Walter

[Walter @walt373]

@orrdavid Most active managers are underweight the mega caps cause it’s hard to justify active management fees if you’re just gonna buy the most well-known stocks. And these were the growth stocks value guys avoided. Politics too.

[Walter @walt373]

@the_green_lark Seems like its simplicity let it stay more concentrated in the momentum winners

[Walter @walt373]

$SATS owns a bunch of SpaceX and the calls could be cheap - IPO in a couple weeks and some index fast track fuckery shortly after. I’m not sure why it has 31% short interest but it has been climbing and I assume some of that is to hedge SPCX exposure and due to unwind.

[Walter @walt373]

@orrdavid I think the most dangerous thing about bubbles is that they can last so long. Potentially an upside down world lasting years where things that worked before stop working and vice versa. Only safe approach is everything needs a stop - themes, factors, entire strategies...

[Grant @glbeaty]

One thing that's long helped me in investing is what I call Equal Weighing Bias: the tendency for people to implicitly assign equal weights to all contributors to some value function.

At its most extreme it leads people to endlessly search for irrelevant information.

[Walter @walt373]

@amtob67 Value stocks probably have to get REALLY cheap... just a guess...

[Walter @walt373]

This was almost ten years ago, and probably the single most important decision for my returns. Opened my mind to the possibility that most of what I read in books was wrong.

[Walter @walt373]

@RodriGo_ethe I believe true value investing still works but it's much harder. But brainlessly buying the value factor is not guaranteed to come back. That's just another quant strategy whose alpha has decayed over time.

[Walter @walt373]

@Merridew__ Value's career risk premium went to zero (and maybe negative) https://t.co/l6UgR0aKaL

[Walter @walt373]

True contrarianism can't be comfortable. It has to look reckless/dumb, come w/ career risk, or some barrier to entry. Maybe impossible to implement in an institution where consensus needs to be reached w/ committees/clients. IMO people underestimate how weird it has to be.

[Walter @walt373]

https://t.co/qPCFm0DYLE

[Walter @walt373]

If useless crypto can do what it did, imagine how big an AI bubble could be

[Walter @walt373]

We were talking about how AI was going to be the mother of all bubbles like three years ago.

[Walter @walt373]

Personally, I've found fintwit to be quite "early" - when people first start talking about something is often a great time to invest. Have been trying to resist my inner curmudgeon and just go with it. Eventually "new" becomes "normal" and most give in, just don't be last.

[Walter @walt373]

@AlphaVulture It’s a lot easier to get 99th percentile returns being massively concentrated. But also easier to get to the 1st percentile. But most aren’t trying to get rich or die trying. And if you’re highly skilled, you should be trying to reduce variance and take luck out of the equation.

[Walter @walt373]

@codytrades I think the reason the risk/reward is so wildly favorable is cause the options are long duration and you're not including the 2.6 years of interest you'd earn on cash instead (and puts and calls bake those in). Risk/reward still looks good after including it but not as crazy.

[Walter @walt373]

@codytrades This is the same as buying a partially ITM call spread, right?

[Walter @walt373]

@vanillager I think the reason the risk/reward is so wildly favorable is cause the options are long duration and you're not including the 2.6 years of interest you'd earn on cash instead (and puts and calls bake those in). Risk/reward still looks good after including it but not as crazy.

[Walter @walt373]

@vanillager This is the same as buying a partially ITM call spread, right?

[Walter @walt373]

So these calls are up 460% vs roughly 25% for the market, 18.4x. Could have put 5.4% of the portfolio in these calls to match the market, limit max drawdown from beta to just that, and have most of the portfolio to make money in other stuff.

[Walter @walt373]

These calls are up 5.6x in 2 years with plenty of time left. I sold too early but maybe better r/r to just buy leap calls instead of D1. Index is either ramping/crashing, doesn’t seem like sideways markets exist anymore, so index drift easily overcomes the small theta cost.

[Walter @walt373]

ES Dec 2027 $8000 strike for $100 (14% IV) only needs 12% annualized return to get in the money. Can 20x if we get a decent bull market or go absolutely bonkers in a bubble.

[Walter @walt373]

Obviously it will pop at some point but the timing and ultimate upside are the whole ballgame. But more importantly, having strategies that work in this apparently quite durable environment instead of hoping for and betting on an imminent return to the good old days.

[Walter @walt373]

We’ve arguably been in a bubble environment since crypto in 2017, RH costs to 0, TSLA and crypto again in 2020, all sorts of nonsense in 2021, SPACs, EVs, NFTs. It survived Covid, end of QE/ZIRP, trade and actual wars. AI is the realest bubble yet. And you’re betting it pops…?