Global Macro Trading Journal

[Daal]

"First, while there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability."

Oh boy....

 

[Daal]

One thing that is not priced in is the fact that the Fed is lying right now, promising stimulus until the end of time. If this fiscal package passes, it will start a countdown inside the Fed for when they will tell the market the truth. The truth is that they will have to taper and stop QE sooner than people think and promise rate hikes if inflation gets out of hand. But right now, people think they will print forever, I dont think thats how the Fed will approach this situation

 

[Daal]

This is fucking hilarious and I would love to buy one of these
https://www.caracaschronicles.com/2021/02/07/marapolio-monopoly-with-a-maracucho-twist/

 

[Daal]

Here are some other names that will change their mind on BTC in the future:

Hugh Hendry, John Hempton, Ray Dalio, David Tepper

They all suffer from the issue of not having done any real due diligence on it so as a result, they dont even know what they are looking at. But they are not dumb and at some point they will realize their mistake

Dalio and Hendry already have

https://twitter.com/x/status/1361753177997996036

Pal really nails the critical issues at the end of this interview. That's the kind of thing I have been rambling for years in this journal, about the differences between a NY thinking (typical hedge fund manager mindset) and SF thinking (typital VC mindset). NY folks are too contrarians and mean reverting, so they dont fully understand optionality and miss exponentials (recently Taleb started to sell his Bitcoin with ridiculous arguments, even him, who wrote volumes about it dont get it) whereas SF folks get it but tend to drink too much kool-aid from time to time, so its not about which is best its about learning from both mindsets and incorporating the best of each

But when dealing with exponetial assets, its better to be more of a VC than a HF manager (better as in, you will make a lot more money)

 

[Daal]

You can even see Hendry at the end of the interview suffering from the lack of price targets, models, numbers and things like that (typical HF mindset).

He wants control but exponentials dont work like that, that's the type of thing that can work in large mature macro assets like developed market bonds, gold, etc. Econometrics will simply not work in crypto, at least not now. The false confidence that comes from it will lead to mistakes.

This is why crypto leads to a quasi religious mindset where people swear by bitcoin or eth, preach to other people, brag about their staying power, hold symbols in their house (like physical metal bitcoins) etc. This is not foolishness but rather a human solution to the issue of not holding an exponential trend

The same way that there are no atheists on foxholes, there are no semi-bulls after 80% bear markets. Either you are in, or you are not
If you are in, you have to become a believer, otherwise the volatility will make you sell

That's the preferred solution for most people, but there is an alternative which is to lock your Bitcoin or ETH in the blockchain and prevent yourself from selling. I like this alternative very much and I'm using it right now but its advanced and it will not work for most people

 

[Daal]

Here is a little table of the different mindsets that I wrote in an unpublished article back in 2017

Of course, these wont hold in every person who runs a hedge fund or VC but they were the tendencies that I was able to identify (I removed one entry that I no longer agree with, also, some entries are just jokes). Also, I'm sure if I had to redo the table today I would add other things or remove others. One thing to add is that Hedge funds tend to rely a lot more on statistics and mathematics than VCs, this is not to say that VCs dont use it but that they wont refuse to invest because they cant project out sales going out 3 years, in technolgy this just doesnt make any sense (in a mature retail stock, it might), etc I tried to capture that with the DCF comparission but its not clear enough

Maybe I will redo the article and publish one day but I hate writing so I dont have much motivation for doing it. Back in 2017 I had a project to create and run an investment newsletter but I ditched the idea due lack of motivation

 

[tsznecki]

Very valid points ^ but I think it can be mathematically much more simple.

You short a random asset 99.9% of the time the floor is 0. If you are right, the most you stand to make it almost 100% assuming you cover at like 0.01. But if you buy a random asset, the upside is theorectically unlimited. You can make multiples regardless of what the fundamentals say.

Shorting has it's place but one cannot be a perma bear.

 

[Daal]

Very valid points ^ but I think it can be mathematically much more simple.

You short a random asset 99.9% of the time the floor is 0. If you are right, the most you stand to make it almost 100% assuming you cover at like 0.01. But if you buy a random asset, the upside is theorectically unlimited. You can make multiples regardless of what the fundamentals say.

Shorting has it's place but one cannot be a perma bear.

Yes but the HF folks have been told that for years but they continue to not get, I mean, the guy has his MBA and Ivy degrees and will tell you he understands the math but you look at his behavior and he doesnt.

Maybe Bitcoin will change that but I have a feeling that even the ones that buy it, will sell it too soon. I think the issues are deeper than that, they relate more to culture/personality/etc

If a guy has a fund located in New York and has a macho way of speaking (contrarian), I can tell this guy does not get exponentials/optionality, even if I never ask him about it

 

[Daal]

Here is a potential mistake Hedge Funders and other asset managers might make (and that includes myself due my background on day and swing trading): thinking we can predict tops Bitcoin (Or ETH) by looking at history (of bitcoin or markets)

Thats the mistake Taleb is making right now (and the Mohammed El-Erian made at $19,000). There is no rule on stone that says that Bitcoin has to behave anything like in that past (or it has to behave like some other boom of a completely unrelated asset), it might show us something completely different this time around. I dont want to be overly realiant on anything did historically, I will take a look at history but I want my method to be more fluid, more intuitive rather than logical. Too much reliance on history is backtesting, which is a NY type mindset that is prone to huge errors when dealing with a new technology. It provides the false sense of security that Hugh Hendry is looking for, but thats dangerous

 

[Daal]

Its also noticeable that Dropbox IPO at $8-9B valuation will be a downround from its 2014 $10B private round valuation. So perhaps this is an example of the "Thiel rule" that companies on downrounds and flat rounds underestimate how much in trouble they are in. They had 4 years to show something that would convince markets that they can differentiate themselves from others, and they didnt seem do to that (in the meantime, the QQQs soared)
Since I'm still early in my tech investing game, I think I will pass on all down/flat rounds as a rule, so I wont be buying DBX

I dodget a bullet there (that was from 2018). If an investor wants to take their investing game to the next level, I wouldn't be reading Buffett, I would be reading Thiel and Paul Graham
The Thiel rule I got from an AMA he did on Reddit, it says avoid investing in "downrounds" (fund raisings at a lower valuation from the previous fund raising). I just extended it to IPO's. Robinhood had a downround recently, so that's one to avoid when it goes public