Reminiscences of a risk operator: 6_4.7.2021 // 9:13pm Singapore // 1,600 words, 5mins
Well if there’s an infinite amount of chances for something to happen, then eventually it will happen - no matter how small the likelihood.
Ah.
…that means somewhere in space there’s another planet, that, by incredible series of coincidences developed exactly the same ways as ours….
Interesting…in these planets, everything that can happen will happen.
Exactly.
][INTRO: Dear high-schoolers, for the next to last Covid entry we visit an economic concept core to the experience (specially high-school) for 3 generations. The retail mall concept was born in middle of nowhere MN and spread far so when you walk underground in the Singapore mall, grab Japanese lunch at the Shanghai Mall, or dinner upstairs in the São Paulo mall it is all the same = a viral retail experience.
In the biggest and grandest -the MOA- there’s an S&P500 mix (the aquarium in EN 5) of luxury, imports, athleisure, food, tech, movies, rides, LEGOs, etc. We use the MOA, with 4 core floors, as the +/- 4 Layers of Risk.
>Above is typical rotunda at MOA, this MPR pic not from Covid19 2020, but from 2014 during some protests.
][4 Risk layers:
Individual/Family: health, food, security, familial where most hold the tightest bonds (even if many times challenged) and where physical touch is quite often - I can go the memory, at any time, to kissing my now gone grandpa’s forehead.
>> “My friends look out for me like family (H2O)” can wake you up 24x7 Circle
Community/Local: the cul-de-sac, sports parents, barbershop, beach buddies, help me move furniture — you know their names and look them in the eye.
>> “Happy 4th of July Picnic bring the brats and frisbee” Circle
Organized/Ownership: tops-down, media, political, corporate - the illusionary/mythical “THE” - the government, the company, the state, the market, the stonks — completely disassociated in the same way we watch the new Taylor Swift doc which is “in our time of covid” but could be “in another galaxy w/Bon Iver”
>> “The THE in the Royal We Far Away” Circle
Ethereal/Derivative: beyond physical, many times living just in our minds, emotions, or for our career-risk-selves in markets/cloud. It’s where most asset classes live - equities, mortgages, credit, (munis/agencies being closely tied to #3). This world lives on movements tied to open, closes, circuit breakers, algos, real $, fast $, dumb $…super robotic and de-personalized at times favoring the arbs of time, connections, and niches (IPOs pre-allocation or founder shares in SPACs).
>> “Total Stranger that Moves in big $” Circle
Main reason to think about risk at 4 different layers is because it is extremely_rare to see any event cut across_all_4.
Recent example: a lame tiger hedge fund blew itself up from leverage a few days ago (this time affecting DISC/VIA…one of the two got mucho cheap) which affected #4 with Nomura falling by most since the early 1970s (!) and Credit Suisse continuing its similar-to-Deutsche-Bank-model of following IBM into self-destruction, but all fairly contained.
>>However COVID19, the pandemic that leveraged globalization at MOA scale? It cut across, below, above, underneath, all 4 layers at once - literally infecting every part of society, comedy, music, government, economy, fashion, sports, globally, from youngest to oldest wiping down boxes of cereal, to leaving packages outside overnight - behavior thought unthinkable.
It actually left entire MOA parking lots empty which is a rarefied event…
][Learn with Pictures: we have 6 pictures from FRED: https://fred.stlouisfed.org - the great easy to use site from the St. Louis Fed.
We are all preconditioned to think that #3 - the “THEY” running Casa Rosada & White House, Facebook & Frankfurt, Baba & Beijing, Twitter and Tehran - THEY got it, we elected/funded THEM plus gave THEM microphones, taxes, printers, hammers, and endless lights since without THEM truth literally dies in darkness (can’t make this up) therefore THEY go it. But No. THEY did not get this one. Far from it.
THEY themselves with decades of statehood ran to hide in their basements…started talking about Lysol solutions…followed by the worst at its best narrative tellers (agh the dripping snark of “Covid no handshakse in the valley” Recode)…to only react in force once personally infected and wink, wink helping THEIR own families >> THEY proved to be all over THE board.
So while this whole pandemic became one more pillar in the coming Decentralization of all - it’s fair to say WE also entered with many pre-conceived notions. The most significant lesson Sancho (the calm careerist vs Don Q, the hot-blooded explorer) learned from his best human capital partner was to study bias. And WE all suffered deeply from bias.
WE were all going up/down 4 escalators textured for 2010-2019 world. And then it shifted by standards of deviation…on overnight illiquidity…when 2-a-day-risk meetings got mandated at trading shops everywhere…and where the most viable path was to get on all sorts of zooms/sites to learn for ourselves and panic early.
2min video from March ‘20 (hate linking FB but mini clip I found):
If suddenly the MOA gets flattened to 1 level instead of 4, it becomes the longest strip mall with that S&P500 diversity extending into the horizon.
From a different angle it looks like below: 6 charts 2010 to ‘19 and Jan 2018-June ‘20.
*Click on each to enlarge each picture*
1-GDP: what a country produces in totality, measured Quarterly:
2-Unemployment rate in percent, measured Monthly:
3-USA 10 year bond yield in percent, measured tic-by-tic Daily but this chart is monthly:
4-Equity Volatility (this one blends the VIX and realized vol on SPX), measured Monthly:
5-Total USA government Debt / of GDP in percent, measured Quarterly:
6-BAML USA High Yield (riskiest corporates) effective yield in percent, measured Daily:
][MOA: We were inside the MOA end of Feb 2020 and realized this would be our test - if our concern was real, then it’d decimate the 4 floors at the pinnacle of retail. From the 1sr floor Don Q had a call w/some friends globally noting how the world was reaching toward emerging market time, when things go upside down. End of Feb it sure sounded crazy, some in Asia close to the fire thought it was crazy. It didn’t matter.
What_did is very soon the MOA would close and months later as we drove around we’d catch hundreds standing in line waiting for heroes to “shoot drugs in arms ASAP.”
][2 potentials: So what do we do when you face risk that is merging layers at once - never investment advice, always for fun only:
1-The goal of becoming more & more antifragile as you age is to BENEFIT from dislocations.
>Sancho’s favorite investment team are experts in dislocations, which means that when there is wreckage they show up to clean up $. Learn to be one, learn to heed advice from them, or learn to invest alongside them - pick 2. They will be spiky by nature so if it all sounds like it belongs in NYTCo keep looking.
2-If you ever again start to see sludge trickling down or temperature rising from below - do the Delta trick: 1-secure yourself (1st layer) then 2-secure your community/circle (2nd layer) 3-Mix up trying to help the 3rd layer while expressing your view$ through 4.
][Wrap-Up: expectations management means that I never thought I’d see the real Mona Lisa as a teenager, or the Mona Lisa of beaches in my 20s, or watch live on CNBC while on PTON the revealing of the normal dude in a sweatshirt owner of the Mona Lisa of the digital art world.
You will find your own, it’s not about the money to buy flights or tours, or far away places - sometimes it’s in our books and memories.
But whatever you do as you/your circles change over the years, don’t forget the 4 layers, and
find
your
own
beach
//END = Visit us with your friends at: erraticnarratives.substack.com
][ @ErraticNars ARCHIVE: #0 1 yr later [] #1 It was inevitable [] #2 JLo’sSuperShakiraBowl [] #3 My Word is My Bond [] #4 YOU are not a Doctor! [] #5 The VIX Doctor
//Disclaim: Individual, non-corporate; not investment advice; may be long/short\\
][APPENDIX: Erratic Nars are late-2020s AP Finance letters—
Current SNAP/Spring 2021 observations:
-”Variant”: will become science word of the summer. Do your own research. Our plan is vax 1 tomorrow, 2nd shot in 2 weeks.
-“Stimulustocks”: localized channel checks in strip malls/big malls + 3 airports + varied metros show that people doing the Black Friday get-out-there, get long trade.
“Hi, I’d like to buy this as a surprise present…Nordstrom sure seems busy vs. what I remember it being like when I’d drive by the mall”
“Cecilia (nice cashier): Yes. People_have_snapped.”
>>Motorized wheelchairs, full 3-generation families, 7mth, 27yr, 70yr olds - all together again inside a mall, with 30% less shops than last spring.
Sancho been adding: 50% crypto, 20% ETFs, 1 SPAC, 1 media play because the world is great to discover, & few leveraged re-opening trades//