SpreZZaturian
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Före detta hedgefondförvaltare, partner och VD på Futuris som utsågs till Årtiondets hedgefond i Europa för perioden 2000-2009
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21 april 2016

The Singularity, and Creativity vs Procrastination

Quick update on the Singularity (before the actual post on creativity):

dawn of singularity

[Length: 932 words]

It has since long been established that unenhanced humans, "originals", can't see beyond a certain point of technological progress (The Singularity). Enhanced humans, "metas", however, can. It has recently come to my knowledge that there is a second singularity further down the road which evades even meta-human analysis. Read more in the super creative David Simpson's (Post-Human, The God Killers) new book "Dawn Of The Singularity"

In other news, dogs are doing just fine despite widespread joblessness in their species. As long as we humans are house trained, I'm sure they'll keep us as pets and treat us pretty well too.

robotics singularity human pets
My rescue dog, Ronja

 

Executive summary: This is another of my "sprezza shorts", just a brief summary of a simple idea regarding creativity and procrastination.

In this case it's about how (moderate) procrastination is good for creativity.

just do it

I think all the findings apply to analysts and investors as well: Try out a lot of ideas quickly, i.e. just start, but be a bit slow to finish your research and follow through with the actual investment. Dare to invest in the unconventional or unloved, but be quick to realize when you're wrong.


adam grant TED

Insights into creativity

In a TED talk from April 1, 2016 by Adam Grant, the following findings were presented:

Precrastinators (the opposite of procrastinators) are usually not very creative, probably due to the fact that they rush in and finish their projects right away, panicking today about deadlines four months hence :). They don't give their brains enough time to think about the task.

Pathological procrastinators on the other hand never get anything done, so the question about their creativity is just moot.

It turns out the most creative people are moderate procrastinators. They put off finishing a project, a paper, writing a speech etc. just long enough to give the subconscious a chance to think thoroughly about the task.

So, don't chastise yourself for starting projects and putting them off until the last moment. That's a hallmark of creative people.

When researching stocks to invest in, I think going slow and being patient is the most important skill you can have. Go ahead and start researching as many stocks as you like; then hold back a little before finalizing your models and your thinking, not least the actual investment.

Challenge defaults: Think and walk at least a little outside the box; challenge rules, where do they come from, who do they serve? Adam Grant says that if you're still using Internet Explorer or Safari as your web browser you might be a lost cause...

All value investors are good at this. They dare to question "truths" about broken companies and business models, and buy when there's blood in the streets.

Do many things, be wrong, try again; its not you, its the project, the process, the attempt, "everybody fails at first". The most creative people simply try many more things and thus widen their range of "production". A few projects in the right tail then turn out to be unusual hits. Grant exemplifies with Bach, Beethoven and Mozart, who were extremely prolific composers with a few works of genius.

Finally, Grant talks about "improvers" or second/last  movers, as opposed to first movers. I don't know what kind of data he is referring to, but I do buy his argument that it's easier to take a given idea and improve it than to create it from scratch. Think about Facebook and Google for example, which were both very late to the game. Or Tesla.

This principle is perhaps a bit harder to apply to investing, but do try anyway. Look at what people are buying and then make your own research. There was plenty of time to research Fingerprint Cards, e.g., after it became the talk of the town.

Why not just borrow other people's research methods and improve on those? Take the quattro portfolio strategy and improve the composition, weighting and timing rules. Use Hussman's ideas about valuation and market internals but use other variables and time periods, and so on.


Summary: Blame it on the rain

In life, work and investments (and other areas) be quick to start but slow to finish, in order to let your subconscious take a long hard look a the problem, before you do anything rash.

Use and improve on other people's methods.

Blame it on the rain
either you get this reference (born in the 70s) or you don't

The most creative people simply try more things than other people (and fail at and quit more things). Blame it on the rain, not your person or worth. Dare to be wrong often.

Assume others are wrong; challenge defaults. Obeying (all) rules won't get you anywhere. You don't wait for a green light (as a pedestrian) if the street is empty, do you?

traffic

You're not using Internet Explorer, are you. Right, so why obey other stupid rules?*

*except for the fact that orders have been shown to shut down certain brain areas, and thus stop you from questioning the motive, morality, authority and logic of the order.

brain shut down due to orders

Now, the only rule here is that if you read the entire article you have to share it with somebody (preferably your entire social network). or, if you are new here, subscribe to my free newsletter and download my free e-book about my time as partner and portfolio manager at the European Hedge Fund Of The Decade.

Obey!

Taggar (blogg): 
18 april 2016

How hard can it be? Consult on Blockchain/Bitcoin

Executive Summary: How to make money consulting on Bitcoin and Blockchain technology

Two steps: 1. Learn it, 2. Consult

Article length: 338 words


 

There is a way, do you have the will?

Hardly anybody knows anything about Blockchain.

That leaves huge room for you to make money.

bitcoin

If you're reasonably intelligent and used to learning things quickly through deep focused work, you should read up on Bitcoin/Blockchain, package a convincing offer and start consulting. 20 hours of preparation is plenty in this context. Then you'll learn enough to become a true expert over the following 100h.

I think most organisations, authorities and companies need (and want) to understand the technology. In addition, I'm certain they'll soon start budgeting for training their employees.

So, what you need to do, if you want to make money and become an expert in a very hot area, despite lacking an education, is this:

  1. Learn about Bitcoin. You could start by reading Princeton's recently released free text book on the subject (perhaps "Princeton" is enough to make you see this is a highly lucrative area, or soon will be)
  2. Create a clean and fresh website, and demonstrate your knowledge (it will become clear after reading up on it)
  3. Create a few template applications and offers, i.e., ideas of how and why your local start-ups, your multinational HQs, your municipal authorities, politicians, police etc. should use knowledge about the Blockchain technology (you should be able to do this after bullet 1. above)
  4. Demonstrate a pedagogical streak, through extremely clear, as-to-a-child, infographs and examples, that scream to decision makers that they need to hire you to explain:
    1. Why it is important
    2. What you can use it for, or risks you want to avoid

 

There, free advice for you or that unemployed friend of yours (share the article!).

Consulting on Bitcoin is basically free money.

Have you signed up for my free newsletter yet? No? Do it now and get my e-book "The Retarded Hedge Fund Manager" for free.

Taggar (blogg): 
11 april 2016

QE explained, and panic ahead of Fimbulwinter

SuFimbulvetrmmary: summer is coming, yeah! But there is an economic fimbulwinter lurking beyond the current monetary madness.

How does QE work? What does it mean for your investments? Focus on skills and gold, but don't worry about war, pestilence and famine.

Length: 2672 words


What is QE, and how does it cause a Fimbulwinter?

I've got a private holding company called Fimbulvetr (which means fimbulwinter; the 3 consecutive winters without summer that are harbingers of Ragnarok=Armageddon).

As of now Fimbulvetr Invest doesn't really hold anything, except my VC consultancy start-up and miscellaneous blog and podcast revenues.

In the last annual report (which was written by hand on just half an A4 paper) I wrote "The basis of Fimbulvetr Invest is to profit from the coming economic meltdown. Since no profitable doomsday investments have presented themselves, the company has not had any operations in 2014".

euro crisis

Buckle up, winter is coming, season 6

It started in 2011, with the first serious consideration of the Euro crisis. It had by then been clear for some time that Greece never should have joined the Euro, that easy money in an economy used to, addicted to, a depreciating currency had created all kinds of problems, not least too much bad debt and unsustainable bank bubbles.

The same things were going on in Spain and Portugal.

Winter kept coming, with season 2 in 2012 and season 3 in 2013. Every time, Goldman Sachs the ECB stepped in with increasingly retarded monetary measures to "save" the Euro. We've now reached the premiere of season 6 of the pan-European tragicomedy and nothing has changed, except that the wildlings have breached the wall and the whitewalkers are drawing closer.

Mario-Draghi-laughing

Why worry?

The head of ECB, Mario Draghi has entered the realm of imaginary (negative) interest rates, increasingly large money printing schemes. Meanwhile, the European periphery, as well as the center, are burdened by ever more debt, while growing ever slower. As a twist to the story an army of migrants are crossing the narrow sea, despite lack of adequate experience and ships , while increasingly extreme leaders are gaining power throughout the continent.

We're even talking seriously about a Brexit from the European Union instead of a Grexit from the Euro. Well done, script writers; very creative plot. Maybe we'll see the strong countries exit instead of the one's who never should have been allowed to join the EU or Euro.

The euro and the EU will not stay the same for another decade, the question is only in which season the seven kingdoms will split apart.

But should you be worried?

Should you fear war, pestilence, famine and death (of money)? Should you hoard gold and construct a Bug Out Location (BOL) where you can barricade yourself? Let's briefly examine the four horsemen one at a time.

BOL

War

Well, it's not a good thing that low oil prices are pressuring states like Russia and the middle east. What's worse is North Korea's insistence on testing nukes. On the other hand, Iran seems to be reforming for the better and IS has started to lose ground. In addition, terrorism in general seems to have flattened out, so all in all, the risk of war perhaps hasn't increased lately, even if it's about time now for a large conflagration.

war

Pestilence

Ebola, Zika and various swine and avian influenzas are sure to find their pandemic way sooner or later, but I wouldn't worry about that anyway. When it happens it happens; the risk of airborne mutations is about the same at all times.

Bacteriophages

Sure, it's not discounted in stock prices, but the risk hasn't changed meaningfully. Multi resistant bacteria is probably a much bigger threat, but there are promising solutions (bacteriophages, e.g.). In other words, no need to worry about going back to pre-antibiotics times (before WWII).

Famine

The bees are dying, but there are other ways to pollinate (other insects, insect robots etc.). Climate change is disrupting some food production, but there are ways around that too, thanks to wild strains of various food crops, not to mention artificial biology and GMO. Fresh water is becoming more and more scarce...

However, all of the above is really 'just' an energy problem. With cheap oil and progress within solar (and possibly nuclear; both fission and fusion), as well as various water filtering technologies, including nanotechnology and graphene based, I'm not worried.

nanoporegraphene

As an energy aside, I recently learned that Lene Hau (famous for stopping light in a Bose-Einstein condensate) has turned to improving photosynthesis, by manipulating various enzymes on a graphene plate. There are many other projects working on clean energy, carbon capture and biofuels, so I'm not worried.

Death (of money)

With zero or negative interest rates, infinite QE (money printing), outlawing cash (large bills to start with), what will happen to your savings? Should you go into Bitcoins or some other cryptocurrency?

Should you buy gold? Physical?

Are stocks, real estate, commodities or bonds your best bet?

Do you need to go as far as to build a BOL, complete with weapons, physical silver and gold, and food stocks?

Economic darwinism is dead, due to fiscal policies protecting misbehaving companies and private individuals, with central banks as the key enablers. In addition, low interest rates promote malinvestment and speculation, instead of skill acquisition, savings and growth, in a vicious cycle with increasing fervor that is all but impossible to back out of.

Despite all that's been done, including printing trillions of dollars (and all the unintended consequences, seen and not yet seen), there is no escape velocity. And now rates are lower, debts higher and growth slower, making the system even more vulnerable.

After the initial bounce in 2009, there was a chance to step back and let the market clear, let insolvent banks and badly run companies make place for more viable alternatives, to prevent moral hazard, increasing leverage and speculation. But now, there are no good choices left. A normalization would be devastating, and more of the last 7 years' policies will make the situation and eventual outcome even worse.

In any case, don't hope for easy employment opportunities but prepare to create your own.

Why do they do it? Why are central banks printing money, when they should know it will all end in tears? My best guess is that they have studied the same simplifications (lies) of economic theory for so long they have lost touch with reality.

If they actually do understand what is happening, they are willing to push the system further toward ruin for just another round of bonuses for them and their friends in politics and investment banking.

Power corrupts, and the absolute power to print money corrupts absolutely.

 

Quantitative Easing

How does it work, where does the money go? Why are asset prices rising but there is no official inflation? Is QE and NIRP (negative interest rates) any different from very low rates and no QE?

At least we know QE and NIRP haven't had any effect. Given other variables since 2008, the economy is basically at the same level as would have been expected without QE and NIRP.

The only discernible effect has been fanning the willingness to accept risk and to speculate on rising asset prices. Mechanistically, the central bank buys government debt on the market. The cash is then passed around the system like a hot potato, driving up bond prices and, on the margin, through cross asset allocation, stock prices and other asset classes as well. Eventually the cash finds a home with somebody willing to hold it at zero or negative interest.

Funny thing now is that some savers are paying interest to hold an account or a bond, while some mortgage borrowers in Denmark and Belgium are getting paid to borrow money on their house. Tell me that that is the hallmark of a sound economy...

Remember that all cash, all stocks, all bonds are always held by someone. All cash is always on the sidelines if you will, ready to buy other assets if the risk appetite is there. All stocks are also always held by someone, ready to be sold at lower prices if risk aversion increases.

QE creates more cash, which needs to slosh around the system for a while before it finds that marginal owner who accepts zero interest (for the time being). On the way there it drives higher asset prices (and lower prospective returns on those assets - that is an important point, the higher and faster an asset rises, the lower its future returns will be).

This process in itself has fueled risk tolerance the last 7 years (rising asset prices made marginal investors believe QE "works"), creating a positive feedback loop of rising asset prices, belief in the omnipotence of central banks, and increasing risk tolerance.

It's not clear how long this process can continue. On the one hand it takes ever larger interventions to stop a collapse. On the other hand, in theory central banks can print infinite amounts of money and buy the entire bond and stock markets at current or higher prices.

Then what?

That would certainly be the death of money, so I don't think they'll go there, but who knows... As long as Yellen and Kuroda get one more paycheck they just might do it. On the other hand, financial markets are showing signs of distress, in terms of increasing variability between and within asset classes; e.g., junk bonds are signalling increasing fear of losses, even if (U.S.) stocks are close to all time highs.

Don't forget that the Fed was fighting the bear markets of 2002 och 2008 throughout the entire halvings of the stock market. Unless central banks go full retard QE, I don't think stock markets will do any better this time. The alternative is even worse, but impossible to analyze, so let's hope it's not too different this time.

 

Inflation & deflation

Should you fear inflation or deflation? Will debts be forgiven?

The economy is deflating. The reason is that too low interest rates for decades have pulled forward productive investments, leaving poor alternatives. In addition, more and more resources have been reallocated toward financial innovation and speculation. And yet other resources spent on bridges to nowhere, a.k.a. malinvestment. That's why economic growth is so anemic, and real jobs are scarce. In fact, malinvestment initially shows up as positive GDP growth, before the wasteful truth is revealed.

At the same time inflation is higher than official gauges tell you. Asset price inflation has been very high. Sooner or later that money will find other places to go, perhaps real assets like commodities, precious metals or real estate. Once stocks falter, we might get a scenario of falling stocks, rising commodities and rising consumer prices, forcing central banks to raise rates just when stocks have already started falling from historical all time high valuations. Demands for higher wages just may make matters worse, when increasing loan service costs and other expenses eat into budgets, thus increasing measured inflationary pressure.

Anyway, I think, we'll first see continued deflation, then inflation, perhaps very high inflation. That in turn could disrupt productivity further and cause all the extra money printed over the last few years to chase fewer goods (leading to yet higher inflation, despite a recessionary environment). The scenario is all too similar to that of the stagflation in the 1970s, which ended with Volcker having to raise rates well into the double digits, and stocks being the only asset class you couldn't invest in.

What happens if central banks suddenly cancel the government debt they are holding? Then governments will be debt free and have room to spend freely on welfare again, as well as lower taxes. Is it possible? Is it legal? Never mind legal, if there is a will there is a way. The question is would it "work"? Could you in fact run a country without collecting taxes, living on QE and forgiven debt? It doesn't make any sense, and it should destroy all confidence in authorities and money, but I don't see exactly how.

Anyway, if that happened, real assets should benefit, i.e. commodities, real estate and precious metals, but possibly stocks as well, even if they already are 100% overvalued in current currency terms. There would be chaos of course, but owning companies with good cash flow should be better than holding cash. Holding debt with fixed interest could mean that debt will be more or less erased.

Sometimes I consider borrowing as much as I possibly can, and hope for the death of money... But, then again, I have a hard time believing this time is that different.

 

What's the point?

Is there any reason to worry, i.e., can you do anything about it?

The authorities seem hell-bent on going full retard; what does that mean? Can they prevent a market melt-down or will we see a repeat of 2002 and 2008, just worse?

Will there be skills barter (instead of using official state currencies) in the future and more or less a restart of currencies, rendering bank savings worthless (and debts erased)?

Are stocks still the best bet?

I don't hold the answers to these questions. Actually, I'm betting that this cycle will be more or less similar to all other cycles in modern financial history, rather than a new era of infinite QE and erased debt and (major) new currency accords.

No

BOL

Hence, I'm not advocating BOLs with weapons and physical gold, or preparation for the four horsemen of the apocalypse.

I'm content with waiting out a profit recession, a significant stock market correction and maybe even rising interest rates and a break-up of the euro, while speculating on paper gold, silver and oil, as well as select small, public or private companies and my own ventures.

 

Always be investing

Most importantly though, just in case the feces really hits the AC system, I focus on keeping healthy and my skill set up to date, not least the skill of being able to focus, do deep work and learn new things quickly.

I'm always investing in myself, and so should you, no matter what money illusions the central bank charlatans are attempting.

By all means, keep speculating on all time high valuations rising even further, thanks to exponentially increasing QE, but remember that only the first ones to panic will get out of the door. I think there will be better times to invest in stocks than 2016, and don't think it's a big deal if I miss one year of returns if I'm wrong.

You missed the stock market during your first 18 years of life, and you're still standing, aren't you? Future generations will miss the coming decades of stock returns. Do you think they are forever doomed because of that? On the other hand they have more time on their hands than you.

In addition, even if there are better and worse times to start buying stocks, buying and holding does work if you're patient enough. Sure, your stock portfolio just might not go anywhere between now and 2040, but after that things should look brighter. What's a few decades between friends? It evens out over a century anyway, and you don't have to spend any time on research and timing.

My bet is firmly in the bear camp for now, with most of my liquid funds invested on the short side, as well as in (paper) gold and silver, though I am carefully investing on the long side in select private and small, forgotten, public companies as well, such as Opus, BrainCool, Peptonic and Stockwik.

I've got no oil related investments for the time being, but I plan to buy in the next significant downturn.

Stay tuned by subscribing to my free newsletter. There is a free e-book in it for you as well.

four horsemen

Taggar (blogg): 
5 april 2016

Habits vs. Homeostasis

Length: 4500 words

Executive summary: This post is about habits; not habits in general, but my particular habits in areas such as food, sleep, exercise, learning, alcohol, leisure and work.

When, how and why do I do what I do, and are there any general takeaways for you?

In short, I recommend you focus on sleep, food and everyday movement and exercise; and the rest will take care of itself.

Create a good solid drum beat of healthy and natural habits, and lead a varied, lateral life, ad libbing with moderate extremes, while following your natural tendency to explore, recognize patterns, learn new things and solve problems.

Habits


Good habits are bad too

Even good habits are a form of homeostasis; stagnation. Sometimes it's not even possible to objectively tell which habits are good and which are bad. It's one of those "how long is a piece of string?" issues.

E.g., it might be better for me to stop lifting weights, and I consider it every now and then, but just can't do it.

That said, it still seems to be easier to slip into bad habits, such as sitting for several hours per day, watching blue-tinted screens before bed-time, or eating junk food.

I, however am quite unbiased in my habit-forming. Yes, I admit that is one of very few things that actually is a bit unusual about me.

Anyway, I've been asked about my particular habits, why I stick to them, and how they were formed to begin with. So, with the caveat that my habits are not optimal in any way, and that different strings work for different things, here goes...

 

Sleep

I go to bed around 11:30 pm and fall asleep at midnight. I typically wake up a little before 8 am, after slightly less than 8 hours of sleep. In the summertime I sometimes wake up for a bathroom break at 5-6, due to the sunrise but I go right back to sleep afterward.

I often spend time on my computer until right before going to bed, but that's okay, since my "lights out" time is midnight. Blue light screens like TV sets, computers and most mobile devices trick the body into believing it's day time.

I read a little on my Kindle Paperwhite e-reader from Amazon every night, aiming for falling asleep close to midnight. If I nod off three times while reading, I just hit off, drop the book, close my eyes and fall asleep exactly as I lay reading (on my side).

My bedroom is dark and cool, to mimic a prehistoric African night.

I sleep in my underwear and with my feet outside the covers (and outside the bed) to keep them particularly cool.

Restless Legs Syndrome Is No Joke

I live alone, but my dog Ronja has her bed right next to mine. If I need some extra oxytocin (calmness and bonding hormone), I can just put my hand down and pet her.

Sometimes I micro meditate for a minute or two, mentally going through my body parts until I fall asleep.

Ronja feb 27 2016

I've written more about sleep optimization, the how and the why here. In this post I'm focusing on the over-arching habit structure.

One thing to keep in mind, though, is that sleeping well affects your health, your willpower, your ability to stick to healthy routines, your general life balance, your level of stress and anxiety, which in turn affect your sleep.

Hence, you want to make sleeping part of a synergistic process, instead of a vicious cycle:

Sleeping poorly affects your income, your health and your happiness. To counter the effects you might turn to drugs (caffeine, tobacco, alcohol or cocaine), which only make matters worse. Perhaps it's time to ditch the nasty habit of bringing your smartphone into bed, or at least install an app for red-tinting the screen.

Another way of fixing your sleep is by fixing your life and health first...

 

Exercise

I work out every second day, spending two and a half hours per session in the gym.

After my morning walk with the dog, I head for the gym. I warm up on the treadmill for 15-20 minutes and then lift weights.

 

This year I've been following one of Sheiko's strength training programs for bench press, squat and deadlift. Including 10 sets extra for biceps after the ordinary program, I spend around 2 hours on the strength and hypertrophy exercises.

What's almost magical with Sheiko's program is the undulating/periodisation of intensity and range of exercises within exercises (!), within sessions, between sessions, between weeks and between longer time blocks. The variation is good both for the muscles and make training more fun.

A very good reason for exercising is that it releases the BDNF substance, which makes you smarter (neurogenesis; birth, growth and plasticity of neurons) or happier (BDNF controls depression more than cognition in some people). Maybe BDNF is connected to the experience of stress relief from the day's constant pressure to fight or flight as well. Or that's an added benefit.

 

You are a smoker; you just don't know it yet

Exercise makes you healthier as well of course. Not least, exercise gets you up on your feet...

I'm sure you've heard that "sitting is the new smoking". Already after 20-25 minutes of sitting, bad and weird things happen in your body, with fat and muscle tissues exchanging unhealthy signal substances, blood vessels becoming more inflammation prone etc. It's almost as if sitting was a signal of dying back in the day when we normally roamed the savannas.

It's difficult to do really deep work for 90 minutes, if you have to move around for two minutes every 25 minutes (the Pomodoro method may have something to it) but it might still be worth it. Just don't look at your phone during your breaks. By the way, I stand at least half the time I'm on my computer.

Anyway, my routine is that I work out for 2.5 hours every second day, of which 15-20 minutes is cardiovascular exercise. (it used to be 12 minutes sharp, but I've recently expanded the allotted time).

In addition, I go for 3 dog walks every day, 1 hour each, sometimes more, depending on who I meet in the park. The walks are very low intensity but I'm up on my feet, i.e., not sitting, and moving around for 3-4 hours a day. And that, my friend, is what will keep both my brain and body inflammation and alzheimer's free until I'm 150, as opposed to "office sitters" who can't expect to remember their own children by the age of 75.

In addition, I listen to science podcasts and do some power posing while out on my dog walks.

But enough about me, I don't recommend my extreme lifestyle unless you are in the same situation as I am.

You don't need to walk as much as I do. What you should focus on is never sitting down for more than 90 minutes straight, without taking 5 minutes for some brisk walking (or burpees, but that would be aiming too high in my book). That is both practical and has long term benefits at the same time. Besides, walking outside the box often opens up new perspectives and resolves issues with being stuck mentally.

Finally, I do a set of 5-10 mobility exercises around 5-10 minutes a week, and micro meditate (just taking a deep breath, e.g., or touching a surface mindfully).

 

Learning

I subscribe to 26 podcasts which more or less are all about science or economics, and are all intellectually challenging. I also subscribe to numerous science channels on YouTube, and regularly read scientific and economy blogs, journals and newsletters. I don't watch the news, read regular newspapers, watch typical TV-shows etc. I do watch certain select TV-series and movies though, and I really like going to the cinema for the best movies.

Yesterday I watched Allegiant (2016):I

I listen to the podcasts when walking my dog (3 times a day, in total some 3-4 hours a day). Moving around helps both focusing, understanding and learning. The rest of the material described above, I consume at home, sometimes while doing mobility exercises.

podcasts

Oh, and I take notes in longhand, which forces me to process the information while writing (rather than taking verbatim notes in shorthand or on a device). In addition, I write about what I learn (Evernote, Twitter, e-book, blogs, Facebook etc., even Periscope sometimes), which further enhances my understanding and learning.

 

Food

The choice of food ties in closely to the sleep, exercise and learning complex. Duh, its life.

I do intermittent fasting every day. 8 hours of eating between 1 and 9 pm and 16 hours of fasting the rest of the time.

It's good for me. For you. For everything (age, Alzheimer's, cancer, inflammation...) Google it. I've been doing it for several years, since I learned about it from Martin Berkhan (leangains).

Actually, it's not true. The last few months I've reduced my fasting, in order to focus more on strength gains. Now I typically have a protein shake earlier than 1 p.m. and one later than 9 p.m. In addition, I eat breakfast before going to the gym, which means around 10 am. So, I guess I'm not fasting at all anymore..., even if I still fast more than I eat, but perhaps 13:11 on average instead of 16:8.

Hello! "fasting" for 12 hours overnight is just called sleeping...


 

So, what and when do I eat, when I eat?

breakfast I
First meal

I turned flexitarian two years ago (for ethical reasons only). At the time I ate meat (land living or poultry) every day. I had fish every day as well, but the important distinction is that in September 2014, I decided to significantly limit my consumption of beef, pork, lamb, chicken and other land dwelling mammals and birds.

It began as just one day, but turned into 30 days straight. Since then I've relaxed my new habit a little and I probably have some kind of meat once a week or so, or with 3-5% of my meals. I'm hoping for an investing in alternative food sources like insects, algae and bio printing.

I get up at 8 and drink a large glass of water (I keep it by the bed in case I get thirsty in the middle of the night... which never happens, so I drink it in the morning instead).

veggo burger
veggo burgers

New habit: morning drink. Now, that I'm trying to gain weight and have relaxed my fasting routine, I mix (and drink) about an ounce (30g) of whey powder with about an ounce of olive oil and water and then go out for an hour's walk with Ronja.

During my waking hours, if I'm at home, I have a drink like that every three hours, unless I'm eating a real meal at the time. Sometimes I have one with my meal anyway. My reasons for this routine are as follows:

1) There is no use eating protein more often than every 3 hours, but every 3 hours, protein should boost net muscle growth

2) whey protein is digested very quickly. Hence, having more than some 30g at a time will be burnt for fuel rather than used for building muscle

3) I want to eat a little more than 2g/kg (4.5g/lb) body weight of protein a day, or approximately 210g of protein. That takes 7 meals at a 30g clip to accomplish

4) spaced 3h apart I need to start eating at 8 am and stop at 11 pm, with at least one meal getting 2x30g of protein.

When eating "real" food, that takes longer to break down than whey, it's no problem wolfing down more than 30g of protein, so I typically have a total of 40-60g of protein with lunch and dinner.

I eat three meals a day, breakfast around 10 am - 1 pm, post workout or lunch around 2-3 pm and dinner around 8 pm, often complemented by a final whey drink at 9 pm. Now, that I'm "bulking" I often have one more drink right before bed-time, around 11 pm.

A typical breakfast consists of 5 fried eggs, half a can of beans (usually black or kidney) and some spinach and kale. And a cup of coffee. Another typical breakfast is 100g of oatmeal (cooked to porridge with half a liter of water) and some whey.

I season my eggs, my whey drinks, my beans, most about everything, with turmeric, cinnamon, oregano, chili and black pepper. The last month I've sprinkled Spirulina algae from Simris Alg on top of my food and drinks as well.

Lunch and dinner are typically variations on the same theme, and not seldom the exact same thing: Some kind of pan fried fish (salmon or cod) with broccoli, haricot verts and beans, potatoes, pasta or rice.

I know, I don't have much imagination when it comes to food. I actually don't rule anything out (unless it's been kidnapped, like cattle, pigs, chicken and sheep). I have no problem eating bread, butter, cream, snacks, gluten or whatever you can think if, I just never buy it or make it myself.

fish
My recipe: Fish. Boil it.

I often eat too little carbs and thus have to force feed it to myself sometimes. It can take the form of a leftover cold boiled potato from the fridge, muesli/müsli with milk, or crispbread sandwiches. Or alcohol... If I know I'm going out for a drink later, I don't feel the same need to chase carbs for lunch or dinner, since I know I'll get some later anyway.

One more thing, I drink a liter/a quart of milk right after my workout sessions. The timing of protein isn't that important, I hear, but I'm thirsty anyway, and it's usually 4 hours since my last meal, so I figure it can't hurt.

As a rule I shy away from vitamins and other supplements.

Anti-oxidants, e.g., have been shown to cause damage, if eaten as supplements instead of as whole fruits, berries and vegetables. Hence, I eat a varied and colorful natural diet of whole foods instead. I add various red and blue berries, as well as leafy greens and spices to my whey drinks. My diet of milk, beans and lemons (to the fish) add further to my intake of vitamins, minerals, fibers ant anti-oxidants. Check out this article for more details on what I eat, rather than when.

However, living in Sweden, I do eat a vitamin-D supplement of 4000 IE (100 ug) a day between September and April. I also have a pill of lactic acid bacteria every day (Biogaia's Lactobacillus Reuteri product Protectis) to help my little friends in the gastrointestinal tract stay varied and healthy. I also supplement my food with fish oil from Arctic Med (and right now also with the cleaner and more sustainable, albeit more expensive, algae based omega-3 oil from Simris Alg).

omega-3

Supplements, fasting and saunas: All three supplements help reduce inflammation, strengthen the immune defence system, speed up recovery after injury, stress, illness, exertion etc., as well as in general reduce a lot of modern welfare diseases and vague symptoms of stress and weakness. As does fasting by the way (including reduce the risk of cancer it seems).

Hot saunas are a fifth miracle cure in the same vein: Link to Tim Ferriss and Dr Rhonda on saunas

(No, I'm not providing any other references; google it, check out examine.com, listen to the Discovery podcast etc.)

Most of all I think about creating a good environment for my microbiome, my bacteria. After all, they account for more than 99% of my genetic material and are probably the ones controlling my behavior anyway. I care for the ones living on me as well as in me...

 

Hygiene and grooming

I shower every second day (after gym), or if necessary (a particularly hot day, before a date, after swimming in a lake).

I scrub my heels and big toe briefly every time I take a shower, and apply a fat foot cream afterward. I use the same cream morning and night as well, to keep my feet soft and supple. I doctor friend of mine once said that bacteria living in heel cracks have been associated with Alzheimer's. Be that as it may, nice feet are nice.

I use a combined hair and body wash in the shower, but I don't wash my face with anything but water (I rinse my face carefully morning, evening and when showering).

Afterward I use lotion on my face (from Bulldog), and apply a mild deodorant (Nivea or Bulldog) before taking care of my feet with foot cream.

When I'm done I spray some after shave/eau de cologne on the back of my neck (currently Armani Code Ice or Bvlgari Man in Black, if you care at all).

I shave when I have to or when meeting people, appearing on TV etc. On average I shave about every second or third day or so. I use an electric shaver - it's convenient and I don't have to use any product on my skin that might kill off the good bacteria residing there.

I don't use any hair products, but I do rub off some excess lotion in my hair, to make it slightly shiny and easier to shape.

Sometimes I can get a pimple after partying. I try to refrain from touching it, but every once in a while I can't resist the urge to squeeze it (especially if I'm meeting someone the next day), using some protective tissue and very clean hands. Depending on the damage, I sometimes (rarely) apply alcohol or zinc paste afterward (or instead of squeezing).

I brush my teeth when I get up, after breakfast, before seeing someone and after the last meal of the day. I floss (J&J) thoroughly a few times a week.

Once a week or so I indulge in a hot sauna at home, sometimes throwing myself in the snow on the balcony. I keep a book for reading, and a water proof notepad (that I got from Ludvig Sunström) for taking notes in the sauna. 

 

Leisure, socializing and alcohol

I don't work, I spend a lot of time with my dog (and other dog owners) and in the gym, and I'm a bit of a loner.

Consequently, I don't spend much time seeing other people (except in the dog park or nodding curtly and manly to fellow weight lifters).

When I do see my friends, alcohol is often involved. It could be a wet lunch, dinner and party, a house party or during travels (I have a few recurring party vacations every year).

All in all, however, I socialize so rarely it can hardly count as part of my daily, weekly or even monthly habits. Somehow, I still manage to find an occasion about twice a month on average to go all in on the juice of the devil. Perhaps I should learn to hold off just a little, but it's just sooo much fun to get drunk, goof around, party, dance, surf on Spotify, YouTube or the internet in general, climb things, talk about life etc.

I didn't drink until I turned 18, so I do have some experience of partying and dancing sober, but it feels way more fun and natural with alcohol than without. Perhaps a warning sign, but I'll start heeding that a little further down the road... (the "I don't have a problem" fallacy)

 

Working and writing

Finally we've come to my raison d'être: my writing.

I don't work the (Wall) street for money anymore, and I don't write for money either; just for fun. The question for the day, however, is when and how I go about it, not why.

I use an app called RescueTime to keep track of how I spend my time at the computer. If you're looking for productivity you should look elsewhere, if that app is any reliable. I manage to accumulate just 1-2 hours a day of desirable work (blogging, writing on my next book, answering comments etc.) and a little more than that on "distractions" like social networks - of which Twitter is the "worst".

Lately I've been spending as much as on hour a day on weekdays on my trading platform as well (up from 1-5 minutes a day a year ago; no doubt an effect of talking to day traders on Twitter all day).

It's hard to objectively discern between productive and distracting activities, but one thing is clear, I don't spend much time producing quality and lasting content, and too much on indulging in online socializing.

I'm useless and hideous; don't look at me!

(I don't write enough, I just tweet my life away)

Well, it's my choice right now to focus more on learning, weight lifting and relaxing, working based on inspiration (otherwise a no-no among culture workers), rather than having set time or productivity goals (hours or words per day, e.g.).

working

OK, let's get down to concrete numbers and times.

I don't write before working out, and I don't write before let's say 5 pm after working out and walking the dog. As a rule, I don't write after dinner or the late dog walk either, which leaves about two hours between 5-7 pm for writing on gym days. Right now, I'm closing in on the end of exactly such a writing window.

On workout free days, there is in theory much more time to write, but I often eat more slowly, brush my teeth or floss watching TV, spend more time on Twitter and my trading platform, or reading articles on Kurzweil, Hussman, Singularity Hub, ZeroHedge, Contrarian Edge, Financial Orbit, HORAN, James Clear, Wall Street Playboys, Barking, Raptitude, Wait But Why, Danger & Play, Start Gaining Momentum, various Swedish and international exercise and nutrition blogs (Styrkelabbet, Hjärnfysikbloggen, Tyngre, Träningslära, Träna Styrka etc.)

In effect, I torturously manage to squeeze in an hour between 1-3 pm before dog walk nr 2, and another hour or two between 4-6pm, and finally, if needed 1-3 hours late in the evening between 8-12 pm.

Funny thing: I'm actually a little worried of getting too caught up in my writing, becoming obsessed and stop socializing altogether. At the same time I worry about not producing enough; that I'll "wake up" in the future and think I squandered my life on dog walks and tweeting.

Well, all things considered, things are the way they are because I'm happy with them - both in the moment and when taking stock of my accomplishments a few times a year. Yesterday's "hard" decision was saying no to a wet lunch, in order to write this. "Too asocial or writing too little?", well how long is that bleeding string?!

 

Life and habits summarized

Good habits are good to have ("Oh, thank you Sprezza, for dispersing such wisdom"); they make you healthier and more productive, without spending any willpower.

On the other hand it's easy to get married to your habits and suboptimize life; climbing just one hill, and the nearest hill at that, instead of several, more interesting and higher hills elsewhere*. The string measuring habits and homeostasis is of unknown length, as with all interesting things in life.

* life achievements; not mounting or conquering other *ehm* things

Life needs both routine and variation, just like a Sheiko strength training program, with intensity and choice of activity undulations.

In Gödel|Escher|Bach, Hofstadter explores recursivity (self-reference) in music, math and music; and finds beauty and intelligence in the complex, half-chaotic space between the monotone and the completely disordered.

That's where you want to be as well, exposing yourself to moderate extremes (convexity*) of all kinds (food, exercise, focused work, socializing...), albeit with a recurring healthy underlying bass rhythm - like a Bach fugue, Sheiko's program or the starting values of Mandelbrot's fractals.

*That word - convexity - has vexed me my entire life. I don't think it fits with pictures of convex items.

 

Final summary

OK, let's get practical and focus on what you can do instead of what I happen do be doing

Foster an underlying drum beat of habits supporting physiological and mental health; a base line you always fall back to after other ventures like traveling or partying. The bass should be strong enough not to be derailed by simple things such as after works, dating or friends visiting town.

Aim for a "natural" set-up of daily everyday exercise and whole foods, rather than compensating sitting all day with gym class in the evening and then back to sitting again. Or pills instead of fruits, berries, beans and leafy greens. Eat real food with lots of color instead of relying on pills.

Engage your large muscle groups (legs, back, abs) for a few minutes at least once an hour. You'll be much better of than if sitting all day and spending an hour on aerobics after work. Stand at your desk if you can, and take walking meetings instead of sitting (you'll think better as well).

Read and listen to new things as often as possible. Cut out the daily news of your information flow. It's not real anyway. Find better, more objective and to the point sources of information than digesting the same entertainment and propaganda in newspapers and on TV over and over again.

Create an environment, and foster habits, for sleeping well.

Sleep, food and physical activity (sex definitely counts) are the pillars of life

Then comes curiosity, pattern recognition and problem solving (you need them to find the first three, and you need those to keep going). The rest is more or less noise (though I do get that you need to finance your food, roof and bed somehow; just at least try to consistently tilt the balance more and more toward what really matters).

I have a whole other line of reasoning ready; from an individual's starting condition of reactive "self" with limited free will, effects of external stimuli and pressure that nudges his development in a certain direction, which turns ideas into habits, which in time internalize and form a new self, partaking in and enjoying different activities and with just as little truly free will.

With the right guidance, your future self can be a healthy, wealthy productivity machine, but your experience of it will be effortless and sprezzaturian, almost with the perception of living day to day governed by whims of lust.

Perhaps it's just me.

Anyway, the subject of self and free will (and consciousness and math as well perhaps) is for another day. Or year.

Please share this article with somebody you want to be quiet for 20 minutes :)

And, if you are new here, remember to subscribe to my free and spam-free newsletter and read my first e-book "The Retarded Hedge Fund Manager", about my time managing The European Hedge Fund Of The Decade.

Taggar (blogg): 
23 mars 2016

Practical step by step guide to get your career started in a meaningful direction

Looking for a job? Trying to decide on an education?

Below you'll find my most concrete and detailed guidance yet to a meaningful and effective education, for a rewarding and future-proof career.

Summary: contact a lot of start-ups and ask them, then study on-line whatever skills they are missing

Share this post. If you only share one single post on my site, this one should be it. Share it with your entire network. Make sure those guys who can't decide what to study, where to study, how to study etc. read it and apply the lessons in it.


There is no spoon

First you must realize your future is not as just another employee at a big firm.

And the path to where you are going probably isn't through 4-5 years of partying and time-wasting in formal education.

Then commence your quest to find the right place for you. Here are a few ideas to get you started:

  1. Find a directory of start-ups. In Sweden you could, e.g., start here, at SiSP, where you'll find 80 start-up areas with dozens or hundreds of associated start-ups each.
  2. Start with the area closest to you, e.g., this one, UIC.
  3. Call and visit all the companies on their list.
    1. UIC currently lists some 300 young companies and start-ups.
    2. Send e-mails directly to each company and start scheduling as many meetings you can.
    3. Treat the project like an essay or writing a book, not as job interviews.
      1. The goal is to map which companies there are,
      2. which industries and sub-sectors,
      3. which problems they are trying to solve and
      4. with which technologies, and not least,
      5. what skills they are looking for in potential employees or partners.
        1. Ask them outright if they would hire people without formal education and
        2. if skills are more important than diplomas.
        3. Do they test the skills of their employees or do they just check their grades?
  4. Keep going through companies on the list, until you find an industry or sub-sector that you find particularly interesting, or, alternatively, that is looking for people and find you interesting
  5. Make a summary of your findings. Do it in a way that you imagine could be interesting to start-ups in your chosen sub-sector -and send it to them. Identify how different start-ups could help each other, or how one company's methods could be used in another etc. What problems or solutions are they missing? If you find something like that, they'd hire you in a heartbeat.
  6. OK, maybe you're not ready to get a job, but now you have a clear view of challenges, available technologies and what skills and knowledge you would need to be able to contribute to those or similar companies in the future, after your "education". So, let's get that education:
  7. Ask around at forums like YCombinator on how best to acquire the skills you need. There you can find out even more about what skills are in demand and where to acquire those. E.g., ask whether it is best to study in a formal setting, or if there are online resources that are equally good or better.
  8. My guess is that Stanford, MIT, KTH, Linköping, Lund, Chalmers offer very interesting courses for free. And then there are of course CourseraKhan and Codecademy, not to mention YouTube in general if you know what you ant to learn. And here are 144 other on-line study resources. In addition never forget the importance of taking stuff apart and trying to put it back together again (with the help of YouTube)
  9. Study. That is, take what you found out in the points above, and either study on-line or combine it with some kind of formal education
  10. Stay in contact with the start-up scene. Keep meeting with new companies; IRL or over Skype if you or they prefer that. Keep identifying which problems are being solved and what skills the start-ups are looking for.
  11. Consider starting your own business, applying whatever skills you gain along the way during your chosen studies. Build websites. Repair electronics... It's the perfect way to broaden your network of industry contacts and potential partners.
    1. E.g., if you found out that a company needs Python programmers, start learning Python. Meanwhile, talk online in various programmer forums and find out what you can do with Python - perhaps control quadrotor robots or add features to Japanese robot toys. Start a business doing that to hone your skills as well as make some extra money.

 

I'll find you

 

And, so help me God, I'll find you and personally punish you, if you don't set up a website with your findings from all those interviews, and create a community of like-minded people, aggregating each other's information at one place.

 

Summary

Forgot where to start?

Find a start-up close to you. Call them or e-mail them and ask if you can visit them to see what they are working on, what their challenges are, what kind of skills they would need.

Then do one more.

Continue until you see the light and know what you want and need to learn. Then learn that - preferably fast, on-line, using and building a habit of doing deep work. While you're at it, maybe try to get paid for your skills along the way, by starting a simple business or doing extra work at the start-ups you of course keep calling and meeting

Share this post. If you only share one single post on my site, this one should be it. Share it with your entire network. Make sure those guys who can't decide what to study, where to study, how to study etc. read it and apply the lessons in it.

Taggar (blogg): 
20 mars 2016

An acid test for your career aspirations

Topic: Detailed career opportunities

Length: 2646 words

Executive summary: Almost every profession can be approached with the future-proof Big 5 human challenges and Big 5 singularity technologies in mind, and still be kind of fun and rewarding in itself. So, not just robotics. And, yes, still hating on finance :)

Remember to bookmark this site, sign up for my free newsletter, and read the first page of my free e-book (and more are coming). Not least, share this article to save at least one poor schmuck from a death by automation.


Show me the money!

11137918_667630853364906_1025128660_n

I've realised two things:

1) you don't care about happiness

and

2) you demand precise guidance for your education and career (as opposed to general "whatever makes your heart beat, or help humankind with robotics" type of advice)

 

Nobody cares about your schmakapalbhati breathing, grandpa

So, where does this realization come from all of a sudden? Well...

I get very few questions about, and reactions to, articles about financial investments, about pension savings, about the future of robotics, about fulfillment and happiness vs. fortune and fame. You know, the things I actually write about, the "know yourself", "lower the threshold to get started", "champagne spray parties aren't that fun" kind of posts.

What I do get is an endless stream of demand for career advice: "Should I study this or that?", "Should I work here or there?", "Should I focus on a traditional career or go it alone as an entrepreneur?", "Which industries should I target?", etc.

I thought I had already answered all of the above with:

  1. Skip (formal, traditional) school
  2. Just say no to finance
  3. Be an entrepreneur
  4. Solve the big 5 with the big 5
  5. Have fun no matter what you do

have fun

Done!

 

Robotics! How hard can it be?

When that, to my great surprise and deep disappointment, wasn't enough I specified:

Work with robotics (which I thought was self-explanatory)

That still didn't cut it, apparently, so I tried this:

Think of all the separate parts of a robot; legs, fingers, muscles, arms actuators, sensors, tools; or it's sub-systems; motion, balance, vision, smell, and figure out what part or system you think needs improvement.

Another line of attack could be visiting every local robotics company you can think of and connect the dots, i.e., identify which companies could benefit from each other without competing. Or, think about ways to combine several different solutions to, e.g., vision or balance, into the same robot.

I got nothing but glazed over eyes and open mouths from that (I know Japan is ahead in both fields that spring to mind, but I'm strictly talking robotics here. Then again, robots... never mind)

BB8

So, I tried being specific:

"Here are videos of bipedal robots, BB8-type of ball balancing robots (5 years before BB8), quadripeds (and more). And here are bipedal robots using gyroscopes for balance, and here are humanoids using fancy software algorithms choosing the optimal foot movement from an internal trial and error simulation of 100 different choices in a hundredth of a second. And here are quads learning from experience, and here are robots actually forecasting when they're about to be hit and (simulating and) bracing before impact."

Nothing. Except the occasional "you know a lot about robots".

I elaborated:

"And here are robots using sound (see round corners, measure distance), laser (distance), stereoscopic cameras (Kinect 3D), radar, x-rays, object databases (to recognize objects and forecast their texture, weight etc. beforehand), memory (gradually build a coherent 3D memory of the surroundings and add incoming/new objects from there), blueprints (it helps knowing the building rather than just looking and feeling)."

"Wow! They can see in so many ways"

or

"Yeah, yeah, schmobotics, but will I get rich more predictably in management consulting than in finance, albeit richer in the latter if I rise to the top?". "Should I take that job in the economy department of a hedge fund or stay as sales at a big investment bank?"

robot landing

No!

No, no, no! The proper reaction would have been: "Ah, but if we combined sound, laser, Kinect, blueprints, repositories and memory in the same robot, it would actually know exactly what it is dealing with. I wonder if it could catch a baseball if...", and "What if you built a quadriped that had balance balls for feet and very small such pressure sensitive balls for fingertips (great for gripping delicate things just enough not to let them slip)."

...

"Perhaps not on all feet or all fingertips. It could be equipped with a gyroscope as well... several..., and a simulation engine that dealt with sudden blows as well as predictable impacts (hello vision!). "I wonder what power source they are using?". "What kind of 'muscles' do they use? Pure mechanical spring systems might be better (already done though).". "What if it falls down or rolls over?"

"Hey, Sprezza! How come a bipedal robot isn't much better at managing stairs than humans? Why do they act as if every step is completely new to them? Shouldn't you be able to give it a hard kick in the back, and it should be ready long before impact, and either bracing enough (judging your weight and kick speed and power correctly) or having another plan for regaining its balance, as well as be able to catch a baseball at the same time? Why not do an impromptu somersault with in-air side-split before making a perfect superhero landing on the stairs?!"

Yeah, I guess I shouldn't hope for such a question, since monkeys are more likely to fly out of my ass long before that happens.

Ouch!

And we're still only talking about robotics, and in very crude and tangible respects. I haven't even updated the above thoughts in the last 5 years and still the kids don't get it. So, here's a slight update:

Add "cop" to the mix..., as in robocopters. There are multicopters everywhere now: quadcopters, hexacopters, octocopters etc. for filming, selfies, weaponry, inspection, search and rescue, even plans for commercial airliners. The Avengers live in a large octocopter since several years back.

So, now I can direct young people to Youtube videos of cars that can drive on vertical surfaces aided by copter fans, to swarms of small quads interacting, helping each other maneuver, accelerate, catch things, and soon, with your help, maybe showing emergent behavior as in Crichton's amazing (his best) novel "Prey".

Don't forget AlphaGo's amazing Go victories, and its future careers in health care, online poker, mining, global warming research etc. Or Alphabet's other robot ventures (through Boston Dynamics), not to mention all the slithering, swimming, crawling and flying things on display in various TED talks.

The reason I singled out robotics as a good example of a change resistant career, was that I thought the opportunities within programming, mechanics, sales, miniaturization, materials, batteries, solar, project management etc. were self-evident. In addition, automation stands a good chance of being the last industry to be automated.

Apparently these things weren't self evident, so let's be a little more specific:

I think robotics has the potential of becoming for this century what the auto industry has been for the last century.

At present there are a lot of stupid single-purpose robots everywhere - some are status symbols, some are not anymore. They are called cars, washing machines, dishwashers, vacuum cleaners etc. Soon, more general-purpose robots will take over more and more household chores, caretaking of sick and old, companionship, telepresence/socializing. I also think robots can become the new status symbol that so far has been reserved for cars.

They had that vision a little prematurely in Rocky IV (released in 1984), but now, 30 years on, there may be just ten years more before its realization. Aibos and copterdrones have been pointing firmly in that direction for at least half a decade now.

Okay, so I've understood I have to be much more concrete when guiding you. I do get it, you don't have the same experience as I do, or the overview and time to think about how certain technologies and human challenges combine to form tremendous career opportunities for you.

My bad.

I'm such a COK (meaning suffering from Curse Of Knowledge) for not being more clear and precise about these things. This post is meant to remedy that.

 

It's not just about robotics, but all the Big 5

The way I see it is this. If you want to be as future proof as possible, you should work in areas that are hard to automate (preferably the automation-enabling industries themselves) and that deal with the largest and most challenging issues the human race is facing:

"5" Challenges

  • Energy
  • Pollution
  • Global warming
  • Food
  • Water
  • Longevity/death
  • Depression (in the wake of automation, unemployment and abundance)

 

I think the best way to deal with the above big challenges is to be found in the following exponentially developing technologies:

"5" Technologies

  • Artificial Intelligence
  • Robotics
  • Nanotechnology
  • Biotechnology
  • Additive manufacturing

 

More specific areas where you could contribute are listed below. Remember that each one of the below are meant in the widest of senses. "Programming", e.g., means everything from actually coding, to designing user friendly apps or planning out whole systems, to marketing them. The same goes for VR (headset hardware, treadmills, software, games, simulation software...) or genetics (reading the code faster and cheaper, finding useful patterns/genes/diseases, visualization software, marketing) and so on.

Subcategories

  • Programming
  • Virtual and Augmented Reality, vision
  • Bionics (sense restoration and augmentation, X-ray vision, e.g.)
  • Artificial agents
  • Space exploration and mining
  • Artificial biology
  • Genetics
  • Stem cell research
  • Organ printing
  • Driverless vehicles
  • Neurology/brain interfaces
  • Multi-resistant bacteria/bacteriophages
  • Mechanics
  • Motors/actuators
  • Psychology/emotion sensing and manipulation
  • Surgery
  • Health care
  • Pandemics
  • Carbon capture
  • Desalination of sea water (source, clean, transport, finance...)
  • Fusion (chamber, materials, fuel, storage...)
  • Solar cells
  • Housing (prospect, plan, materials, energy, agri)
  • Migration (where to live, how to be integrated, educated)
  • Debt clean-up
  • Entertainment (incl. porn)
  • Psychology (dealing with migration or not fitting in the automated world of the future)
  • Energy storage (batteries)
  • Vertical farming
  • Insect farming
  • Algae farming
  • Ecological (insect fed) fish farming

Since those technologies themselves are in the vanguard, and driven by human creativity, they are the least likely to be automated anytime soon. Rather they are advanced by humans aided by tools provided by the previous technological generation in an ever accelerating cycle. That's where you want to be, whether it is in engineering, design, marketing, psychology etc.

I guess you need a list for that last part:

  • Engineering
  • Design
  • Marketing
  • Psychology
  • ...

 

What do we want? And how?

We want a time machine! When do we want it? It is irrelevant!

time machine
by Pixabay

Alright, sorry for that. My apologies.

What do we want? Well, you want money, I know that much, but why do you want it?

You want to buy food, clean water, a roof over your head, clothes, other stuff, healthcare, energy for running your tools. Well that and a Lamborghini, fancy food, champagne for your spray parties at Ocean Club, Marbella etc.

How are these things going to be produced? With the help of better and better tools provided by the big 5 technologies.

 

What's your part in it?

Well, what can you do? What are you interested in? Your education doesn't really matter, unless you want to become a medical doctor, a lawyer, a finance slave or work at a top tier management consultant. Most every other line of work lies wide open.

Just start tinkering, taking things apart, meeting people, interviewing them, reading stuff, connecting dots, studying online (here are 144 resources) and soon you'll be the expert, the having 'right' education or not. If you're driven and interested, you could fit 50 hours a week of your future-proofing, on top of the lowly bread winning activity you temporarily have to engage in. Remember how you could play all day long as a child, with no regard to remuneration for your efforts? That's how I feel about blogging and podcasting, and probably would about tinkering with robot hardware and software too.

After just one single year, your 2500 hours will have brought you close to expert level, in whatever you single out as your area. Imagine where you'd be in 5 (the length of a typical education) if you keep at it.

 

Speed things up with a little acid

I'm not you, and I can't go through the pros and cons associated with every conceivable job. However, think more in terms of satisfying yourself, than living either vicariously or conspicuously. Think more in terms of exploring and possibly leading for the experience in itself, rather than becoming a CEO or other kind of manager, just for the status and money.

 

Life is not about being a rock star, it's about rocking and rolling

 

...you still need the money however. Sure.

And you want to feel pride about your work, and not having to fear being axed all the time. Well then, back to the list of future-proof jobs, industries, challenges, their intersections with each other, with your interests and skills; and...

Perhaps, if it's legal where you are, try 50 ug of LSD to gain a fresh perspective on it all; your interests, your abilities, your aspirations. Reading this post again right before should set the stage nicely. Here is a great 15-minute video detailing the differences between the effects of LSD and psilocybin respectively.

N.B. I haven't. No, promise. Scout's honor. Whatthef..., read my lips: I. Haven't. Dropped. Acid. Or munched 'shrooms.

Ever.

LSD

 

Do it for the rainbow, not the gold

"But what about finance?"

Well, here's some food for thought: Finance wasn't cool or high-paying when Buffett or Marks or Dalio and other finance gurus entered the business.

They did it because they were fascinated by understanding business models and doing research. In short: they did it for fun, not money. They did it for the rainbow; there just happened to be a pot of gold at the end of it as well. If you focus too much on the gold, you'll miss the rainbow altogether.

Since they began in the business, we've experienced 40 years of falling interest rates and more and more (over-)banking, as well as rocketing valuations to the highest point in history (median MC/GAV, which unlike all other models is more than 90% correlated with subsequent decade long average returns).

That's why and how they got rich, including dozens of followers and wannabes riding the same spectacular wave of financial innovation and money debauchement. I think that trend is about to reverse, leading to much worse prospects for employment, careers and riches.

Thus, I think it's time to focus on real innovation and production (virtual reality counts as real) instead of the ephemeral Ponzi scheme that is finance.

Oh, and if you claim to have a 'burning interest' in finance, investing or management consulting, you shouldn't care about slaving away at Goldman or McKinsey. Or about being paid the big bucks by somebody else. Open your own shop, manage your own money, develop your own models in collaboration with like-minded people on social media.

 

Rock on!

This is the summary: Rock not rock star.

Fun, unique, human, entrepreneur, problem-solving; not an employed drone in a soon-to-be-automated mindless toil in whore village - at least not as more than a short gig to get started.

By the way, my wolfram just lit up: anything worth doing is future proof. Well, unless you really think driving a truck, ship, airplane and similar extremely automation-prone jobs are meaningful and fun if it weren't for the pay.

Now, sign up for my free newsletter, and share this article with a friend heading in the wrong direction.

Taggar (blogg): 
12 mars 2016

Selling oil, waiting for abundance

Executive Summary

A quick (and simplified) overview of the oil price development, including Iran ramping its production, Saudi-Arabia refusing to cut production, overflowing storage and the risk of rogue contango.

What I'm doing about it, i.e., my personal investments - tactical and strategical.

And some ducks... (and doomsday scenarios). And DIKs

walks talks looks like a duck

Readability: Including the summary, and this, it's a fairly quick and easy read at 2011 words (10 minutes) and an F-K US school grade score of 10.


Oil

The table below shows my (simplified) view of the oil situation. I assume you are a grown up that understands it's not the complete picture. I also assume you understand I'm not recommending anything. It's all just entertainment. Disclaimer here.

Anyway,

To the left are variables supporting higher oil prices

To the right are variables that could cause significantly lower prices again; possibly new lows

Broken oil producer budgets Iran ramping production
Storage situation exaggerated Saudi-Arabia wants shale out
Price momentum Marginal storage left for futures arbitrage
Potential production cut Recession is coming, lower demand*
Capex cuts Dead cat short squeeze bounce ending
Strategic bombing = prod cuts (renewables - long term)
I'm selling oil :)  

*incl China


It's all Bernanke's fault, just as everything else

The story so far: low interest rates and QE drove higher oil prices as well as heavy (mal-)investments* in shale production. (*investments that only made sense in ZIRP La-La land).

Once enough new capacity was in place (it took a few years to complete the malinvestment projects), sub-par economic growth (and thus lower demand) contributed to storage all but overflowing and consequently a sharp drop in oil price.

 

They key is OPEC and shale budgets

Saudi-Arabia, Kuwait and UAE have exacerbated the situation by increasing production in an attempt to fix their broken budgets (they need to sell more at lower prices) while crushing the shale industry at the same time.

 

Oil prices have jumped on hopes alone

Very recently, the oil price has bounced by more than 40%, due to short covering and speculation amid hopes of an OPEC production cut. Several countries, including Russia and Nigeria happily fuel such speculation (to mitigate their budget deficits).

 

Productions cuts are highly unlikely

In the real world, however, Iran is looking to ramp its production back to "normal". Before that is accomplished, there is very little chance of any production cuts anywhere. This will take some time.

My guess is that oil speculators will be sorely disappointed when production cuts meetings are postponed or cancelled, while storage inches closer and closer to full capacity.

 

The storage crisis haven't even begun

Nota Bene that storage isn't full yet; that the storage crisis haven't even begun. Also note that Iran is just starting to ramp, they aren't actually producing more yet... It will probably take several more months to reach absolute full capacity in storage facilities, and several quarters or more for Iran to reach normal production levels.

 

Without arbitrage, exploding contango could obliterate ETFs

When there is no more room for front end/next month futures contract arbitrage, through temporary storage (when back yard containers of barrels are full, as well as tankers and ordinary storage), there could and should be a devastating price plunge in the front end contract. The resulting massive contango (Next month's price less this month's price; which could be repeated month after month) will erode any investment based on rolling oil futures forward, e.g., through an ETF like USO or Olja S.

 

Just knowing about it doesn't fix it - that takes time

This situation could go on for several quarters, maybe a year... or more, while Iran is increasing its production and OPEC is falling short of promises of production cuts again and again, perhaps most notably at the supposed meeting on March 20.

 

I'm selling

Due to the reasons stated above, I have sold my Brent ETF (Olja S) as well as the oil junior ShaMaran (which is still waiting for its "first oil" and has some cash flow problems, but trades at what might turn out to be just 1x P/E a few years hence).

I've also sold some but not all of my DNO shares. DNO could be a strong Buy for the coming 3 years, but there is a definite risk of a deep downturn before that, even if the company doesn't have the same financial problems as ShaMaran.

DNO is probably a much better bet already at current prices than any oil futures ETF or derivative.

 

Don't short what should eventually double

I won't go short though. And I'm actually not that confident in cancelling my longs either. The reason is that a sustainable oil price probably is somewhere between 60-100 USD per barrel for the coming few years (rather than the current $40), once the current storage crisis is sorted out. In between however, the front end contract could easily fall back to 30 and even below 20 USD/barrel. 

In any case, I'm expecting a quite prolonged storage crisis, up until Iran is content, shale is dead, and Saudi-Arabia, Kuwait and UAE can agree on the necessary cuts. I plan to buy more DNO, ShaMaran and USO long before that of course, but only when Iran has ramped significantly or we've hit new lows for oil, oil companies and the stock market in general. This might happen already this April,or as late as April 2017.

We'll see. I'm not sticking around for the downturn, except maybe with a marginal position in DNO.


 

Ducks

If it walks like a duck, talks like a duck and looks like a duck, it probably is a duck. 

Oil prices pass the duck test of a recovery: unsustainably low prices, rising, breaking key levels, talks of production cuts...

On the other hand, so do storage problems (which pointy in the opposite direction): almost full, meaning the real problems haven't even started, Iran not backing off, neither is Russia or Saudi-Arabia. Shale still lingers as the walking dead.

Another walking, talking, living, sitting duck is the economy. Most pundits talk of low risk of recession. However, a select few, very mart people, point to a combination of factors: duck tail, duck beak, duck feet, duck feathers, duck calling sound etc., all clearly pointing toward there being a recession duck swimming around in plain sight.

I'm squarely in the "dead cat bounce" camp regarding the oil price and stock market, and in the "given these variables, including the stock market there is almost invariably a recession" group of people.

One caveat though: In 2009-2012 I used to say "this won't be too bad if we normalized rates to 4% and some other things". Now I'm leaning more and more toward "we are beyond thinking about investments, and more about defending civilized life as we know it". I'm sure many more make the same assessment, including policy makers.

 

There is no turning back from full retard central bank policies

That means the powers that be truly will do "whatever it takes" (as Draghi's Full Retard Threat went back in 2012) for as long as they can, thus making the final crash even worse.

As time passes and policy makers venture further and further into retarded measures, I'm becoming less and less certain of my forecast of a "pretty bad but not catastrophical outcome quite soon". Instead I see increasing risk of a blowout on the upside followed by something on the downside we haven't seen since the 1920's crisis in Germany and the Great Depression in the U.S. in the 1930's. 

The best long term outcome would be a normalization of stock markets, interest rates and debt burdens as soon as possible. There actually are some promising signs in that direction. But then again, there is Draghi (ECB), Ingves (Sweden) and Kuroda (Japan) trying to get into the history books with a particularly toxic variation to the Rio Spread Theme*. Maybe war is the only "solution" after all.

*The Rio Spread means taking a huge bet in the market and going to Rio for unlimited celebration. If it works out, it works out. If not, you stay there. The DIKs (to which Mark Carney of the BOE is very close to being added) will either miraculously save the economy, or (much more likely) ruin it completely. Either way, they will get their place in the history books.

I think the ECB reaction was quite expected (except the rebound afterward). The Fed is more important though. My guess is we'll get the exact same reaction after the FOMC meeting (except the rebound) as after ECB, i.e., reflexive buying followed by heavy selling.

 

How an economy grows

Saving enables investments which lead to better tools and infrastructure and thus increased productivity and falling production costs and selling prices.

Falling prices typically lead to increased consumption, but if it doesn't, it means more room for even higher savings and investments and higher growth. 

Somehow many economists have misunderstood this completely and think that lower prices (like spring sale, summer sale, Christmas sale etc.) mean less consumption. And even if it does, what's bad with that? Nothing! people will buy what they want and need, no matter the direction of prices. And if they were to limit their purchases somewhat that only means more saving and room for investments and even higher growth.

So, saving=>investment=>low prices and high growth=>both increased consumption and investment and thus even higher growth in a virtuous cycle.

Most economists want higher prices, which lead to less room for consumption and investments and thus both lower supply and demand => lower growth, less wealth, even less room for saving and investment, and so on and on in a death spiral.


 

Invest responsibly. Remember that investing is 80% psychology. The other half is patience.


Summary - selling oil, waiting for abundance

In short, I'm selling oil due to the storage situation, that will only get worse until Iran has reached full production and OPEC cuts can be seriously considered.

I don't dare shorting though. Quite the opposite; I'll look for (oil company) stock bargains in the expected carnage (blood in the streets).

I've gradually had to "refine" my general outlook from "bad" to "binary". I'm staying short the stock market but even that feels less and less palatable these days. Gold and silver are the only things that feel OK. I'm even leaning closer to getting some physical gold to complement my paper gold. So far, however, I haven't, and I just don't want to be that pessimistic.

I mean, the 2020's promise to be the best era ever (so far) for humanity, with widespread abundance provided by AI (did you see AlphaGo's victory?), nanotech, biotech, robotics etc. Billions of people coming online, sharing knowledge and using ever accelerating technological tools to create more and better solutions to everything than at any time in human history. And then we haven't even mentioned the 2030's!!

We just have to pass this little "bump" provided courtesy of Draghi, Ingves, Carney, Kuroda etc. (including Yellen of course, but she's no DI...)

What goes bump in the night?

Mario-Draghi-laughing

Ingves negative interest rates are FUN

Carney

kuroda

Janet Yellen

 

I want to put my wisdom in you

I may have gone overboard with that Will Ferrell-inspired book cover I tweeted the other day (the Tweet, viewer discretion is advised).

The message is the same though. I'm not blogging, podcasting and writing for financial gain, I just want more people to become aware:

Aware of themselves, aware of the world, aware of their career possibilities, of their investment opportunities, of the fantastically bright future that awaits.

So, please share this article, bookmark this site, subscribe to my newsletter and download and read my first e-book about the investment guidelines I picked up during a decade and a half as partner, managing director and portfolio manager at Futuris - The European Hedge Fund Of The Decade.

If you have already downloaded the book but never opened it, try just the first page summarizing my ten most important investment rules. Please.

 
Taggar (blogg): 
7 mars 2016

Procrastination - how to simultaneously embrace and avoid doing it

Topic: How do you even know if you're procrastinating? (and some kind of update on how my next book is coming along)

Reading time: 5-10 minutes (1700 words, F-K 69, F-K US school grade: 7.6)

Executive Summary: The difference between legitimate preparation, recreation, recharging and recovery on the one hand, and procrastination on the other, lies in the long term outcome. Pay attention to whether your important projects are progressing as desired or not.


It was a catastrophe

Loud electrical noise hit my eardrums, sparks flew and smoke rose from my new toy race car track and the two cars, that I was so excited to start controlling and racing. One car had jumped up and off the track. A sharp chemical tang was abusing my olfactory cells (which by the way are very versatile, and have recently been used to cure quadriplegics from paralyzation).

spark

It was my 7th or 8th birthday and I had just happened to bypass the power adapter (it wasn't pre-assembled and I didn't read the manual, so I had just put two naked electrical cords into the wall socket) and ended up burning and short circuiting my new toy race car track, including a couple of the cars.

burning car

 

Since then I've always read the (entire) manual before using a new device.

toy race car

 

Learning a new skill - procrastinating

A few days ago I set out to turn my notes in Google Docs into a real book. I had a cup of coffee, turned off all notifications and sat down with my computer to do some Deep Work.

Right at that moment I realized, Mr. Mania was in control. Mr. Mania didn't really care about the future; he just wanted to get off to a start, thinking and writing. Now, most writers would say starting is a good thing...

I, however, realized that jumping right into the writing would be a kind of procrastination and sub-optimizing. Consequently, I paused and thought "Hey, wait a minute, perhaps I should use a real text editor this time and make it right from the beginning. I mean, I want this book to feel like a proper book rather than just some sloppy pdf document"

So, I bought Scrivener (Wait? What? I know, Mr. Mania just went ahead and did it). After installing it, I was just about to import my lengthy notes and start writing, when I stepped in again: "I probably should read the Quick Start Manual to get a feel for the program first". Again, was that smart preparation... or procrastinating?

What did I do? Instead of writing or browsing the quick start manual, I spent yesterday and today reading the entire manual, going through all example exercises. I did in to two lengthy sessions of total focus and concentration. Once in a while, though, I thought to myself "is this smart, is this manic, is this procrastinating? Is this 8-year old Sprezza afraid to destroy his toy for lack of reading the manual?". I still don't know.

However, now I have this article ready, as well as know all I need to know about Scrivener - a new skill!  

During the above process, I realized a few things regarding procrastination:

 

The most dangerous thing with procrastination...

...is that there is nothing dangerous at all about it. You'll get whatever needs doing done in time eventually. And if you don't, nobody ever died from missing a deadline.

However, if you want to get things done, but also believe in sound preparation, being rested, fed and inspired, you should pay close attention to the actual progress of your projects. For some it's paramount to just get started to get anything at all done, while others thrive when and only when the circumstances are perfect (somehow Bobby Fischer springs to mind)

 

The second most dangerous thing...

...is that you often don't even know you are procrastinating.

Writing this post, e.g., instead of outlining the book I'm (supposed to be) writing. I mean, I am supposed to put out a blog post about every week, so writing this is not procrastinating, right? It's better to get these thoughts off my mind and then focus on the book, right?

Sure, that's the P(rocrastination) snake talking, but it could just as well be being effective, or alternatively Mr. "just do it, do it right now" making an appearance, or as I like to call him: Mr. M(ania).

The P snake is a sneaky bastard that can rationalize any behavior: "It's fun, it's what you really want, it's even more effective than doing project X, live a little..." and you won't even realize what's going on.

Mr. M is his cousin. Supposed to study for an exam? Mr. M suddenly wants to do some spring cleaning, or visit your parents in law, or doing taxes, working out or some other actually important and sound activities. Like writing this post.

I often sound like and advocate of Mr. M's. I think you should "just do it, start right away, try stuff, commit and quit...". It is good for you, provides a healthy dose of variation in your life and gets things done. On the other hand, it's a bit manic, isn't it? In addition, without some planning and afterthought you risk climbing the nearest hill instead of the right one.

 

The third most dangerous thing...

...is that it's all too easy to quit procrastinating, and hence just as easy to keep at it, since you know you can quit anytime you like (sic).

I could put this post aside right now. But, I just won't. Besides, I'm so close to finishing now anyway.

I actually can stop procrastinating whenever I like, and in fact I often do. I don't need rituals do get into working mode, like some people seem to need. I can just switch on and off my Deep Work mode and start. I just need to get my priorities right to do it.

Since I know that, it's even easier to just keep procrastinating; tweeting, e-mailing and doing other shallow work that doesn't add any long term value.

Then again, my "job" is spreading my gospel, my life advice, and the more I engage on social media, the wider I get to spread whatever quality wisdom I'm able to produce in between my social sessions.

So, how do I know what to do about the shallow work and procrastination?

 

Resolving the issue

If you try to minimize it or avoid it completely I think you end up doing it a lot more of it instead.

Thus, I think the best way to deal with procrastination is to embrace it, to acknowledge it as a part of life, a part that can be quite enjoyable even.

I don't have a specific check list for how to do it, but whenever doing shallow work, stop for a minute or two to explicitly go over your priorities:

  • What do you want to accomplish the coming month?
  • What should you first and foremost do to accomplish that?
  • How does what you're currently doing fit into that scheme? (e-mailing, tweeting, surfing on Facebook, Youtube etc.)

Do not let the gut reaction of "charging my batteries, getting into mode, searching for inspiration, preparing, marketing etc., or 'all of the above'" be your final answer.

Explicitly state why you should use up even one more minute doing what you're doing, instead of digging into your highest priority project, the one you want to have finished in the future, as opposed to activities that only pass time (albeit superficially supporting your long term goals).

Sure, blogging and tweeting amount to expanding my network (apart from the fun, relaxation etc.), but without doing real work on my book, there is no real value created that can be leveraged by the network. In addition, doing shallow work, having fun, marketing, e-mailing etc. feels so much better after real work on the right projects than before. That's when it's really relaxing rather than anxiety inducing.

 

Summary

Step 1: Acknowledge procrastination isn't bad or dangerous at all, and that's exactly why it's so damaging. Pause, reflect, prioritize and put off the shallow work instead of your Deep Work.

What I mean is that there actually is nothing wrong in procrastinating for a few minutes. But three minutes can easily lead to three more and then three more after that. If three minutes is OK then why shouldn't three more be too? Therefore it's better to not do it at all and proceed directly to:

Step 2: Before peripheral (albeit important) tasks, first do that which you in the future want to have accomplished, i.e., your real work

Step 3: After step 2, relax with the shallow and supportive tasks that you put off in step 1

The hard part lies in knowing what is primary and what is secondary work. Specifically, in my case, was buying and learning Scrivener procrastinating or was it doing Deep Primary Work that truly furthers my important book project?

I think it was the latter, and the right thing to do. On the other hand, that was on Thursday and Friday, and now it's Sunday and I still haven't written a sentence on my book.

However, I imported it and structured it and was just about ready to begin writing, when two parties came between me and today, not to mention this year's heaviest workout session so far (which coincided with my being heavily hungover on Saturday, which is just another example of how my habits control me rather than the other way around. I can't not go to the gym, if it's scheduled for that day, no matter how hard I partied the day before).

So, once again, the hard part isn't avoiding procrastination, it's realizing when you are doing it. For that, you need to have your priorities sorted and a thorough knowledge of yourself.

In other words, trial and error. Try just jumping right in for a while and gauge the outcome over a few weeks or months. Then compare it to a more thorough approach where you focus on preparation and recreation before working.

 

Please share this article with anybody who ever missed a deadline, or your entire social network, to make them realize that it's exactly because there's nothing wrong in doing so that makes them do it.

If you still haven't read my free e-book about how this lazy, Aspberger's afflicted, bullied little guy came to manage the European Hedge Fund Of The Decade, and not least what you can learn from it, now is the time.

Taggar (blogg): 
29 februari 2016

Oil opportunities and the slippery slope of contango extraordinaire

Retarded Redux

Once, a friend from business school wrote in his capacity as a business journalist "It's fascinating how retarded Syding is. He still hasn't realized that...". That was 20 years ago.

Well, here I go again, I just realized* there is this thing called contango..., and consequently I've had to update my view on oil.

*not really, see more below


 

Oil update - to keep or not to keep

This is a quick update on my thoughts on (brent) oil

It's not a recommendation to buy or sell anything (see disclaimer page), it's simply my thoughts on the issue of low oil prices potentially going (much) lower before exploding higher, and what that means for investments in oil futures and oil stocks.


 

Oil and Asperger's

Back in August last year I wrote this article on brent oil and Asperger's - about how I had profited from having both.

Today I'm long oil again, both a brent certificate/ETF (a Swedish instrument: Olja S)and two oil exploration companies (DNO and ShaMaran).

The case for oil is pretty easy and straight forward: the world is growing and we have reached peak cheap oil production. It will only become more and more difficult and expensive to find and extract oil, while the easily accessible oil reserves become depleted and go off-line one after the other. 

The case against oil relies mainly on solar energy and more effective use of energy, including storage (batteries). Well, that and the coming super recession.

I'm pretty sure renewables won't be able to fill the oil supply/demand gap within the next five to ten years - at least not unless oil prices sky rocket again, thus making non-subsidized alternatives attractive enough. I also think a recession has been more than priced in. I consequently think oil prices will be much higher than today 18 months from now, and yet much higher 18 months after that.

10$ oil

In the short term however, there are a few snags, including 10$ oil:

  1. Easy money has fueled malinvestments in north American shale oil/gas production capacity. Nobody wants to be the first to fold, but some need to fold though in order to rebalance the oil market and support higher prices. The latter is taking longer than expected. Crashing oil junk bonds is, however, a good sign things are moving in the right direction.
  2. Crashing oil prices have forced Opec to pump even more oil than usual on order to keep their countries afloat. Russia, Saudiarabia, Kuwait, UAE and Iran simply refuse to agree on the needed production cuts. Instead they seem hell bent to keep at this chicken race at least long enough to crush the north American shale industry.
  3. Oversupply. The combined production of a pumped up Opec, Iran coming online and massive investments in shale production capacity have created a shortage of storage capacity. Once the industry runs out of storage (including in tankers and refined products) excess oil can and will be sold at just about any price.
    1. Yes, 10$ per barrel is conceivable (for a very short time) - if that is what's needed to make anybody find use or (build) temporary storage for it, not to mention paying the cost to move the product.

Contango extraordinaire in the face of a storage crisis

The reason I am considering taking my oil profits to the sideline for a while is solely based on the risk of a storage crisis which could spark a panic sell off that in a single month can create a truly massive contango, wiping out 20%, 30%, 50% of the value of an oil ETF or certificate.

I have based my investments on Opec doing what they can to crush the shale industry.

I have been ready to sit through a bottom in oil prices caused by both a supply war and a simultaneous recession.

I have been quite calm, faced with a contango of  1-2% per month for the rest of the year, and a total of 20% until the end of 2017. No problemo.

oil futures

What I hadn't really considered, until I listened to the MacroVoices podcast the other day, was the risk of literally overflowing oil storage facilities (check out some of the statistics here), and thus nobody willing to take delivery of oil at just about any price, while next month's futures still trade at more or less reasonable prices. Even if current contango is limited to 1% per month, temporary spikes can kick that up to tens of per cent per month.

oil storage
picture from Art Berman via MacroVoices

I previously thought it would be quite easy to find alternative uses, or to build temporary storage facilities if you stood to make a dollar or two per barrel per month in arbitrage, but it seems it just isn't that easy.

Hence, if a long oil ETF trade as of today is to become profitable, the current oversupply of 2 million barrels per day pretty soon has to come down to zero. It only takes a few per cent production cuts by, Russia, Saudiarabia, Kuwait and UAE to accomplish that. However, they just won't, if Iran is increasing its supply at the same time, and definitely not if it means the US shale industry will survive.

If the cuts or shut-downs, shut-ins, don't come soon enough, any product relying on rolling oil futures contracts over from month to month, could be more or less wiped out, and not recover sufficiently in the ensuing rally, due to too low a starting point.

Veering

So, it's a chicken race, and I'm not entirely sure I want to be part of it anymore. The risk of suddenly losing even 'just' 10% in a single month's contango simply is too much of a gamble for me.

I will keep my oil stocks, but I just might sell my oil certificates as early as this Monday.

If I were you, I would think long and hard about what kind of oil exposure I had and why.

With that I leave you, and encourage you to spread this article far and wide, to help others in their quest for making a quick buck in oil.

P.S. If you haven't subscribed to my newsletter or read my eBook already, don't hesitate to sign up. It's free, spam free, easy to unsubscribe, and I hear it's pretty entertaining as well as useful (sometimes)

Taggar (blogg): 
25 februari 2016

How to ace a hedge fund job interview

How to get through a hedge fund interview with flying colors

Reading time: 8-10 minutes (2120 words, including this)

Difficulty: super easy at F-K 70 and US school grade 7.5

Warning, this post is a bit unusual. It's a run-through of a job interview case I used at my hedge fund Futuris.

It takes about five to ten minutes to read, and will teach you a lot about what I was looking for when hiring analysts (PMs to be), and what you probably should keep in mind during an interview.

Executive summary

Don't crack under pressure was probably the most important part of the test - the ability to pick oneself up and continue, to try new ways and ideas, after failing one route. Functioning under pressure, keeping communication up, and being able to make decisions, ask questions and try, despite having made a few mistakes.

That...

...and keeping neat notes, following a logical order, formulating a plan, communicating, demonstrating an ability to do quick sanity checks on the fly, to combine a bird's eye view with at least a quantum of sense for details and plausibility in the micro perspective.

 

How long is a string?

("piece of string" - I know, but I want it to sound a little retarded)

Well, a quantum string is around 10-35 meters long, so they're pretty well defined in terms of length, if that's what you're asking.

string

Huh?

Unfortunately, you never know what kind of string the question is about, so the answer is usually completely arbitrary. What it means is simply "there is no (known) answer to your question".

I love using it as my turn-around to a lot of questions I get about valuation, timing, subjective judgement calls etc. 

-It works for most truly important questions regarding life, the universe and everything:

  • How far will the stock market bounce go? What multiple is warranted for this and that biometrics company?
  • Is micro or macro most important for valuing this stock?
  • Is it different this time or not?

The answer is typically "both" or some variation of that.

 

On required skills (measuring strings) for getting a job at a hedge fund

When I hired people at my* hedge fund, I wanted to know the person could manage switching perspectives back and forth, while being organized and keeping calm enough to keep track of the task at hand. Not least I wanted to see how they handled pressure and (rectifying) mistakes.

I asked them one simple question:

"Do all the physical legal currency (bills and coins) in Sweden fit in the Stockholm Globe arena?"

The question is similar to asking if all the physical money in New York would fit in the Madison Square Garden arena.

globen case

The math is quite easy, and the assumptions needed are hardly rocket science either. Without pressure, a person of average intelligence and math skills should manage to do it within 5-1o minutes using just a pen and paper.

  • First you need to calculate the size of the arena.
  • Then the amount of physical currency.
  • Third, how many bills and coins that amount is, and how much space that many bills and coins would occupy
  • Fourth and final, you have to remember to compare the volumes of one and four, and answer if the bills and coins fit.

You get a pen and a stack of papers and about an hour, during which you're allowed to ask questions, and supposed to explain what you're doing and thinking.

Globen
The Globe arena

(*my = I was one of three partners, as well portfolio manager and the managing director)

 

Size of the arena

Is it 10 meters, 100 meters or 1000 meters? If you don't know, just try to imagine a hockey rink or a soccer field.

Let's go with 100 meters. It's obviously larger than 10 meters across, and less than 1000 meters...

The globe arena building is (almost) spherical, but never mind that. Think of it as a cube instead. The volume thus can be estimated at around 100 x 100 x 100=1 million cubic meters.

globen

A few guys tried using the formula for a sphere but got it wrong. Once they got the correct formula from me they couldn't handle the (very simple) calculations due to stress and inability to use rounding. Worst of all, they didn't verify the answer against the volume of a cube of the same size. Those mistakes are not what you want to see an analyst or portfolio manager make.

You can always go back and refine if needed. FYI: the real answer is 0.6m cubic meters. Close enough. At least it's not just 1 000 cubic meters or as much as 1 billion cubic meters...

 

Money

Triangulate the amount of currency in SEK:

  1. a certain percentage (2%? 1%? 10%?) of GDP (4 000bn SEK) is physical money
  2. assume how much cash all physical people (1000 SEK each?), stores (twice as much as the people? Four times?) and banks (as much as the stores?) are holding
  3. make alternative calculations based on total national wages or something similar, followed by circulation and accumulation in stores before being shipped to banks daily or weekly.
  4. make an assumption of the proportion of bills vs. coins... how much do you typically carry of each?

Answer: There is 68bn SEK in bills (8bn USD) and 5bn SEK in coins in Sweden.

When I first did this, 10 years ago, there were 100bn SEK in bills and 5bn in coins. Let's go with the current number 68+5bn SEK.

By this time, many had already forgotten why they were trying to calculate the amount of money in Sweden, or estimating GDP etc.

Some were so confused they started comparing GDP in SEK to the cubic meter volume of the globe arena.

What?! Comparing GDP to a volume?! What were they thinking? What if an investment decision was made using a similar approach? 

They had to be nudged into calculating the physical amount of money needed to drive GDP, people's wallets, cash registers etc., i.e. how many coins and bills there were and their physical volume requirements.

 

How many bills and coins?

Well, assume an average value per bill or guess the amounts per each type of bill. The answer is the average value per bill is 200 SEK and consequently there are around 68bn/200 => 340 million bills (317m actually). Let's go with 300 million typical bills.

Do the same for coins. The average coin is worth 2-3 SEK and there are thus 5bn/2.50 => 2bn coins.

100 SEK

How much space does a bill or a coin occupy

So, how much space do these slippery little buggers occupy?

Could the amount of money in New York occupy Wall Street? Madison Square Garden?

How big is a bill?

How long is a piece of string, some applicants seemed to think and just froze. And, yet, they had a stack of papers in front of them - just like a stack of bills...

applicants freezing up

Anyway, a typical Swedish bill is around 70 mm x 140 mm x 0.1 mm.

At least it's not 200 x 100 mm.

Nor is it 1 mm thick (I seem to remember somebody going for 2 mm (1/10 inch) thick for a while. That guy did not know the length of a piece of string).

Sure, you're free to think out loud, but you should always do a quick "in and out" (of micro and macro perspective, to make a sanity check: What would a stack of 2 mm thick bills look like. Just ten of them would be an inch thick! Is that plausible? What if you folded it 5 times, making the equivalent of a stack of 32 bills?)

Bill x32

Anyway, a reasonable assumption, given the time and task was to say a bill had the dimensions 100 x 100 x 0.1 = 1000 mm3, or 1 cm3. However, any assumption within half or twice those dimensions in all directions would have been more than OK.

Some stopped right there.

Some just forgot about the coins (sloppy notes) and went on to do all kinds of crazy things.

Some tried comparing the volume of one single bill to the arena. Some compared the volume of a bill to the volume of a coin. Some tried stacking the bills on top of each other in one single stack 30 km high (300 kilometers in one case) and draw conclusions from that.

OK, a few just took the volume of the notes and compared it to the arena. Pretty good, albeit a bit sloppy. They were asked to repeat the original question (in order to remember the coins), which they should have written down neatly on top of the first page. I repeatedly throughout the case urged the applicants to keep neat and clear notes. None of them did.

P1010650

OK, back to the coins:

A typical coin is about half that size (20mm diameter and 2mm thick), but assuming it occupies the same space as a bill is perfectly ok.

Those lucky enough to get this far, often went right ahead and made a stack of coins 4bn mms high = 4 000 kilometers, and then went through all sorts of trouble trying to fit it inside the arena in various ways (rarely succeeding)

Total volume then comes to: 300 million bills x 1000 mm3 each + 2 billion coins x 1000 mm3 each = 2.3tn mm3. Scaling it to cubic meters means dividing by 1bn (1000 x 1000 x 1000), or 2300 cubic meters.

 

Comparing volumes

Here and now, you should have a couple of neat notes saying

  1. "Arena volume=1 000 000 cubic meters" and
  2. "Money volume=2 300 cubic meters"

Some did (very few - actually not a single one of all applicants had such neat notes. However, four of them were at least able to eventually find the numbers, with some barely legible notes attached).

Most had to go back and redo a lot of their calculations, while trying to keep their notes in better order (often stressing and failing again, this time freezing up on simple calculations like 2+3 or 4/2)

And, yet, even those with the two appropriate numbers at the ready still found it somewhat difficult to answer if the money would fit. Mostly because they weren't entirely sure which number was the volume of the arena and which was the money volume, due to... sloppy notes... and inability to make a simple quick verification of the easiest volume to calculate (1003=1m).

Four finally did answer, trembling and sweaty (they claim to still get shivers down their spines, just hearing about the "Globen Case"), that yes, the money fits.

 

Fingerspitzengefühl

Then I asked them to draw the arena and the money in it (remember it would only would occupy some 0.2-0.4% of the volume), and invariably got way, way, way too big piles on the drawings. By then, however, we couldn't exclude more people or we would never be able to hire anybody.

I'm sure you are feeling smug by now, thinking the above case was super easy. 

Actually, you're right. It is. The case in itself is easy.

It's just that when sitting down at a job interview for a hedge fund, with me in your face, and not really knowing how long you have and not wanting to look stupid, can give anybody stage fright and freeze up.

And that was probably the most important part of the test - the ability to pick oneself up and continue, to try new ways and ideas, after failing one route. Functioning under pressure, keeping communication up, and being able to make decisions, ask questions and try, despite having made a few mistakes.

That...

...and keeping neat notes, following a logical order, formulating a plan, communicating, demonstrating an ability to do quick sanity checks on the fly, to combine a bird's eye view with at least a quantum of sense for details and plausibility in the micro perspective.

Actually, the real lesson here probably is that hedge fund managers can be quirky.

 

Bonus: How to write a CV

If you want to help a friend prepare for a job interview, share this article with him or her. Even if it's not for a job in finance, they might find it useful anyway. If, nothing else, you could always talk them into subscribing to my newsletter and reading my book about investing.

Read more about applying for a job in finance here (how to write a CV), and why you shouldn't here (please don't waste your life in finance), and what you should do instead (robotics).

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