Business

  • The Six Biggest Mistakes Ordinary Investors Make

    It's your livelihood, it's your retirement, it's your future. 

    Tony Robbins released an infographic on the six biggest mistakes ordinary investors make. 

    1. Seeking confirmation to your own beliefs
    2. Conflating recent events with ongoing trends
    3. Overconfidence
    4. Swinging for the fences
    5. Staying Home (tendency to invest in things that are familiar)
    6. Negativity Bias (tendency to overemphasize negative experiences)

    In other words, the biggest threat to your trading profits is your own brain.  Humans are wired to avoid pain and seek pleasure … and those tendencies just aren't conducive to smart trading. 

    It's getting harder to find an edge, let alone maintain one. 

    If you don't know what your edge is, you don't have one.

    The reality is, over 90% of trades are electronic, and over 70% are algorithmic.

    Do you think those numbers are going to increase or decrease?

    Firms are using faster computers and smarter algorithms.  On top of that, high-frequency traders are skimming alpha on the executi0n. 

    Here's one thing you can predict … It is getting harder for humans to trade against the machines.

    Momentum is building … but, it already happened.  The new world of trading is quantitative. 

     

    The Old Style of Trading Is Dead Luckily Not All The Old Traders Are_GapingVoid

     The best way to avoid fear, greed, and discretionary mistakes is to avoid them.

  • It’s a Quant World

    Just finished speaking at an algorithmic trading conference, called QuantWorld, in Toronto.

     

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    AI, big data, and high-performance computing are getting cooler … in a nerdy way.

    At this show, data and methods were the focus … showing a shift from hardware and low-latency. 

    Skynet is turning on!

    Woo Hoo!

  • Eight Major Forces Shaping Our Global Economy

    In trading, the holding period (or "time in trade") is shrinking.  Consequently, there is less focus on predicting markets … and more focus on determining which techniques are making money most predictably.

    Markets are not the same as the economy … and on a macro scale, it is possible to understand and predict the major forces shaping our global economy.

    Jeff Desjardins, of the Visual Capitalist, recently highlighted some of the major forces that are changing our global economy.  Here is a summary.

     

    The Tech Invasion … and its Accelerating Progress

     

    If you were to look at the biggest companies globally – almost all of them are in tech. Fifty years ago, the largest companies were in commodities (like oil, steel, etc.). Even 5 years ago, the biggest companies were widely "goods" centric. 

     

    Tech-market-capsvia Visual Capitalist

    But it's more than just the biggest companies. We're experiencing a technological revolution in many subspaces – AI, 3D printing, gene editing, quantum computing, etc.   

    Yet, for all the change and disruption we've experienced until today – understand that it is going to get faster, and more pronounced, in the future. 

    And, it isn't just the tech that is new.  The pace of its adoption across industries is a game-changer as well.

     

    Tech-adoption

    via Visual Capitalist

    We are at a point where new technology often gets released before the previous iteration can fully take hold and mature.

    It is not just trading that is getting faster, product cycles are compressing, and foundational technologies are disrupted and replaced (or made obsolete) faster than ever as well.

    Even global adoption cycles have become viral and near instantaneous.  Think about how fast Pokemon Go (AR) got adopted, or new Smartphones became mainstream.

     

    The Evolution of Money, a Changing Wealth Landscape, … and China

     

    Money's definition is changing.  Cash is becoming less common (with the increasing use of credit cards, electronic payments, and payment services like Paypal, Venmo, and ApplePay).  In addition, the public has maintained its interest in cryptocurrencies.

    Ultimately, our perception of money may radically change how global economies work. 

    On top of that, money is changing hands, the ultra-wealthy are from different industries than before, and the wealthiest countries & companies widely influence politics. 

     

    Global-growthvia Visual Capitalist

    Consider the economic rise of China. Even though we've been watching China grow for decades, the scope of its population and economic impact can still be difficult to understand. China has over 100 cities with more than 1,000,000 inhabitants.  Even scarier, perhaps, is that China now has more honor students than we have students. 

     

    Conclusion

     

    Obviously, the global economy is changing.  To see more about the eight forces shaping it, read this.

    We live in interesting times.

    Onwards.

  • Visualizing the Global Economy

    I've recently been spending more time with economists, while we're not always on the same page when it comes to the interplay with trading, I still find economics interesting. 

    Trump's impact on global trade and politics will also be interesting to quantify. 

    Take a look at the world economy divided by region (Mexico is part of Latin America for the sake of this graphic). 

     

    Numvpjvzwzt11via howmuch

    Some thoughts: 

    • Russia probably has the biggest disparity between GDP and land mass.
    • This doesn't tell us anything about economic growth, would be interesting to compare this five years ago, and five years from now.  
    • Global GDP isn't zero-sum, so this circle can theoretically grow.
    • Top 3 economies were the U.S., China, and then Japan (with a large drop between each economy).
    • The top 4 countries account for over 50% of GDP.

    It will be interesting to see the way Trump's tariffs will affect the world. There are potentially hundreds of billions in annual revenue that would be affected. 

     

     

  • Here Are Some Links For Your Weekly Reading – November 4th, 2018

    Reminder: election day is this Tuesday. 

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

    Lighter Links  

     

  • Real or Fake? Data Science Debunks Internet Rumors

    A French team, Escalenta, put together a series of debunking videos called "DATA SCIENCE vs. FAKE". 

    Here are five that are short, educational, and entertaining. 

    These days, it's easy to be confused by fake news, misleading statistics, and hyperbole. 

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    Hope this serves as a reminder to check your sources and remain healthily skeptical of random factoids delivered through the intertubes. 

  • Is the Market Sell-off Going to Continue?

    October has been tough on equity markets this year. 

    For example, the S&P 500 opened to a sea of red this past early last week.

     

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    McDonald's was one of the few green spots on that heat map.  Which reminds me, Mickey D's is becoming a little more modern by adding online and touchscreen ordering.

    For some context, the S&P is on pace for it's worst sell-off since 2010 … while the NASDAQ hasn't been hit like this since post-Lehman in 2008. 

    Is it a correction or a blip?

    Historically, midterm elections inspire uncertainty among investors that dissipates quickly as soon as they're over. Once that uncertainty is resolved, the S&P gains an average of 31% the following year.

    Markets exist to trade … and confusion is a primary catalyst.  As such, many people believe the market will rally … while others believe that the traditional midterm effect could be blunted. 

    For all the confusion in today's society, it's good to see that some things don't change.

    Onwards.

  • Farm Tank Podcast – AI Trading, The Cowboys & Pablo Escobar

    I was recently on Jordan Van Trump's Farm Tank podcast. 

    On the podcast, we talked about artificial intelligence & trading, the Cowboys, my trip to Columbia, and a bunch of other things. 

    Worth a listen. Check it out. 

    Screen Shot 2018-10-19 at 2.47.23 PM

    Here are some highlights:

    • "You have to really enjoy the people you do business with. It's important to know who's fun to be around, who's going to be a net add, who's going to create energy, and who's going to have ideas." (5:55)
    • "I had a computer. Back then, only secretaries typed. I had a lot of people telling me it looked bad for a lawyer to have a computer, but I loved it and pretty quickly it became a competitive advantage." (15:20)
    • "One of the most important business lessons I learned is you have to understand what you want. So much of what I see in business is people telling me what they don't want." (19:00)
    • "I found that 10 times better is often easier to achieve than 10% better. If you're going for a 10% change, then you're bringing the past forward and you're trying to figure out what you can adjust." (20:00)
    • "Learning and growing are huge. For me, it's about raising the standard, getting comfortable with being uncomfortable, seeing the bigger picture, and creating breakthroughs. In order to do that I surround myself with people who think differently." (22:45)
    • "There's a difference between good and great and that difference is infinitesimal. You have to find not only what you're excellent at, but also what gives you energy because every day you fight the good fight and compete with everybody else."(58:00)

     

    I'll be at The Van Trump conference, in Kansas City, on November 28th. Hope to see you there.

  • This Year’s Most Brutal Campaign Ad

    2018 has been stranger than fiction in many regards … Regardless of your political leanings, some of the recent news has seemed more like a sitcom than usual. 

    For all the different ridiculous headlines, this still stands out. 

    Six siblings are running campaign ads against their brother. 

    Yes … You read that right. 

    Check it out. 

     

    Brill For Congress via Youtube

    Here are some quotes from Congressperson Paul Gosar's (R-Arizona) siblings.

    • "He just doesn't appear to be well"
    • "It would be difficult to see my brother as anything but a racist"
    • "Where is his integrity? I don't know"
    • “There isn’t a kooky, crazy, nutty thing that he isn’t a part of …What are we supposed to do?”

     

    Weird. 

    Make sure you're registered to vote in the upcoming madness (sorry, I mean midterms). 

  • Does Entry Level Still Mean Entry Level?

    We often hear millennials complaining about today's job climate.

    How can I get job experience if I can't even get a job to get experience?

     Is there any validity to that belief system?

    Apparently, yes. 

    According to TalentWorks, after analyzing a random sample of over 95,000 job listings they discovered that 61% of full-time "entry-level" jobs require 3+ years of experience. 

     

    4132018 entry-level-jobs-years-experience-1via TalentWorks

    Turns out "Experience Inflation" is a real thing.  Brings context towards the shift away from traditional education I mentioned a couple months ago. 

    TalentWorks also found that three, five, and eight years are the magic numbers for upgrading your job title.

    Mid-level jobs open up to you after five years, and senior level jobs open up after eight.

    I guess Millennials get a pass on this one … just this once. 

    With that said, we've had great success with the few high school interns we hired.  Perhaps the passion and interest that caused them to look for serious work, so early,  was a great way for them to get experience (and an early indicator of true talent)?