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Ben Hunt
@EpsilonTheory
, 5 tweets, 2 min read Read on Twitter
My (apparently) (very) unpopular opinion: passive investing IS a bubble.

It's a behavioral bubble formed by the now universal belief that stocks will *always* go up over time.

A bubble = investors thinking they've figured out a "secret" that past investors somehow missed.
The only thing that pops this bubble is a popping of the now universal belief that stocks *always* go up over time.

Which is why capital markets must be transformed into political utilities.

Thus endeth the lesson.
It's so weird that prior to the 1960s and the expansion of Wall Street to Main Street, the ubiquitous belief in "stocks for the long haul" did not exist.

I guess we're just much smarter now.
I’m just gonna leave these here.
But sure, it’s just “stocks for the long haul” and “diversification”.
epsilontheory.com/things-fall-ap…
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Ben Hunt
@EpsilonTheory
Buffett letter TLDR: book value is for chumps, and we’re gonna financial engineer the hell out of this industrial conglomerate.

It’s exactly the GE pitch I heard ad nauseam from 2005+ ... the cultists can @ me all they want, but this IS the Jeff Immelt playbook.
In 2005, GE was an industrial conglomerate that desperately wanted to be thought of (and valued as) a financial services firm.

In 2019, BRK is a financial services firm that desperately wants to be thought of (and valued as) an industrial conglomerate.

Funny world, innit?
The BRK-as-investment-fund narrative ("we can buy companies w/your $100 billion in cash better than you can") is too hard to maintain today. With an industrial conglomerate narrative, Buffett can use the cash to buy back BRK stock hand over fist. Which is what he's going to do.
Read 6 tweets
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Ben Hunt
@EpsilonTheory
Sorry, but no. You're not competing against "the masses". You are competing against the smartest humans in the world and the non-human intelligences they have created. There is zero market edge from being another smart guy. Zero. This is the Big Lie of Jim Cramer and his ilk.
Most of the responses to this thread are great examples of the three most common behavioral errors in markets: mistaking luck for skill, overestimating your own abilities, and underestimating informational efficiency in markets.
Is there “alpha” to be gained from understanding these three most common behavioral biases? Sure, it’s called the CNBC business model. It’s called the Ameritrade 24/5 ad campaign. It’s called E*trade.
Read 3 tweets
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Ben Hunt
@EpsilonTheory
Alpha = private information. Period. Full stop.
I understand that we'd like to think that smarts + process + time = alpha. It's one of the little lies that we tell ourselves to get through the day. Here's the 10-year chart of Berkshire vs. S&P total return. Without private information (and often with it) THERE IS NO ALPHA.
When did fundamental active management begin to die? In August 2000, when Reg FD made it illegal to get private information from public companies. If Reg FD dated back to 1980, you would have never heard of Peter Lynch and Warren Buffett.
Read 8 tweets

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hive.one
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Paranoid Bull
@paranoidbull
The Videogamization of our Markets was one of the most obvious signs of its Destruction.

While the Central Banks crushed Volatility, forcing original thinking into Submission, the Bots got smarter and the Game of earnings got more predictable...
Given that $21T+ of QE was sloshing through Markets a a unidirectional Bid, it became quite clear that markets would go up over time.

Passive money helped grease the wheels, so Company Management became quite adept at the Game:
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Jake Chervinsky
@jchervinsky
0/ Last week, the SEC delayed its decision on the VanEck/SolidX bitcoin ETF for the last time. With a *final* deadline set for February 27, let's discuss:

- key updates from the past few months
- how to interpret this delay
- my prediction on what the SEC will decide

Thread. 👇
1/ I'll say this upfront: I think the ETF is in trouble.

I'll explain why below, but first I want to stress that VanEck & SolidX have done great work this year. Unfortunately, some things are out of their control, and it's possible the markets just aren't ready for an ETF yet.
2/ When we last discussed the ETF on September 20, the SEC had just stated its "grounds for disapproval under consideration."

The goal of that step is for the SEC to explain all the reasons why it might deny the ETF so the sponsors & the public can respond to them all.
Read 21 tweets

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