Item #0: RIP to the GOAT: Jim Simons, a Pioneer of Quantitative Trading, Dies. It is believed that Renaissance Technologies’ Medallion Fund earns title of the greatest performance of any hedge fund. Although we don’t agree on much politically, I like to think he served as inspiration for my own life. He set the standard which may never be surpassed. When someone is really good at something, they are so far ahead of the pack that it takes many years for others to even merely rediscover what was already done. I hope to continue his legacy in my own trading endeavors albeit at a much smaller scale.
Item #1: The stock market has recovered all its losses from the Iran-Israel situation, as predicted:
Item #2: As did Meta, which recovered almost all its post-earnings losses, as also predicted:
Item #3: Another profitable day for my Bitcoin method, which is to short Bitcoin when the stock market opens. It’s evident below that QQQ is flat but Bitcoin plunged over 2.7%.:
Longer-term, for 2024 Bitcoin is on track to underperform 3x funds again:
In my post from a few days ago I mention shorting Bitcoin and being long tech. I run these methods concurrently. It’s like a one-man Jane Street, but I keep all the profits. There are obvious differences: Jane Street is market neutral and does market making, which necessitates millions of trades/day and presumably balancing out trades to be ‘delta neutral’. My approach is more directional and ‘macro focused’. Although a buy-side fund has the discretion to run anything. Anyone who is good with numbers and can parse data can find something.
Leveraged tech is probably superior to the majority of hedge fund strategies, including convergence trades, macro, and arbitrage. Sometimes the simplest things work best. For example, a hedge fund may tout a 13% return vs 10% of the S&P 500 as being a success using a long-short strategy. Presumably, as per the prospectus, the shorts and longs balance out and make the method market neutral, whilst capturing upside as shorted stocks fall and ‘long’ stocks rise. A hedge fund may bet on the tendency of storefront retailers to be weak relative to online stores (e.g. going ‘long’ Amazon and shorting Target). It sounds good in theory.
However, it’s possible to beat the market by just adding some leverage, hence leveraged tech. Second, the claimed neutrality of balancing out longs with shorts is negated by the idiosyncratic risk of the individual long/short constituents of the portfolio going awry (ask anyone who was short GameStop in January 2021). So in the end, you have not reduced risk, but have only moved it to something else, creating a false sense of security. This is why many hedge funds keep periodically ‘blowing up’, do not hedge all that well, and lag index funds even when adjusted for risk. This risk makes such strategies in the long-run worse than leveraged index funds.