The fundamental premise is that we are undergoing a credit cycle which at some point must fall onto itself, since growth/inflation cannot be sustained without continuous lending.
Although I've written before, this actually completely misses the point that none of
the inflation we saw was actually due to credit expansion, hence one is just waiting for the bursting of something that never even built up in the first place
People are confusing a mixture of wage cycles, brought on by supply chain bottlenecks/sudden
It amuses me that people who were complaining that US in 2021 wasn't "Real inflation" because banks were not lending, are convinced more than ever that deflation is ahead due to a rapid contraction of M2, despite an increase in bank lending and deliquencies below pre-Covid levels
Beyond that, it misses the point that if 2021 inflation wasn't caused by an expansion of credit, then mistaking current contraction for a credit cycle on why inflation should come back to an average of 2% over the next 5-10 years, completely misses the point that it was fiscal
Jun 2, 2022 • 14 tweets • 5 min read
So during a pirates of finance episode, there was a quick discussion on the importance of looking at Fixed Strike Vol vs just blindly following VIX
Lets start off with the VIX; for reasons we won't go into, the VIX is influenced more by the Implied volatility of OTM calls/puts
with strikes closer to the current ATM, rather than ones that are further away. This means that the VIX is for the most part, basically heavily tilted towards just telling you what ATM IV is.
(For any nerds who want to know the exact calculations, you can go read:
May 14, 2022 • 25 tweets • 6 min read
Intuitive understanding to options
You might have heard that options represent the full distribution of the market and are thus the real underlying. Sure you can argue, in the English sense of the word, that they are not underlying, but that viewpoint is useless for making money,
where underlying stocks only represent a sliver of what a market is actually pricing in.
To illustrate, think of a stonk as having a probability of having an ending price, represented by the graph below. The market probabilities assigned to each of these prices is influenced by
Jan 28, 2021 • 8 tweets • 7 min read
@JaDaveus_Spliff@profplum99@StephenWindahl 1) Alright, then buckle up.
What these morons don't understand about praxeology is that it fails to meet the criteria of science as defined by Popper's falsification principle. Anything that is not falsifiable is not science at best and complete superstition at worst.
@JaDaveus_Spliff@profplum99@StephenWindahl 2) Mises attempts to create the mystical synthetic a priori
That Kant failed to create, by simply asserting that all the axioms of Praxeology are grounded in truth akin to mathematics. Unfortunately mathematically/philosophically semi-literate Mises didn't get the word that
Dec 31, 2020 • 5 tweets • 1 min read
This year, the most important thing I've learnt in markets is to focus on compelled transactions.
Attempting to decipher how events (COVID, Elections, Lockdowns etc...) will influence economic factors is a game of guessing; on top of that, trying to guess how the market responds
to such events just increases the dimensions of guessing required to take any market position.
Instead of guessing on how people WANT to transact, focusing on how large players would be FORCED to transact has been the major takeaway for me.
Nov 20, 2020 • 8 tweets • 2 min read
Look, I really get the deflation spiral we are in.
It just so happens that currently, ISM PMI and ECRI seem to be pointing towards sustained growth and inflation for an interim. This does not mean a recovery or secular inflation, but only that the current economic bounce might
go on a bit longer.
Outside of a credit event (Monitoring with TED spreads and High yield OAS), the natural tendency seems for nominal yields to rise.
Gold falling and the rise in copper/gold ratios seems to corroborate with the idea of a sustained bounce. I just can't help but
Oct 23, 2020 • 21 tweets • 4 min read
1) Many people don’t seem to understand MMT and fire off at it, but a lot of the points they try to make don’t make any sense because they do not understand what MMT is and isn't saying. The main source of confusion comes down to the nature of money.
2) Money can be fixed to something with a supply constraint, or it can be freely floating. The choice between these two creates markedly different outcomes in terms of the monetary system.
Aug 9, 2020 • 6 tweets • 1 min read
Basic Statistics PSA:
Fixating on the case fatality rate without considering incidence is myopic; this is how the mathematics breaks down.
Say we compare two countries, lets call them Sensibleland and Deludedland, both countries have populations of 1,000,000
1/n
A disease called 2020Sucks suddenly breaks out and we want to know which country has dealt with the disease better. So we look at the case fatality rate (CFR), say Sensibleland has a CFR = 30% whereas Deludedland's CFR = 5%. Has Deluldedland handled the disease better?
2/n
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