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Global Macro Trading Journal
- Thread starter Daal
- Start date
So I sent the first draft of my NY vs SF investing mindsets article to a friend of mine that lives in my city, he said writing wasn't his forte and he forwarded the article to his friend, a risk manager of a hedge fund that is doing (right now) his Phd course at New York University (is there any more intoxicating thing to the ego than to do a PhD thesis at NYU?)
The absurdity that followed was comical. He railed me for the 'lack of sources' and empirical evidence, and even had the audacity of mentioning the work of Kahneman and Tversky to say what I wrote was wrong. I counter pointed him by showing that the work of these two point out that people rely (and have relied for millions of years) on heristics to simplify life (even if they dont always work) and how even "empirical" academics act without evidence when they hang up on a telemarketers or salespeople and how decision making under uncertainty doesn't need publish academic papers to exist. And that what my article was about, heuristics and rules that are derived from cultural tendencies. He replied some nonsense about how market operators don't rely on rules and heuristics (an absolute ridiculous and proposterous statement and any moron who read Market Wizards knows that) and quants being evidence against what I was saying. I even pointed out to him that he would hang up on an random investment banker calling him to sell something (and I did use the word random), even though he would have no evidence that the product or service was bad but would assume that it was
You know what he said?
That he would not hang up. Thats how bad the NY egoic influence can be, the dude in order to not admit he was wrong, now is claiming he would chit chat with random ibankers pitching him stuff and how it could be win win
These intellectual yet idiots are utterly disguting
The absurdity that followed was comical. He railed me for the 'lack of sources' and empirical evidence, and even had the audacity of mentioning the work of Kahneman and Tversky to say what I wrote was wrong. I counter pointed him by showing that the work of these two point out that people rely (and have relied for millions of years) on heristics to simplify life (even if they dont always work) and how even "empirical" academics act without evidence when they hang up on a telemarketers or salespeople and how decision making under uncertainty doesn't need publish academic papers to exist. And that what my article was about, heuristics and rules that are derived from cultural tendencies. He replied some nonsense about how market operators don't rely on rules and heuristics (an absolute ridiculous and proposterous statement and any moron who read Market Wizards knows that) and quants being evidence against what I was saying. I even pointed out to him that he would hang up on an random investment banker calling him to sell something (and I did use the word random), even though he would have no evidence that the product or service was bad but would assume that it was
You know what he said?
That he would not hang up. Thats how bad the NY egoic influence can be, the dude in order to not admit he was wrong, now is claiming he would chit chat with random ibankers pitching him stuff and how it could be win win
These intellectual yet idiots are utterly disguting
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I understand Taleb a lot better now, these people live in such a ridiculous bubbles that a lot of the time, the ONLY way to get through their heads is to humilate them socially and intelectually. If you just act nice, they will put out this ego defense field and rationalize crap to defend their patethic egos and points, and then life goes on. But if they hit rock bottom because they get absolutely destroyed by someone else, they might 'get back to earth'. I know that there is a lot of people that report overcoming ego issues after hitting rock bottom. I know for traders that's how it works you think you are the greatest until you hit a drawdown, then you are humbled back to earth and get over past ideas/beliefs/crap
I was trying to do that with this intelectual yet idiot, but he quickly ended the debate and wished me good luck. I got to say, I'm tempted to email him again anyway, the shit that he is saying is so absurd that deep down, he knows he is full of shit. Its just that all that ego consumes and confuses his intelligence
I was trying to do that with this intelectual yet idiot, but he quickly ended the debate and wished me good luck. I got to say, I'm tempted to email him again anyway, the shit that he is saying is so absurd that deep down, he knows he is full of shit. Its just that all that ego consumes and confuses his intelligence
I'm reading Peter Thiel's book as part of my research (on the SF side) and its fantastic. He even has a name for what I call a "New York Type" (typical WS asshole) he calls them a "MBA type" and how these people's biases (heuristics) hurt them when it comes to Venture Capital. It confirmed a lot of my points. He also talks about how even venture capitalists don't understand convexity/powerlaws, this confirms to me that what I call 'convexity blindness' does exist and I wasn't hallucinating.
He talks about how that arises from the fact that people watch progress gradually through time which hides the effect of exponential growth. I raised a similar point a few months ago. People mark stock market results on a annual basis which gives that impressional that rallies and collapses have a linear relationship. But it doesnt. As I mentioned a 2008/2009 investor that was afraid of a 30% drop, missed out on a almost 300% total return since then (exponential growth/power law)
He talks about how that arises from the fact that people watch progress gradually through time which hides the effect of exponential growth. I raised a similar point a few months ago. People mark stock market results on a annual basis which gives that impressional that rallies and collapses have a linear relationship. But it doesnt. As I mentioned a 2008/2009 investor that was afraid of a 30% drop, missed out on a almost 300% total return since then (exponential growth/power law)
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As I mentioned a 2008/2009 investor that was afraid of a 30% drop, missed out on a almost 300% total return since then (exponential growth/power law)
What's funny is that I raised this point on the article and the idiot PhD from NY I was emailing asked '300% in the S&P? What?'
Typical convexity blind intelectual idiot heavily influced by NY finance culture that uses year end accounting
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The IYI also railed me that none of my ideas were 'original' or 'new'. He mentioned how 'we already know this or that since X'. Proving my point even more. They don't care about usefulness or helping people (which heuristics can do), all they care about is 'being the first', statistics and rising in their academic lifes. Their lives revolve around their egos and credentials.
Its just sickening
Its just sickening
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Thiel's pointing out that venture capitalists don't understand powerlaws helps me understand why it took 4 times reading Antifragile to finally understand powerlaws/convexity. Its not an obvious thing, even the people getting rich off it dont get it (Skrelli being a great example). Most people think they understand it, but they are probably thinking in terms of 'great risk reward trades' 'if im wrong i lose 1, if im right i make 3'. That's not what that is, not fully anyway. That's what I used to think convexity was.
On convexity:
Whats better?
-A 3 to 1 reward to risk trade
-A 2.9 to 1 reward to risk trade but that has a bonus payoff of 10-1+ a small percentage of the time? And by 10-1+, I'm also including 50-1, 100-1, 600-1, 5000-1 or more payoffs that will show up when you get extremely lucky.
The latter has a lot more of what I call 'convexity exposure' (essentially the chance that you will get lucky and get a monster payoff, even if infrequently). With the latter, sometimes you will become Mark Zuckerberg, Jeff Bezos (or someone that is 10x richer than the 2nd richest man in the world, when you absurdly lucky) or at the very least, the richest man in your city. You don't know when it will happen, you have no idea why it will happen, but you know that sometimes luck will be with you and you will make huge money
I'm not mathematician but if you run a monte carlo of these 2 "systems" and chart the median or average equity curve, the second one will graph a lot more convex then the first, I mean, a lot more. Especially if you give it time. They both will be convex but one will be more than the other
Whats better?
-A 3 to 1 reward to risk trade
-A 2.9 to 1 reward to risk trade but that has a bonus payoff of 10-1+ a small percentage of the time? And by 10-1+, I'm also including 50-1, 100-1, 600-1, 5000-1 or more payoffs that will show up when you get extremely lucky.
The latter has a lot more of what I call 'convexity exposure' (essentially the chance that you will get lucky and get a monster payoff, even if infrequently). With the latter, sometimes you will become Mark Zuckerberg, Jeff Bezos (or someone that is 10x richer than the 2nd richest man in the world, when you absurdly lucky) or at the very least, the richest man in your city. You don't know when it will happen, you have no idea why it will happen, but you know that sometimes luck will be with you and you will make huge money
I'm not mathematician but if you run a monte carlo of these 2 "systems" and chart the median or average equity curve, the second one will graph a lot more convex then the first, I mean, a lot more. Especially if you give it time. They both will be convex but one will be more than the other
On convexity:
Whats better?
-A 3 to 1 reward to risk trade
-A 2.9 to 1 reward to risk trade but that has a bonus payoff of 10-1+ a small percentage of the time? And by 10-1+, I'm also including 50-1, 100-1, 600-1, 5000-1 or more payoffs that will show up when you get extremely lucky.
The latter has a lot more of what I call 'convexity exposure' (essentially the chance that you will get lucky and get a monster payoff, even if infrequently). With the latter, sometimes you will become Mark Zuckerberg, Jeff Bezos (or someone that is 10x richer than the 2nd richest man in the world, when you absurdly lucky) or at the very least, the richest man in your city. You don't know when it will happen, you have no idea why it will happen, but you know that sometimes luck will be with you and you will make huge money
I'm not mathematician but if you run a monte carlo of these 2 "systems" and chart the median or average equity curve, the second one will graph a lot more convex then the first, I mean, a lot more. Especially if you give it time. They both will be convex but one will be more than the other
The 2 systems can be essentially the same, except in the 2nd one the person sacrificies a little bit of profit to obtain that convexity exposure (say, by using skill to buy equity stakes in certain companies). So the person increases their 'convexity exposure' by acting a certain way. Sometimes dumb people will act in ways that decrease their convexity exposure, and to me, a lot of the time this can be very stupid. Very dumb. That's what Skreli did by shorting bios big time, he essentially put that 'lottery' chance against him. Its even worse than a reverse lotery because lotteries have a limited payoff but stocks have unlimited potential. In alternative realities/universes, Skreli fund didn't just blew up, it blew up and went dozens of millions into debt when OREX went to 20 instead of 8-9 (and in another altervative reality, it went to 50 and he committed suicide)
If you live your life in a way that increases convexity exposure that's smart, if you decrease, thats usually dumb. The more you run reverse unlimited lotteries, the more the chance that will get your bad luck lead you to a gigantic disaster. The more you got the unlimited lottery working for you, the more the chance that one day you will lucky and wake up as Jeff Bezos
And to me, that's what convexity is
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Its even worse than a reverse lotery because lotteries have a limited payoff but stocks have unlimited potential. In alternative realities/universes, Skreli fund didn't just blew up, it blew up and went dozens of millions into debt when OREX went to 20 instead of 8-9 (and in another altervative reality, it went to 50 and he committed suicide)
And in an alternative reality, OREX went from 2.5 (the price Skreli shorted at) to 1 and he covered at a nice profit and was hailed as a genius. You never know which result from the randomness you will get, so its more useful to think in terms of 'convexity exposures' and if you are increasing it or decreasing it instead of being a typical egoic New Yorker and say "Im right god dammit, I know I'm right' and then have your broker cover you at 8/9 dollars a share
No one, no matter how talented or intelligent, can predict the result of these unlimited lotteries, its impossible (so even knowing which side, long or short, has positive expectancy is difficult). What you can do is to manage your convexity exposure in a way that is smart, that anyone can do