To the Damped Spring Community: Once I began curating financial tweets, I quickly learned that interacting with and building this community are my true passions. I will now also be creating a Private Twitter experience. My current feed will also remain active with great content.
My journey on Twitter has been incredibly rewarding. I am looking forward to continuing to provide interesting commentary and educational threads to all of you. I wanted to let you all know that I have decided to launch a paid account. This decision was not easy.
So much of what you see on Twitter is so blatantly a money-grabbing scam. I hope you all know me well enough by now to know that I am not like that.
To improve the content on my public account, new private account, and institutional business,
I must acquire and consume very expensive data. Furthermore, all of the content is created by me and, as you might imagine, takes a huge amount of time and effort. It is indeed my full-time job.
Although I have many potential ways to earn a living, the creator economy is something I truly enjoy. In order to take my content and output to the next level, I would also eventually like to hire additional resources for various functions.
Finally, you can probably tell that mentorship and teaching are important values to me, and doing this all on my own does not feed that need.
A private Twitter account will allow me to grow my business and advance the content I deliver to all my stakeholders.
The private Twitter account will be limited in number to assure a high-quality experience. I hope that some of you can afford to join and help me as my journey evolves. The creator economy is truly amazing, and I am so glad I became a part of it.
Below in the comparison table are the details and the value proposition vs. staying on the public feed (which I will of course continue to make a rich place for you all to visit).
As an incentive My "No touch" list is posted in the private room. Please join me.
Go to dampedspring.com to subscribe.
As an incentive the monthly rate of $200 per month will buy 2 months for the first 50 beta users.
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Flow 101 - Flow moves markets. If you know of a market moving flow before it hits the market or you know that a market moving flow is about to end you can make money in markets if, and this is a big if more most, you know about market moving flow and others don't. Some musings.
The best way to know about a market moving flow is to literally know before it is sent to market. There are people who became billionaires by colluding with sell side Wall Street firms who would disclose market moving orders they held from large "Boston based Fund" I saw it.
It's called Front Running and anybody who lived through the 80's and 90's can tell you stories. To this day one form or another exists. It is illegal BTW. But that's not what this thread is about. I mention it because front running is flow trading just not the illegal part.
Hedging 101
Tl;dr
-Diversify
-If that doesn't suit you use options passively
-If you think you can actively hedge at the right time then you have alpha (you probably don't)
-If you hedge during an event you are better off dumping your portfolio cuz your already dead
Hedging a portfolio is a reasonable idea. It is designed to limit downside at the expense of upside. It is a natural desire to make sure your portfolio has a worst case outcome. It lets you "sleep at night" However how and when one hedge has big impact on long term return.
The first point I would like to make is that assets have a risk premium which provides long term excess return over cash. Investing in assets is essentially the only free lunch in markets. When you hedge you are eliminating some of the risk of your portfolio
How the JHEQX roll works 101. I am writing this because I want to bookmark it so I can copy the link to those who think the roll has no market impact because "It's traded delta neutral" While this is 💯 true that the other side of the JHEQX collar is handed a delta neutral trade
That doesn't mean that @JPMorganAM doesn't have market impact in setting up the trade.
There are two possible states to consider regarding the old collar at expiration and one corner case state that I won't clutter this thread discussing
Number 1 macro misunderstanding 101 - a short thread. When tweeting about tax selling I noticed a number of my followers making a basic mistake in their questions and comments. It's extremely common. Simply put when someone decides to sell a stock for any reason
They demand someone else who may not have had any interest in the stock to either use available cash or leverage and raise cash to buy the shares. Typically the motivated seller is more "inelastic" than the buyer. For instance tax selling results in selling motivated by
The sellers specific basis and is almost orthogonal to the "value" of the stock. The seller pays a concession to the buyer. So I get it. What if buyers are highly elastic and topped up on their risk and begin to demand a larger and larger concession. Well prices fall.
Challenging times for Fed dual mandate 101. This thread discusses what policy is appropriate for stagflation. Tl;dr that answer is easy if true stagflation is present. If it's the mild and or transitory kind then the Fed should do exactly what they are doing and react if
Persistent high inflation with below trend growth occurs. When inflation expectations are set as far as the eye can see at 2.5% the Fed does not have a problem. Inflationistas can scream all they want about the current high inflation and how it is not going to be transitory but
the Fed deals with real problems that are actually happening or are certain to happen in the near future. Stagflation doesn't matter exist at the moment. Paul Volcker would bust a gut if he read the stuff people are saying about stagflation today. Stepping back.
Equity valuation 101 - Firstly even if you know with certainty the "Fair value" of an equity or equity index or for that matter any asset or any relationship between assets the path to convergence to FV is rocky. I spent decades in the RV space before learning macro and have ...
Traded many absolute and statistical arbitrage relationships. Convergence to FV for many of these strategies often depended on macro conditions. This generated track records that often were simply levered beta with bad drawdowns and expensive transaction costs and fees.
The path to convergence generated p/l volatility which impacted risk adjusted returns. The returns from knowing FV just don't compensate investors for the risk significantly more than owning a passive beta portfolio. Tl;dr alpha is hard to get.