journal to hold myself responsible & reinforce what the market teaches me
Joined February 2023
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deafturtle retweeted
God dammit Clement 🫠
Druck shouted this book out speaking with hedge funds last month. I rushed to read it, as I see my friend did here as well. Great read, very unfortunate consistencies between now and then. Hope it's all wrong, but what can we do other than read the tea leaves?
The whole book looks at the relationship as if Data Centers now are the railroads back then. Railroads in the 1860s are the AI infrastructure of today, transformative technologies that require enormous amounts of capital upfront.
Their finance mechanism of choice?
MASSIVE BOND ISSUANCES to fund construction.
When investors began questioning whether railroads could generate enough revenue to service their debts, financing dried up.
The big red flag in similarities is the building of infrastructure ahead of demand as they bet the building of said infrastructure would create demand. They were developing railroads in sparsely populated areas thinking they'd attract settlers. Sometimes it worked like a charm, other times companies went bankrupt before the anticipated economic activity came through.
The analog works as such:
-Hyperscaler builds a massive data center assuming AI inference demand will explode.
-It purchases GPUs based on the expected utility several years in the future.
-Signs long term power contracts and infrastructure agreements.
-Financial projections assume customers will pay enough to justify the enormous investment.
WHAT BROUGHT DOWN THE WORLD ECONOMY BACK THEN: the anticipated economic activity failed to justify the lofty financial projections and the enormous debt accumulated to fund them.
The 1873 crisis wasn't necessarily about railroad stocks collapsing due to lack of growth, it was more about the railroad bond market losing its ability to finance the continued expansion. The railroad businesses were booming! They were simply not growing enough compared to the aggressively lofty expectations.
The aspect most striking to me was the net positive that railroads did for society and still lead to the market influx. The railroad boom was absolutely correct in its future utility. They DID transform commerce as they connected national economies, reduced shipping costs and overall helped create modern capitalism. Just like AI WILL cure diseases and all these other amazing things. So the technology was ABSOLUTELY evolutionary, but the capital allocation is what lead to the market top.
THE BIG DIFFERENCE THOUGH, between now and then, were the financiers. Hyperscalers got a lot of cash and generate a whole lot more whereas the financing in the bond offerings simply dried up back then when investors began to doubt the growth projections. Jay Cooke got cooked back then but we know guys like Zuck will spend forever. They are all in and will keep spending to keep this trade in motion.
I have no idea what happens next, I am not calling anything. I have been on margin long for weeks until today.
The one thing i DO KNOW, is that memory looks like absolute shit after today.
$DRAM here was looking like a base for weeks and with today's failure is resembling much more of a stage 3 top.
Again, I am not saying this is set to happen. I am simply explaining @Clement_Ang17 's post. If this post triggers you in any sort of way ... BLAME CLEMENT!
deafturtle retweeted
Long-end 20Y+ Treasury bonds hit -2.5 standard dev. move on weekly intervals. ~N=8 since $TLT inception, so keep that in mind. 1W–1M is mixed, but beyond that +EV, with 75%+ win rates from 2M+ out. Payoff has been positive at every horizon, even when win rate wasn’t.
deafturtle retweeted
market insanely strong at $710 $QQQ this morning, fucked forever and ever at $700.50 15 minutes ago, and shaping up now at $703
Am I doing this right?
deafturtle retweeted
Better framing is probably variant view. There can still be plenty of variant perception in large caps. Edge doesn’t have to come from obscurity or differentiation. It can come from interpretation, time horizon, behavior, or sizing. And on “capacity,” large caps actually enable more audacious sizing because liquidity is far less constraining.
At the portfolio level, a heavily sized large-cap winner can produce comparable or better returns than a small-cap home run, especially when small-cap exposure has to be spread across multiple names and sized smaller to control downside + liquidity risk. A microcap may offer far more raw upside, but if you can only put no higher than 5% into it, its portfolio impact/deployable alpha can still be lower than a much smaller move in a large cap you can size aggressively.
deafturtle retweeted
There is a reason utilities boomed in the Roarin' 20s.
This was also the reason why the Dow Jones Utility Index didn't break even with the 1929 high, permanently, until 1984.
This chart from @monsterstocks1 on Utah Securities.
Thanks to @spirittrader65
deafturtle retweeted
Long paragraphs on some trading truth.
Cult-like behaviours in the trading community need to end. There isn't a single book you read that will magically turn you into a profitable trader. They're likely there trying to sell you something: their subscription service or some indicators.
Don't follow a single person as if he/she were Lord Jesus himself. We're all just tools that YOU can use. If we're useless, then stop using us. You're likely never going to meet me, so in reality I am not a real person. So don't ever think anything too deep. And you should start gaining consciousness this way.
Most importantly, if someone you suspect is not a real trader and is posting retarded tickers all the time, chances are that person is retarded. Doesn't matter their follower count. Just because something or someone is popular doesn't mean it will work; heck that's the whole business. The least popular type shit will be the ones that work.
Ever heard a trader saying something like "All you need is a few trades a year, and you'll be able to make a living?"
Yeah, maybe it works for THAT person. Or maybe he's bullshitting you. See if it works for you; if it doesn't, the chances are he's bullshitting you. Doesn't matter if he is or not; if YOU'RE not making money, you're getting bullshitted on.
Personally, I have to take like 50,000 trades a year to make a living. First thought that comes to your mind? "Wow, he's overtrading"
And I'll ask you this: are you profitable? If not, what is there for you to say that I am overtrading? It's the same as how a 400lbs person have 0 rights on saying what is healthy to eat or not. Wake up!
deafturtle retweeted
Is it popularly known that Japanese banks have seen very impressive growth in their offshore dollar-denominated loan books the past couple of years? And that these loans mainly service Asian markets that Chinese banks used to service?
The outcome: Japanese bank balance sheets are expanding just as Chinese ones are contracting.
Which is to say, as Chinese banks pull back from lending dollars to BRI markets in favor of RMB loans, Japanese banks are moving in to take advantage of that unserviced dollar loan demand.
This coincides with increasing Japanese bank profitability, and collapsing Chinese bank profitability.
One interpretation of the above is that the narrative around increasing RMB preference in the region is far from correct. It’s not that demand for dollar-denominated loans is falling in favour of RMB. It’s that Chinese banks can no longer lend dollars at a profitable rate in the region, and are thus trying to promote RMB loans instead (since they are cheaper to provide for them).
This is likely because China’s overall cost of capital is increasing as deflationary forces mount.
Japanese banks on the other hand stand on the opposite side of the cycle. They have very cheap capital costs in relative terms, including in USD. It thus makes sense for them to take advantage of the market opportunity that is presenting itself.
In fact the op may be so large that it’s prompting a rush into yen funded=> USD swapped loans, exacerbating the depreciation in the yen.
In that case, everyone may be missing that this isn’t an ordinary emerging-market style currency depreciation crisis. The cause has nothing to do with Japanese banks lacking sufficient dollars to cover their liabilities in a way that threatens their profitability. On the contrary the cause is likely a rush to acquire what dollars they can so as to better take advantage of the mega profit opportunity that might otherwise not be captured.
All in all, this is incentivising Japanese banks to sell dollars that they don’t yet have via swap markets (which is resulting in rapid yen depreciation) on the basis that the risk-adjusted profit of doing so is too attractive to ignore.
If I’m right this changes the calculus on what’s really going on with US yen intervention.
It’s not a bailout. It’s fuel to help Japanese banks keep stealing market share from Chinese banks in the region.
One last related note: Japanese banks have spent years diversifying their USD funding sources. Today they have very large and robust deposit franchises in the US and in dollar terms. This adds even more resilience.
All of which is a long way of saying: what we are seeing is a profit-motivated market mania not a crisis.
That, at least, is my hunch.
deafturtle retweeted
Human intelligence is a complementary good to ai intelligence.
Its the same as working with a team of all people. When you are on a team with someone with outlier intelligence, there needs to be other people on the team that are pretty sharp as well. Maybe not at their level, but they can't be too far off. That's always been the recipe for outstanding team performance - you get a mega-brain and a couple of sharp people and you are cooking. At least that's what I have personally observed.
In contrast, if you have a mega-brain on the team - that doesn't mean everyone else on the team's intelligence is suddenly redundant.
We have seen those setups as well - what happens is the smart person is in that role for a year or two and accomplishes absolutely nothing of note. The capability is totally wasted. Then they move onto another or team or company with other smart people - and immediately start doing incredible things.
In sum, its going to be people with high intelligence that are going to be able use AI intelligence to push the frontier of knowledge and deliver value.
People are going to have to become more intelligent (not less) as ai advances to continue to be able to get the most out of its capabilities.
Diehards are gonna say - you can have multiple AI intelligences. It ain't gonna be the same. AI intellegence may be similar to human intellegence but its different - and its gonna remain different for a long time. We have bodies, emotions, spirits, families, values...so a fleet of agents and agents working with intelligent humans are going to arrive at different outcomes.
The frontier labs. The frontier developers. They are paying out the ass for the smartest people possible to be interacting with these AI intelligences.
deafturtle retweeted
Retweeting an idea from Wey. I’ve been thinking about the second part.
As technical traders, we often trade price; which is a lagging indicator.
The real divergence happens in positioning, sentiment, and fundamentals way before it shows up on the chart.
Take the recent macro backdrop:
• Dovish Fed pivot & rate holds
• Bessent securing a BoJ deal to backstop US bonds (no forced selling)
• Oil dropping for 3 months
• Solid earnings reports re-confirming the AI trade
• Failed breakouts in DXY and yields
Despite this massive bullish tailwind, Silver sold down heavily, undercutting lows and flushing out leveraged retail.
Meanwhile, Nasdaq, DXY, and Oil all confirmed the macro divergence.
It made zero fundamental sense for Silver to drop; unless you understand that Silver market makers use these aggressive peak formations to hunt liquidity before a massive reversal.
When the macro screams buy, but the asset flushes retail, you get an A+++ setup. It's way beyond just a chart pattern.
deafturtle retweeted
I was getting ready to talk about how awesome $HPE looks. Appears everyone already beat me to it 😅
deafturtle retweeted
There are two types of momentum crashes: market rebounds (left) and market downturns (right).
The prototypical momentum crashes are rebound crashes, for example post GFC 2009. They are much more violent and driven by the short leg.
But there were also some downturn crashes, for example Dotcom burst 2000. They tend to be milder and driven by both legs equally.
