Freedom from negative forces

Social media is designed to reward provocative and extreme behaviour. Sadly it is an algorithm that mostly rewards noise and very little signal resulting in polarising behaviour and views.

The interesting thing about how LLMs work is research suggests that because the AI models are designed to look through the noise and seek authoritative sources users tend to exhibit more centred opinions and beliefs.

People often ridicule ritual steeped in symbolism. There is a huge amount of literature both psychological and theological to support the power of ritual.

Tomorrow night the Jewish people of which I am one celebrate the festival of Passover or by another name the festival of Freedom from Slavery.

As hard as we try we still fall into the traps of slavery to some form of behaviour mostly associated to ego in the form of materialism or popularism or many of the other isms.

The beauty of rituals attached to rich symbolic history is they give you a chance to reset.

So in the spirit of the research that I shared that suggests we could be starting a trend to a more centred view of the world through AI search. I wish everyone of all religions a time of reconnecting with family and the opportunity to shake off the shackles that have enslaved you this past year.

Chag Sameach and Happy Easter.

S2N spotlight

The world’s youngest billionaire was quoted in the mainstream press as if he had submitted an economic thesis to the Nobel committee for validation.

John Arnold was taking the piss on X. The most peer-reviewed medium for “scholars”.

I was intrigued to see if there was anything to this strategy. Of course he has chosen the best period, the last 6 years, where things have really taken off.

I chose to take a look at how this strategy performed relative to the S&P 500 benchmark, and it does in fact outperform.

I wouldn’t recommend it on its own, and I certainly wouldn’t regard it as a particularly big discovery in financial markets. But then John Arnold is a billionaire, and I am not.

S2N observations

I have discussed on a number of previous occasions that, over long periods of time, the S&P 500 equal-weight index outperforms the market cap index. Over the last 10 years you have seen the market cap index strongly outperform the equal weight, riding on the back of the Magnificent 7 since the Covid crisis abated.

I started recommending shorting the market cap index and going long the equal weight pretty near the top of the green ratio line in the chart below. This has been a good trade for us, and I think that it has more room.

Long the Hang Seng (Hong Kong) as a proxy for going long China and short the S&P 500 is still hanging in there. The trade has been one of the better calls, and I believe it has more left in it.

The relative trade with the most conviction has been the long Bitcoin short Strategy. The green ratio we are trading to move up. This is one we are riding all the way on to the sand. When the green ratio line trades above the all-time high in mid-2022, we can talk about taking profits. Call me a pig; that will be the greatest honour.

Soros is credited with the saying, "It takes courage to be a pig." He used this when encouraging Stan Druckenmiller to double his position to more than $10 billion short the British Pound.

I think value is going to outperform growth.

To round off the relative trades. Gold miners are continuing to lag gold.

S2N screener alert

The Australian Labour government is back to doing what it does best – spend.

Yesterday it came to the party with the cutting of excise duties on fuel by half.

However, this one got me. In a landmark decision, half a million 18 - 20 year olds in fast food and retail will soon receive adult wages after the Fair Work Commission abolished junior scales. This will result in a 42% pay increase.

No wonder the Aussie currency is getting crushed down 7 days in a row. The last time that happened was in mid-2024. The interesting thing is the statistics suggest we should see decent growth from here over the next 6 months, if 34 previous occurrences are to be deemed statistically significant.

S2N performance review

S2N chart gallery