TradeSmith Daily

May 2020

Warren Buffett is Worried About the Future

May 6, 2020John Banks

If you had invested broadly in the U.S. stock market on Aug. 30, 1930 — the day Warren Buffett was born — it would have taken 20 years to get your money back. That gloomy anecdote was shared by Warren Buffett, the Oracle of Omaha himself, at the annual Berkshire Hathaway shareholder’s meeting on May 2. Normally the annual Berkshire meeting is a huge shindig — it is nicknamed “Woodstock for Capitalists” — with investors, journalists, and Buffett and Munger

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Bitcoin is the Purest Form of “Hard Money” Ever Created

May 5, 2020John Banks

Bitcoin could be one of the greatest public investment opportunities in all of recorded history. That’s not hyperbole. We are serious about this — and we come to that view having studied Bitcoin intently for more than two years, and global markets overall for more than 20. There are venture-capital opportunities and private-investment opportunities that can deliver multi-thousand percent returns. But these opportunities are not public in the sense of being widely available and easily accessible for any investor at

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How Silicon Valley is Helping in the Virus Fight

May 4, 2020John Banks

As we have explained in these pages, America — and the world — is at war with a virus. The novel coronavirus is an invisible foe that has penetrated all national defenses. It has established beachheads in every major city and every state, and it has resulted in more American casualties than the 19-year Vietnam War. As Balaji Srinivasan has pointed out, the virus has even disabled an American aircraft carrier, the U.S.S. Theodore Roosevelt. No foe has been so

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How “Never Waste a Good Crisis” Applies to Public Company CEOs

May 1, 2020John Banks

Winston Churchill has been credited with saying, “Never waste a good crisis.” The idea is that, in times of turmoil, you can make big changes that otherwise would have been blocked. When the status quo dominates, it’s hard to get buy-in for radical proposals. But when chaos abounds and everything is in flux, what was once considered radical might now be considered acceptable (or appropriate to the situation at hand). “Never waste a good crisis” is thus a common rule

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April 2020

“Black Swan” Funds Demonstrate Why Shorts Go Best with Longs

April 30, 2020John Banks

For so-called “Black Swan” funds, March 2020 was the best month in years. And yet, after a multi-year stretch of poor performance, a lone burst of gains underscores why bearish wagers should pair with bullish ones — that is to say, why shorts work best in a supporting role for longs. The term “Black Swan” was popularized by a best-selling book, The Black Swan, in 2007. In the book, author Nassim Nicholas Taleb described a black swan as an unexpected

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Bayesian Priors and the Trouble with Antibody Tests

April 28, 2020John Banks

On the COVID-19 medical front, the hot new thing is antibody tests. The idea is that, if a person tests positive for antibodies, it would show they have already contracted COVID-19. That would imply (though not guarantee) they are safe from getting infected again. Antibody tests could also indicate the overall percentage of a population that has already had COVID-19. In the state of New York, for example, 21% of New York City residents may have been infected (as reported

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Heed the Message of the Crude Oil Forward Curve

April 24, 2020John Banks

To quickly recap recent commentary, we explained on April 17 why the oil price could go negative. And then, on April 23, we explained why negative pricing came so quickly. Some of you wrote in to ask, “Who was buying oil at the negative lows? Were they taking delivery?” It’s possible the big global commodity houses were buying to take delivery. Outfits like Vitol, Trafigura, and Glencore specialize in trading not just paper commodities, i.e. futures contracts and derivatives, but

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How a Trade Went Spectacularly Wrong — Sending Oil to Negative $37.63

April 23, 2020John Banks

We recently explained “How the Oil Price Could Fall Below Zero.” The piece felt a little “out there” because, at the time it was written, the possibility we were explaining — oil contracts trading below zero — had never happened before. When we explained how the oil price could go negative, we thought a looming lack of storage space might cause it to happen in a matter of months, or possibly a matter of weeks. Instead it happened the very

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