January 2022

  • It Isn’t Whether Tom Brady Is Retiring – It’s About When … and Why We Care?

    In 2017, I wrote an article “asking” why the Patriots were so good. Then Tom Brady left, the Patriots have suffered (somewhat), and Tom Brady won another Super Bowl with the Buccaneers. 

     

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    Now, several sports pundits are reporting that he may be retiring. Tom Brady insists that he hasn’t made a final decision yet. 

    Of course, there is the matter of the $15 Million portion of his signing bonus that becomes payable to him on Friday. That might explain the “confusion” on timing?

    Regardless, all this talk reminded me about what makes Tom Brady special. 

    There is a difference between ‘luck’ and ‘skill’.

    Both exist … yet, luck favors the prepared.

    In life, as in sports, hard work often beats talent (especially if talent fails to work hard).

    But, when you see this picture from the 2000 NFL Combine, it’s hard to believe that Tom Brady would be a 7-time Superbowl MVP taking the Buccaneers to the Super Bowl in his first year with them. All at the geriatric (for an NFL player) age of 44. 

     

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    via CBS Sports

    When I talked about the Patriots, I focused on the fact that they were a well-oiled machine with a powerful framework of success that allowed individual greatness to shine. 

    I think Brady’s continued success is emblematic of that. 

    Tom Brady is a paragon of culture, process, and hard work. Much of his approach was molded by his time with Belichick, but of course, he gets enormous personal credit as well. 

    He expects the best of himself and brings out the best in his teammates. That’s enabled him to stay a top-level competitor despite not being the strongest, fastest, or most mobile QB (and that was when he was young). 

    As well, Tom Brady is remarkably consistent and disciplined; his diet, his routine, his exercise, his film routine, etc. All NFL athletes have impressive routines for the most part, but take a look at Tom Brady’s routine. It’s a routine built for him and his needs – and he’s got it dialed in. He doesn’t need to waste time trying to get big in the gym, so he focuses on 9-key exercises to support his goals. 

    The System is the ‘system’; but, within it, you can measure what works, who contributes, and then use those insights to identify the best things to try next.

    Win, lose, or draw … some things speak for themselves. And whether he retires today, next year, or never, we don’t need to wait five years to know he’s a Hall of Fame player with an incredible career. 

  • Here Are Some Links For Your Weekly Reading – January 30th, 2021

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

    Lighter Links:

    Trading Links:

  • 2022 Predictions

    About a month ago, I shared visualcapitalist's 2021 predictions to check how well they fared at the end of the year. 

    Honestly, the list was pretty good. It wasn't perfect, but you wouldn't expect it to be. 

    In that article, I asked this question: 

    What's going to happen as a result of the continuing pandemic, inflation, interest rates, the ongoing supply chain issues, and the growing anxiety and unrest brewing underneath the surface of the new normal? In January, we'll get to see VC's predictions. Before that, what do you expect to happen in 2022? – How'd These 2021 Predictions Fair?

    With that, here are visualcapitalist's 2022 predictions: 

    Prediction-consensus-2022-1via visualcapitalist

    Let's be clear – most predictions are either vague and easily guessed (and therefore not helpful) or random conjecture. 

    But, there's value in prediction, and there's value in analyzing the data before you. The caveat is that prediction is better when it's applied to human nature and not the machinations of fate, and data can be a distraction if it's not being carefully curated and analyzed to remain relevant to your goals. 

    For example, I agree with their general direction for technology. Tech is continuing to grow in influence, and as Web 3.0, the blockchain, and AI mature as platforms for sub-technologies, I think their importance is only going to skyrocket. 

    Prediction can also be entertainment. I certainly catch myself looking for patterns and differentiators for everything from whether my meal is going to come to the table correctly, to who's going to win the Super Bowl. 

    I know the chances are low, but I still think it's going to be the Cowboys … 

  • How Markets Performed in 2021

    2020 was a roller coaster of volatility, and while 2021 was as well, most asset classes saw improvements as the world reopened. 

    But it wasn't all smooth sailing.  There were significant supply chain struggles and rising inflation … not to mention the rising cases of COVID. 

    Regardless, markets are not the economy, and while there are numerous factors to think about, I've always found markets interesting. 

    Maingraphic-asset-class-2021via visualcapitalist

    2021 was a year of rampant speculation, in part because so many systematic traders underperformed.  For example, Renaissance reportedly saw ~15 billion in outflows last year (despite double-digit returns) as their clients likely moved towards more "exciting" opportunities. 

    Of course, some of those "exciting" opportunities were cryptocurrency-related.  Moreover, chasing performance like that is often mean-reverting.  Yet, I've seen a massive increase in interest among various business groups in crypto, Web 3.0, and the Blockchain. 

    Cryptocurrencies

    While crypto generally performed well in 2021, 2022 has seen a drop that erased over $1 trillion in value. 

    Crypto-Performed-in-2021_03via visualcapitalist

    The reality is that crypto markets matured a lot in 2021.  The thousands of coins are mostly a distraction, but there are many interesting coins from various sectors with interesting technology behind them.  There is increased infrastructure and decreased correlation between coins.  Unfortunately, not enough to keep this drop from affecting the whole space. 

    So the question is, is this a "discount" for people to buy into the space, or a sign of future troubles?

    It's no secret that I've always been a fan of Blockchain but cautious of cryptocurrencies. 

    I think there is a lot of money to be made speculating in cryptocurrencies, but how much of that money being made is attributed to luck vs. skill?

    Crypto's are interesting, in part, because they're a digital currency decentralized over a peer-to-peer network.

    The more people are willing to accept it as a medium of exchange, the more valuable it becomes (and the more it becomes a stable store of value).

    Supposedly, decentralization provides it safety from censorship and government interference – meaning it has value as an international currency and as a currency for black-market transactions.  But, in my opinion, that remains to be seen (and I consider it unlikely for most cryptocurrencies).

    However, the worth of a Bitcoin isn't just based on sentiment (on one hand, there are desires to avoid fiat currency vagaries, government interventions, and scrutiny, while having a fair price discovery method, etc.  … on the other hand, there are also the costs to mine a Bitcoin, transaction fees, etc. and crypto has recently been under fire for its huge environmental impact).

    Compared to a reserve currency – whose worth is primarily influenced by trade value and other macroeconomic factors – watching crypto's volatility can be scary. 

    That being said, as adoption increases and more businesses enable it, it's possible that it will continue to legitimize.  For the time being, I remain a long-term skeptic because there is too much working against it. 

    Many of my initial complaints are centered on coins as currency.  I get that there are already many interesting uses of Blockchain that will also help to bring credibility to coins as a store of value. 

    The question for me is, even if cryptocurrency is here to stay long-term (and avoids government control), which coins will it be?  Do they even exist today?

    I'm positive there is money to be made related to the Blockchain, NFTs, and cryptocurrencies.  But, at this point, it's a speculators game, and I think the best way to capitalize on this trend sustainably is to sell picks and shovels for the gold rush, instead of trying to stumble upon gold. 

     

     

  • Here Are Some Links For Your Weekly Reading – January 23rd, 2022

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

    Lighter Links:

    Trading Links:

  • Media Bias and You

    Information is Power.

    Consequently, your choice of information source heavily contributes to your perceptions, ideas, and worldview.

    Coincidently, news sources are a lightning rod for vitriol and polemic.

    I am still somewhat surprised by the abject hatred I hear expressed towards a particular news source by those who hold an opposing bias.  This often leads to claims of fake news, delusion, and partisan press.  Likewise, it is common to hear derision toward anyone who consumes that news source.

    Perhaps the reality is that most sources are flawed – and the goal should simply be to find information that sucks less?

    It's to the point where if you watch the news, you're misinformed, and if you don't watch the news, you're uninformed.  News sources aren't just reporting the news … they're creating opinions and arguments that become the news.  Moreover, many consumers don't care enough to think for themselves or to distinguish facts from opinions.

    Here's a chart that shows where news sources rank on various scales.  It has default options and over 1400 sources you can add to the interactive version.  You can click the image to go to an interactive version with more details.  It gets updated every year, and Version 9.0 just got released.

    Screen Shot 2022-01-23 at 2.03.35 PM

    via Ad Fontes Media

    I once spent fifteen minutes arguing about how you know whether the information in this chart is accurate.  If you're curious about their methods, click here. 

    The "new normal" is to distrust news agencies, big companies, the government, and basically anyone with a particularly large reach. 

    Perhaps even more dangerous is the amount of fake news and haphazard research shared on social media.  Willful misrepresentations of complex issues are now a "too common" communication tactic now on both sides … and the fair and unbiased consideration of issues suffers.  

    Social media spreads like wildfire, and by the time it has been debunked (or proven to be an oversimplification), the damage is done.  Once people are "convinced," it is hard to get beyond that. 

    In reality, things aren't as bleak as they seem.  People agree on a lot more than they say they do.  It is often easier to focus on "us" versus "them" rather than what we agree upon jointly.  This is true on a global scale.  We agree a lot.  Most Democrats aren't socialists, and most Republicans aren't fascists … and the fact that our conversation has drifted there is intellectually lazy.

    This idea that either side is trying to destroy the country is clearly untrue (OK, mostly untrue).  There are loonies on the fringes of any group, but the average Democrat is not that unlike the average Republican.  You don't have to agree with their opinions, but you should be able to trust that they want our country to succeed. 

    I don't know that we have a solution.  But there is one common "fake news" fallacy I want to explain at least a little. 

    It's called the Motte and Bailey fallacy.  It's named after a style of medieval castle prioritizing military defense.

    Launceston_Castle_-_geograph.org.uk_-_22242

    Launceston Castle via Chris Shaw, CC BY-SA 2.0

    On the left is a Motte, an artificial mound often topped with a stone structure, and on the right is a Bailey, the enclosed courtyard.  The Motte serves to protect not only itself but also the Bailey. 

    As a form of argument, an arguer conflates two positions that share similarities.  One of the positions is easy to defend (the Motte), and the other is controversial (the Bailey).  The arguer advances the controversial position, but when challenged, insists they're only advancing the moderate position.  Upon retreating, the arguer can claim that the Bailey hasn't been refuted, or that the critic is unreasonable by equating an attack on the Bailey with an attack on the Motte. 

    It's a common method used by newscasters, politicians, and social media posters alike.  And it's easy to get caught in it if you don't do your research. 

    Conclusion

    As a society, we're fairly vulnerable to groupthink, advertisements, and confirmation bias. 

    We believe what we want to believe … so it is hard to change a belief (even in the face of contrary evidence). 

    But, hopefully, in learning about these fallacies, and being aware, we do better. 

    I will caution that blind distrust is dangerous – because it feels like critical thought without forcing you to think critically.

    Distrust is good … but too much of a good thing is a bad thing. 

    Not everything is a conspiracy theory or a false flag.

    Do research, give more credence to experts in a field – but don't blindly trust them either.  How well do you think you're really thinking for yourself?

    It's a complicated world, and it's only getting more complicated.  But, hopefully, it encourages you to get outside your bubble and learn more about those with whom you disagree. 

  • Betting On The Super Bowl

    Trying to get rich quickly? Want to know if the markets going to be bull or bear this year?

    Look no further than the "Super Bowl Indicator".

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    The theory is a Super Bowl win for a team from the AFC foretells a decline in the stock market and a win for the NFC means the stock market will rise in the coming year. 

    There is one big caveat … it counts the Pittsburgh Steelers as NFC because that's where they got their start. 

    If you accept that caveat, it has been on the money 33 years out of 41 – an 80% success rate. Sounds good, right?

    Come on … you know better.

    Here are some other "fun" stock market fallacies:

    Back to Reality

    Rationally, we understand that football and the stock market have nothing in common.  And we probably intuitively understand that correlation ≠ causation. Yet, we crave order and look for signs that make markets seem a little bit more predictable.

    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..

    As goofy as it sounds, some of these "far-fetched" theories perform better than professional money managers with immense capital, research teams, and decades of experience.

    I have a thought experiment I often ask people that come into my office. 

    What percentage of active managers beat the S&P 500 any given year?

    … Now, what percentage beat the S&P 500 over 15 years?

    The answer is about 5% as of 2019 (and that's in a predominantly bull market), and I have to imagine it's only gotten worse in the past two years.  That's significantly worse than chance. That means something they're doing is hurting, not helping. 

    Screen Shot 2019-01-30 at 1.22.32 PM

    via Gaping Void

    There's simply too much information out there for us to digest, process, rank, and use appropriately.

    Every second you spend looking at a market is a second wasted.

    There are people beating the markets — not by using the Super Bowl Indicator … they're doing it with more algorithms and better technology. 

    There will never be less data or slower markets.

    Onwards.

  • Here Are Some Links For Your Weekly Reading – January 17th, 2022

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

    Lighter Links:

     
     

    Trading Links:

  • Cowboys Are Out of the Playoffs Again

    It's always exciting for me to watch the Cowboys make the playoffs. Meanwhile, yesterday, the San Francisco 49ers ended the Cowboys season in the first round of the playoffs. 

    Only one team can win the Super Bowl.  I know that.  Yet, most seasons, somehow, I expect the Cowboys to have a real chance.  That form of hope and wishful thinking comes with being a fan. 

    Whether you like football or not, one thing we can probably agree about is that geriatric white dudes shouldn't rap. At least … that's what my kids tell me when I try. 

    Unfortunately, Cowboys owner, Jerry Jones,  didn't get the memo. 

    Here is the video.

     

    Hopefully, our season (next year) will be better than that video. 

    For another light-hearted NFL video, here is an oldy, but goodie.

    It is kind of the opposite of one of those old Kung Fu movies where the dubbed words you hear aren't synched with the mouth movement. 

    Here it looks like they are saying what you hear … it's just that someone changed the words.  You could call it "So THAT'S what they were saying …"

     This video works for the same reason trading often doesn't … Humans are great at finding patterns (even when there isn't really a pattern to find).

    Regardless, this was fun (and it's gotten over 70 million views on YouTube).

     

     

  • A Look At The Future Through Today’s News

    Inspiration comes from many places. 

    I'm grateful for the many groups I'm in, and smart people I know, because they're shortcuts to insights that can be hard to find. 

    One can also find inspiration through events, books, and more. 

    But, while it's easy to discredit mainstream news sources … there's plenty of insight to be gained just from keeping track of various news sources. You have to take them with a grain of salt, and find the articles that provide a different perspective too, but it's still a valuable exercise. 

    It's part of the reason I share my weekly links and this newsletter. They give me a reason to continue to do research and stay on my toes. 

    With that, here are some interesting articles I found recently on advancements in technology. 

    • In VR, You Can Become Your Own Psychologist – There's a new VR psychology treatment where you play both patient and psychologist. It has promising results in leading to detachment from habitual ways of thinking about personal problems. This is on top of already interesting VR technology around meditation and psychedelics. 
    • Synthetic tissue can repair hearts, muscles, and vocal cords – 3D-printed tissues have been growing in popularity recently. Also making progress is synthetic tissue made of a new biomaterial in the form of an injectable hydrogel. It's durable and porous, both important qualities in creating wound repair that can handle the movement and stress put on hearts and vocal cords. 
    • AI Is Discovering Patterns In Pure Mathematics That Have Never Been Seen Before– Mathematicians using computers to discover patterns is not new, but now deep learning models are not only assisting in analysis but formulating conjectures and approaches for formerly unproven ideas. This is a promising indicator for many spaces including chemistry, metallurgy, and material sciences (on top of trading of course). 
    • DARPA Funded Researchers Accidentally Create The World's First Warp Bubble – Warp drives have been part of science fiction for a long time – and science for a decent amount of time as well. Warp drives have been theoretically possible since 1994 but were deemed "impossible" due to their use of theoretical materials and massive amounts of energy. Now, there's tangible progress as a real (but very tiny) warp bubble was successfully modeled. This is very fledgling, but it's always exciting to see science fiction become reality. 
    • Renewables 2021 by IEA – I remember when renewable energies were not only ineffective but very costly. Now, 95% of the new electricity capacity from 2021-2026 is expected to be from renewables. Now, IEA bases their estimates on historical data, so they over underestimate the adoption curves. I would take that number as conservative. Just remember that capacity is different than coverage. Several countries are making a lot of progress on renewables, and several are making none. 

    Have you found any other articles you found interesting?

    Always looking for more sources to read.