The importance of having an information advantage at trading

This is a great interview with Tom Costello, a veteran Quant PM formerly of Tudor Investment Corp and Moore Capital:

I like how he doesn’t downplay his intelligence with this annoying false modesty you often see online. At the 59:00 mark he talks about being the smartest in school and college, but only being in the 25th percentile of JPMorgan employees. I too describe how growing people thought I was one of the smartest people in the world, which I dismissed, although in hindsight they were right.

He’s open about being smart and credits at least part of his success to that, among other factors. He’s candid that intelligence matters if you want to succeed in this industry, and that lines up with my own experience too, even at the retail level.

A theme of his interview is the importance of having an information advantage. He describes how in 2001-2003 he built a system that gave him an information advantage by automatically parsing headlines. For about a decade he was profitable with this, and never having a losing year. He says it’s extremely hard to find new methods, and the last novel method was 15 years ago.

High frequency trading is old and likely to be obsolete soon in terms of generating alpha. Same for mean reversion and technical analysis, among other other common strategies. This again agrees with my experience–none of those things worked for me either. Bigger firms have already exploited those.

Information asymmetry also matters for prediction markets. Speculators are able to profit by knowing things before it becomes public. It’s creative how people find ways to obtain this information in a way that is also legal.

My information advantage was in 2024 and early 2025 knowing that Trump would abandon support for Bitcoin, and that he would fail to live up to donor’s and investor’s expectations. The assumption was he would waste no time enacting a Bitcoin reserve and use federal funds to buy Bitcoin to fund it. Neither of those happened, but also hasn’t talked about Bitcoin ever. Bitcoin had surged from $60k in mid 2024 after he won–to as high as $126k on hope–which has evaporated.

For example, today, Nvidia CEO Jensen Huang flew with Trump to China after last-minute invite. NVDA stock has surge to new highs (which I own and have recommended on the blog). This was just as I predicted: NVDA, INTC getting red carpet by admin despite their CEOs not supporting Trump in ’24. Crypto donors get zero–no shoutouts, no meetings, no taxpayer-funded purchases despite campaigning actively for him. I was the only one who predicted this. This calls into question or doubt common theories of power and influence–Moldbug ought to write a post about it.

Here is is a shoutout to “buy a Dell,” but no mention of Bitcoin ever:

With this information advantage, I developed what I believed was the best hedging strategy–or at least the best publicly known: shorting Bitcoin to hedge tech stocks. Given that hedge funds recruit some of the smartest people in the world, it seemed highly improbable that a random blogger would stumble onto low-hanging alpha that all those funds had presumably missed. This is demonstrative of the power of high IQ, ingenuity, and imagination.

Here is what I wrote a month ago on 4/12/2026:

This also means I don’t need to be right about what exactly happens in Iran, and who is right about everything? I make money no matter what, which matters more. Given the long-term tendency of Bitcoin to underperform tech stocks, but also using Bitcoin as a hedge, I make money with good Iran news or bad. Such asymmetry is why shorting Bitcoin has worked so well: QQQ will only be down maybe 1/2 percent on the blockade news, whereas Bitcoin will be down 3-5%. Yet you never see the converse when there is good news.

This has hit paydirt after a month of waiting as the divergence between QQQ and Bitcoin has widened, as I predicted above it would. I have profited substantially from this over the past 2 weeks:

Look at that divergence–QQQ up 20% vs Bitcoin being up 11%. After a hugely profitable 2025, 2026 is even stronger. By shorting Bitcoin I am also fully hedged if market drops too due to Iran. So I cannot lose, pretty much unless the divergence fails, which it likely won’t. Nothing has changed between now and 2025: no Bitcoin reserve, growing quantum risk, and AI is taking over. Crypto cannot take advantage of the AI boom; they are entirely different technologies. Additionally, Michael Saylor announced he will sell Bitcoin to prop up his Ponzi scheme.