There are two stock markets. One is made of cash flows, discount rates, earnings, margins, inflation, debt, productivity, recessions, and all the other boring things that eventually matter. The other is made of beliefs. Not survey beliefs or what investors say on television. The marginal beliefs embedded in prices. Most of the time, we implicitly […]

“Buy the dip, short the VIX, **** Bitcoin.” – Slightly censored version of a quote from HBO’s “Industry” Few investing phrases are repeated more often than “buy the dip”. Financial television talks about it. Social media treats every market decline as a fire sale. Even advisors can describe corrections as “healthy” because they create buying […]

There is a common, fairly logical story about market efficiency: the more people look at a stock, the more efficiently it should be priced. Attention brings trading, and trading corrects mispricing. Therefore, highly watched stocks should be harder places to find anomalies. QED. (quod erat demonstrandum, for those without the benefit of a classical education.) […]

The rise of zero-days-to-expiry options has produced an amusing mixture of excitement, moral panic, and bad intuition. Some people see 0DTEs as the new day-trading casino. Others see them as the purest possible form of volatility trading. Both views contain some truth, but neither is very useful on its own. The more interesting question is […]

Most of what we believe to be true in the markets isn’t true. It takes a long time to accumulate enough observations of an effect that by the time we believe in it; it has often ceased to be true. Most so-called market wisdom is really a collection of statements that are true just often […]