There are edges that perform better with crowding, and their edges to perform worse with crowding. I've imagined momentum is one of them in the sense that the more people that are trading momentum, by definition, they will be selling it when you are selling. And guess what? There's ten thousand other people doing the same thing. The anomaly and the arbitrase goes away. Is there any model that can exist in a hyperconnected age without getting arbed out of existence?"
Lily Francus is a risk theorist and a quantitative researcher at Moody’s. She is also the author of the ‘Midnight on the Market Momentum’ newsletter. Find Lily on her Twitter at https://twitter.com/nope_its_lily and read her newsletter at https://nopeitslily.substack.com Jesse Livermore is an OSAM research partner and a recurring guest at Infinite Loops. You can connect with him on Twitter at https://twitter.com/Jesse_Livermore and read more about his work at http://www.philosophicaleconomics.com/ Show notes:
- Why all the recent focus on bubbles?
- How the era you grow up in shapes your investment philosophy
- Intrinsic and Extrinsic value
- How leverage impacts pricing
- What is a bubble? And how to identify if you’re in one
- Role of uncertainty in arbitraging
- What makes a bubble pop
- How bubbles set a new floor price
- Do we have enough short sellers?
- Time arbitrage
- Information arbitrage in a hyper-connected world
- Are we currently in a financial bubble?
- Implications of pseudonymity
- Is there a free will?