Log Pilot retweeted
Beware of investors who have turned a stock into their identity.
You know the accounts I’m talking about. Sometimes the warning is right in the username: All in in XYZ, XYZ Super Bull, XYZ Forever, XYZ to the Moon. Every post is about the same company. Every decline is a buying opportunity, every earnings report is brilliant, every competitor is inferior, and anyone who disagrees simply doesn’t understand the business.
At first glance, this looks like extraordinary conviction. But there’s a fine line between understanding a business deeply and becoming psychologically incapable of questioning it or living in a fashion where it becomes your identity. And the more publicly someone has committed to an opinion, the harder it becomes to reconsider it.
Here’s what makes this particularly dangerous. When your wealth, reputation, audience, and intellectual identity become attached to a single investment, changing your mind becomes enormously expensive emotionally. Selling the stock no longer feels like making a financial decision. It feels like admitting that everything you’ve been telling yourself and thousands of followers might have been wrong.
And that’s when something fascinating happens. You stop evaluating information and start defending a conclusion. Good news becomes evidence, bad news becomes an excuse, and legitimate criticism becomes a personal attack. You’re no longer researching the company to discover the truth. You’re researching it to protect what you already believe.
The greatest danger in investing isn’t being wrong. It’s becoming so emotionally invested in being right that you lose the ability to recognize when you’re wrong.
I’ve owned some businesses for well over a decade, and I understand the value of extraordinary conviction. But conviction should be the result of continuous examination, not a substitute for it. In fact, the longer you own a business, the more important it becomes to challenge your assumptions, because familiarity can quietly turn into complacency.
There’s also an important difference between knowing a company better than everyone else and believing you know it better than everyone else. One comes from years of curiosity, observation, and intellectual honesty. The other can come from nothing more than a rising stock price and an audience applauding your every opinion. A bull market has a remarkable ability to make confidence look like competence.
Here’s another uncomfortable truth. Once someone builds an audience around being bullish on a particular company, their incentives subtly change. They may begin telling followers what those followers want to hear rather than what they need to hear. The audience rewards certainty, while good investing demands the humility to live with uncertainty.
Never confuse loyalty to a company with loyalty to the truth. Companies don’t know you own their shares, and they certainly don’t owe you anything for believing in them.
Fall in love with the process of understanding businesses, not with the need for any particular business to prove you right. The goal of investing isn’t to defend yesterday’s decisions. It’s to make the best decisions you can with what you know today. Your portfolio should reflect your judgment. Your judgment should never become a prisoner of your portfolio.
🌹
Exceptionalism.
From another friend:
JFK'S Secretary of State, Dean Rusk, was in France in the early 60's when DeGaulle decided to pull out of NATO. DeGaulle said he wanted all US military out of France as soon as possible. Rusk responded, "Does that include those who are buried here?"
DeGaulle did not respond. You could have heard a pin drop.
When in England, at a fairly large conference, Colin Powell was asked by the Archbishop of Canterbury if our plans for Iraq were just an example of 'empire building' by George Bush. He answered by saying, "Over the years, the United States has sent many of its fine young men and women into great peril to fight for freedom beyond our borders. The only amount of land we have ever asked for in return is enough to bury those who did not return."
You could have heard a pin drop.
There was a conference in France where a number of international engineers were taking part, including French and American. During a break, one of the French engineers came back into the room saying, "Have you heard the latest dumb stunt Bush has done? He has sent an aircraft carrier to Indonesia to help the tsunami victims. What does he intend to do, bomb them?" A Boeing engineer stood up and replied quietly: "Our carriers have three hospitals on board that can treat several hundred people; they are nuclear powered and can supply emergency electrical power to shore facilities; they have three cafeterias with the capacity to feed 3,000 people three meals a day, they can produce several thousand gallons of fresh water from sea water each day, and they carry half a dozen helicopters for use in transporting victims and injured to and from their flight deck. We have eleven such ships. How many does France have?"
You could have heard a pin drop.
A U.S. Navy admiral was attending a naval conference that included admirals from the U.S., English, Canadian, Australian, and French navies at a cocktail reception. He found himself standing with a large group of officers that included personnel from most of those countries. Everyone was chatting away in English as they sipped their drinks when a French admiral suddenly complained that, whereas Europeans learn many languages, Americans learn only English. He then asked, "Why is it that we always have to speak English in these conferences rather than speaking French?" Without hesitating, the American admiral replied, "Maybe it's because the Brits, Canadians, Aussies, and Americans arranged it so you wouldn't have to speak German."
You could have heard a pin drop.
AND THIS STORY FITS RIGHT IN WITH THE ABOVE...
Robert Whiting, an elderly gentleman of 83, arrived in Paris by plane. At French customs, he took a few minutes to locate his passport in his carry on. "You have been to France before, monsieur?" the customs officer asked sarcastically. Mr. Whiting admitted that he had been to France previously. "Then you should know enough to have your passport ready." The American said, "The last time I was here, I didn't have to show it." "Impossible. Americans always have to show their passports on arrival in France!" The American senior gave the Frenchman a long hard look. Then he quietly explained, ''Well, when I came ashore at Omaha Beach on D-Day in 1944 to help liberate this country, I couldn't find a single Frenchmen to show a passport to."
You could have heard a pin drop.
I am proud to be an American, and proud of this God given heritage!
Log Pilot retweeted
COLDCARD makes retirement attacks impossible, generate your own entropy and reproduce it provably! coldcard.com/docs/verifying-…
Log Pilot retweeted
The next time you’re feeling down, remember it's all about perspective. I got a friend who reads 2-3 books a week, works out twice a day, has no financial worries, & has people who want to have sex with him all the time & yet he constantly complains about how much he hates prison
Log Pilot retweeted
Andrew Lo, MIT - the economist behind the "physics envy" critique of finance - on the most dangerous instinct investors have:
every time NASCAR adds a new safety feature - reinforced bumpers, roll bars - drivers crash more, not less.
they feel protected, so they push harder. economists call it the Peltzman effect: make people safer and they spend the safety on extra risk.
now apply it to markets. when volatility is low, investors don't sit still feeling safe - they pile on leverage and risk, convinced the danger is gone. the risk didn't vanish. they just stopped seeing it.
his warning: the calmest markets are exactly where people quietly load up on the most hidden risk - right before it snaps back.
~50-min Google talk, free. the MIT economist on why "safer" quietly makes us reckless ↓
Mark Spitznagel - founder of Universa, the "black swan" fund Nassim Taleb advises - on the most counterintuitive idea in investing:
add a 3% sliver of crash insurance to a stock portfolio. give that insurance a 0% expected return - it makes nothing over time.
it still raises the portfolio's long-run compound return - by roughly what you'd get from putting that same 3% into an asset returning 20%+ a year.
how? by killing the deep drawdowns that quietly destroy compounding. but the insurance has to actually fire in a crash. one that only sometimes pays out is "like a parachute that only sometimes deploys - you're better off not wearing one."
most "safe havens" - gold, the dollar, hedge funds, even a Picasso - fail that test.
~13-min talk, free. the man who made ~4,000% in the 2020 crash, on what actually protects you ↓
Log Pilot retweeted
Let’s be honest.
Warsh at the Fed.
Kevin Warsh’s arrival at the Federal Reserve is not a personnel change. It is a regime change attempt inside an institution built to prevent one. A supply-sider now runs a central bank hard-wired for Keynesian demand management, and the machine is already resisting the new code.
The next mistake is visible in plain sight. Keynesians on Wall Street and inside the Fed are treating a supply shock as if it were a demand boom and calling for tighter money. This is dogma masquerading as seriousness. A chokepoint in the Strait of Hormuz, a jump in energy prices, and a cost shock rolling through transport, food, and manufacturing are not evidence of overheated demand. They are evidence of a damaged supply side.
Monetary policy cannot reopen a shipping lane. It cannot pump more oil. It cannot repeal geopolitics. It can only crush demand somewhere else, usually with a lag, and usually in the most interest-rate-sensitive corners of the economy first, housing, commercial real estate, capital spending, and durables. Those sectors did not close the Strait. They are simply first in line to pay for the Fed’s intellectual mistakes.
That is the Keynesian reflex in its purest form. Every price spike becomes “inflation.” Every inflation scare requires a rate move. Every rate move is advertised as proof of resolve. It is nonsense. A change in relative prices caused by a supply shock is not the same thing as an inflationary spiral. Pretending otherwise is how central banks turn an external shock into a domestic recession.
Machiavelli explained why change is so hard. The innovator makes enemies of everyone who did well under the old order and wins only lukewarm defenders among those who might benefit from the new. Christensen gave the same warning in corporate language. Incumbent institutions kill disruptive change because their processes, incentives, and prestige are built around the existing model.
That is the real problem Warsh faces. The resistance is not incidental. It is structural.
The test for Warsh is not whether he can sound tough on television. It is whether he can resist the Wall Street catechism that every supply shock must be met with tighter money. If he hikes rates into a supply-driven price spike to prove his anti-inflation credentials, he will not have broken with the Keynesian regime. He will have submitted to it.
This is not the 1970s. Expectations are not unanchored, and the productive economy is already scarred by years of policy excess, fiscal decadence, and institutional bias.
The hope is that Warsh understands the difference between inflation and a supply shock, ignores the Keynesian pundits, and refuses to compound one policy error with another.
Kevin Warsh is to be sworn in as Fed chair on Friday, and some investors say the central bank’s next move could be a rate hike—not the cut he was hired to deliver on.wsj.com/3Phncg3
Log Pilot retweeted
Well as you point out power law tails is quite a different domain and statisticians / econometricians are usually dealing with that certainly in financial data. We are talking about about a power law backbone as the fundamental underlying reality. Autoregression is not a problem (a) of course there is just as a rocket can folllow a parabolic power law in general and its current position depends on prior position (it also has deviations due to atmosphere, gravity variations and of course any burns) and (b) one can correct to AR(2) level with generalized least squares and get a Durbin-Watson statistic very close to 2, it is then still a power law and the power law exponent actually steepens slightly.
Of course there is a whole underlying physically motivated theory of Metcalfe’s square law for networks x observed viral adoption spread as a cube law. I generally avoid arguments with statistical purists they forget to ask Why it has followed a power law as price increased by 7 orders of magnitude because they refuse to see the evidence directly in front of them.
Log Pilot retweeted
We need an Eponymous Law for naming bills. Something like:
"Orwell's Law of Nominal Inversion": The more virtuous a bill's name sounds, the more likely its effects are the inverse!
Log Pilot retweeted
Haha sure!
Power law trend price (blue) is at 122.5K, and the “soft floor” price (orange) is at 66.5K.
This puts current price (65k) just below the pl floor, and ~87% below the pl trend.
For context, instances when price fell below -85% divergence were around:
-Sept. 2023 (-90%)
-Dec. 2022 (-120%)
-March 2020 (-90%)
-Sept. 2016 (-95%)
-April 2016 (-95%)
-Sept. 2015 (-120%)
So here in Feb. 2026 and BTC at 65k … yes, it could still dip lower short term.
But we are in a zone of historically excellent entries.
Enjoy ⚡️
#bitcoin
Log Pilot retweeted
Fun Fact: Many of the musicians on “Buena Vista Social Club” were in their 70s, 80s, and even 90s when they recorded. Their voices and playing carry decades of Havana’s musical history, and Ry Cooder captured it all in just six days of live, largely improvised sessions.
Log Pilot retweeted
Bitcoin may or may not revisit its support levels in the near term, but if it does: the lower it goes, the less time it is likely to spend there before running up again.
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🚨WORST CASE... we dive into this support rainbow IF we head down. Coincidentally (or not?), the estimated marginal production cost level, electrical cost, etc. (estimated with error) also happens to live in this range, or just above it.
See the TABLE in the figure for the implied support prices if we were to reach them today. With BTC currently around $92K, these represent 27-41% further correction from today.
Historically, if price breaks below the 10th percentile, it would only remain below that level for an average of 36 days in any given year.
For the 5th percentile (what I normally use as "support"), price would remain lower for an average of just 18 days per year.
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💡KEY INSIGHT: The deeper we go into the support rainbow, the lower the likelihood we continue lower, and if those lower quantiles are reached, the fewer days price is likely to spend there. *NOTE* the 1st percentile is exceedingly unlikely.
All support levels built from the most powerful long-term price model in my opinion: the power law (derived here using quantile regression).
