Things that will improve your life. Believe me, or not

1. Do things in fast growing markets. Right now - that's AI and crypto. Work in AI or crypto, preferably both. Life is better with the wind in your sails. 2. View every concept, religion, ideal or emotion as a potential attack vector into your own mind.

The second you're worked up about something you're no longer working for your own vision

What are memes? Why are they here? What do they have to do with free will?

1/ When you see vast amounts of digital advertising data, you do not see evidence of free will

In aggregate, we are predictable. 1000 people click. 8 buy. Clockwork. Individuality is an error coefficient 2/ You see how the sausage is made.

Somebody comes up with a message. It gets shown to a bunch of people. The message resonates or it does not.

Some messages work, others don't.

The ones that work tend to keep working on larger populations with very little exception

Many have observed that ChatGPT became dumber and less useful in the past few months. Below is a thread on fixing this

1/ Recently, ChatGPT shipped “Custom Instructions” which can make the model useful again. Below I get into how I use Custom Instructions to supercharge ChatGPT 2/ First - you'll need to enable Custom Instructions. You do this in the Beta features. You find this under "Settings and Beta".

Once you enable this you will have a tab by your plan that allows you to input Custom Instructions

People don't understand Bryan Johnson. So I'm going to engage in the terrible Twitter thread format to explain his work.

1/ He sold Venmo/Braintree to PayPal and made FU money. "what's the point of making FU money if you don't say FU?" He's also ex-Mormon. Explains tweet below

https://twitter.com/bryan_johnson/status/1677348309617500161

2/ He took $100m of his sale and plowed it into genetic / health tech. He also started his own company to track the brain called Kernel.

He ran a payments company but it seemed crazy to him we couldn't measure our health or or minds as well as we could measure software

How to get ahead of 99.9% of retail investors

1/ Split your strategies up. You have one type of trade where you research a company and hold it for a long time? You also buy options into earnings calls? You also own 'safe high div stocks'. These are all strategies. Measure them 2/ Obsess over PNL line items. Taxes. Transaction costs. Implied market impact (if you're big enough or trading things that are small enough). Interest charges. Cost to borrow. FX roll. Mutual fund/ ETF fees. Do you know how each of these things are trending over time?

The SEC Charged Zack Morris and other "FinTwitters" with security price manipulation. $100m in fines.

Key list of things not to do based on the filing:

1/ Non Disclosed Dumping. Selling stock you’ve promoted without informing followers you have done so 2/ Deleting the Deed. Removing evidence of your selling a stock your promoted to build trust with your followers

The Fed denied the rumored "pivot" this week, increasing corporate borrowing costs. Below I will explore implications

1/ Stocks offer the worst value to high grade bonds in nearly 10 yrs both in the US and internationally. Reversion to mean would imply a ~20% drop in the S&P 500 2/ For apples to apples, I dealt with the composition difference in Investment Grade Bond Indices and the S&P 500 (tech cos have less debt).

The result is similar - implying 17% S&P 500 downside if stock valuations were to move in line with their normal relation credit.

Credit Suisse. Below I will summarize what has happened and what I think the implications are.

1/ Credit Suisse options price an explosive equity move over the next 3 months. Implied vol of 61 at decade highs imply moves 2x US financials. Bonds and CDS paint a similar story. 2/ CDS are a bit hard to understand, so instead I'll focus on the bonds. The 2025 Credit Suisse bonds pictured below trade at 6.4%. Compare this, for example to Ukraine 2025 debt trading at 67%.

Talking about Ukrainian debt default makes sense. CS debt default - less so.

Today, the Agency Morgage ETF $MBB dropped its 3rd largest amount (2%+) since 2008. Below are some of my attempts to understand context & implications.

1/ Fannie Mae 30-year current-coupon spread to the 5/10-year blend - a measure of risk is near decade highs. 2/ why bother:
A] Housing is key to the fed tightening financial conditions
B] Home buyers are voters, house affordability is a problem, and midterms are coming
C] Rent is a big part of inflation and is influenced by mortgages
D] Case Shiller Housing prices are out tomorrow

On Friday, GBP made its 4th largest drop since the 90s - nearly the size of Black Wednesday Exchange Rate Mechanism crisis in 1992. 2Y UK yields surged 44 bps (close to Black Wednesday move). It's now down another 3%

1/ This happened because of the amusingly named "mini budget" 2/ The cost of the 'mini budget' which included big tax cuts for the rich was 160b£ on top of 60b£ recently spent on energy subsidies. While deficit spending can often boost equities, the MSCI UK Index dropped over 5% in USD terms on Friday.

There are two ways to look at this.

FedEx $FDX is -17% after pulling its full year guide due to macro-economic trends that "worsened significantly later in the quarter both internationally and in the US." Delving in

1/ Q2 F2023 expects were $24.7B of revs. The white line shows bottom of new guide. Not good! 2/ Worth noting before going further. FedEx management has credibility issues. They provided a 2025 Financial Target just 3 months ago. On last call analysts questioned their ability to guide multi years given they'd "missed even the nearest of profitability targets" for 2 yrs

Today was a good day. 60+ earnings trades, 15 of them qualitative, the rest purely quantitative. 65% hit rate

Meme stocks going at the same time as fundamentals which is quite new indeed. A new regime?

Finally spoke with my brother after years. Cooked myself chana masala Hit me today that I'm not in this for money. I used to be. Money in trading is like clay to a sculptor. You need enough clay, but that's a pre-requisite to the art, not its essence

The question is what you want to say, not how loud you want to say it

there's been a trope of "eating your vegetables" with trading process. here's my take on it:

1/ tax management. your after tax pnl is your earning. thought needs to be put up front into whether you're a futures trader or an equities trader, and how to structure that business 2/ a US based equity trader might consider 'trader tax status' entities. these entities have substantial disadvantages such as hold time. whereas a futures trader doesn't have wash sale issues but loses in flexibility. the dominant strategy is living somewhere w low taxes

In 1991 Japan hadn’t crashed before, and the Japanese believed their own hype

In 1997, Emerging Markets hadn’t gone haywire and their sovereign wealth funds were betting on themselves

In 2001, Tech hadn’t crashed before and many of today’s billionaires held to zero In 2008, real estate seemed to only go up and many genuine believers blew the system up

In 2017 crypto had never hit scale issues, and imploded

In 2018, balance sheet unwinds were uncharted territory

There is a pattern and a point to all of this relevant to today

Going to talk a bit about my understanding of the growth unwind

1/ let’s start with the obvious absurdity - negative 30 year yields do not force you to buy mongoDb stock. Why? The more volatile a stock and its outlook is the less relevant government borrowing costs are. And yet 2/ a number of stock promoters latched on to the low rates story. The argument was that technology delivered “secular efficiency improvements” that lowered prices. Implying a feedback loop between low rates and technology. This was a distraction from the real feedback loop …

Comments on Upstart $UPST earnings (1/4). TLDR: secondary (i.e. investor) demand for loans dried up due to rates / credit move, forcing UPST to take loans with increasing default rates directly onto its balance sheet - something that shouldn't happen for a platform/tech company 2/4 The problem wasn't on the volume side. "The volume of loan transactions across our platform in Q1 was 465,000 loans, up 174% year-over-year and representing over 350,000 new borrowers". But commentary was that adding another 3-5% of cost on the loans was slowing demand

Some basic thoughts on why I like to own things. (This will be a rant so if you hate threads just don’t read this).

Appealing assets have a mix of good 1) Fundamentals 2) Data 3) Investors 4) Liquidity. Below I’ll provide checklists for each of the 4 points 1) fundamentals. A) expected to make large free cash flow over next 3 years relative to enterprise value B) The ratio in A is elevated both vs the company’s own history, and versus its competitors C) margins and growth are increasing with churn decreasing D) not doing m&a

I bought Mosaic, Nutrien, Corteva and CF Industries $MOS $NTR $CTVA $CF on the close today and shorted the consumer staples $XLP, 13% of capital a side.

1/ Dec 8 Belarusian sanctions, inflation hedge inflows, and LFP battery phosphate demand should drive this trade til Year End 2/ Farmers buy Potash and special seeds to enhance yields in tough crop environments. Fertilizer prices globally have gone parabolic due to a combination of strong food demand, declining soil quality, and climate change. These factors have accumulated, and are likely to persist.

Took .3% position in Activision $ATVI Nov 19 2021 calls for .67. Nvidia conference on Nov 9 focusing on the Metaverse, the gigantic pump going on in game-focused crypto, and MSFT's Metaverse entry will refocus investors on ATVI long term story

1/ The calls were $7.5 last night. 2/ Yes - earnings came out and there was disappointment about pulling the timeline for Diablo 4. The tech sector and other video game cos are now 2x as expensive as Activision on forward free cash flow yield in spite of the company's superior IP, balance sheet and profitability

I just read an interesting thread by @RaoulGMI talking about techno utopianism and how we are all going to make it.

1/ We are in what I believe is the final stage of the Super Bubble. The Super Bubble is the misconception that bailout capitalism is actually a free market. 2/ The belief that markets are a machine is a beautiful lie, peddled very profitably by Ray Dalio. Funds invest hundreds of billions of dollars in his underperforming funds because it is so enticing to think of a system running on "levers". Capitalism - the vast Randian Railroad

I bought 1.5% long Arch Resources $ARCH $98.79 vs the Utility Sector $XLU @ $65.19 into earnings on October 26.

1/ Exploding coal prices in China combined with China's ban of Australian imports have caused Arch's 2023 earnings estimate to more than double in the past 2 months 2/ Coal prices repeatedly limit up is building a crescendo for Arch. Due to China banning Australian coal imports, heavy rains in Indonesia, and record low coal inventories Arch Coal has the opportunity to make inroads to the Chinese market as foreshadowed in Q3 earnings