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It’s Not About How Smart You Are

Take the smartest financial analyst in the room, feed him or her a bunch of bad information, and they will lose money.

It’s not about how smart you are, it’s what you know and when you know it.

In the financial world, they are a lot of very smart people looking at the screen trying to figure out where the market is going to go.

I would say, in this world populated by MBA and PhDs, I have a below-average IQ.

That means every day I trade, it’s against people who are smarter than me.

What’s my edge?

I know the screen is constantly trying to trick me.

What you see on-screen, what read, what you watch and hear is data that is continually manipulated and massaged by algorithms that pick up on your prejudices and tell you what you want to hear/see/feel.

It’s not just Facebook. It’s YouTube, Google, Twitter, and even Netflix.

Liberals, conservatives, Christians, atheists, football fans, hockey fans, stamp collectors: What you see on-screen is what the algos think you want to see so that you keep coming back for more and keep clicking.

And that’s a problem if you are a trader. When I’m staring at the screen, I’m not looking for a warm fuzzy. I don’t need to see a YouTube video that validates my view of the world.

I’m looking for data that shows my investment ideas are wrong, that the narrative in my head about what I think about my little corner of the financial world is incorrect.

The articles and videos that validate my investment strategy, I don’t worry about that. The algos show me that data without any effort. The ego-stroking is automatic.

How do I get to the data that makes me doubt my view of the world?

One way is to check the betting markets.

This is from Polymarket, a crypto platform that allows bets on various future events.

And of course, it’s all about Omicron.

My news feeds had been telling me nothing but bad news about Omicron for the last three weeks.

But on Polymarket there was this bet at 10-1 odds that Paxlovid will be authorized for emergency use in the next ten days.

I’ve never heard of Paxlovid, despite my reading of the latest news on Omicron every day.

Checking for Paxlovid specifically on Google brought up this story:

Now maybe for some of you, this wasn’t a surprise.

But it was a surprise for me, in the sense that it wasn’t showing up on my newsfeeds for COVID and Omicron.

I was doing this research on Tuesday and it is now Thursday.

On Wednesday this news was enough for me to go hmmmmm.

I bought more than $100K of public crypto stocks and sent out a bulletin to my paid subscribers.

Yesterday, after market closed, the FDA announced that Paxlovid is now approved for treatment of COVID.

Today I’m up $15K from yesterday.

Is that a coincidence?

I don’t think so.

Is it proof I’m a real smart guy?

No.

I just don’t like echo chambers, and I don’t trust the algos that throw up the stories on my screen.

DJ

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