#190: Love Your Fate

micksonmatch
November 29, 2024

Happy Thanksgiving to all our American subscribers.

I think Nietzsche’s greatest philosophical gift was his “love of fate” (amor fati). He believed we should embrace the whole package, the good and the bad. What is unique about his approach is that it isn’t passive, he is not saying we should just accept. He is saying the opposite: we should be actively grateful for our fate. Our fate was chosen for us, and all that it encompasses is a chance for us to grow and become the best versions of ourselves.

It doesn’t matter who we are; we all go through struggles. In the spirit of Thanksgiving, it is a good time to reflect on this and try and change our attitudes from being the victim to rather welcoming the challenge as necessary for our growth. I am not lecturing, as this is as much a challenge for me as the next person.

Over the last few years, I have definitely become more accepting of my circumstances. I am now trying to be more active and love them.

S2N Spotlight

It is not often I can produce a backtest that outperforms buy and hold over a long period of time. I would say that 99% of people wouldn’t be able to trade this strategy as it is too long-term. However, it is worth taking into account as a timing tool and perhaps doing more work on it.

Essentially, if you hold the S&P 500 for as long as the percentage of stocks in the index above their 200-day moving averages is below 85%, when the number of stocks above their 200-day moving average is above 85% of the index, you sell.

The more I reflect on this setup, the more I am thinking its a purely academic beat. Maybe not my best work, but I think I learned something from it nonetheless, I hope you did to.

S2N Observations

While on the subject of the S&P 500, I thought I would look at its correlation with the equal weighted S&P 500 index. A few months ago, talking about the equal weights deviation from the market cap weighted index was all the rage. We are still way below its historic average.

This is a look at the 2 indexes from 2 days ago and how they have diverged but are now on similar glide paths. As someone into statistical arbitrage, I am tempted to trade this pair coming back to its historical average.

The latest MicroStrategy copycat is a Nasdaq-listed company called MARA. Get the popcorn; this is going to be highly entertaining.

As you can see, there continues to be a divergence in the amount of monetary liquidity in the system and the S&P 500. It will be interesting to see if this relationship moves back to its recent embrace.

On the subject of liquidity, one of the components of this measure is the reverse repo. We continue to track towards $0 with only $148 billion. Down a long way from the $2 trillion days.

I noticed how the Japanese yield curve has climbed higher over the last month.

S2N Screener Alerts

I mentioned a contrarian trade I wasn’t brave enough to take yesterday, i.e., to go long the Russian rouble and stock market. Well, the Rouble had a positive 3-sigma day, and stocks ended their 8-day losing streak.