If you missed Friday’s e-mail breaking down this past week’s events regarding GameStop and Robinhood, it’s a doozy: Surf Report: Game stopped. I think it’s as good an introduction as ever for this weird, wild week.
But believe it or not other things happened too so let’s drop back in to our regularly scheduled format 🏄♂️
“The most important lesson that history has to teach us is that men do not learn very much from the lessons of history.” —Aldous Huxley
Breaking 🌊
Here are a few things that happened this week that did not involve GameStop or Robinhood:
Nearly 1/4 of the S&P 500—39% by market value—reported earnings including Apple, Facebook and Tesla. Friday was also an expiration day for options contracts. So What?: Weeks like this will cause a lot of expected volatility in otherwise stable securities, as people are forced to buy/sell options (a contractual obligation) while others are reacting to earnings reports (a judgment call). Not a big deal for long-term investors, but rough seas for anyone watching their account all day long. (Don’t do that.)
Since early November about 2.7 million (5.5%) of American mortgage holders have been putting off payments, according to weekly data released by the Mortgage Bankers Association. So What?: That’s down from a peak of just over 8.5% in early June, but with a slower-than-expected recovery and weak job market it’s unclear when borrowers will be able to resume payments. Some may negotiate lower rates and others may just sell their homes, which would probably be snapped up quickly given current demand.
Massive companies in the industrial sector reported way better than expected earnings. These include firms like 3M, Raytheon, General Electric, and Rockwell Automation. So What?: If you want to gauge the future outlook of the economy as a whole, you look first to industrials. It’s a category of stocks of companies who produce goods used in construction & manufacturing.
“A gamer who has played thousands of Madden games has encountered all sorts of situations that could help with thinking through strategies, clock management, play calling and all the in-game decisions that coaches only get a chance to practice 16 times a year.”
Cargo Cult Startups by Luke Burgis. Luke’s work is all about mimetic desire, a theory pioneered by the philosopher René Girard explaining why so much of what we do is due to imitation—not intrinsic wants and likes. A great place to dive in if you’re not familiar!
I wanted more than the traders’ wealth or prestige—as elusive as both of those things are. (Did you know that the word prestige comes from the Latin praestigia, which means “illusion”? Prestige is literally an illusion.)
Insights 💡
“No one is as impressed with your possessions as much as you are. It’s easy to overestimate the social signaling benefits of having nice stuff. The quirk is that people who see your nice stuff spend more time imagining themselves with your stuff than they do admiring you for having that nice stuff.”
Extreme adherence to an investment strategy is dangerous in a world that changes all the time, so an important question to ask when things aren’t working whether you’re being patient or stubborn.
Investing ability is unproven until it’s survived a disaster. So be careful when identifying skill, whether your own or others’.
Buy & Hold Investments (I will hold these forever)
This section is only available for contributing subscribers. If you’d like to trade and invest along with me, consider one of the paid tiers!
Swing Trades (1-3 month time horizon)
This section is only available for contributing subscribers. If you’d like to trade and invest along with me, consider one of the paid tiers!
Barrels 🎯
Portfolio Highlights
Winning Trade of the Week: $NOK, because some reddit users decided to pump a stock I invested in back in September, just for lolz. Scaled out some profits for an 88% return.
“Game theory means rigorous strategic thinking. It's the art of anticipating your opponent's next moves, knowing full well that your rival is trying to do the same thing to you. Though parts of game theory involve simple common sense, much is counterintuitive, and it can only be mastered by developing a new way of seeing the world.”
🔊 I think it’s important to build conviction (in anything) by understanding opposing opinions thoroughly and being able to argue against yourself better than opponents can. Your argument either becomes weakened or strengthened, and it gives you a chance to fill gaps in your knowledge. So if you’re skeptical about Bitcoin and want to hear some debate, this is one of the best ones recently:
📄 Here’s an amazing collection of Bitcoin resources someone recently put together for people just starting out: https://bitcoin-resources.com/
👨🏫 Free event on Feb 4 hosted by RealVision: Bitcoin In The Real World. RSVP here.
Tools of the Trade ⚒
Products I use to make money
Wealthfront. ~25% of my portfolio is in Wealthfront, which since 2016 has netted me a time-weighted return of ~53% (~50% money-weighted) at the time of this writing, all while harvesting tax losses like the pros do.
