Posts published in April 2018

We have a natural drive towards it. And it’s how we can make uncertainty a home. But rationalism, scientism and the maleducation system suppress it and supplant it with semantic Fakehood. It is of the timeless way.

Ἦθος.

I’ve mentioned it, but I shan’t explain it. This missive ought to demonstrate, more than anything, how words fail most spectacularly at describing it. This is why, to your frustration, I keep using the Attic word ἦθος. It’s not to annoy you or be fanciful, although aggravating you into action and curiosity would come as a bonus. I don’t even use the transliteration ēthos (long sound “e”) because it alone constrains and diminishes.

4) “You are what you do.”

ἦθος ἀνθρώπῳ δαίμων

This is the Foundation and the Firmament.

— sᴛᴀʀᴛᴜᴘ ᴅᴀᴇᴍᴏɴ (@startupdaemon) April 18, 2018

It is much better to show you – if only glimpses at a time – ἦθος in context, experience and action. And an opportunity has presented itself.

In the past few weeks, I’ve been enjoying Alex J. A. Cortes’s periscopes as part of my relaxation & contemplation. (I don’t pass up on a free supply of extra energy.) I’ve even tweeted direct quotes from him for authentic effect. But the one thing that made an impression over time was how frequently his rants touched on different aspects of ἦθος, as both notion and practice. Perhaps without realizing it, this one time he tried to describe it, to deliver a sense of it. And what an opportunity to show you ἦθος while it’s also being grasped at with the spoken word.

Why say that you’ll see ἦθος and not just get a faulty word-description? If you’ve followed Alex’s exploits online or off, you will have noticed that he is very extroverted, and says so himself. He is also probably better at speaking than the average person and perhaps ever-so-slightly more intelligent. You may have been led to believe that such “gifts” are just the outcome of another Jenetyx hair product. And you would be very, very wrong.

What follows is not a definition, as there isn’t one. There’s only “getting it” in authentic knowledge, through action. This is not about Alex being “correct” in what he says (he can’t be). I’m not quoting it as advice either, although there is use aplenty one can find. I surely take advantage myself. But I don’t give advice – your circumstances are yours.

Nor is this about masculinity or femininity. It’s not even so much about people in general. It’s about you more than anything.

To get beyond the literal words, think bigger. When you read and hear “movement”, sense direction, decision, deliberation. Sense that, at a higher level, one can move the world with stillness. Forget the semantics for unfettered power and understanding.

First read through to the end of this missive. Then enjoy the first few minutes of the periscope where Alex says all this (it’s definitely worth it to do both). Make no mistake - it's his public persona - but let go of prejudice and expectation. Hear the tone of his voice, feel the direction of his body language, see the depth of his movement, experience the becoming.

Here we go.

For every person I’ve known, for everyone I’ve worked with, for everyone I’ve studied, for every case study, for every individual I’ve seen rise to the top of something, whether it be modern or historical, everyone has the same thing in common – they don’t stop.

And I don’t know that I can put that into a single quality: well, it’s dedication, or it’s persistence, or it’s responsibility, or it’s self-belief, or it’s mindset, or it’s confidence. It supersedes all those things. You can put all those umbrella qualities together and they all click with each other, they all are complementary, they all speak to the same, shall I say, transcendent universal principle that the way forward is the way to create. If you don’t stop moving, if you keep going, if you keep getting up, if everything about your way of being is that there is continuous action to you, you get what you want. You do. It doesn’t matter the domain, it doesn’t matter the subject, it doesn’t matter the field, it doesn’t matter the profession, it doesn’t matter what it is. It only matters that you stay moving, that there is some essence of movement about you. What is your practice? Movement. Progression? Movement. Evolution – is movement. Time goes forward. In a way, in a transcendent way, in such a way that you are aligning yourself with the way of the universe. The nature of the universe is forward. The nature of time is forward. If you want to work with that, if you want that to work for you, you have to BE that. You cannot stay still. You’ll die – you can’t.

Death is the only thing that stops.

Move.

That’s it.

Move.

That’s the “secret”.

Move.

If you move, it falls upon you that you should want to be better at moving. If you stay moving, it will come naturally to you that you want to wise yourself up, that you wanna get smarter, that you wanna refine the process, that you wanna learn systems. If you want to stay moving, you’re going to have to learn the principles that sustain that. If you want to stay moving within any given environment, you’re gonna have to study that environment. If you want to stay moving in the face of adversity, you’re gonna have to change the way you see adversity. Movement is the sub-structural quality of everything. Movement is time. So if you are that and that is your way of being, what stops you? Nothing. Only death. Only death.

And you get to pick and choose how you die. That’s why when you guys ask me the questions “I’m in a rut, how do I get out of it?” I have no idea. How do you wanna die? Seriously, though. How do you want to die?

Heraclitus put worlds more than this in five words.

πάντα ῥεῖ

ἦθος ἀνθρώπῳ δαίμων

More to come.

The Only Secret I’ve Learned in 29 Years https://t.co/rXjiaD4Qta

— Alexander J.A Cortes (@AJA_Cortes) April 5, 2018

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It’s been around 25 years since I started skipping food. Usually for days at a time. Recently, I went on an open-ended doxastic fast, which lasted over 18 days and turned out to be one of the most enjoyable things I’ve ever done (I tweeted about it over here). In this missive, I will share some of my experience fasting, but – as always – this is NOT advice.

AH, YES.

— Akilah Aije Carvajal (@AijeCarvajal) April 4, 2018

I began my experiments with fasting when I was barely a teenager. Some of it was about building discipline and proofing myself with blood in the game, but I was primarily motivated by getting my physical fitness at a level where I could get girls. Then, as now, I experimented with a variety of diets and workouts. Some weeks I ate only after getting home from martial arts (just before midnight) and only pommes-frites with piles of cheese on top (roughly 1 kg of fried potatoes each dinner). Other times I would cut out fats completely and go all-vegetable. And so on. But let’s keep this strictly about not eating food and leave macronutrients and healthy eating for another time.

What Is Fasting?

To me, intermittent fasting isn’t fasting. Anything under 24 hours isn’t fasting. Intermittent fasting is just a fancy name for what a natural human diet ought to be like based on evolutionary principles. I would take that even further: no breakfast, no snacking or drink calories, and best just eating a big dinner before bedtime – at whatever time of day that would be. Extended periods of food restriction such as Orthodox lent and as found in yoga practice would probably qualify as well, but for this missive let’s just take fasting to mean ingesting no calories.

My Experience of Fasting

My typical fast lasts three days and I’ve never had a regular schedule of doing it. (Although I’m considering one as an experiment, right now I’m more interested in fasting as a doxastic practice.) I never even began to count them, but I may have done these 3-day fasts over a hundred times. The baseline is only to drink water midnight-to-midnight for three days. Sometimes I also take aspirin and creatin, but that is unrelated to the fast itself, and most of the time I’ve done it without anything but water. No appetite suppressants and typically no other supplements. I’d put my success rate (not quitting the fast before the 3-day period has ended) at about 90%.

The one critical ingredient of a successful – and healthful – fast is water. One of the first high-value discoveries I made because of fasting was about the tremendous importance of water for performance and wellbeing. Dehydration is a common cause of sleepiness and lack of energy. Getting those four liters of water every day (sometimes in the form of unsweetened tea) is essential, especially while fasting, when you lose food as a source of hydration (you get water from food both directly and as part of the metabolism). My guess is that people who experience weakness, dizziness or other adverse effects during an extended fast, typically do so because they get dehydrated. Or because they don’t have the right mental frame going into and during the fasting period.

The Fasting Frame: Getting to It

Most people are seriously daunted by the idea of not eating. I can’t possibly overstate how much of a successful and enjoyable fast – or a miserable failure of one – is about the idea, the psychology of it, than any other physiological process. Throughout life, especially in the developed world, people are bombarded with food options and a mythology that you need to eat at regular intervals. There is zero evidence in my experience that periodic meals, let alone snacking all the time, is necessary. If anything, my overall energy level, life satisfaction and performance improve significantly if I eat only once a day or not at all.

Comfort "food" = bloating, drowsiness, anxiety, heart palpitations etc. often within minutes.

"I can't think right now."
"I need a nap."
"I'm too bloated/self-conscious to go out."
"I can't work out after so much food."
"I'm not in the mood for anything."

...

Shut the fuck up.

— sᴛᴀʀᴛᴜᴘ ᴅᴀᴇᴍᴏɴ (@startupdaemon) March 24, 2018

Surely, if you’ve never done it and you’re hooked on sugar and refined carbohydrates (RCs), you might experience discomfort and even early-onset withdrawal (pre-ketotic withdrawal usually doesn’t come until day 4-6 of getting off the RC addiction). Chronic diseases such as diabetes may also have an impact, as will your unique metabolism, so beginner beware. My take is that if you don’t do something extreme while fasting (a 10-day desert retreat) and trust your instincts, you’ll be just fine if you tried your own fasting regimen. My formula is simple: start small and trust your instincts.

If you have trouble committing even to not eating for 24 hours, you can use your gluttony to overcome your fear. Plan out a disgustingly lavish feast of whatever you desire for right after the fast and use that as an incentive to stop eating for a while. It is best to pick something rare, expensive or an infrequent indulgence of best results. Beginners, especially those who are overweight or have other diseases, should be extra careful not to overeat too much when they get off the fast – just until your metabolism gets used to the variance. And chew that bloody stake!

Some of you may want to try public commitments as a way to shame themselves into doing a fast. That’s never worked for me because I don’t care about approval. In the early days, fasting didn’t come that easy, but it wasn’t a matter of being hungry. I craved food as a comfort and an escape from being stressed and anxious. Those unhealthy drives fell away as I figured out what to do with myself and fasting itself was a big part of that journey. With practice, I simply came to want – even need – to fast. Nowadays, if I go a couple of weeks without fasting, I start feeling physically uncomfortable because I sense I’m below my top performance level (although I still feel great). Fasting is its own reward.

What Does Fasting Do?

In the early days of my life, before I started my fasting practice, I would get ill very frequently. I often got sick on purpose so I could skip school because it was mind-numbingly boring. I’d have colds and flu 7-8 times a year, plus the occasional midsummer pneumonia. Antibiotics were a staple in my diet. Even when I wasn’t sick, I’d sleep a lot and spend a lot of time in bed just because I didn’t want to get out of it. I was moody, had infrequent panic attacks and would get depressed for weeks on end. It’s hard to claim that fasting changed all that, but it doesn’t seem to have hurt because none of those pathologies are part of my life now and haven’t been for a very long time. I’m deeply engaged in life and haven’t had so much as a cold in at least a couple of years. I would say that the long-term effects of fasting surpass those of any other practice or lifestyle change one can make. And it saves you money!

I’m not making such claims on the basis of the budding medical literature about the benefits of fasting – as a cancer treatment, among other applications. My direct experience of the fast screams healthfulness in its own right. I will report here only the effects of my recent 18-day doxastic fast because they are the freshest and it’s the most “extreme” fast I’ve done to date. I must admit, even after so many years of practice, I was absolutely shocked by the experience. The only noticeable discomfort was the mild RC withdrawal as my metabolism switched onto ketosis around the fifth and sixth day. The following two weeks, I felt nothing short of SUPERHUMAN. When I decided to call it and eat some, I physically did not want to.

What is it like to be superhuman? High-energy as I am, I have never been so activated in my entire life. My brain was ON – and with a razor-sharp focus and deliberateness. While I typically sleep about five-six hours a day, I cut down to about four, often in the form of several short naps, simply because I couldn’t stand the idea of sleep. I was bursting with mental and physical energy and craved action and engagement and productivity. This was ketotic ecstasy. I even developed a habit of sleeping on the couch in my workspace because I felt borderline disgusted about lying in a bed. So much did I hunger - not for food, but to get to it and get things done. Physically, I felt better than ever and even went for a run one day, but refrained from further HIT exercise as a precaution to losing muscle tissue.

No nootropic I have tried has brought me even close to such a high of sustained hectic productivity and deliberate concentration for days and days and days. And I can’t wait to do it again, and for longer.

(This is not investment advice. It's only provided as a mental exposure to complexity in the financial markets.)

A lot of market participants have been obsessing over “unsual” volatility in the first quarter of 2018. Of course, volatility is the wrong metric to follow, especially after the ETN volapocalypse earlier this year. And no, there wasn’t any huge shift in market sentiment or political risk. All that is pure rationalization – and you should know better unless you are an entry-level Wall Street analyst who’s spent the last three nights in the office. There had been no macro-level surprises and, if you are about to mention Q1 earnings jitters, that’s probably not a sense of humor most would appreciate. What’s been going on then?

Well, it’s all quite embarrassingly straightforward.

But before we take off the wrapper, a quick inventory of the piñata of real market events that broke in 2018Q1:

• LIBOR embarked on a steep and “puzzling” (not at all) climb.
• The Fed continued on its preannounced and “pre-digested” (it wasn’t) path of rate hikes and balance-sheet contraction.
• Retail shocked (not really) by withdrawing from equity ETFs.
• Gold (mostly unsecured IOUs) finally broke out of its channel and made solid, if unimpressive, gains.
• US Treasury auctions were underwhelming (unless you were paying attention) relative to recent experience of yields & oversubscription.
• Hedge funds continued to get clobbered despite the “favorable” environment (OK, OK, this is not entirely news yet, but it will be).
• The USD was beaten down and stayed there because tweets (actually, nothing to do with them).

Confusing? Not if you consider the possibility that all of these are in fact the same event. To make that notion manifest, all you need is a very basic understanding of global macro, monetary cycles and market structure.

Getting Real

Policymakers’ half-hearted narrative of Global Synchronized Growth was met with laughter from the galley. Because even central bankers didn’t believe themselves. Every market participant with a brain knew that “growth” (it was mostly inflation and fuzzy accounting) and asset prices were driven by:

• Asset purchases & liquidity operations by central banks.
• Fixed investment in China (and of Chinese corporates overseas).
• Real-estate reflation in the US and other developed markets.
• Subprime & consumer lending in the US.
• Record borrowing by US corporates.
• Momentum-driven leveraging of US financial assets.

Because these drivers were mutually reinforcing and induced second- and third-order credit expansion, debt acceleration (and, consequently, asset inflation) globally continued even after major central banks started reducing the growth rate of their balance sheets.

Turning of the Tide (Do NOT Attempt to Eat It!)

What did the same drivers of monetary expansion look like over the past couple of quarters?

• Only PBoC, ECB, BoJ and SNB are still expanding their balance sheets, but the market operations of the first two are decelerating, while the BoJ is running out of things to buy and the SNB of leverage to buy with. The Fed is contracting its balance sheet (although the PPT stepped in to prop up asset prices in Q1) and raising interest rates. The BoE and RBA are out of the game, too, because of rising inflation.
• Although no good data on Chinese fixed investment are available, after a decade of rampant overbuilding and overinvestment, it probably cannot continue to accelerate henceforth.
• Real-estate prices have been decelerating markedly in many US markets.
• The US consumer is tapped out and the savings rate has inched up for the first time in years, in part due to tightening lending conditions.
• US corporates are levered up to the hilt and have been going off the buyback binge.
• Momentum in market leaders such as large-cap equities and low-quality fixed income (Tesla paper, anyone?) is dead.

Consequences have consequences, just as they did during the debt acceleration period. That giant sucking sound you’re hearing is the (temporary) end of the global synchronized growth of money supply acceleration through credit creation. The money supply may still be growing, but it is the acceleration rate that matters. Asset prices get wobbly after money growth slows, they don’t wait for it to turn negative. Wobbliness begets wobbliness (acceleration events like the ETN blowups, margin contraction etc.), and so the MOMO train turns. It is THAT simple.

Will the Real Minsky Moment Please Stand Up?

So how does a potential Minsky moment make the first-quarter surprises unsurprising?

• LIBOR I shan’t explain because it ought to be obvious by now. Just remember how insanely overleveraged European banks are.
• The Fed has been in panic mode for about a year already, and the only reason they didn’t start tightening earlier was the change of the guard in the White House and the Eccles Building. Even if they are ignorant of real-world monetary economics, they know a recession is overdue and want to have an interest rate to cut when that happens. The jitters in the markets are only going to solidify this process, as you may have noticed from the last Fed meeting. The monetary deceleration is now causing Fed policy because reflexivity. The Fed will not (overtly) reverse course until a “policy mistake” is obvious. Literally look for that phrase in the Fake News Media before the Fed intervenes again.
• Retail investors are not getting suckered into inflated assets as much as expected because they are tapped out on the credit front and spooked by rising volatility.
• Paper gold is rising because of margin contraction.
• The US Treasury is dumping record issuance on the markets in the first half of the year (a lot of it short-term, which adds to pressure on short-horizon rates) while the Fed is winding down assets. People were loath to hold the short end of the stick when everyone was assuming yields were to go up (they will come down again soon enough) and other financial assets are going bonkers. When financial conditions are tightening, especially during a reversal, cash is king.
• So-called hedge funds are getting killed because most of them are just leveraged MOMO chasers and quants, who can’t handle tail events and market discontinuities. Volatility acceleration hits hardest at the tail end of both momentum and volatility exposures, which is where “hedge” funds had been parked – while margin interest was rising steeply. So they got clobbered like baby seals.
• The USD beatdown is the most curious aspect of this Minsky moment and the only one that requires any degree of more sophisticated knowledge. The key to understanding it is across the Pacific. There were mumblings that the Chinese authorities intervened repeatedly with liquidity injections in both the banking and the shadow-banking sector (because deceleration exposes insolvency). Official Chinese government data and records of Belgian holdings of USTs suggest that in 2018Q1 the Chinese sold off significant amounts of USD-denominated bonds. The also clamped down hard on capital flight through bitcoin and other channels. It stands to reason that both of these costly measures were motivated by the need to neutralize domestic credit expansion in order to maintain the USDCNY peg amid rampant import-led inflation of consumer prices. Both of these measures would have put significant downward pressure on the dollar – one on the supply side, the other on the demand side.

Every market top that I know something about has taken place amid parallel acceleration, where equity volatility rises alongside momentum driven by small-cap stocks. This has been accompanied by a divergence in the credit markets, where yields subject to short-horizon bias (junk, overnight, credit-card, margin etc.) rise while long-horizon yields (UST30Y, JGB50Y etc.) fall or remain flat, leading to the moth-eaten inversion of the yield curve. Neither of these signals has yet been completed this market cycle. And they may never be, although my default scenario continues to be contrarian – that we will see new ATHs in US equities before this market cycle is completed.

This Time IS Different

History rhymes, but never repeats itself. Because this probably is the most epic thinning of the US equity market as far back as broad data are available. Daily volume has been dropping since QE started some decades ago, but it gets even better. Volume in drawdown periods has been falling as well.

Bank assets, leverage and every other horror metric imaginable around the world is at record levels. Central-bank interest rates are close to the zero bound and CBs are running out of assets to buy despite massive government borrowing. The global financial system is fragilized by orders of magnitude more than it was in 2008. This spells acceleration events may become the norm rather than the tail.

On that cheerful note, I shall leave you with a classic worth pondering.

[youtube https://www.youtube.com/watch?v=c52R46E3vLk]