Markets

You may occasionally hear about “yield inversion”, which is usually referring to the difference in yield between the 10 year and the 2 year US government treasury bonds. This number often gets mentioned in the news because when the value goes negative, it’s often interpreted as a sign that we’re either in a recession, or about to be in a recession.

Life is a series of random walks. Even if you walk the same path every day (in the literal sense), your individual steps on every walk you take are essentially random, and for the most part you aren’t even conscious of them because this is handled by muscle memory. When I say the steps are random, what I mean is that if you could precisely measure every step you take—where your foot lands, how much force you apply with your individual muscles—the data would reveal a pattern from a statistical perspective, but each individual step would follow a normal random distribution. In fact, research on human gait variability confirms this, with studies showing that step-to-step fluctuations follow statistical patterns characteristic of complex systems.

I remember when my first serious girlfriend broke up with me decades ago. Her chief complaint revolved around some recent incident, the details of which have faded from memory, but our conversation remains vivid. I pleaded with her, explaining how she was clouded by recency bias—focusing on the recent negative experience while overlooking all our positive history together.

I’ve made my share of bad predictions. I’ve had plenty of good ones too. But being right often doesn’t matter, because few people will remember if you were right or wrong, and when it comes to placing bets on your predictions, timing is incredibly difficult to nail down. Some of my best predictions include my general bullishness on software and the internet since the 90s (when the dot-com bubble saw the NASDAQ rise over 400% from 1995-20001), betting on Airbnb (now valued at $86B+), and Bitcoin (up over 30,000% in the last decade). In the case of Bitcoin, I was right about the bet, but got the timing wrong. Bitcoin’s journey from $0.09 in 2010 to nearly $69,000 in November 2021 represents a staggering 76,000,000% return, making it the best-performing asset of the decade by orders of magnitude. For context, an investment of just $100 in Bitcoin in 2010 would have been worth over $76 million at its peak.

Over the past few weeks I’ve noticed an increase in commercial real estate vacancies around Manhattan, especially ground level retail. Tonight on my walk, I took some photos around Flatiron, NoMad, and Union Square. A few of these places were vacant before the pandemic began, such as the Belgian beer spot, but many are recent casualties.