Jun

17

A convex function can be thought of as one where the output (in this case prices) accelerates with time. Case study of NVIDIA stock:

1999 - $0.04 (ipo price)
2022 - $14.64 (366x gain, 23 year holding period)
2026 - $211 (5,275x gain, 4 years extra holding period)

Total overview:
27 year holding period
$1 turns to $5,275
14.8% of the holding period (4/27 years) accounts for 93% of the total gains today ((5,275 -366)/5,275)

If you sold NVDA in 2022 you would have missed out on 93% of the gains — even though you held it for 23 years (from the ipo price). What's even crazier is that, if you just held it for only 4 more years (only 14.8% longer) (2022 to 2026), you would have made $5,275 instead of $366 from a $1 investment.

An interesting reason to consider buy and hold or following the drift. I also found it to be a very good illustration of a convex function applied to thinking about market.

William Huggins comments:

that analysis misses out on the notion that someone buying in 2022 would not have achieved (x5275 less x366 = x4909), instead they would achieve closer to (x5275 divided by x366 = x14.4). the vast majority of the gains on nvda were long gone by the time this most recent order of magnitude came around. there is no way anyone buying in now could achieve a similar x10 on nvda in the next 4 years without them becoming, singularly, more than half of US market cap.

Jeff Watson points out:

Unfortunately, hindsight is 20/20.

Asindu Drileba responds:

that analysis misses out on the notion that someone buying in 2022

You are right in your case. Buying in 2022 would only yield about 14x. But as I described, I was referring to only holding for an extra 4 years, from the IPO.

- holding from IPO price to 2022 - 366x
- holding from IPO price to 2026 - 5,275x

The difference of just holding for 4 extra years from IPO price, is what makes the difference. The idea is that the biggest moves might happen towards the end of the holding period. And that by getting out early, you miss out on more than you think.

Stefan Jovanovich offers:

The doctor-daughter has a husband who does tape outs for Nvidia.

Asindu's narrative is a wonderful story; but it is not the history of how people behaved as owners of NVDA. The SIL aka SEF15 was the oddball in his lab because, unlike the older veterans, he did not immediately convert his incentive shares into cash once they could be sold. The chart [click for full view] is a year-over-year Hi-Lo price history for the stock; it explains why the veterans were not fools, why some of you are smart enough to be able to trade, and why the SIL puts up with me because I told him to keep every share. The years that are omitted are those where stock-splits made the calculations too hard for ChatGPT and me.

Jun

14

A 19-year-old Thiel fellow just raised $7.3 million to build an African ‘super app’

If he hadn’t dropped out, Aubrey Niederhoffer would be nearing the end of his sophomore year at UC Berkeley. Instead, the 19-year-old from the New York area is living in Lagos, where he just launched his food delivery app, Swoop. The 28-person company just booked $7.3 million in seed funding, and the teenager was named to the prestigious Thiel Fellowship.

The Thiel Fellowship, founded by billionaire investor Peter Thiel in 2011, offers young people $250,000 to skip or drop out of college and “build new things.” Notable recipients include Figma CEO and cofounder Dylan Field, Ethereum cocreator Vitalik Buterin, and at least one early employee at Elon Musk’s Department of Government Efficiency.

In an interview, Niederhoffer recounted how he grew interested in Africa while playing the online geography game GeoGuessr as a tween. When he was 15, he started a recruiting company focused on the labor pool in Eswatini, and would visit the southern African country during breaks from school.

Jun

12

Dwarkesh Goes Inside Jane Street's Latest AI Data Center (video)

Twenty years ago, our "cluster" was just 6 Dells stacked on the floor of our office. Today, come tour our new Texas datacenter: 4,032 GPUs, liquid cooled.

Asindu Drileba writes:

Their hiring is surprisingly very meritocratic, if you can solve any of their monthly puzzles, they will unconditionally grant you an interview & likely a job offer.

For the current offer: Jane Street: Puzzles

And an archive of previous puzzles (with solutions).

Oliver Joseph comments:

For those who are computer science oriented their podcast signals and threads is lots of fun I recommend it. In particular they interview Daniel Pontecorvo on their facilities in general. Some of the solutions they have come up are very interesting and reminded me of some solutions we used in the music world. For example they use a raised platform to run air, data and electricity to workstations on casters so they can move workstations often. This is how we would rig up outdoor tours. Racks and amps on casters and modular raised stages were safer and faster to set up.

Of course I always enjoy time in server rooms. While I’ve never had the pleasure of working on one quite like the one you have linked. “Started with six dells on the floor” It’s a great lesson never despise small beginnings.

Jun

10

Can Stock Indexes Afford to Ignore SpaceX?

Another side to the argument deserves more scrutiny than it receives amid enthusiasm for technological innovation and market capitalization milestones. Institutional incentives have changed radically since index inclusion became a major event. And the mechanism by which being a component of a stock index has become important is beyond merely symbolic. The growth of passive investing now triggers billions of dollars in mechanical purchases from index funds and exchange-traded funds benchmarked to major indices. In effect, index decision committees now exercise considerable influence in private capital allocation decisions that were once determined more organically through decentralized management decisions and market processes.

Jun

9

The 1-Day Expected Move calculation is the practical application of the "Rule of 16" described by Euan Sinclair and other volatility traders.

The Rule of 16 is a mathematical heuristic used to convert annualized implied volatility (the number you see on a quote screen, like 16%) into a daily expected move. The rule is derived from the "square root of time" principle in the standard deviation formula. Since there are approximately 252 trading days in a year, and the square root of 252 is roughly 15.87 (which traders round to 16). Divide VIX by 16 and get the percent expected daily move.

Or consider Parkinson absolute volatility, Expected Daily Absolute Range. By scaling the current VIX using the Parkinson volatility framework, calculate the total expected intraday path length - the absolute breadth from the high print to the low print of the session, independent of the previous day's close.

Useful but occasionally very wrong, like Friday. But a midday update of abs vol after Vix jump provided a fairly good bottom number.

Jun

7

The market spent three months pricing the barrel. The next 90 to 180 days will be decided by the products refined from it.

Crude shock is now understood; product shock is not. Since the effective closure of the Strait of Hormuz, attention has shifted to crude oil. Brent peaked at roughly $138 in early April and now trades in the low $100s, with WTI in the high $90s and the Brent–WTI spread near $10–$12 a barrel, wider than its customary $4–$6. That is the visible price. The less visible, more consequential story over the next 90 to 180 days is what happens to the products refined from crude — jet fuel, gasoline, diesel, and fuel oil. Crude can be rerouted; refined products are produced by configured refineries, and refineries sit at the far end of a supply chain measured in weeks, not hours.

“Energy independent” describes volume, not chemistry. The United States produces more crude than it consumes, but the crude it produces is the wrong type for the products it needs. Shale oil recovered by fracking is very light and sweet; it yields LPG, naphtha, gasoline, and some kerosene, but little of the middle distillates — diesel and jet — and almost none of the residual fuel oil that a complex economy runs on. Those heavier products require medium and heavy sour crude: the grades that flow from the Persian Gulf, Canada, and Latin America, and that Gulf Coast refineries were built to process. The Hormuz closure removes medium and sour barrels from the global pool — precisely the barrels whose yield is weighted toward diesel and fuel oil. That puts a premium on the heavy crude the US can still reach — and Canada is the backbone of it: heavy, sour Western Canadian barrels piped straight to US refineries, by far the largest single source of US crude imports. With Venezuela unable to raise output quickly and Mexican volumes in slow decline, Canadian crude and the sour grades released from the Strategic Petroleum Reserve must carry more of the load. So even as crude prices ease from their peak, the product slate can tighten because the marginal barrel lost is the one that produced the scarce products.

Read the full post.

Jun

4

Cy Young's Rules For Pitching Success

1. Pitchers, like poets, are born, not made.

2. Cultivate good habits: Let liquor severely alone, fight shy of cigarettes and be moderate in indulgence of tobacco, coffee and tea. A player should try to get along without any stimulants at all. Water, pure cool water is good enough for any man.

3. A man who is not willing to work from dewy morn until weary eve should not think about becoming a pitcher.

4. Learn to be patient and cool. These traits can be cultivated.

5. Take the slumps that come your way, ride over them and look forward.

6. Until you can put the ball over the pan whenever you choose, you have not acquired the command necessary to make a first-class pitcher. Therefore start to acquire command.

Published in "Baseball Magazine", 1908.

Jun

2

Looking at longer dated charts (eg. Wheat, Oil etc…) and knowing how easily every new government in the UK will yield to public moods makes me think. (There were calls by politicians to cap food prices.) Maybe not immediately relevant, but perhaps later this year or next.

Call for food price caps ‘completely preposterous’, says M&S boss
Stuart Machin argues government should reduce tax and regulatory burden on supermarkets instead

Jun

1

Who We Are and How We Got Here: Ancient DNA and the New Science of the Human Past, by David Reich

Highly recommended. Turns ancient history on its head. Absolutely fascinating.

Big Al adds:

He does an interesting quick summary of current paleogenetics:

Your ancestors aren't who you think they are | David Reich

Over the last 15 years, data on ancient DNA has upended the old story of human history. In this full-length interview, geneticist David Reich explains how new findings have challenged the family tree model of ancestry and revealed a past shaped by migration, interbreeding, disappearance, and constant change.

From Neanderthals and Denisovans to the myths of purity that still shape modern identity, Reich shows how the last decade of research has rewritten what we thought we knew about human origins. The result is a much stranger, more dynamic picture of the human story, one that forces us to rethink ancestry, evolution, and the deep history of who we are.

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