!!Decode/Thread (12/31/20)

Well this could be the LAST Decode/Thread of the Year ...

... Have a Happy and Safe New Years Eve ...

...

The most common problem faced by day-traders and it's easy solution which is extremely difficult to implement.
A thread.
( uses concepts I have discussed many times before in separate threads)

Problem : I have a good system, I understand charts and/or price action, but I simply can't make money. I hold my losses too long or ( this is most common) I get out of profitable positions too fast and cannot sit for the whole move

At many firms at NASDAQ, day-traders are seen as elite sportspersons playing in a difficult taxing game. That's why, they have regular sessions with sports psychologists. They are advised to follow the basic routine of sportspersons.
Train ---- Play tournaments --- Rest

The cycle repeats

We retail day-traders here neither rest nor train.

Rest = taking time off markets
Train = trading in markets in training mode

Understanding REST is easy, simply take time off markets and spend time with family or do something you love

🤔 Thread: More of the wrong thing is less
(or, how I stepped off the hamster wheel)

I’m going to share a personal story with hope that it inspires at least one person to re-examine their definition of success 👇

Through hard work and an unfair share of luck, I’ve done some cool “bucket list” things in my career:

✅Raised VC from the worlds’ top firms
✅Helped build 100’s of millions in revenue from nothing
✅Rang the bell at the NYSE
✅Met & did deals with billionaires & business icons

These are things I dreamed about when I was young and I treasure some of the memories. But when they finally happened I felt surprisingly unfulfilled. I was scoring lots of points but didn’t feel like I was winning.

Then a few years ago during a board meeting I had a moment of clarity. I looked around the table at 10 people, all absurdly successful by financial measures. There wasn’t a single person I wanted to emulate. Most were unhealthy and several had told me that they were unhappy.

Within months I walked away from from a 7-figure salary, moved my family to Boulder, & haven’t looked back. Don’t get me wrong, I’m a capitalist & like money as much as anyone. But for me it's not the thing, and *more of the wrong thing is less*.

1/ A thread on $APY @apyfinance. I believe this could become a major DeFi bluechip, and I’ve been waiting since the 10th Feb for the price to settle before posting this! But it just won’t. So I’ll post it now, but please go slowly if you buy it. It just did a 5x in 2 days!

2/ So the APY platform is a yield farming aggregator that uses a single pool of liquidity and automatic rebalances the portfolio among different strategies to optimise risk adjusted yield revenues. It is basically like having an automated fund manager managing your portfolio.

3/ Today, if for example, you have funds in a yearn vault and you realise another vault launched with better returns, it can cost 100’s of dollars in ETH fees to switch between them. For anyone not investing huge amounts, this makes switching strategies completely unpractical.

4/On APY, with a single deposit, users funds will be spread across multiple yield farming strategies and automatically rebalance over time to optimise risk-adjusted returns. So users won’t need to keep track & switch between strategies (+pay for fees!) to optimise yield over time

5/ The genius step here is that the $APY algorithm will track not only the strategies % yields, but also risk scores taking into account financial, liquidity or smart contract risks, so funds will be re-allocated over time in order to maximise yield but also manage risk.

Marathon Asset produced several iconic investors such as Nick Sleep and Jeremy Hosking.

Their letters from 2002 to 2015 provided a treasure trove of insights into their investment frameworks and how they look at the capital cycle.

Here are my main takeaways:

1/ Periods of high profitability leads to reckless investments.

When profits are high:

-Boost CAPEX with little regard for ROIC
-Competitors will follow suit to avoid losing market share
-CEO's incentives aren't aligned with shareholders

It's a race to the bottom.

2/ The capital cycle will swing down when investments are taken too far.

Forecasts that were reasonable will now look overly optimistic.

Profits collapse, management teams are changed, CAPEX is cut, and consolidation begins.

This will pave way for a recovery of profits.

3/ Asset growth matters

Consider both asset growth at the company and industry level.

Avoid industries where assets are growing rapidly.

4/ We tend to extrapolate

When overdone, investments that appear logical at first can become disastrous.

We have a tendency to forecast linearly when many things are cyclical.

Examples: trade cycles, credit cycles, etc