It makes some sense to let positioning, as a jury, decide between two conflicting theories or narratives, the problem is timing. Large specs can be at extremes for quite some time. Not a drawdown I would welcome.
I like how you look at both sides of the coin in your articles, much more informative than the standard bull- or bear-posting.
The path of least resistance is always up for markets. Sure positioning is stretched but it can always get more stretched. Is positioning ever not stretched close to ATHs?
Agree equities trend up over time. Not sure if always stretched at ATHs, what I have seen when markets march higher is that positioning is cleared very quickly on any (shallow) dip, providing the fuel to go higher
You are very methodical in your development of theses, and write with great clarity. A pleasure to read.
Because this post addresses biases, this question becomes more prominent: to what extent does the bias to either utilize the macro/ignore the macro impact the outcome? i.e., given that over time there will be errors, how does the success rate compare to that of a naive approach?
My apologies. You wrote with clarity and I wrote with mud! My intent was not to ask about trades. Rather, if one lays out N plausible scenarios, a naive approach might be expected to get 1/N "right." If one applies some mental effort, resulting in weighting the N possibilities, the success rate may change. That difference, Sm - Sn (success using mental effort - success using naive approach), over time, is going to be affected by the "quality" of the analyses and by "luck." The "quality" is really the sum of the objective analysis and bias. Over a single test, "luck" may be dominant; over enough tests, it should tend towards some fixed level. So long term, Sm - Sn should reflect (obj analysis + bias), and trends in Sm - Sn may provide some clues the trader can look at with respect to their own process.
It makes some sense to let positioning, as a jury, decide between two conflicting theories or narratives, the problem is timing. Large specs can be at extremes for quite some time. Not a drawdown I would welcome.
Of course, there is never certainty. It could keep getting longer
where can I find pricing on "inflation swaps"?
On Bloomberg, 3.32% vs 3.2% consensus
I like how you look at both sides of the coin in your articles, much more informative than the standard bull- or bear-posting.
The path of least resistance is always up for markets. Sure positioning is stretched but it can always get more stretched. Is positioning ever not stretched close to ATHs?
Agree equities trend up over time. Not sure if always stretched at ATHs, what I have seen when markets march higher is that positioning is cleared very quickly on any (shallow) dip, providing the fuel to go higher
You are very methodical in your development of theses, and write with great clarity. A pleasure to read.
Because this post addresses biases, this question becomes more prominent: to what extent does the bias to either utilize the macro/ignore the macro impact the outcome? i.e., given that over time there will be errors, how does the success rate compare to that of a naive approach?
Thank you. Success rates vary between 25-50% even for the best traders. The key is risk management
My apologies. You wrote with clarity and I wrote with mud! My intent was not to ask about trades. Rather, if one lays out N plausible scenarios, a naive approach might be expected to get 1/N "right." If one applies some mental effort, resulting in weighting the N possibilities, the success rate may change. That difference, Sm - Sn (success using mental effort - success using naive approach), over time, is going to be affected by the "quality" of the analyses and by "luck." The "quality" is really the sum of the objective analysis and bias. Over a single test, "luck" may be dominant; over enough tests, it should tend towards some fixed level. So long term, Sm - Sn should reflect (obj analysis + bias), and trends in Sm - Sn may provide some clues the trader can look at with respect to their own process.
Feels like a superforecasters vs. Taleb match invitation to me :-)
Excellent Florian 🔥
Thank you!
A classic!
Thank you!
I grew up in Rorschach. Loved to read.
Excellent as always Florian! Thank you
why you think CPI is coming in hot?