Some Things I Was Wrong About
Jim Simons created perhaps the greatest marketing machine ever built at Renaissance Technologies.
The Medallion Fund returned a preposterous 66% per year for 30 years.
The bag has traded heavily and I’m still not sure what symbols code breakers and rocket scientists use. But in Greg Zuckerman’s book The Man Who Solved the Market, one of the partners in this company said they are right about 50.75% of their jobs.
No one hits a thousand in the markets. Everyone gets things wrong.
Here are some of the things I’ve been wrong about in recent years:
I thought bitcoin had the potential to be digital gold. At my daughter’s soccer game last year I got into a crypto conversation with some soccer dads. One person is a big fan of bitcoin. He asked to take a long time.
I said if bitcoin becomes digital gold that would be a win.
He looked at me as if I was running in the field and the girls tripped. That’s all?! Bitcoin will be much bigger than gold. Just look.
Maybe so but I think we can put digital gold comparisons to rest for now.
When central banks around the world wanted to get rid of Treasuries they bought gold. When investors are looking for a way to hedge against high deficits and a low dollar they buy gold.
Bitcoin has been pulling while gold has been rising.
I’m not going to put garbage on bitcoin’s grave. Crypto has looked deader than a doornail many times before and came roaring back.
But this area is the blackeye of the crypto space. Everything we were told could be bitcoin didn’t happen.
It still works as a technical stock:
I’m sure there will be new bitcoin accounts in the future but the ones released so far haven’t caught on.
I thought that bitcoin has a chance to demolish gold in this new era of technology and innovation.
So far, I’ve been wrong.
I thought the meme stock crash of 2021 would slow the speculation. At the time it felt like GameStop, AMC and other meme stocks were a flash in the pan thing.
People had more money in their Covid checks and time on their hands because of the pandemic. Speculating on stocks made sense.
From the height of excitement in early 2021, GameStop and AMC are down 71% and 99%, respectively. A loss of that magnitude should have ended the speculative fever of Reddit/Robinhood traders. That was my thesis anyway.
No.
Retail trade continues to take market share:
Stock brokers became major players in trading stocks, options, and futures. They move bodies and trade like a swarm of locusts.
That’s how you get a silver chart that doesn’t look real given the parabolic rise and crazy crash we’ve seen over the past week:
Social media has changed the market structure for good.
This is not going away.
I thought DoorDash was going to be a Covid fad. During the pandemic when we were all confined to our homes it made sense that food delivery would be very helpful.
When the world opened up again I thought people would stop paying the bills, especially when inflation rises in 2022.
It’s wrong.
According to the New York Times, about three out of every four restaurant orders are not eaten at the restaurant. Check out DoorDash’s year-over-year revenue growth:
That’s about a 40% year-over-year increase in sales growth from 2020.
For many households, paying for the convenience of food delivery has gone from luxury to necessity.
This was not a fad.
Many households are now addicted and are changing the food industry (some would say for the worse).
I didn’t think the Fed could raise interest rates so high because of government debt levels. I wrote a blog post back in 2021 about how interest rates need to be kept low because of our national debt.
That one ages like High Noon left in the sun all day.
My thesis was based on the idea that we could not let interest costs eat up a large part of the budget. That was wrong.
You can see the government’s debt increase significantly over the decade:
By 2022, interest expense on our debt was estimated at $400 billion or 7% of total spending. Last year it was 14% and about $1 trillion:
I think we just decided to borrow more and pay higher rates.
I should have known.
I thought the Lions would make the Super Bowl one of these years. The NFC Championship game against the 49ers two years ago was our chance. Now it feels like the window is closed. Oh well.
I thought the AI bubble was inevitable. Based solely on the history of how these things work, my initial position has been that all AI capex will lead to a bubble. It’s still possible.
But AI is advancing so fast that you have to be open-minded about the situation where this whole thing isn’t the speculative bubble that it appears to be.
Claude’s Anthropic Code is the first iteration of my AI dream which is an AI personal assistant to handle multiple tasks for us at once.1 Claude seems to have single-handedly driven down software stock prices in recent weeks.
This is still TBD but I think it’s time to start thinking about the possibility of AI adoption happening sooner than we thought.
Equal parts exciting and terrifying.
Michael and I talked about bitcoin, gold, DoorDash, AI and much more in this week’s Animal Spirits video:
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Further reading:
The rail bubble vs. The AI bubble
Now here’s what I’ve been reading lately:
Books:
1My only hope for the AI boom is that we all get a human assistant like Scarlett Johansson in the movie Her.
