The weak efficient market hypothesis should be taken seriously. That is roughly the idea that the price of the market is already fair – that everything that needed to be taken into account already has.
If you believe you have secret knowledge about the future that wasn’t already factored into the price, you are most likely wrong unless you are an insider.
Yet if you are going to get into the markets anyway, I can provide at least some minimal altruistic guidance.
I opened a brokerage account at the age of sixteen after teaching myself technical analysis on paper trading accounts. The fancy mathematical tools: MACD, ADX, and Bollinger Bands, combined with candle stick patterns, trends, stops and limits, appealed to the systematizing side of my mind.
I also studied fundamentals. Old-school value investing that looks at P/E ratios, dividends, and most importantly, the broadly educated feeling that draws on synthesis at different levels of granularity which leads one to the aesthetic conclusion that something is undervalued and will grow significantly. A sufficiently strong aesthetic stab then leads to certain buttons being pressed, and live refutation of hypothesis.
The recognition that the aesthetic exists is not the same as advocating for intuitive gut feeling. His rationality should be pressed against her gut-feeling. The yab-yum fusion results when the world is guillotined by Δt’s.
As a boy, I thought to myself that if only I could combine these varied approaches into the right system, I could grow exponentially and escape the world without ever touching a single soul.
Of course, the idea is foolish. I laced my makeshift wings with confirmation bias that I found by being very lucky in more than doubling my net worth at the time. Things like that do happen for mysterious reasons. Mysterious entities are not worthy of respect.
No one has ever developed an anti-fragile system. An anti-fragile system is a strategy that can be applied in one niche and then another without modification. Try it and you will fail. The nature of the market, like nature in general, is to cannibalize itself in order to not get stuck in local optima.
Nassim Taleb is partially wrong about all things, as we all are, and I would particularly highlight his strange views on genetics and the utility of psychology’s big 5 psychometric traits encapsulated in the acronym OCEAN. One thing he is not wrong about however is the black swan.
Success in life plays on expecting the unexpected and being right. An alien invasion is a black swan, superhuman level AI with sufficient generality is a black swan. Tracking the pattern of “end of the world” more closely than the “other patterns” is what provides safety to make it out alive after the violent shot of unpredictability such events induce.
And if you are paying close attention, black swans are not a concept that had not been invented before – they are what we call miracles. The miracle exists right there, in that which is partially unknown. If you guess a miracle inaccurately, you suffer. Only the right miracle absorbs you. After sufficient iterations, the chaos becomes reduced and the miracle very sharp and solid. At the end, we can call the miracle physical reality, and call ourselves a rational agent.
I pressed random article on Wikipedia. The first website I got had this on it:
You can believe me or not, it is the truth, it means nothing, and I fully know it.
Humans tend to imagine that there is a time “out there” in that partially predictable space. – A thing that does other things. But our GPS system wouldn’t work if there was a global time sweeping forward. The time out there on a satellite isn’t the same time here in this approximate piece in my palm. This isn’t an arbitrary human construction like the U.S. Pacific time being two hours behind the U.S. Central time. It is physically a different time from one piece to another piece. No pieces are actually in the same time. We instead model existence with an eternal fabric of relative reference frames in order to accurately predict and manipulate. If we naively modeled existence assuming there was a platform pushing us all forward along the same universal time axis, your iPhone would be out of sync with a satellite and you wouldn’t get your daughter to her practice on time.
There is no hourglass outside of the relativistic territory underlying us. Two fingers on a hand are simulations inside something that is already relativistic; not time dependent. Ironically, the way we figured this out is by virtue of the eternal algorithm containing sequential processing. The human algorithm often feels like time because that property allows us to survive. This is not epiphenomena, in other words: accidental mist with no causal efficacy. That would contradict the pile of dead memories, fantasies, gods and megalodons we call observations. These observations build our prior assumption that everything is a physical situation of natural selection in the way that will be defined below. Assuming a thing unhinged to causality contradicts Occam’s razor, i.e., the subjective orientation towards rationality.
The iterations, then, aren’t because of a physical time pushing on the back of “things.” Instead, they can be perceived as that which you usefully are not: the quantum branches that you are not, the multiple drafts that you are not, the people or memories that you are not. The more refined “what you are not” becomes, the stronger the sense of being.
But even on a so-called “more down to Earth”-level, Tesla is a black swan. Neurotypicals, or whatever I want to call my perceived out-group, look at the numbers and short themselves to hell. It keeps growing, becoming overvalued by a conventionally rational standard that compares the growth rate to the P/E ratio, extrapolates from the history of the sector, etc. However, there is a secret essence that dissolves the perception: “overvalued.” Detecting the hidden essence makes one a winner. This detection destroys the previously rational and creates a new rational that wins in the way that the one who heeds to Omega in Newcomb’s paradox wins. That secret essence is that it is: only. There is no other way to say it. All the words generated up to now, and that create the world, do not capture the sense of being convincingly only. Human eyes trained on the most self-restrained axioms of probability theory alone do not capture it. –And that which can’t be captured is: There aren’t two saviors. There aren’t two Elon Musks.
If there were more than one Elon Musk, that would make him generalizable and therefore fragile, and therefore not integrated into being. If there was a generalizable principle called Elon-Musk-savior-like-charisma, that could allow you to see other Elon Musks before they sprout, that would destroy the comparative advantage. Such a hypothetical principle will eventually be known if we rationally extrapolate the past trend that has monotonically pushed in that direction of systematizing. We “post-modernize” everything. Once you automate a principle by putting it in a reference class that exists with others, it leads to a level-up in difficulty. And this is how the universe doesn’t allow stasis.
That Musk example is meant as a parable of sorts. It doesn’t just apply to what I choose to point out of all things in the world. The sharp aesthetic or integration into being, which is this, is the so-called Hard Problem of Consciousness. The Hard Problem of Consciousness, like Roko’s basilisk, draws people in to it and becomes real through their action. There exist people who do not have a concept of consciousness, much less see a problem to solve. My bringing up this kind of relativity is a motion of freedom, like someone born Christian saying Jesus is arbitrary because Kalacakra, Visvamata, Lorn and Muhammad exist in the same reference class. The way we become free to advance is by placing a specific thing in a box of many.
To get a handle on this motion and use it in the future, let’s call it the systematizing drive, which is the Thanatos drive, or death drive, that Freud spoke about. We kill our object of interest out of “boredom” when we perceive ourselves to be god. Gods are all these arbitrary classes with objects that belong to them. In order to function, we helplessly think that a class is impermeable, or equivalently, that the object belongs to it. Fruits is a god. You compare Oranges to Apples, not usually to Ghosts. When you convincingly and usefully compare Oranges to Ghosts, you achieve life. The flagellum in that sperm is synthesis – ATP synthesis in the mitochondria motors – but also just synthesis.
Regardless of what synthesis feels like, that experience is already synced with what is most rational because there is no global time ticking forward and no anticipation of betrayal branches or any such depravity suggested in the probability amplitude. Realizing this seems to be the in the same reference class as the psychological move made by Mahayana Buddhists who say everything is already enlightened. And that psychological motion is contrary to the Theravada Buddhists who emphasize the non-illusory aim to the end goal through arduous striving and learning.
Due to my style being perhaps somewhat similar to Taleb’s, this sounds like a bold claim wrought of some kind of pride and not careful, dispassionate analysis. Yet challenge yourself to find a “thing” not degraded of its power to move you by being placed in a box of many. Find a principle that gives you an advantage when everyone knows it. Such principle is not just tautologically impossible on paper. It is what is functionally going on. Heck, it even applies to this paragraph. Once you detect its motivation, thoroughly, it is no longer motivating.
This is how mind works, which is how natural selection works, which is how scientific and philosophical refutation works, which is how markets work, which is how probability clouds drawn from infinite amplitude in complex conjugates works. By saying this, I am simultaneously automating something to unsatisfactory dukkha and committing what seems like a regression from blind clockmaker to a Lamarkian evolution guided by purpose – some kind of fatal error of teleology.
This dual critique is incredibly important because it is the same motion. It is in the same reference class as what David Deutsch tries to point to with his natural-selection/Popperian-falsification unification. Natural selection between his way of saying it and my way of saying it results in you.
The anti-teleological critique is handled with increasing robustness, because this time we know experience really is undergirded by relativistic fabric. The knowledge that I always win in the most minimal sense – that there is no place in which existence is not already set, eventually becomes conventionally rational. It is not at that stage yet – most people I can believably affect who are attempting to be conventionally rational are convinced by their underlying models that existence somehow vanishes to nothingness.
The truth of eternalism seems like a call to stasis, hence why it is instinctively rejected by the agents of change that perceive it as such.
Eternity seems like something to be placed in “spiritual box,” and which therefore doesn’t help me win at “markets.” And yet it does help me because it is physically true; it helps further resolve the image in the probability density cloud. I can explain how eternity is true by guiding you through special relativity and non-epiphenomenalism but if I understood how it helped me in such a way that I could reliably translate that knowledge to you, it would no longer be helpful. Useful knowledge requires already useful algorithms built on top of you.
It is a form of psychological stability that cannot be provided by knowledge of the lore in a game, anime, or other imaginary belief system. The psyche craves to imagine the truth, which is synchrony with “the external.”
I say imagine the truth. And that might appropriately trigger those who know the truth is learned, not imagined. Yet the word, “imagined,” points to the many-worlds in the probability amplitude. You do not live as if randomness should be expected. The random existences unconstrained by the Born Rule seem out there, happening to “someone else.”
Knowing that you are deceived about what you are really doing is crucial, but only after enough alignment with rationalism has made you solid. Firm musculature not blanketed by soft skin does not appear beautiful. Belief in the deception will not be readily believed until I show it. But the showing Occurs post-hoc and thus transcends what you currently perceive as my person.
Here is why you should always buy puts instead of directly shorting when you predict a fall in price:
First let’s get everyone on the same page.
If you believe there is a rising market, you go long – going long on a call is a profitable strategy when the underlying stock price rises in value.
If you suspect a stock is going to fall in value, that is when you will be turning to puts. Puts are the opposite of calls and have different payoff diagrams.
But why puts and calls over direct shorting and buying of the shares?
That’s because you want to leverage and cap your capacity for loss. Leverage allows you to make larger profits than what you would make by just using personal capital. Symmetrically, having a safety net is something you need even if you don’t think you do.
Here’s an example:
Tesla Inc currently trades at $295.39. One put option in Tesla with a strike of $295.00 and the December 28 expiration costs around $7.30 per share and it covers 100 shares. You’ll have to pay $730.00 for one put. And, if you do that, your long position in Tesla will be protected until December 28. With the purchase, you would limit your potential loss to $7.30 per share until December 28.
Do the math by adding the premium of $7.30 to the difference between the market price and the strike of the put. If Tesla closes at $270.00 on December 28, you’ll exercise the option. This means that you are going to use the right to sell Tesla at $295 and instead of losing $25.00 per share, you’ll only lose $7.30 per share. If Tesla closes at $305.00 on December 28, your total profit would be $9.61 – $7.30 = $2.31 per share, because you would make $9.61 per share through ownership and you would lose the premium you paid for the insurance.
So what keeps people from using options for predicting up or down in a more sophisticated and therefore more advantageous manner? – The sophistication itself.
To make better moves, a greater capacity to understand complexity is necessary. At bottom, the gamble is binary. Up or down. Long position or short position. This becomes boring because it leads to randomness. Pressing up or down gives you a Gaussian distribution – a dissolution into simplicity.
Fun arises in the climb away from simplicity. But fun, which is called “seeking behavior” in psychology, is destroyed into pain when it doesn’t lead to success and instead dissolves back into the random distribution (nothingness).
Imagine a vacuum world full of screens and traders. Those who are best at understanding complexity are having more fun. They have more fun in front of the screen and also have the key to a swimming pool party if they so choose. It is those who chose options over stocks that prey on the fools and therefore expand their degrees of freedom with widely agreed upon tokens of value. And this is just because they could better climb the gradient of complexity.
In reality, enough people have already climbed that gradient of complexity and therefore an average options trader doesn’t have an advantage over an average underlying stock trader. The craving for freedom/fun away from this random distribution of stasis causes runaway into evermore sophisticated pattern recognition. There is alway “someone” at the top. The one who collapses the wavefunction, so to speak, or more accurately – the one who gives the probability density cloud. Without belief that someone is truly beating the market, there is no motion of the market.
Creativity is simple. It’s a generative adversarial network. The generator on bottom competes against the discriminator on top. Shooting arrows at Apollo is The Prediction. Once the generator is punished for his deviation from The True Image, he tries again.
What you See is what is on the right – The Prediction. That which is some parody of an angel. It does not constitute The True Image, but increasingly grows closer.
The generator on bottom is initialized randomly: pure nonsense. Binary that is sheer noise. The discriminator is more perfect on the other hand. It knows about that which you want to create: a cat, a Van Gogh, a particular voice. It provides the samples that awaken potential.
Creativity arises when the generator fails its way up, while aiming at the discriminator’s sample.
In the same way that the words I have used are a way of modeling that which is unfinished, the expression below is also a way of modeling that which is unfinished.
Let’s now explain to the unversed:
Although what is in red are not symmetrical symbols in the way that parentheses are, they similarly just form a casing like ( ). They say that whatever is inside that casing will be integrated. Integration is visually the area under a curve. Integration is also what it means to undo the slope into a point on a curve.
Curves have infinite points. If you looked at infinite points, you would see no direction or inclination to them. However, you can hone in on a particular point and measure where the curve is going by taking that individual point’s slope (called the derivative). Integration is the anti-derivative. You do the operation in reverse – knowing a slope, you find a point, and that point value is the area under that curve.
Doing the operation in reverse is like addition unto subtraction, multiplication unto division, Leibniz unto Newton. They are in the same reference class and therefore usefully contrasted, allowing understanding and manipulation.
So what we are doing is finding the orientation of what is inside the casing.
What is inside?
That represents the unknown function, the True Image. It is considered a separate thing, and that is why it is placed adjacent to the other thing. Being placed adjacent to the other thing inside means multiplication.
Why multiplication? Remember that integration and differentiation is how we feel the orientation of things? Well, multiplication and division is how we weigh things. We must weigh the other thing by the True Image.
What is the other thing?
P𝓰(x) is the novice generator that needs to awake into excellence. So the most simple version of the model would just have that alone weighed by the True Image.
Pᵣ(x)P𝓰(x) is what you would find inside the integral since that multiplication provides the weighing of value with regard to something, and the encasing integration ∫ dx provides the sense of direction.
Placing the novice inside the denominator of a fraction inside of log( ) instead of just leaving him P𝓰(x) is just transformative ornamentation attempting to make the weighing better. It is a human prediction about the model of that which is unfinished.
Don’t assume that transformative ornamentation is just here to make your life more difficult and has no purpose beyond that. The transformation is real, let me show you:
log(1/1) = 0
This tells us that the generator has become the True Image and therefore 0. The sought perfection has been attained, what we call a local minima.
If we just had 1/1 without a log, that 1 would be multiplied by the True Image giving us just the True Image’s value for orientation. That would be useless. We need to reduce the True Image’s value to a 0 so we can train.
When the numerator is larger, as in log(1/.5), that means x most likely comes from the True Image’s data rather than from the generator. So the generator is still being ascended.
When the numerator is smaller, log(.5/1), that means x most likely comes from the generator’s imagination, not from the data.
As you can see, this transformative ornamentation over the simplest model allows us to better represent reality, because now you can see that science and fantasy create the true future which looks a lot like science fiction.
Too many secrets being revealed, huh. It’s obvious now isn’t it? Well there is now a secret that I did not tell you before, and this was on purpose, with the intention that you might have gotten the wrong idea. But now I will reveal it: It turns out that the discriminator is not really a thing. It is not set. It is not the tiger to blame and it is not the female to blame for pressuring the peacock into painful beauty. The discriminator, like the generator, is also a mere neural network.
The battle seems to be about the x’s: Is this thing real or not real? Data or imagination? But it is all taking place inside P(x)’s which are continuous, not actually made of pieces. We integrate the derivative into a point in order to unsee infinity and know where to move.