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- I don’t care if the market’s up or down
I don’t care if the market’s up or down
I’m still making money (and here’s how)
Tim Vollans
January 12, 2024 • Estimated Reading Time: 5 minutes
🧠 The Big Brain
Tactically bearish & probably insane
Almost DEFINITELY insane. But what if…
Stuff goes wrong, or too right? What if something breaks?
OK, seriously now. There’s a lot of positivity priced in to markets across the board. The S&P 500 is a whisker away from all time highs.
What makes sense here? To be tactically bearish, sit on the sidelines, or just join the flows and keep bidding…
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⚡ The Spark
I don’t care if the market’s up or down
I’m still making money (and here’s how)
That’s what we’d say if we’d invested in an obscure asset class that nobody really talks about.
See, directional trading isn’t the easiest way to make money in markets, especially for an individual investor.
Terabytes of musings are churned out every year assessing markets and whether they’ll go up or down.
Why keep punting?
Just invest* in a boring, market neutral, asset class. So simple!
Especially if you’re a pro.
Litigation Funding doesn’t get much coverage. Why would it?
Even the name sounds boring.
How about “this investment returned 37,000%“
Way more interesting, right?
As long as they get the payout…
See, litigation funding is a tricky business. It’s basically a version of ‘no win, no fee’ in high stake, high value cases.
Simplified version: Investors stump up cash to fund an expensive lawsuit in exchange for a stake in the eventual payout.
With the complexities and scandals around ESG policies, rulings and declarations, it’s fair to say that legislators have created a target rich environment for litigators…
*not financial advice obviously!
💡 The Lightbulb
Reality is whatever we say it is
According to this MASSIVE study…
FT’s Alphaville bods got hold of an NBER research paper earlier this week.
The idea was to study economic sentiment via a MASSIVE amount of historical news and see if it predicted economic outcomes.
Unsurprisingly, they claim it does…
We find that economic sentiment a) predicts economic fundamentals at the country and state level, b) leads consensus GDP forecasts, and c) exhibits large cross-sectional variation across states, with the nationwide component driving only 35% of the state variation.
And they take it one step further too…
Our measure predicts future GDP per capita growth even after controlling for current GDP growth: a one standard deviation increase in sentiment corresponds to 2% additional GDP growth over the next year in the sample period from 1850 to 2017.
So we can just vibe ourselves into prosperity…
Why didn’t we think of this sooner?!
Seriously, one of the most important factors in economic growth is population size.
Easiest way to grow your economy is to add more people that produce, consume & contribute.
The US population in 1850 was 23 million people. That number’s now ~335 million.
Sentiment alone won’t cut the mustard.
But there’s also a point of diminishing returns. See, the authors believe they can predict GDP per capita growth.
Can that really be driven by sentiment?
The overall analysis is interesting, with a an enormous sample size (200 million newspaper pages of 13,000 local newspapers, corresponding to approximately 1 billion newspaper articles)
There’s merit to the claims that sentiment impacts employment, consumption, and services over the short term.
As for the long-lasting impact of sentiment on GDP…
