How we invest: notes on method
Money management, position sizing, which tape we are in, and where our circle of competence ends. The method behind the calls.
These pieces are kept as written at the time. Charts are the originals from the time of publication.
- 2022-06-24 · Written in 2022Money Management, Part 1: Cutting Losses and Adding to Winners Is What Raises Your Payoff Ratio
In Taiwan index futures from 2001 to 2014, a 30 point stop turned a losing day trade profitable, at the cost of a win rate falling to 39%.
- 2022-06-28 · Written in 2022Money Management, Part 2: Position Sizing With the Kelly Criterion
The Kelly criterion turns win rate and payoff ratio into a position size: a 2 to 1 coin flip says stake 25%, and 50% is twice Kelly, where growth goes to zero.
- 2022-07-28 · Written in 2022A Macro Tape or a Stock Picker's Tape? The Four Forces That Set Prices, and Why 2022 Belonged to the Multiple
In 2022 prices fell while EPS held up. We break share prices into four forces: fundamentals, valuation, monetary policy and risk appetite.
- 2022-12-15 · Written in 2022Buy and Hold, Buy the Turn, Buy the Trend: Three Styles and the Research Each One Needs
Buy and hold, buying the turn and buying the trend each need different research, different sizing and a different size of book.
- 2023-03-30 · Written in 2023End of the Long Credit Cycle, or the Start of a Short Inventory Upturn? Why We Sat Out the First Quarter of 2023
Markets are paying for a sharp fourth quarter 2023 earnings rebound and SOX at 22x forward. The inventory buy signal has not fired and credit keeps tightening.
- 2021-12-09 · Written in 2021The Data Driven Industrial Revolution: The Hard Part Is Process Redesign, and Factory Electrification Proves It
Electrification cut factory coal bills 20% to 60% and still killed most incumbents. In the data revolution, process redesign is what sorts winners. The closing essay of the Data Driven Tech Revolution series.
Other collections
Track record: the calls and the checksThe electronics inventory cycleAI main line, 2023 to 2025Earnings and supply chain notes, 2019–2022