Global Macro Trading Journal

"Some of the critics of these ideas —over the past two decades— have been countering that this proposal resembles buying "lottery tickets". Lottery tickets are patently overpriced, reflecting the "long shot bias" by which agents, according to economists, overpay for long odds. This comparison, it turns out is fallacious, as the effect of the long shot bias is limited to artificial setups: lotteries are sterilized randomness, constructed and sold by humans, and have a known upper bound. This author calls such a problem the "ludic fallacy". Research has explosive payoffs, with unknown upper bound —a "free option", literally. And we have evidence (from the performance of banks) that in the real world, betting against long shots does not pay, which makes research a form of reverse-bankingviii ."

https://www.edge.org/conversation/n...a-poor-substitute-for-convexity-antifragility
 
I decided to do a quick little study to try to figure out if the inflation trends are worrisome and whether I need to pullback from the Fed funds trade

I complied some data on Excel of the main "core" inflation metrics that the Fed looks at

upload_2017-7-14_19-50-17.png


Looking at the annualized rates since March (when the data started to miss) vs the annualized rates since 2012 (when it looks like the deflationary forces lost power and price stability appears to have returned)

It looks like the economy is running at something like 1%-1.25% annualized inflation instead of a more typical 2%

This could be noise as the Standard Deviation of annualized MoM changes are (since 2012)

1 SD

Core inflation 0.8%

Median 0.5%

Trimmed 0.62%

So they are all missing by a little over 1 Standard Deviation

Its a troubling sign, at this point, one more inflation report that comes out at a annualized rate of 1% or bellow and I would have to consider that there is some kind disinflationary force at work and consider cutting back some

Yellen is saying this is all due some one-time cell phone contract changes but the annualized m-o-m rates continue to miss the 2% target
 
https://twitter.com/x/status/887299895803203584

If Trump is tweeting this, its a very bad sign
They should still get tax reform passed (which is probably the stock market is not caring about any of this) as it should be easier to form a consensus given that tax cuts are politically profitable (and cutting healthcare benefits is not) but other parts of the agenda seems doubious at this point
 
lawrence-lugar said:
10K to 1.5 million could be achieved much faster than 15 years, o_O -- rather than being very lucky in holding one stock for the long haul,
More...
Point is, folks going around making bearish/skeptical comments about certain companies dont hold themselves accountable by keeping a tally on this sort of thing. If they did, they would be down several times their networth (in reality, they would be margin called but I'm speaking of a 'virtual' account where their bullshit is always held to account no matter what). Which leads to this realization: when you hear those folks saying this or that skeptical comment and there is a lot of potential (convexity) perhaps there is an edge in buying as a rule.
Its possible that those situations are consistently mispriced because most people don't fully understand convexity/exponential gains
Its not easy because there are a lot of fake convexity plays out there (like OTC stocks) that consistently produce losses but a good filter should help the systematic long convexity strategy
 
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