In 1991 a Stanford professor turned $100,000 into $7 million off two stocks that went nowhere - using nothing but their swings. Wall Street was so rattled it buried his math for 30 years.
His name was Thomas Cover, and in information theory he was royalty - he wrote the textbook the whole field still learns from. Then he did something no one asked for. He pointed Claude Shannon's math at the stock market.
He took two forgettable stocks. On their own, over 20 years, one rose 4x and the other 8x - nothing special. But they jumped around hard, and out of sync. So he rebalanced them daily: trim the one that popped, add to the one that dropped. That pair returned over 70x. The gain never came from the companies. It came from the shaking.
The rule behind it is one line:
W* = max E[log bᵀX]
Maximize the expected log of your wealth, not the average return. Average return says dump everything into the top stock. Log says spread and rebalance - because compounding runs on the geometric mean, and volatility becomes fuel instead of risk.
Then Cover went further. He built a portfolio that keeps pace with the best rebalancing you could have picked with a year of hindsight - no forecasts, no model. It held through the crashes of 1929 and 1987. And the same constant that runs it shows up in file compression. To Cover, beating the market and zipping a song were the same problem.
He never found a better stock. He found the money hiding in the fact that stocks move at all.
THE MONEY MASTERS | HOW INTERNATIONAL BANKERS GAINED CONTROL OF AMERICA
William T. Still
An excellent 3.5 hour documentary on the history of money, The Federal Reserve, the takeover of the Rothschilds & Private Central Banks.
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Feedback is appreciated! Will release the full video series next week on X and @MoneylineTrades
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1/ One of the oldest venture firms in Silicon Valley is also one of the most unorthodox
Rather than just fund companies, they focus on building them
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