet.

    You know, I would actually watch that for Defense, State, and maybe AG.
  • I am not sure whether Bernie could have defeated Trump. But I think Biden would have. (Hillary had the union bosses but lost the men on the factory floor. Biden would have had both, and when combined with the Dem machine, that would have been enough.)
  • More people are protesting Trump’s victory than attended Hillary’s rallies.
  • There is going to be a Donald Trump Presidential Library.
  • “Great Again Dot Gov” LOL
  • So when does Trump TV launch?

Election musings…

…in no particular order.

  • I wonder how much Hillary will be paid for her next speech.
  • Can we please stop with the SHE WON THE POPULAR VOTE thing? If we had a popular vote system, (a) the candidates would campaign differently and (b) Republicans in states like CA and NY would actually have a reason to vote. This is like losing a football game and then shrieking BUT WE GOT MORE RUSHING YARDS. It is just embarrassing; or, in the modern vernacular, sad!
  • Speaking of the Electoral College, our system does not allow you to become President by appealing only to the population centers. This is by design, it has always been true, and (let us hope) it always will be.
  • Huma Abedin is having a pretty bad year.
  • I have been anticipating a Hillary Presidency since the first time I saw her on the national stage in 1993. I thought it was inevitable. I knew — knew! — that somewhere in my future lay eight years of that person holding the reigns of power. I even donated to Lazio’s 2000 Senate campaign in a futile effort to slow her down.
    Having a confidently-held 23-year-old belief ripped from you is an interesting (and yuge!) experience. Hillary Rodham Clinton… will never be President. I am still trying to wrap my head around it.
  • Live by Executive Order; die by Executive Order. Perhaps you should have used the Legislature to legislate?
  • When I first heard about Trump’s campaign, I thought he was an idiot and his candidacy a stunt. Over the course of the primaries, I was forced to update my priors. I figured out sooner than most — though later than some — just how (bigly!) wrong I was.
    I now realize I am not smart enough to understand Donald Trump. If you believe a buffoon has somehow managed to stumble into the Presidency Chauncey Gardner style, you are letting the wrong people give you your opinions.
  • Live by the Supreme Court; die by the Supreme Court. Perhaps you should have used the Legislature to legislate?
  • In her concession speech, Hillary mentioned people who had donated money to her campaign, “as little as $5”. She forgot to mention the people who donated as much as $20 million. They spent a billion dollars trying to drag her across the finish line.
    All of those donors, all of the global banks and foreign governments… The return on their investment is going to be zero. This is probably my single favorite thing about this election.
  • Trump is more likely to pardon Hillary than to prosecute her.

Betting site links: Election 2016

The betting sites react very quickly to new information, so they provide an excellent way to monitor events in real time.

Granted, in 2012 my favorite market (InTrade – RIP) was clearly manipulated. Had anyone been set up to perform the arbitrage, they could have pocketed a few million risk-free dollars on election day. My guess is that the arbitrageurs are ready this time around, which means it does not matter which betting site you watch; any attempt to push on one requires pushing on them all.

That said, my favorite these days is Betfair, and all of these links go there. It is a fairly liquid market. As I write (Nov 7 12:30 EST), they have $137 million in matched bets on the overall election outcome.

Click the “Back & Lay” check box to see the ask/bid spread. You can think of the number as a reciprocal probability (e.g. back/lay of 2 means probability of 1/2 = 50%). Or you can think of it as the number of sides in a die roll (e.g. 6 = 1d6, 2 = coin toss, etc.)

Overall outcome


North Carolina






Trump, of course

Frankly, I do not understand why anyone other than cat ladies and doughy beta males would vote for anyone else.

OK OK I exaggerate. And anyway I would likely support anyone running against Hillary.

But I really am voting for The Donald with enthusiasm, and I want to take a moment to explain why.

Back in college, I had a buddy who annoyed literally everyone. And I do not mean that in some boring, passive way; this guy was smart, and he carefully honed his skill. He had a preternatural ability to determine how best to irritate you at any moment, and he would deliberately do precisely that, repeatedly.

At first I found him… well, annoying. But over time, I recognized that there are a lot more other people in the world than there are of me. Being the occasional target of his talent was more than repaid by watching his effect on friends (funny) and adversaries (hilarious).

Granted, the current topic is Donald Trump and the Presidency of the United States. But if the last 16 years have demonstrated anything, it is that there is no such thing as “qualifications for the office of President”. Actually, Trump is more qualified than most, at least in the ways that matter. For example, imagine making a list of great Presidents and another list of Presidents who were policy wonks. How much overlap would you find?

Not that I mind (most of) Trump’s policies. To take one example: I vastly prefer the general notion of “kill people who are trying to kill you; otherwise, mind your own business” versus the Bush/Obama/Hillary/etc. modality of nation building / regime change / coup instigation. I am the first to admit that I am no expert on foreign policy. But that is kind of the point; such experts do not have a particularly stellar track record. Competence leading to overconfidence is perhaps the most human of all failings. Unlike most endeavors, however, foreign policy is one where overeducated a**holes playing God have a tendency to leave piles of bodies in their wake. Simply put, Hillary is obviously more likely to get us into a war.

Back to that college buddy. Of course I do not like everything about Donald Trump. (I mean, come on…) But the damage he would or could do to things that I like is vastly outweighed by the damage he would do to things that I hate, e.g. this. The Democratic establishment hates him, the Republican establishment hates him, Wall Street hates him, Hollywood hates him… This election season has exposed the deep irony of our ruling political party, donor class, and press acting as a single entity while labeling the opposition “fascist”. Seeing all of them react to a President Trump would be… hilarious.

So, yes, the enemy of my enemy is not my friend. But he will do.

A little FBI narrative

Quick little speculation before it all becomes history…

Comey’s letter was an extraordinary event. He is a smart guy, so he must have had an extraordinary reason. Sure, maybe he is just trying to sway the election. But (a) that would be counter to every aspect of his reputation and track record; and (b) he could have done it more effectively (and less suspiciously) simply by referring the case for prosecution back in July.

This is an interesting observation:

He is right. The Weiner investigation is being conducted by the local DoJ (including FBI) in New York, not by the home office in Washington.

So how about this for a narrative. In the process of investigating Carlos Danger’s perversions, they combed through a computer he shared with Huma and found… something. At least a few of these local agents and attorneys are career law enforcement types, not politicized strivers, and they are outside the… um… let’s say “environment” of D.C.

They have seen whatever the “something” is, and had Comey not made some public statement, they would have.

I do not know whether this narrative is true. But it seems to fit all the available facts.

Is the “something” actually nothing?

Hillary, Obama, and Biden have canceled all campaign appearances until election day.

Huma is in tears.

Sure, probably nothing.