Housekeeping/How I think about markets

Quick thoughts

Hey everyone,

We need to do some housekeeping:

• First, I appreciate all of you guys and enjoy interacting with you but there are thousands of you so please be cognisant that I can’t always respond ASAP. If you are a subscriber then it’s clear you have an insatiable desire to learn and better yourself. I respect that about you.

• Second, Capital Flows is the place where I share the entirety of my process for research, strategy building, and trade ideas. This is meant to be a reflection of what I am doing. If you want tailored consulting or research (I typically only do this for family offices), you can email me but right now I am pretty busy with my current clients.

• Third, all of the research or trade ideas I share are NOT investment advice! Trading requires extensive preparation, scenario analysis, risk management, and a clear thought process. This is clearly still lost on many.

• Fourth, all trolls immediately get blocked. I have no interest in providing opinions on other people and I have no interest in being trolled. I am extremely confident in by ability to run a hit ratio that fluctuates between 40%-60%. This means there will be views that are falsified and lose a predetermined amount of capital. Gap risk, broker risk, execution risk, emotional risk etc must be taken into account for this entire process.

• Fifth, read ALL the educational articles and all the referenced resources in these articles before asking questions please. I have literally set out an entire path of educational resources to understand macro. I am a professional at what I do and I will treat all of you as professionals who are operating a trading business.

A life principle:

I have always believed that if you become skilled at a craft, it will be recognized. Unfortunately, in today’s world people are more interested in buying lottery tickets and being lazy instead of turning themself into a competent and capable individual.

Do you see a man skilled in his work?

He will stand before kings;

He will not stand before obscure men.

Proverbs 22:29

There are several ways I think about developing competence and skills that are monetizable:

• First, identify what is incredibly difficult and/or what people don’t want to do.

• Second, identify the carry or capital constraint involved in the development of a specific skill. For example, if there is a negative carry (it costs money) for building something, a large amount of people will immediately be excluded because they can’t fund the carry. Typically, situations that have very extreme payouts have a negative carry. Similar to how tail risk strategies in the market typically have a negative carry, so does the acquisition of specific skills.

• Third, most people can commit to something for a couple months or maybe a year. If you can make an incredibly calculated decision and work on intentionally developing a skillset for a decade, no one will be able to compete against you.

Conclusion:

I wrote a full report on the current situation we are experiencing with equities and internet rates. I will be expanding on this with another report on the specific tensions we will see into the end of April. Fundamentally, we have several catalysts between now and the next FOMC meeting.

We are at a significant implied vol premium and the repricing in the short end is functionally complete unless we begin to price hikes (which is unlikely). However, this still leaves volatility in the long end as a risk in direct connection with the implied vol premium in equities.

More on this soon. For now, we move forward together