Mid-Week Commentary
A virtue of being an unemployed gambler in this era of ultra powerful metered intelligence is that I have lots of time to read as Claude figures math and coding things out for me. Here are my reactions to the things I read as Claude (who I am very grateful for) coded at about 1000x my speed.
John Turek on Implied Correlation
John Turek of Cheap Convexity argues that one can construct a portfolio of positive EV bets on prediction markets by thinking carefully about implied correlations. I wrote something similar a few years ago (link), and I am in near complete agreement: this is the fun and high-brow way to play prediction markets.
In particular, Turek suggests that betting “no” on high unemployment and “yes” on large rate cuts could be good. I have not modeled the unemployment side of this well enough to have a view; financial markets likely present better opportunities to bet on large rate cuts than Polymarket. Another fun implied correlation market is the combo of a) “will the straight of hormuz traffic return to normal levels” and b) oil price options markets.
While I love this style of investing, the flow of oblivious money into prediction markets has made plays like “capture the 1c spread on every sporting event in the world” or “bet against internet-addicted conspiracists"” generally more lucrative than thinking carefully about geopolitical correlations and conditional probabilities.
Jason Rotenberg on His Micro and Macro Views
Jason was my first investing boss and is the best investor I’ve ever worked with; he has a blog called Irrational Exuberance that is private but you can request access and it is free. He and a colleague Martin Cseperkalo wrote up macro views a week ago that I highly recommend reading.
Academics on Twitter Re Iran/Israel/Conflict
I find a number of academics focused on the Middle East to be most helpful for contextualizing the breathless headlines that seem to move Brent $5 at a time, creating and destroying tens of billions of value. If I ran a trading firm I’d hire these people as consultants.
Arash Azizi, https://x.com/arash_tehran, https://arashazizi.com
Arash is a lecturer at Yale who seems to have the best English-language perspective on Iranian public opinion and the perspective of various power brokers in Iran. I find his twitter feed to be the single most helpful for assessing whether the market reactions to “news” are justified. If you followed Arash, you probably would have faded Reza Pahlavi to lead Iran in the tumultuous betting moments after the invasion.
Elizabeth Tsurkov, https://x.com/LizHurra, https://elizabeth-tsurkov.net/en/
Elizabeth Tsurkov is a Russian-Israeli Princeton politics grad student who was held hostage and tortured in Iraq by Hezbollah. She seems to have knowledgeable takes about Israeli and Iranian military doctrine, as well as useful takes on the deteriorating humanitarian situation in Lebanon/West Bank and Gaza.
Akin Unver, https://x.com/AkinUnver, https://www.akinunver.org
I had an Akin Unver as an instructor in college. He introduced me to the game peacemaker, which I think is an astoundingly good (if now out of date) representation of how difficult it is to achieve a peace deal in an ethnic conflict even if you have the best of intentions. In general, his approach of thinking of conflict as an evolving process that can be studied academically opened my eyes to thinking about “systematically trading politics”.
Avraham Burg on Tucker Carlson (hear me out)
Avraham Burg is a pretty odd guy: he’s a former interim President of Israel who kept moving left until he joined the Israeli Communist Party. His father was also one of the founders of religious Zionism and so many of the people he grew up with went on to become leading rightists.
Before he went on Tucker Carlson, I had never heard him speak before, and so I was surprised to see how much he leans on aphorisms, jokes and modern psychology. Nonetheless or perhaps because of those mannerisms, I was captivated by the interview. Tucker mostly lets him speaks to advance Tucker’s agenda, and Tucker not speaking suited me just fine. The Jerusalem Post has a writeup and here is the spotify_link. The last segment of the interview I found most interesting, which is basically a reflection on his own political and psychological alienation from his upbringing, country and political party. My honest reaction is also that this guy is way too intellectual to be a politician, crazy he tried that.