Thoughts about the markets, automated trading algorithms, artificial intelligence, and lots of other stuff

  • My Recent Podcasts with Dan Sullivan & Brett Kaufman

    I recently did two interviews I want to share with you. The first was done with Dan Sullivan and Steven Krein for Strategic Coach's Free Zone Frontier podcast… and the second was with Brett Kaufman on his Gravity podcast. 

    Please listen to them.  They were quite different, but both were well done and interesting. 

    Free Zone Frontier with Dan Sullivan and Steve Krein

    Free Zone Frontier is a Strategic Coach group (and podcast) about creating "Free Zones." It refers to the green space where entrepreneurs can collaborate and create without competition.

    It's a transformative idea for entrepreneurial growth. 

    In my episode, we focused on topics like building your own future, how decision-making frameworks and technology can extend your edge, and what it takes to get to the next level.   I realize there is a lot of Strategic Coach jargon in this episode, but it is still easy to understand, and there was great energy and an elevated conversation about worthy topics.

    As an aside, Steve Krein happens to be my cousin, and we joined Strategic Coach entirely separately before realizing we had joined the same group. 

    The podcast is 47 Minutes. I hope you enjoy it.

     

    Or click here to listen on: Spotify, Google Podcasts, Apple Podcasts 

    Gravity Podcast with Brett Kaufman

    Normally, I talk about business, mental models, and the future of AI and technology, but Brett Kaufman brought something different out of me. 

    Brett's Gravity Project is about living with intention, community, consciousness, and connection. He focuses on getting people to share their life experiences … with the intent that others can see themselves in your story. 

    In my talk with Brett, we do talk about the entrepreneurial journey … but we also probe some deep insights by discussing the death of my younger brother, how my life changed almost immediately upon meeting my wife, and why love is the most powerful and base energy in the universe. 

    This was not a typical conversation for me (a different ratio of head-to-heart), but it was a good one (and I've had a lot of people reach out because of this podcast). 

    The episode is 65 minutes. I hope you enjoy it. 

     

    Click here to listen on: Spotify, Apple Podcasts, Listen Notes

    Let me know what you think.

  • WallStreetBets Analysis: Market Crashes & Oreos

    During the Robinhood & Gamestop debacle, I wrote an article about r/WallStreetBets where I essentially said that most of the retail investors that frequent the site don't know what they're doing, but there is the occasional real post with strong research you would see at a real firm. 

    As an example of good research done by the subreddit, here's a link to a post where a user (nobjos) analyzed 66,000+ buy and sell recommendations by financial analysts over the last 10 years to see if they had an edge. Spoiler: maybe, but only if you have sufficient AUM to justify the investment in their research. 

    There are also posts that show a clear misunderstanding of markets, and more jokes than quality posts, but I saw a great example of correlation ≠ causation. 

    In the past I've posted about the Superbowl Indicator and the Big Mac Index, but what about Oreos?

    The increasingly-depraved debuts of Oreos with more stuffing indicate unstable amounts of greed and leverage in the system, serving as an immediate indicator that the makings of a market crash are in place. Conversely, when the Oreo team reduces the amount of icing in their treats, markets tend to have great bull runs until once again society demands to push the boundaries of how much stuffing is possible.

    https://en.wikipedia.org/wiki/List_of_Oreo_varieties https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

    1974: Double Stuf Oreo released. Dow Jones crashes 45%. FTSE drops 73%.

    1987: Big Stuf Oreo released. Black Monday, a 20% single-day crash and a following bear market.

    1991: Mini Oreo introduced. Smaller icing ratios coincide with the 1991 Japanese asset price bubble, confirming the correlation works both ways and a reduction of Oreo icing may be a potential solution to preventing a future crash.

    2011: Triple Double Oreo introduced. S&P drops 21% in a 5-month bear market

    2015: Oreo Thins introduced. A complete lack of icing causes an unprecedented bull run in the S&P for years

    2019: The Most Stuf Oreo briefly introduced. Pulled off the shelf before any major market damage could occur.

    2021: The Most Stuf Oreo reintroduced. Market response: ???

     - LehmanParty via Reddit

    It's surprisingly good due diligence, but also clearly just meant to be funny. It resonates because we crave order and look for signs that make markets seem a little bit more predictable.

    Funny-mealso-me-meme-about-making-healthy-choices-but-also-eating-crap-like-all-stuf-oreos

    The problem with randomness is that it can appear meaningful. 

    Wall Street is, unfortunately, inundated with theories that attempt to predict the performance of the stock market and the economy. The only difference between this and other theories is that we openly recognize the ridiculousness of this indicator.

    More people than you would hope, or guess, attempt to forecast the market based on gut, ancient wisdom, and prayers.

    While hope and prayer are good things … they aren’t good trading strategies.

    A good reminder that even if you do the work, if you're looking at the wrong inputs, you'll get a bad answer. 

    Garbage in, garbage out. 

  • Here Are Some Links For Your Weekly Reading – May 9th, 2021

    Happy Mother's Day! 

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

     

    Trading Links:

  • Assessments and You

    Over the years, I've used a number of different assessment tests on myself and our team. It's a great way to help people better understand each other and the different forms of communication and problem-solving styles we use.

    Here are several of the tests that have proven themselves time and again:

    1. Kolbe: measures a person's instinctive method of problem-solving, and identifies the ways they will be most productive.
    2. Predictive Index (PI) – helps you understand the way their traits manifest in relation to their true nature and their perceived role.
    3. StrengthsFinder: helps people uncover their talents, so they can do more of those things each day.

    On top of my normal tests, as a team of data scientists, it's always fun to see what's available. 

    For example, Ray Dalio recently created a personality assessment called PrinciplesYou that you can take for free. I've seen a number of articles claiming that the assessment is not only accurate, but that it also has impressive insights.

    Less meaningful, but still fun, I also found a website that lets you test your performance on various reaction and memory tests. Unsure how scientific it is, but it was an interesting use of 10 minutes nonetheless. 

    Image-2via Human Benchmark

     

    Progress starts by telling the truth … most often to yourself.  

  • Timeless Wisdom From Socrates

    Small distinctions separate wise men from fools. Perhaps one of them has to do with what the wise man deems important.

    Socrates' Triple Filter

    In ancient Greece, Socrates was reputed to hold knowledge in high esteem.  One day an acquaintance met the great philosopher and said, "Do you know what I just heard about your friend?"

    "Hold on a minute," Socrates replied. "Before telling me anything, I'd like you to pass a little test. It's called the Triple Filter Test."

    "Triple filter?"

    "That's right," Socrates continued.  "Before you talk to me about my friend, it might be a good idea to take a moment and filter what you're going to say. That's why I call it the triple filter test.

    The first filter is Truth.  Have you made absolutely sure that what you are about to tell me is true?"

    "No," the man said, "Actually I just heard about it and…"

    "All right," said Socrates. "So you don't really know if it's true or not. Now let's try the second filter, the filter of Goodness.  Is what you are about to tell me about my friend something good?"

    "No, on the contrary…"

    "So," Socrates continued, "You want to tell me something bad about him, but you're not certain it's true.  You may still pass the test though, because there's one filter left.  The third filter is Usefulness.  Is what you want to tell me about my friend going to be useful to me?"

    "No, not really."

    "Well," concluded Socrates, "If what you want to tell me is neither true, nor good, nor even useful … then why tell it to me at all?"

    With all the divisiveness in both media and in our everyday conversations with friends, family, and strangers … this is a good filter for what you say, what you post, and even how you view markets. 

    How Does That Apply to Me or Trading?

    The concept of Socrates' Triple Filter applies to markets as well.

    When I was a technical trader, rather than looking at fundamental data and scouring the news daily, I focused on developing dynamic and adaptive systems and processes to look at the universe of trading algorithms to identify which were in-phase and likely to perform well in the current market environment.

    As we've transitioned to using advanced mathematics and AI to understand markets it becomes even more true. 

    Filter Out What Isn't Good For You.

    In contrast, there are too many ways that the media (meaning the techniques, graphics, music, etc.), the people reporting it, and even the news itself, appeals to the fear and greed of human nature.

    Likewise, I don't watch TV news anymore either. It seems like story after story is about terrible things. For example, during a recent visit with my mother, I listened to her watch the news.  There was a constant stream of "oh no," or "oh my," and "that's terrible". You don't even have to watch the news to know what it says.

    It's also true with what you feed your algorithms. Garbage in, garbage out. Just because you can plug in more data, doesn't mean that data is adding value. Deciding what not to do, and what not to listen to is equally as important as deciding what to do. 

    Artificial intelligence is exciting, but artificial stupidity is terrifying. 

    What's The Purpose of News for You?

    My purpose changes what I'm looking for and the amount of attention I pay to different types of information. Am I reading or watching the news for entertainment, to learn something new, or to find something relevant and actionable?

    Socrates_quote_to_move_the_world_we_must_first_move_ourselves_5420

    One of my favorite activities every week is looking for new insights and interesting articles to share with you and my team.  If you aren't getting my weekly reading list on Fridays – you're missing out. You can sign up here. 

    Getting back to Socrates' three filters and the business of trading, I often ask myself: is it important, does it affect our edge, or can I use it as a catalyst for innovation?

    There's a lot of noise out there competing for your attention. Stay focused. 

    Onwards!

     

  • Here Are Some Links For Your Weekly Reading – May 2nd, 2021

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

     

    Trading Links:

  • A Wordcloud For Each of the Major Religions

    The six largest religions in the world are Christianity, Islam, Judaism, Hinduism, Buddhism and Sikhism. 

    We often think about the differences between religions.  However, the many similarities are obvious if you look (and may be indications of a more integral "truth". 

    Below is a wordcloud for each of those religions based on their major religious text. 

    Q04t0id427v61teddyterminal via Reddit

    If you find the name "Keith" it's because it was the translator's name, and the word "car" in the Hinduism wordcloud is an old-fashioned word for "chariot".

    It's also worth acknowledging that this wordcloud is from the English translations so some words that may mean slightly different things in other languages can be all translated to one word in English. For example, it's very common in Biblical Hebrew to see different words translated into the same English word. A good example is Khata, Avon, and Pesha–three different ways of committing a wrong, that may all be translated the same.

  • Gaining Insight & Ideas from Hedge Fund Letters

    Most Hedge Fund letters are hard to come by. They're sent to their investors and are not generally posted publicly. 

    However, Milton Financial Market Research Institute puts out a quarterly collection of letters they've curated since 2016. 

    These letters contain a lot of insight into not only the performance and approach of the funds but also the markets and the world as a whole. 

     

    Screen Shot 2021-04-23 at 10.29.07 AMvia Milton FMR

    This is a valuable resource to gain a more holistic view of the markets and the fund industry.

    Hope it helps.

    Also, please let me know if you are aware of other sources like this.

  • Here Are Some Links For Your Weekly Reading – April 25th, 2021

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • Ikigai in the Post-Quarantine World

    Getting old is tough … and it gets tougher the older you get.   As a result, finding your 'reasons for being' and joy in life become increasingly important as well. 

    2020 was a year of massive upheaval for many. Stress, change, pandemics, quarantine, new jobs, new goals … or at the other end of the spectrum, lack of change, lack of a job, or lack of purpose.

    Regardless of the reason, many people struggle to get up in the morning. This is a shame because life is so much better than the alternative (and life becomes even better when you learn to enjoy living and let go of what isn't serving you). 

    There's a Japanese concept called Ikigai that may help.

    Ikigai centers around finding purpose as you grow older.  Paradoxically, it makes sense to start the process as early as possible. 

    Here is an infographic that lays out some "Reasons for Being."

      

    IIB-Ikigai-1

    via InformationIsBeautiful

    Finding your "reason to be" and living with purpose are keys to making the most of your time.

    The beauty of 2021 being a fresh start is that you can also change your approach and your vision.

    The graphic highlights something interesting (yet almost counter-intuitive) … When two areas intersect, it creates something positive (e.g., a passion or a mission).   However, where three areas intersect, it creates a pain point (for example it could be what you're good at, you love doing it, the world needs it … but it doesn't make you any money – so now you're struggling).

    Worth examining and thinking about for a bit.

    On a related note, here is a TEDx talk about the 9 common diet and lifestyle habits that help people live past 100.

     

    TED-ED via YouTube

    And here is a link to Dan Sullivan's free e-book on his plan to live to 156. 

    Live long and prosper!