20 Truths most investors don’t want to hear
Stop grading markets against ideals. Grade them against who needs stability cheapest and which vendors reduce enforcement cost.
Truths most investors don’t want to hear
Markets clear to constraints, not to truth.
Prices are “efficient” relative to mandates, collateral needs, accounting optics, and political utility. If a thing helps the system reduce enforcement cost, it trades rich; if it threatens moats or policy plumbing, it trades cheap — regardless of “fundamentals”.Policy is the primary factor model.
The biggest risk premia shifts are toggled by issuance mix, eligibility lists, app-store/bank/cloud Acceptable Use Policies, and “emergency” templates — not by earnings beats. If you don’t track those knobs, you’re not running the real factor book.Liquidity > valuation in the short–medium term.
Net liquidity (CB balance sheets – TGA – RRP), term premium, and USD direction explain your P&L more than Discounted Cash Flow (DCF) tweaks. Multiples are plumbing derivatives.Defaults beat morals — every time.
What’s pre-checked, pre-routed, and auto-renewed captures flows. Your thesis loses if it demands willpower from users or Portfolio Managers.Paperization is a control surface, not a convenience.
ETFs/futures/notes exist to standardize custody, tax, and gating. They damp upside tails, monetize carry for intermediaries, and keep exposure revocable. Own paper for carry, but understand you sold part of your convexity.“Regulatory clarity” is a distribution event.
Clarity = you’re downstream of the margin. Peak Investor Relations/Public Relations = best time to overwrite calls, not to add.Relative outperformance is manufactured.
Benchmarks are engineered (sector weights, rebalances, index inclusion timing). Career-safe managers hug them, so mega-cap defaults keep winning by design.ESG/optics is a liquidity screen.
It’s not about “virtue”; it’s a throttle on who can buy/size/market an exposure. Your advantage is in names where the true driver can’t be written in an LP memo.Most “alpha” is timing forced flows.
Value at Risk (VaR) hits, margin hikes, redemptions, quarter-end optics, rating triggers, and inclusion/deletion mechanics. If you can’t list next month’s forced flows, you’re playing luck.Government spend is moving from services to switches.
Bodies (Systems Integrator hours) lose; knobs (identity, lineage, revocation, auditability) win. Vendors that emit court-proof artifacts beat those that emit dashboards.Volatility is politically managed.
Paper share up → realized vol down. Cycles persist, but blow-offs are capped and crashes are shallower/shorter (ratchets stay). Trade the corridors, not the old regime.The crowd wants stories; the system wants levers.
Narratives sell “AI models”; budgets buy admissible decisions with provenance. If your pick can’t survive discovery/subpoena, it’s not deployable at scale.Free options hide in “unmarketable” theses.
Anything adjacent to surveillance, governance, sanctions enforcement, or programmable money is under-owned because it sounds “conspiratorial”. That’s where mispricing lives — until standards harmonize.There is no prize for being early without sizing.
If you can’t add on fear and trim on clarity, being “right” doesn’t pay. The edge is in pre-plans and staggered orders, not in conviction tweets.Most risk models institutionalize panic.
Value at Risk (VaR) and vol-target funds sell winners first (liquidity triage) in stress — exactly when forward Enterprise Value (EV) improves. Your edge is to be unforced and liquid.In a low Gross Consent Product environment, inflation targets are theater.
Authorities choose nominal stability over purges; a 3–4% CPI band with rapid backstops is the path of least resistance. Financial repression is not a bug; it’s the model.“Decentralized” adoption is centrally gate-kept.
App stores, banks, clouds, ISPs, pools: five levers can throttle any “permissionless” stack without passing a law. Don’t bet Medium-of-Exchange where gatekeepers hold the UX throat.Winners are installers of defaults.
The moat is becoming the template the regulator touches. If your company’s UI is the policy, you own duration.If the thesis depends on ‘they wouldn’t dare’, you don’t have a thesis.
Sanctions lists, emergency decrees, short bans, selective custody freezes — precedent exists. Price the perimeter risk or it will price you.Alpha dies when it becomes speakable.
Once consultants coin the framework and indices add it, your edge migrates to carry/overwrites. The monetization window is before polite society admits what you saw.
How to convert this into money
Scoreboard to run weekly
Net Liquidity (Fed BS – TGA – RRP, 4-week Δ)
Issuance skew (bills vs coupons), term premium, DXY, MOVE/VIX
PSC/LPI: policy synchronization + legibility-pressure verbs in drafts/RFPs (attest/revoke/lineage/rollback)
Forced-flow calendar: inclusion/rebalance dates, ratings watch lists, coupon-heavy weeks, quarter-end optics
Positioning
Equities: state-embedded software that outputs admissible decisions and policy knobs (Palantir), compliance/identity consoles (Microsoft/Entra/Purview), policy-grade cyber (PANW class), payments ID middleware (V/MA).
Self-sovereignty: self-custody Bitcoin, physical Gold, especially for shock convexity if asset seizure / payment rail coercion goes too far.
Play Value at Risk (VaR): place staggered buys into VIX>40 or MOVE>150 + Net-Liq drains; distribute into “clarity” PR ramps.
Rules
Buy fear + plumbing (liquidity drains, policy panic)
Sell/overwrite clarity + inclusion
Avoid anything needing end-user willpower; defaults win
If you can’t describe the perimeter lever that could nuke your thesis, pass
Bottom line
Stop grading markets against ideals. Grade them against who needs stability cheapest and which vendors reduce enforcement cost. In a low Gross Consent Product world, the system pays for defaults, knobs, and lineage, not for narratives.
None of this should be considered investment advice.