November/December 2023 by Luckbox Magazine

WINTER 2023/24 Factfullness & Forecasting

Momentum & Insider Buying Poker & Prediction

98 Forecasts!

OUR ANNUAL

GIFT GUIDE

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LIFE MONEY PROBABILITY

THE ANNUAL ISSUE WITH FORECASTING 12/27/23 10:27 AM

the control freak's guide to life, money & probability

Luckbox Ad - November December 2023 Print Ready File 1.pdf 1 16-Nov-23 4:28:31 PM

CMY

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Contents

WINTER.2023/24 2% Superforecasters 8% Luckbox Readers 12% AI Experts

The forecasted probability of AI causing the death of more than 10% of humanity by the year 2100. —FOR EC A STING R ESE A RCH INSTITUTE

Anybody who plays the stock market not as an insider is like a man buying cows in the moonlight.

28 33 34 36 40 42 46 47

“Your lifeline is very short. Actually, humanity’s lifeline is very short.”

FACTFULNESS MEETS SUPERFORECASTING

Two movements aim to nudge society toward truth and probability.

AI: EXCITING NEW TECH OR EXISTENTIAL THREAT? AI experts and Superforecasters differ on humanity’s fate.

A SUPERFORECASTER LOOKS AHEAD

Forecasting’s foreman shares tips on making better predictions.

CAN THESE TWO STRATEGIES PREDICT A STOCK’S DIRECTION?

Momentum and insider buying defy the efficient market hypothesis.

33 PREDICTIONS FOR 2024

THE ISSUE WITH FORECASTING

Luckbox editors’ forecasts on the markets, tech, politics and sports.

THREATS ASIDE, AI WILL BE GOOD FOR YOUR HEALTH

Algorithms are diagnosing ailments and recommending treatments.

YOUR DOCTOR, ONLY SMARTER

AI is effective at identifying red flags in your physical exam.

I’m a very serious “possibilist.” It’s a new category where we take emotion apart and we just work analytically with the world. —H A NS ROSLING

AI PICKS UP THE PACE

Get ready: 2024 will be an even bigger year for artificial intelligence.

On the Cover

Illustration by Ian Murray 1

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New Look, Same Us 2311_elements_TOC.indd 2

the trader’s un-network WATCH DAILY AT tastylive.com

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09 11 13 20 22

THE PAST AS PROLOGUE History holds this underappreciated key to predicting the future.

Book Value

THE LUCKBOX BOOKSHELF

These books captured our attention this issue.

Diversions

28 GIFT IDEAS

Favorite items to level up your brain, body, home bar and home base.

Rockhound

2024 GRAMMYS

The Rockhound’s annual rock, pop and post-punk predictions.

IS YARD ACT THE FUTURE OF POST-PUNK ROCK?

Meet Elton John’s (and Luckbox’s) new favorite band.

Fettle & Fitness

FAREWELL TO BELLY FAT

We predict you’ll lose your love handles if you follow this advice.

“Nationally, 41.9% of adults have obesity.” —T R U S T F O R A M E R I C A’ S H E A LT H

ILLUSTRATIONS: GETTY IMAGES

Fake Financial News

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51 52 54 56 58 60 61 62

Breakout

SOCIAL FINANCE

SoFi’s cup is about to run over.

The Unlucky Investor

ZERO DTE OPTIONS

These options provide volatility—but they’re risky.

The Poker Trade

PREDICTION IN POKER A WSOP poker pro teaches pot odds and counting outs.

Futures

“So he was all in on a 2-7-Q unsuited flop after limping in to a pre-flop raise? He was bluffing.”

FORECASTING FUTURES Two trading ideas for 2024.

Macro

MACRO MOVES IN 2024

Mexico is looking up, China down and recession risk is “on.”

Cherry Picks

TRADING VOLATILITY Consumer discretionary, energy and gold look promising.

Trader

MEET BRIAN CHUNG

This young meme stock trader has had his ups, and downs.

“[Bitcoin] is going to hundreds of thousands of dollars per coin.” — JA C K M A L L E R S , S T R I K E C E O

Crypto Currently

BET ON BITCOIN

The crypto complex is looking up (again).

05 From the Editors 06 Open Outcry 24 Calendar 49 Mathbox

64 The Last Picture 4

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From the Editors

WHERE ARE WE HEADED?

Evolution, revolution, gun control, sound of soul Shooting rockets to the moon, kids growing up too soon Politicians say more taxes will solve everything And the band played on So, round and around and around we go Where the world’s headed, nobody knows — B A L L O F C O N F U S IO N ( T H AT ’ S W H AT T H E W O R L D I S T O DAY ), T H E T E M P TAT I O N S , 19 7 0

Ed McKinley

ED I T OR IN CHIE F

Jeff Joseph

E DITORIAL DIRE CTOR

THE 93-YEAR-OLD oracle of Omaha seems

to find stocks a bit pricey. Should we care? Probably. Virtually every investor knows Warren Buffett earned that nickname by amassing more than $100 billion and shunning ostentation. His every move is scrutinized and often emulated. And what he’s been doing lately is shedding equities. His firm, Berkshire Hathaway, reduced its stock holdings by $28.7 billion in the first three quarters of 2023, according to Newsweek. It’s been a steady stream of bearish moves, as shown by that magazine’s tally of his divestitures. Buffett’s company sold $10.4 billion of stock in the first quarter. It sold nearly $13 billion of shares and bought less than $5 billion in the second quarter, and it sold $5.3 billion in the third quarter. Does that mean recession’s ahead in 2024?

Illustrations by Tyson Cole

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We’ll let you be the judge. But Luckbox is here to help with the resources you’ll find in this annual forecasting issue. Our effort in these pages to bring clarity to the science of forecasting includes a mashup of two of our favorite movements: Factfulness and Superforecasting. Factfulness aims to dispel commonly held misconceptions, and its founders have uncovTwo ways to send comments, criticisms and suggestions to Luckbox. Email: feedback@luckboxmagazine.com Visit: luckboxmagazine.com/survey A new survey every issue

ered them everywhere. Getting rid of them can be the first step toward making accurate forecasts. The Superforecasters begin by basing predictions on accurate information and move on from there. They’re part of a scientific approach to prognostication that began with the Good Judgment Project at the Wharton School of the University of Pennsylvania. Perhaps unsurprisingly, our study of forecasting in this issue also hinges on artificial intelligence. Humans and AI are working together to improve all kinds of forecasting. Some call it a “hybrid” model. That hybrid inclination is already making itself felt in medicine, where the speed and thoroughness of AI are helping doctors make more precise decisions more quickly. Evidence of this emerged as this issue went to press. In a groundbreaking research collaboration among four universities, scientists announced they had developed an AI model called life2vec, trained on the “life sequences” data of 6 million people, that demonstrated extraordinary accuracy at predicting events in people’s lives, including an individual’s risk of contracting specific diseases and a precise estimate of one’s time of death. No AI partners were necessary, however, to help humans develop a lot of the forecasting you’ll find in this issue. There’s the annual grab bag of predictions by Luckbox editors Jeff Joseph and Garrett Baldwin. Don’t expect all their forecasts to come true. But you can expect accuracy elsewhere in this issue. You’ll see forecasting has its place in fitness training, poker playing and (of course) investing. Yet it’s not all about forecasting. Another annual feature rounding out this issue, The Gift Guide, offers potential presents for the brain, body and base. Alliteration aside, the ideas lean heavily toward the best in board games and spirits.

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Open Outcry

Predictions: Luckbox Readers vs. Tom Sosnoff Will Joe Biden be the 2024 Democratic presidential nominee?

Yes.................................................................. 60% No.................................................................... 40% Will Donald Trump be the 2024 GOP presidential nominee?

Yes................................................................... 67% No .................................................................... 33% What will President Joe Biden’s approval rating be on March 31— according to FiveThirtyEight? (38.9% as of Dec. 20.)

Lower than 36.3%.......................................... 38% 36.3% to 38.2%............................................... 27% 41.3% or higher............................................... 10% How will the S&P 500 perform between Nov. 15, 2023, and March 31, 2024?

A gain of 5-10% ............................................. 23% A gain of <5% ................................................. 19% A loss of 10-15% . ............................................ 11%

How will Tesla’s stock perform between Nov. 15, 2023, and March 31, 2024?

A loss of <5% ................................................ 20% A gain of <5% ................................................. 18% A loss of >15% ......................................................

The John Deere AI story was outstanding, and the articles on the economics of growing your own food and food as medicine were both excellent. The Portillo’s and the extra virgin olive oil stories were informative, and anything by Vonetta Logan gets a thumbs up. Great issue all around!

What will be the most valuable publicly traded company as of March 31, 2024?

Apple ............................................................... 43% Microsoft........................................................ 23% Amazon........................................................... 13% Outlier 2024 predictions from our readers.

Bob Iger is out at Disney—again.

—Kirk Sattazahn | Womelsdorf, Pennsylvania

China attacks both Taiwan and the Philippines. —Tom Molitor | Milwaukee

— JAC K W H I T E | B E R R Y V I L L E , V I R G I N I A

Extraterrestrial contact. —Rob Dryden | Santa Fe, New Mexico

The next U.S. president is not even in the mix today. —Tom Sosnoff

Your thoughts on this issue? Take the reader poll at luckboxmagazine.com/survey

FACEBOOK • LINKEDIN:

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X (TWITTER) • INSTAGRAM:

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WEBSITE:

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Legendary options trader and tastylive founder Tom Sosnoff is an adherent of the efficient market hypothesis and thus a reluctant forecaster. “You don’t need to know where the market is heading to make money as a trader,” says the architect of tasty’s trading approach.

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TRUTH

Much of what you believe is wrong. Now that we have your attention, we’ll walk that back a bit—but not completely. All of us carry around plenty of misconceptions. Most of our errors, illusions and flawed perceptions result from outdated “facts.” We harbor beliefs that have been disproved decades ago. Truth evolves. With that in mind, Luckbox is setting out to dispel myths, present new data and combat disinformation. “TK” is journalism lingo for “to come.” The answers to the questions posed here are found in the stories that follow. 1. Worldwide, how many people have some access to electricity? 20% 30% 50% 80%

Reader Survey How often do you view video content on YouTube? Daily 53%

LUCKBOX Yesenia Duran James Melton

ASSOCIATE EDITORS

Kendall Polidori

♥ Navpreet Dhillon ♥ EDITOR AT LARGE

See answers on pp. 28, 37 and 43.

Garrett Baldwin

Rarely 10%

TECHNICAL EDITORS

Monthly 8%

Nick Battista, Kai Keng

Never 1%

CONTRIBUTING EDITORS

Vonetta Logan, Tom Preston, Mike Rechenthin

Subscribe to YouTube channels @tastyliveshow and @tastyliveTrending for daily market news and trading ideas.

CREATIVE DIRECTORS

AptCDesign + Gail Snable CONTRIBUTING PHOTOGRAPHER

Garrett Roodbergen EDITORIAL DIRECTOR

Jeff Joseph

COMMENTS, TIPS & STORY IDEAS

Feedback@Luckboxmagazine.com CONTRIBUTOR’S GUIDELINES, PRESS RELEASES & EDITORIAL INQUIRIES

equal to the S&P 500 1.0% higher 1.5% higher 2.0% higher

69.3% 79.4% 89.5% 99.6%

Ed McKinley

MANAGING EDITORS

2. Fortune magazine compared 2.5 million legal trades by insiders at multinationals with the typical monthly S&P 500 return of 0.9%. The publication found the insiders’ returns are approximately …

3. Scientists at the University of Edinburgh have developed an AI tool that can diagnose—and rule out—heart attacks quickly and precisely. Its accuracy is:

EDITOR IN CHIEF

Weekly 28%

Editor@Luckboxmagazine.com ADVERTISING INQUIRIES

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SUBSCRIPTIONS & SERVICE

Support@Luckboxmagazine.com

There’s more to Luckbox than meets the page.

MEDIA & BUSINESS INQUIRIES PUBLISHER: JEFF JOSEPH

jj@Luckboxmagazine.com

Look for this QR code icon for videos, websites, extended stories and other additional digital content.

Luckbox Magazine, a tastylive publication, is published at 19 N. Sangamon, Chicago, IL 60607 Editorial Offices: 312.761.4218 Issn: 2689-5692

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Printed at Lane Press in Vermont Luckboxmagazine.com

Luckbox Magazine is a product and service offered by tastylive, Inc. (“tastylive”). Luckbox Magazine content is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involves risk and may result in a loss greater than the original amount invested. The information provided in Luckbox Magazine may not be appropriate for all individuals, and is provided without respect to any individual’s financial sophistication, financial situation, investing time horizon or risk tolerance. Transaction costs (commissions and other fees) are important factors and should be considered when evaluating any securities, futures, or digital asset transaction or trade. For simplicity, the examples and illustrations in these articles may not include transaction costs. Nothing contained in this magazine constitutes a solicitation, recommendation, endorsement, promotion or offer by Luckbox Magazine or tastylive, Inc., or any of its subsidiaries, affiliates or assigns. While Luckbox Magazine and tastylive believe that the information contained in Luckbox Magazine is reliable and make efforts to assure its accuracy, the publisher disclaims responsibility for opinions and representation of facts contained therein. Active investing is not easy, so be careful!

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BY 1893 INSPIRED

F E W H A S T H E S P I C E . H A N D - M A D E I N S M A L L B ATC H E S, U S I N G A M A S H-B I L L INSPIRED BY WHISKEY ’S PRE-PROHIBITION GOLDEN ERA. F E W COMBINES A HIGH RYE CONTENT & PEPPERY YE A ST TO MAKE A UNIQUELY SPIC Y BOURBON.

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LIFE, LUXURY & THE PURSUIT OF HAPPINESS

By Vonetta Logan

Illustration by Tyson Cole

Fake Financial News

The Past as Prologue History holds the key to predicting the future—just not the way you would expect LUCKBOX HAS BEEN publishing an annual forecasting issue for four years. That’s why I was running out of ideas for yet another column on the subject when I spied a seemingly innocuous message on FinTwit. It was about a new book by Morgan Housel called Same as Ever: A Guide to What Never Changes (see p. 11). Perfect, I thought, I’ll just skim this woo-woo financial book, crank out some prose and be on my way. Let me tell you I wasn’t prepared for how this book con-

torted my brain in such a good way. A book about what never changes can change your life.

Not the only constant

I wasn’t familiar with Housel, but his previous book, The Psychology of Money, has sold more than 4 million copies. My Jerome Powell/Janet Yellen fanfic, Rising Rates, Rising Passion,

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has sold only four copies, so points there to Housel. On the exact day Same as Ever was published, Spotify (SPOT) announced a new benefit for premium subscribers—15 hours of audiobooks a month. I hit play and was immediately drawn in. Housel divides his book into short, themed sections providing historical context to buoy the premise. He writes that “change captures our attention because it’s surprising and exciting, but the behaviors that never change are history’s most powerful lessons because they preview what to expect in the future.” It’s not that old chestnut about ‘those who fail to remember history are doomed to repeat it.’’ Instead, his thesis is that while we know where we’ve been, we can’t predict where we’re going because what may seem like inconsequential decisions can lead to either magic or mayhem.

the painful reality of not knowing what will happen next. Housel quotes forecasting guru Philip Tetlock, writing: “We need to believe we live in a predictable, controllable world, so we turn to authoritative sounding people who promise to satisfy that need. Certainty is so valuable that we’ll never give up the quest for it.”

Who does your PR?

Another theme is the power of good storytelling. “What do I believe is true but is actually just good marketing?” Housel asks, adding that it’s not the best idea or even the rational idea that wins—it’s whoever tells the best story. “The valuation of every company is simply a number from today multiplied by a story about tomorrow,” he writes. Lehman Brothers was bad at telling its story, but GameStop (GME) crafted a phenomenal narrative. Moreover, you shouldn’t base every decision on reason, rationality or fundamentals, Housel advises. “If you relied on data and logic alone to make sense of the economy, you’d have been confused for 100 years straight.” The economy is rooted in emotions—the one quality you can’t predict, measure or model on a spreadsheet.

Risky business

No one knows what the world will look like in 50 years, Housel writes, but he feels it’s a safe bet people will still respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations and social persuasion. Events—whether they’re social, political or relational—compound like money. Every event spawns offspring, which makes prediction exceedingly difficult. One chapter is titled Risk Is What You Don’t See. “We’re very good at predicting the future, except for the surprises which tend to be all that matter,” Housel cautions. “If you’re only preparing for the risks you can envision, you’ll be unprepared for the risks you can’t see.”

A desire for wealth and a penchant for certainty

A favorite chapter describes how we’ve become good at showing off wealth and haven’t stopped coveting what we don’t have. He cautions readers to manage expectations in relation to circumstances. “Money buys happiness in the same way drugs bring pleasure,” Housel writes. “Incredible if done right, dangerous if used to mask a weakness and disastrous when no amount is enough.” The psychological twistiness continues a few lessons later. “People don’t want accuracy—they want certainty,” he notes. We reject 10

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Even in the distant future, our descendants will still respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations and social persuasion.

Cultivating craziness

Calm plants the seeds of crazy, another chapter says. The financial instability hypothesis posits that things are most dangerous when people perceive them to be safest. The only way to test the limits of what’s possible is to venture beyond those limits. You can find the top only by experiencing a decline on the backside. “Are stocks overvalued? What is Bitcoin worth? How high can Tesla go? You can’t answer these with a formula,” Housel insists. “They’re driven by whatever someone else is willing to pay for them.” Pack it up, everyone. Nobody knows anything. Housel also urges caution for investors who want mo’ money but without mo’ problems. I laughed out loud when he quoted Warren Buffett, who said “you can’t make a baby in one month by getting nine women pregnant.” Um, has anyone told Nick Cannon that? “The question everyone asks is ‘how can I make the highest returns?’ not ‘what are the best returns I can sustain for the longest period of time?’” Housel notes.

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He contends that imperfection has its advantages because honing one skill can come at the expense of another. “Cash is an inefficient drag during bull markets and is as valuable as oxygen during bear markets,” he writes. “Leverage is the most efficient way to maximize your balance sheet and the easiest way to lose everything,” he continues. “Concentration is the best way to maximize returns, but diversification increases the odds of owning a company capable of delivering returns. A little inefficiency is the best spot to be in.”

Same as ever

Housel’s writing never comes off as smug or condescending. He understands the logical fallacies that plague us and how dogmatic financial literature can be. “Nothing is more persuasive than what you have experienced first-hand,” he insists. But unexpected hardship makes people do the unexpected. “In investing, saying I will be greedy when others are fearful is easier said than done because people underestimate how much their views and goals can change when markets break,” he notes. Housel urges readers to gut-check their personal time horizons. When are you being patient and when are you just being stubborn? “Long-term thinking can be a crutch for people who are wrong but don’t want to change their mind,” he contends “I’m just early,” he says we tell ourselves. “Everyone else is crazy.” Housel advises reframing our view of the mythical long term as a series of short terms. Instead of creating a 10-year plan, we should ask: “How can I endure a never-ending parade of nonsense,” or what I like to call our weekly marketing meeting. Housel is adamant that his lessons apply to more than investing. It’s what we are taught to believe vs. what we experience. Here’s one final insight: “The typical attempt to clear up an uncertain future is to gaze further and swing harder to forecast with more precision, more data and more intelligence,” he writes. “Far more effective, is to do the opposite,” Housel contends. “Look backward and be broad. Rather than attempting to figure out little ways the future might change, study the big things the past has never avoided.” Vonetta Logan, a writer and comedian, appears

daily on the tastylive network. @vonettalogan

Book Value

The Luckbox Bookshelf The writing that captured our attention this issue Same as Ever: A Guide to What Never Changes (2023) By Morgan Housel

Investment plans tend to offer speculation on what may happen—based on a systematic extrapolation from the past. Same as Ever reverses the process, inviting readers to identify and act upon the many factors that never seem to change. Think of Morgan Housel as an author who shows how we can see around corners by looking backward and focusing on what’s almost permanently true.

Gambler: Secrets from a Life at Risk (2023) By Billy Walters

This autobiography by widely known sports gambler Billy Walters offers more than just an account of his life story. It also reveals the secrets of the betting system that produced his 30-year winning streak in sports wagering. After Walters’ five-year sentence for insider trading was commuted, he devoted himself to this guide to improving your odds at the casino sports book.

The Truth Detective: A Poker Player’s Guide to a Complex World (2023) By Alex O’Brien

In the Thinking in Bets issue of Luckbox (August/September 2021), journalist and competitive poker player Alex O’Brien discussed all things poker. She ranged from tips on analyzing risk to insight into the similarities between playing poker and investing in the markets. In her latest book, she describes the mental upside of playing poker and explains how to parse information to get to the truth.

The Coming Wave: Technology, Power and the 21st Century’s Greatest Dilemma (2023) By Mustafa Suleyman and Michael Bhaskar

Artificial Intelligence has generated plenty of excitement in 2023, and Mustafa Suleyman, co-founder of Google’s DeepMind, has been a central figure in the birth of this new age. In his book The Coming Wave, written with Michael Bhaskar, Suleyman says this powerful burgeoning technology will define the next decade, creating opportunities for unprecedented prosperity but also posing a threat to the established global order.

Far too often, book reviews drive readers away. They’re written from the viewpoint of just one stranger and taking them to heart leaves great books undiscovered. That’s why Book Value offers profiles instead of reviews. Don’t look to this page for opinions. Think of it as a place to find writing that educates, entertains and challenges entrenched beliefs. WI NT ER 2 02 3/2 4

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Higher, faster, further. Why not more beautiful?

Patria Modest gold watches made with superior manufacturing skill, have a centuries-old tradition in Germany. After Glashutte‘s new rise, the watchmakers and their fine watches were able to attain a world-renowned reputation once again. With the Patria, we keep Glashutte’s deep-rooted horological tradition alive: the watch must be noble, beautiful, and precise. Patria · manufacture caliber · 6600-01

MADE FOR THOSE WHO DO.

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by Kendall Polidori

The Luckbox Gift Guide Our favorite items to level up your brain, your body, your bar and your home base

TRENDS

GIFT GUIDE

PHOTOGRAPHS: GARRETT ROODBERGEN, OTHER IMAGES COURTESY OF VISKI, THE NEAT GLASS

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bar

1 / PEDESTAL

MIXING GLASS

For spirits that shouldn’t be shaken, this 17-ounce lead-free crystal glass is a sure-to-beappreciated gift and a stylish addition to any at-home bar. —$43, viski.com

2 / NEAT GLASS

Judges use the artisan NEAT Glass at more than 40 major spirits competitions. It’s a leadfree European crystalline glass that fits perfectly in your hand. You be the judge. —$12, theneatglass.com

3 / GLOBE SHAKER

We love the detailed profiles of the continents on this shaker. Their slightly distressed look recalls antique maps, and there’s even a compass etched into the shaker’s wooden cap. —$40, viski.com

4 / THE SMOKY TWELVE

Benriach Distillery, located in Scotland’s Speyside region, prides itself on having a distinctive flavor-forward portfolio of single malts complete with unpeated, peated and triple-distilled whiskies. The Smoky Twelve has an extraordinarily sweet and smoky flavor derived from three-cask maturation in bourbon, sherry and Marsala. Perfect for a Penicillin cocktail. ABV: 46% —$68, benriachdistillery.com

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5 / JONES SODA

Luckbox couldn’t resist the chance to print bottles of My Jones Soda with past covers. The company can customize labels as personalized gifts for birthdays, weddings, holidays and other special events—or just for fun. Enjoy flavors like green apple, strawberry, lime and classic root beer. —$45 (custom 12-pack), jonessoda.com

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brain

6 / TRAIGH BHAN

BATCH 5

With notes of mango, maple, bacon and soot, this smallbatch release is matured in American Oak and Oloroso sherry casks. It’s a 19-year-old Ardbeg that’s non-chill-filtered for a full flavor, body and depth. It has an herbal, peaty, spicy taste and a long finish, hinting at smoked bacon, warm toffee and butter. ABV: 46.2% —$286, ardbeg.com

7 / PORT WOOD

The GlenDronach Port Wood, a single malt Scotch whisky, is inspired by the rich history of importing cased port into Scotland during the 19th century. The GlenDronach’s rich, full-bodied Highland spirit has been matured in the distillery’s Pedro Ximénez and Oloroso sherry casks, followed by a second maturation in some of the finest port pipes. ABV: 46% — $95, glendronachdistillery.com

8 / PORTSOY

New to America, this Glenglassaugh single malt whisky has been gently matured in sherry, bourbon and port in the distillery’s coastal warehouses overlooking the rolling surf of Sandend Bay. The distillery has roots dating back to 1875 but was restarted in 2008. The full-bodied taste evokes dark chocolate, charred mango and a hint of sea salt. ABV: 49.1% —$75, glenglassaugh.com

1 / WAVELENGTH

Wavelength, a party game show in a box, is a social guessing game where two teams compete to read each other’s minds. Is it hot or cold? Soft or hard? Wizard or not wizard? Only you can find out! This 2021/2022 Årets Spill Best Party Game Winner is a Luckbox favorite. More than 150,000 copies of the game have been sold in 14 languages. —$30, cmyk.games

PHOTOGRAPHS: GARRETT ROODBERGEN

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PHOTOGRAPHS: GARRETT ROODBERGEN, OTHER IMAGES COURTESY OF REPOS PRODUCTION, CMYK GAMES, THE MASTER THEORM, UNLUCKY INVESTOR

2 / BOHNANZA

Celebrate the 25th anniversary of Bohnanza with this special edition game and see if your card-matching skills are “to bean or not to bean!” The goal of this German-style game is to earn the most gold by planting, harvesting and selling beans. This gamer’s favorite was released in 1997 and has a high rating of 7.6 out of 10 on the BoardGameGeek website. —$30, barnesandnoble.com

3 / THE MASTER THEOREM

The Master Theorem is a members-only society, but this puzzle book encourages the rest of us to become master solvers on our own. Be forewarned: These are not your average Sudoku or crossword puzzles—think of them as an escape room where you decrypt messages and overcome brainteasers. (See MathBox, p. 47) —$30, themastertheorem.com

4 / LUCKBOX MAGAZINE 5 / JUST ONE Who couldn’t use a little more luck? Give the gift of Luckbox home delivery with this 10-issue print subscription, including unlimited access to all archived digital issues. Luckbox is the control freak’s guide to life, money and probability. It’s essential reading for overachievers looking to understand the zeitgeist and get more for their money. —$39, getluckbox.com

Just One is that party game for everyone. Why sit through complicated rules when you can skip ahead to the fun? This game enables three to seven players to work together to discover as many mystery words as possible. Your challenge is to find the right clue for your teammate. The game has a high 8 out of 10 rating on BoardGameGeek. —$16, rprod.com

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6 / THE UNLUCKY

INVESTOR’S GUIDE

TO OPTIONS TRADING

In this indispensable book, tastylive’s Julia Spina breaks down the science of options trading. From the basics of options trading to strategy construction and portfolio management, she helps readers develop an intuitive grasp of the risks and rewards. —Hardcover $28, barnesandnoble.com

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body

1 / RAY-BAN

META HEADLINER SUNGLASSES

These AI-powered wearables protect your eyes from UV rays, take photos, make calls, and livestream. The glasses have five built-in mics that pick-up voice commands and double as headphones. You can easily control the glasses by setting up a fingerprint touch command. When you’re not wearing them, simply place them in their case to charge! —$329, ray-ban.com

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2 / ZOZOSUIT

The two-piece ZOZOSUIT, combined with the ZOZOFIT app, uses body measurement technology to make an unforgivingly accurate 3D-rendering of your physique. The suit is covered in more than 15,000 fiducial markers that calculate key parts of your body. Available in 13 unisex sizes, the ZOZOSUIT can accommodate a wide array of body shapes. It’s the perfect gift for anyone interested in health and fitness. —$98, zozofit.com

3 / PROXR PICKLEBALL ZANE NAVRATIL “THE

STANDARD” SIGNATURE CARBON PADDLE

Want to play pickleball like 2022 No.1 men’s pro Zane Navratil? “The Standard” can help with its shorter, standard-length handle and wide face. Made with T700 ultra-raw carbon face for extra spin and a shock foam edge guard, this top-of-the-line paddle offers the promise of comfortable consistency. —$210, proxrpickleball.com

4 / LEAGUE AND CO.

5 / THE NOBULL MATRYX

Bring the game wherever you go. This Bocce Ball yard game set is complete with eight solid resin balls, a secure wooden platform, one Pallino, a scorepad and pencils, and an instruction booklet all within a stylish and durable canvas carrying bag. First played in Italy during the 18th century, Bocce ball is a lawn or yard game played with eight balls used to aim at a smaller ball, or pallino. —$130, bespokepost.com

Originally featured in our first (2019) gift guide, NOBULL has grown from a small startup to a rising star in a world dominated by big-name sports brands. It accomplished that feat by offering innovative products and building a loyal following. The Matryx trail runners, for example, are suitable for all-terrain training and feature a durable tread and breathable material. —$89, nobullproject.com

BOCCE BALL SET

TRAIL RUNNER

PHOTOGRAPHS: COURTESY OF ZOZOSUIT, BESPOKEPOST, NO BULL PROJECT, RAY-BAN, LEAGUE AND CO., PROXR PICKLEBALL

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U3 Coffee 1

PHOTOGRAPHS: GARRETT ROODBERGEN, OTHER IMAGES COURTESY OF HUMANE, MY BIRD BUDDY, GRAZA

base

6 / AI PIN BY HUMANE AI

One of the world’s first wearable AI’s, the AI Pin is controlled by voice commands and hand gestures, and it makes telephone calls, takes photos and plays music. It can recognize food and state its nutritional value, as well as translate between languages. Besides the purchase price, using it requires a subscription for data, cellular and wireless. Humane’s goal is to build technology that feels familiar, natural and human. Clip it to your shirt, pants, belt loop or bag, and the AI pin becomes part of your day-to-day life. —$699, hu.ma.ne

1 / BIRD BUDDY®

2 / GRAZA “DRIZZLE”

BIRD FEEDER

OLIVE OIL

ORIGINAL SMART

Do you love bird watching but don’t have much time to dedicate to it? Here’s a solar-powered bird feeder equipped with a high-resolution camera for close-up bird shots. The device even identifies birds, with over 1,000 species listed on its system. You can set up bird arrival notifications and learn which food is best for which birds, too. —$210, mybirdbuddy.com

EXTRA VIRGIN

Experts interviewed for the recent food issue of Luckbox stressed the importance of knowing where your olive oil is produced. The Picual olives used here were grown and processed in Jaen, Spain. They were harvested in October, before they were fully ripened, and then cold-pressed. The bottle adds a drizzle of flavor to your food. —$21, graza.co

Former tastylive co-CEO Kristi Ross and her husband, Craig Ross, founded U3 Coffee with the mission to “unite the world through coffee.” The idea is to connect the coffee industry’s three verticals—farmers, coffee entrepreneurs and customers. To that end, the owners are striving to create a new coffee ecosystem. Through U3 Coffee Media, they’re telling the stories behind each cup, sharing relevant stats and educating people throughout the value chain. They mean to bridge the information gap and empower coffee entrepreneurs. Besides roasting its own single-origin coffee, the company operates an online marketplace showcasing other roasters and entrepreneurs, including Park Avenue Coffee and Mighty Good Coffee Roasting Co. Through its U3 Coffee Bank, the company also gives back to farmers and supports other entrepreneurs. You can find U3 Coffee at u3coffee.com, or visit the first U3 Coffee Roastery & Cafe in Forest Park, Illinois. It’s scheduled to open in Spring 2024. In the meantime, brew a cup of U3’s Tarrazu Estate coffee, a sustainably farmed and Rainforest Alliance Certified blend. With hints of milk chocolate, caramelized sugar and orange, this smooth medium roast is ideal for any morning. —$18, Whole Bean, 12 oz., u3coffee.com

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PHOTOGRAPHS COURTESY OF: BEASTMODE, BOSE, JULY.COM, TARGET, LEVAIN BAKERY

b a s e continued

3 / BEASTMODE BY

4 / BOSE SOUNDLINK

5 / CARRY ALL WEEK-

6 / DISNEY100 LIMITED 7 / LEVAIN HOLIDAY

In partnership with football legend and entrepreneur Marshawn Lynch (aka Beast Mode), a company called Beast Blender is offering the “baddest blender on the planet.” It packs a 1,200-watt motor, comes in a forest green special edition and features a new stainless steel hydration bottle. Lynch says it can help you avoid fumbling your health. —$172, thebeast.com

SPEAKER

Available in three colors, this simple yet sleek water-resistant duffle bag makes for seamless, stress-free travel. Carry it by the soft leather handles or sling it over your shoulder to use the detachable dual adjustment shoulder strap with cushioned leather padding. The maker, a company named July, calls it a premium and secure bag for elevated travel. —$195, july.com

ESSENTIAL SET

BEAST BLENDER

MICRO BLUETOOTH

Eighty-seven percent of the nearly 30,000 users who ranked this compact speaker on Amazon awarded it five stars. Portable and durable, the Bose SoundLink is also waterproof and offers easy Bluetooth connectivity and a long battery life. It’s great for traveling and outdoor activities, like hiking or relaxing on the beach. —$99, amazon.com

ENDER DUFFLE BAG

EDITION FOUR PIECE

Disney adults, this one’s for you. The Disney100 Limited Edition Four Piece Essential Set was inspired by the debut of Disney’s Mickey Mouse in Steamboat Willie in 1928. The set includes a nonstick saucepan, stockpot, frypan and a universal lid, plus a pan protector adorned with a black and white Mickey Mouse design. —$130, target.com

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ASSORTMENT

Don’t stress about baking the perfect cookie when it already exists! Levain Bakeries, known for “New York’s most famous cookies,” has expanded to Chicago, Boston, Los Angeles, Maryland and Washington D.C. Each thick, scone-like cookie weighs about 6 ounces, and they’re crunchy outside and gooey inside. —$49/8-pack, $79/12-pack, levainbakery.com

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by Kendall Polidori

2024 Grammys Rock, pop & post-punk predictions

TRENDS

THE ROCKHOUND

Every year, some nominations seem obvious, others feel pleasantly surprising and a few rate as downright shocking. For example, women dominate the Album of the Year category this year. Look at some of The Rockhound’s favorite categories and predictions.

BEST ALTERNATIVE MUSIC ALBUM

Nominees: Arctic Monkeys (The Car) Boygenius (The Record) Gorillaz (Cracker Island) Lana Del Rey (Did You Know That There’s a Tunnel Under Ocean Blvd) PJ Harvey (I Inside the Old Year Dying) WHO WILL WIN: Boygenius (The Record) WHO SHOULD WIN: Boygenius

BEST ALTERNATIVE MUSIC PERFORMANCE

Nominees:

Alvvays (Belinda Says) Arctic Monkeys (Body Paint) Boygenius (Cool About It) Lana Del Rey (A&W) Paramore (This Is Why) WHO WILL WIN: Boygenius (Cool About It) WHO SHOULD WIN: Alvvays (Belinda Says)

I adore Boygenius—which includes solo stars Phoebe Bridgers, Lucy Dacus and Julien Baker. I’ve been following and listening to the band 20

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since their 2018 EP boygenius, and have obsessed over their individual work. But if you’ve followed my reviews this past year, you may have noticed I have developed a deep appreciation for the work of Alvvays, a Toronto-based alternative-rock group that blows me away every time I see them live. To me, their music perfectly fits the alternative category—their sound is unconventional and outside the mainstream. Their song Belinda Says kicks off with a soothing synth intro and transitions to a fuzzy guitar melody; it doesn’t sound like any other alternative song out there right now. Five years after its last album, Antisocialites, Alvvays came back strong, earning a first-ever Grammy nomination.

I’m having the most trouble with this one. Of the artists on this roster, I’d consider Arctic Monkeys’ The Car the most alternative album. If the winner was to be picked solely by that standard, then they’d win. But is it the best album on this list? I’d say no. I’m at a tie between Lana Del Rey’s Did You Know That There’s a Tunnel Under Ocean Blvd and Boygenuis’ The Record because these were two of the best albums of the year. It’s been such a wonderful year for women artists. While I know music genres are a bit muddled today, I still like to hold artists to some categorization. While Lana Del Rey’s album is a mixture of pop, folk, rock and jazz, Boygenius’ album holds a stronger alt persona. Both are deserving, but considering Boygenius’ presence in mainstream rock it’s likely they’ll take this one home.

BEST ROCK SONG

Nominees: The Rolling Stones (Angry) Olivia Rodrigo (Ballad of a Homeschooled Girl) Queens of the Stone Age (Emotion Sickness) Boygenius (Not Strong Enough) Foo Fighters (Rescued)

PHOTOGRAPHS: ALVVAYS, ELEANOR PETRY; BOYGENIUS, CHUFF MEDIA; AND PARAMORE, ATLANTIC RECORDS PRESS

(The Record)

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WHO WILL WIN: Foo Fighters (Rescued) WHO SHOULD WIN: Boygenius

(Not Strong Enough)

Back to my opinion of Boygenius. They kick ass! It’s so refreshing to see a strong trio of talented women spearheading modern rock. This category is often made up of all male musicians, so it’s also pretty cool to see Olivia Rodrigo’s name on the roster. Each of Boygenius’ members holds such power in their vocal range and guitar-playing that they occupy the space equally. Driven by guitar, their music is pure indie-rock, filled with groovy guitar solos and progressions. Not to mention that Not Strong Enough is one of my favorite songs of the year. And Foo Fighters love them too! In October, Dave Grohl joined them on drums for the song Satanist at their sold-out Halloween show at the Hollywood Bowl.

The re-emergence of pop-punk bands like Paramore, Blink-182 and My Chemical Romance has brought us retired emos back to life. It’s difficult for bands to make a solid comeback after some time away, but Paramore did so gracefully. The band has been around since 2004, and their latest album, This Is Why, solidifies their spot as one of the most influential woman-fronted rock bands of this generation.

BEST NEW ARTIST WHO WILL WIN: Ice Spice WHO SHOULD WIN: Noah Kahan

BEST ALBUM OF THE YEAR WHO WILL WIN: Taylor Swift (Midnights) WHO SHOULD WIN: Miley Cyrus (Endless

Summer Vacation)

BEST SONG OF THE YEAR WHO WILL WIN: Taylor Swift (Anti-Hero) WHO SHOULD WIN: Taylor Swift

(Anti-Hero)

Luckbox Reader Survey

WHO WILL WIN BEST ROCK ALBUM?

Foo Fighters: 30% Greta Van Fleet: 16% Metallica: 29% Paramore: 15% Queens of the Stone Age: 11%

PHOTOGRAPHS: TAYLOR SWIFT, SHUTTERSTOCK AND NOAH KAHAN, GETTY IMAGES

More 2024 Predictions

BEST ROCK ALBUM

Nominees: Foo Fighters (But Here We Are) Greta Van Fleet (Starcatcher) Metallica (72 Seasons) Paramore (This Is Why) Queens of the Stone Age (In Times New Roman…) WHO WILL WIN: Foo Fighters

(But Here We Are)

WHO SHOULD WIN: Paramore

(This Is Why)

No hate toward Foo Fighters ever, but I like to see other amazing artists receive the recognition they deserve. And folks, I have a Paramore album tattooed on my arm, so let me have this!

Taylor Swift’s Eras Tour

$4.1 Billion Swift’s estimated personal earnings from the Eras Tour

$1,279

How much the average attendee spent on a ticket, travel, food, lodging, merch and outfits

$465

• Expect ticket prices to keep rising. Ticketing platforms (such as Ticketmaster) will remain a point of frustration. • Taylor Swift will announce the release of Reputation (Taylor’s Version). • The Recording Academy will reconsider its stance on AI-generated music because of the success of The Beatles’ Now and Then. Before the current Grammys, the RA had ruled the human contributions—but not the AI input—was eligible for nomination. Here’s an example: If AI performs the lead vocal for a song penned by a human, the track would be eligible in a songwriting category but not a performance category.

More Grammys

The full list of Grammy noms

Average ticket price

—The Washington Post

Kendall Polidori is The Rockhound, Luckbox’s resident rock critic. Follow her reviews on Instagram and Twitter. @rockhoundlb WI NT ER 2 02 3 /2 4

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by Kendall Polidori

Is Yard Act the Future of Post-Punk Rock? Meet Elton John’s new favorite band

TRENDS

THE ROCKHOUND

YARD ACT IS KNOWN for the angry, political alt-rock anthems on the band’s successful first album, The Overload, but the members don’t wear that rage on their sleeves. Instead, they display gratitude that people listen to them at all. “In the U.K., we had anticipated the reaction the album would get, but we had no idea what sort of reaction it would get in America,” said frontman James Smith. “We’ve been consistently blown away by how well it has done everywhere.” Yard Act—2022 Mercury Prize and NME Best New British Act nominee—was performing in Chicago for the second time when members of the band sat down with Luckbox. Their third gig was an official Riot Fest aftershow on Sunday, Sept. 18 at The Empty Bottle.

Yard Act kicks off their 2024 world tour in March in support of their upcoming album Where’s My Utopia?, out March 1, 2024. 22

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In 2022, the band released its first album, The Overload, which garnered major attention in the U.K. punk rock scene and quickly gained traction in the U.S. and beyond. With an appearance at South by Southwest in 2021, a year before the album release, Yard Act made its mark on fans with only two songs available on streaming services.

PHOTOGRAPH: PHOEBE FOX

An overloaded debut

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At first, Smith said he was worried the music might be a bit too niche for some fans—and their music is quite niche. To appreciate it, you have to be into that talk-singing style. But if you’re a fan of bands like IDLES and shame, Yard Act is for you. It’s a fast-paced sound, focused on varied guitar riffs and sprinkled with comedic British Cockney. Much of Yard Act’s music from The Overload is driven by anger—Smith’s neck flares in a red sweat, his veins visibly popping out. When he’s not prancing around the stage, flailing his arms, he’s likely to be on the floor screaming into the microphone. And the band mimics his expressions. Guitarist Sam Shipstone jives his hips into a groovy guitar solo. They’ll convince you to “take the money and run!” Smith said he feels music is a spirit, with the sound a kind of ethos—but Yard Act is driven by pure rock ‘n’ roll, and it’s hard not to define them as such. “On the pragmatic and practical side of it, rock ‘n’ roll is a catch-all for me,” Smith said. In July, the band released the single The Trench Coat Museum, an eight-minute song with synth Depeche Mode vibes. Despite touring the world for the past 18 months. Smith said members have been conscious of not letting too much time pass before their sophomore album, Where’s My Utopia?, which is slated for release on March 1, 2024. There are always nerves and expectations for musicians around a second album: Will it live up to the success of their first? For Yard Act, members obviously want fans to enjoy

People will come up to us and say how much a certain song has impacted them, and that’s very humbling and scary at the same time. — JA M E S S M I T H

it, but they based their sophomore record on what they themselves wanted to do. And they’re proud of that. Late in October, the band released the first single from Where’s My Utopia?, titled Dream Job. It features more of that cowbell-like sound we’ve all been wanting. The song is

Yard Act’s angry first album was written during a time when some members felt caged. immediately more groovy, upbeat and crisply produced than Yard Act’s past work. Even the music video indicates a new joy in letting loose and having fun with making music. For the upcoming album, the band homed in on more synth, electronic and instrumental inspiration. “I prefer using those complex sounds when recording because then we can play it live

well,” bassist Ryan Needham said. “It’s reverse engineering in the traditional sense.” The band developed a technique while writing and recording the second album, by needle-dropping and making sample tunes out of whatever sounds were happening around them. Yard Act also sampled hip-hop and rock songs they love. The band overlayed those favorite songs with their original material and then removed the samples at the end. “It became quite creative and rewired our brains in a way,” Smith said. “Like building a song that we got samples from and then writing over the top of that and pulling it, so we don’t get sued. That was quite soul-shredding because no one will ever know, technically, if it was illegal or not.”

Besides switching up its writing and recording approach, this is the first record with drummer Jay Russell fully taking part. Smith said his worldview has also changed a lot since the first album came out. Now, he views things through a lens of empathy instead of leading with that angst. “On the first album, there was a lot of anger and frustration,” Smith said. “It was largely written from a place of being trapped, during a time when everyone felt caged and boxed in. The only outlet we had to express ourselves was to put it into music.”

World-changing personal events

Now, he has a lot of trepidation about landing on something that has worked in the past and just repeating it. Smith said his mind hasn’t been rooted in the real world for the past 18 months because of the way his life has turned out. It’d be disingenuous to use anger now as a tool to make money or retain a level of popularity the band achieved via The Overload, he said. “I had a child right before the band started, and I think that has changed my world,” he said. “Now I know more strongly about what I believe in and what I want to aim for. It boils down to love.” With a team backing them, there was always some indication and incentive that Yard Act could go bigger. But Smith feels fortunate because not many musicians taste the level of success Yard Act has enjoyed. “People will come up to us and say how much a certain song has impacted them, and that’s very humbling and scary at the same time,” Smith said. “I think that’s the beauty of music—giving it away.” To make sure his humor doesn’t go unnoticed, he added that, “Well, it’s not given away, technically. For copyright and legal reasons, we get paid.” Kendall Polidori is The Rockhound, Luckbox’s resident rock critic. Follow her reviews on Instagram and Twitter. @rockhoundlb

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More Yard Act

The Trench Coat Museum

12/21/23 6:31 PM

FETTLE & FITNESS

Farewell to Belly Fat We predict you’ll lose your love handles if you follow this advice

TRENDS

by Jim Schultz

YOU HAVE NO IDEA how lean you can be.

Don’t get me wrong. If you’re 40 to 50 pounds overweight, dropping 20 will improve your mood, energy, bloodwork and overall health. But what if we’re talking about the physique you’ve been chasing for months or even years? It’s nearly impossible to know just how far

Calendar

January-March

1.7 Golden Globe Awards BEVERLY HILLS, CALIFORNIA

1.9-12 CES Tech Conference

LAS VEGAS, NEVADA

1.15-28 Australian Open

1.23-24 ENTERPRISE GENERATIVE AI SUMMIT

1.28 International Lego Day

MIAMI, FLORIDA

International Lego Day

Celebrate the world’s most versatile miniature plastic brick! The phenomenon began in 1958 when Denmark granted a patent to the toy that became a pastime. By now, about 400 billion Lego bricks are scattered around the planet, and some sets contain trillions of combinations. Two eight-pipped bricks, for example, can be combined 24 ways. The most expensive Lego set of all time, the Millennium Falcon, contains 7,541 pieces and sells for $849.99. In 2022, Lego Group’s revenue grew 17% to $9.2 billion, and in the first half of 2023, Lego saw revenue rise 1% to $4 billion. 24

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you have to go with your diet and training to achieve that look if you’ve never been there before. And the cold, hard truth is your progress is almost certainly going to take longer than you want and move more slowly than you think it should. Just as it’s difficult to predict where the stock market will end this year, it’s not easy to forecast your weight at the end of your cut. If you’re a plump, juicy and well-fed 235 today, you might think you’ll be lean and mean at 210. But 210 isn’t going to do it … 200 won’t work, either … and 193 probably won’t be enough. Buckle up and get ready to dig well into the 180s before your love handles disappear, your lower back tightens up and your abs make an appearance.

PHOTOGRAPHS: SHUTTERSTOCK

AN EXPERT’S VIEW

Take some advice from Jeremy Ethier, a fitness guru and social media personality who’s known for a site called Built with Science. He starkly puts it this way: “This is what makes belly fat, lower back fat and love handles so easy to gain yet so tough to lose: These areas build up slowly over time without you really noticing and then can seem almost impossible to lose no matter what you try.” But getting into incredible shape is no different from the first time you were hit with an outlier move in the market. It’s a surprise. It’s a shock. It’s not what you expected, and you

2.4 Grammy Awards

LOS ANGELES, CALIFORNIA

2.11 NFL Super Bowl Sunday PARADISE, NEVADA

weren’t exactly prepared for it. Nevertheless, you have a decision to make. You can dig deeper, trust the process and press forward. Or you can wave the white flag and surrender. It’s emotionally charged to watch profits accumulated over months whittled down from one big move in the market, and the same holds true for the fatigue built up from dieting. It’s one thing to predict a six-month fat loss phase on the front end, when your leptin levels are high, your glycogen tank is full, and the world is filled with sunshine and strawberries. It’s another to wonder how much longer you have to press on when you’ve already worked 14 weeks to drop 24 pounds, you’re not nearly as lean as you want, and last night you dreamed of peanut butter and jelly sandwiches. So what can you do? Here’s your threestep plan.

Abdominal fat can shrink your brain and might lead to dementia. — S A I N T J O H N ’ S H E A LT H C E N T E R ’ S PA C I F I C B R A I N H E A LT H C E N T E R , S E P T E M B E R 2 0 2 3

First, you don’t know what you don’t know. So, if you’ve never been super lean, you don’t know what it’s going to take to get there. Embrace the uncertainty and prepare yourself for a long journey. Second, double your timeline for getting into great shape. No, triple it. That’s your number. If you think it’s going to take 12 weeks, get ready for 36.

3.6-7 MoneyLIVE Summit LONDON

What happens in Vegas ... PHOTOGRAPHS: SHUTTERSTOCK

Jim Schultz, Ph.D., a derivatives trader, fitness expert, owner of livefcubed.com and the daily host of From Theory to Practice on the tastylive network, was named North American Natural Bodybuilding Federation’s 2017 Novice Bodybuilding Champion. @jschultzf3

THREE (NOT SO) EASY STEPS

2.14 Premier of the biopic film Bob Marley: One Love

... is arguably the tech industry’s mostanticipated conference. CES (formerly the Consumer Electronics Show) has invited Qualcomm (QCOM) CEO Cristiano Amon to deliver this year’s keynote address. The industry gathering is expected to attract more than 130,000 attendees, exhibitors and members of the media—but the public isn’t invited.

Third, use the QR code on this page to watch the Jeremy Ethier video. It’s had 2.7 million views. If you’re committed to working hard for the next four months, think in terms of the next year. That will help you handle the curveballs life is certain to throw your way.

3.8-16 SXSW Conference and Festivals AUSTIN, TEXAS

More (Less) Belly Fat

Lose those love handles

3.16 3.18-21 tastylive Nvidia GTC Trader’s Summit Developer and AI Conference HOUSTON, TEXAS

Nvidia GTC

Jensen Huang

The Nvidia GTC (GPU Technology Conference) is an AI event that brings together developers, engineers, researchers, inventors and IT professionals for workshops, training and panels in San Jose, California. But the action doesn’t stop there. Around 319,000 people from nearly all of the world’s 195 countries have signed up to attend virtually. Nvidia (NVDA) President Jensen Huang is slated to deliver the keynote speech. WI NT ER 2 02 3 /2 4

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SAN JOSE, CALIFORNIA

12/21/23 6:28 PM

Factfullness Meets Forecasting This edition of Luckbox—our annual forecasting issue—combines two seemingly disparate but actually copacetic ideas: factfulness and superforecasting. We’re also covering prognostication news on AI, medicine, sports, politics and, of course, investing.

IN THIS SECTION P. 28 Factfulness Meets Superforecasting P. 33 Predicting AI’s Role: Friend or Foe? P. 34 Forecasting’s Foreman Shares Tips P. 36 Tracking Momentum and Insider Buying P. 40 Our Outlier Predictions for 2024 P. 42 Predictive Medicine Moves Forward P. 46 AI Will Make Your Doctor Smarter P. 47 Experts Predict What’s in Store for AI 26

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ILLUSTR ATION BY I A N MUR R AY

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12/22/23 11:00 AM

by ED MCKINLEY

Factfulness Meets Superforecasting

Two movements aim to nudge society toward a more data-driven search for truth and probability

he theater reverberated with laughter and applause as a Swedish physician put a humorous spin on a profound message. Paradoxically, he was capturing the crowd’s imagination and winning their affection by revealing their ignorance. “In the last 20 years, how did the percentage of people in the world who live in extreme poverty change?” the late Hans Rosling asked the audience at one of his TED Talks. He added that “not having enough food for the day” was his definition. His listeners entered their estimates on handheld devices offering three options. They could declare extreme poverty had doubled, stayed about the same or was reduced by half. While their choices were being tabulated, Rosling announced that only 5% of Americans had responded correctly in a previous iteration of the test. Yes, 95% didn’t know the percentage of the population in extreme poverty had fallen by 50% in just two decades. But the audience at this particular TED Talk had done much better. Thirty-two percent got it right, nearly equaling the 33½3 % a group of chimpanzees would score by responding at random, he told the group. This was their introduction to what Rosling called “Factfulness,” a crusade to combat false notions of how the world works.

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TRUTH

80%

of the world’s population has some access to electricity. Most in the West get it wrong. — FAC T F U L N E SS

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Thinking Fast and Slow. So, exactly how did these scholarly families develop their approaches to wisdom in discussions around dinner tables 4,000 miles apart?

Superforecasters beat the experts

Average Brier score (lower is better)

Subject-matter experts tend to overestimate the importance or influence of their areas of concentration. That’s one reason why generalists trained at forecasting tend to make better predictions than the specialists in a field. This graph shows a group of Superforecasters was 35% more accurate than the Chicago Mercantile Exchange FedWatch Tool at predicting the outcome of Federal Open Market Committee meetings. The performance of both groups was measured in Brier scores that assign lower numbers to more accurate predictions.

ORIGIN STORIES The idea of Factfulness was hatched to address a vexing problem Hans Rosling was facing. His daughter-in-law Rönnlund shared the genesis with Luckbox. “He was working in global health and trying to teach the students a bigger picture of global trends and proportions, so they would understand what the world was like,” she said. “He was always frustrated that he didn’t manage to give them the proper overview.” Meanwhile, on another continent, Superforecasting grew out of an academic undertaking called the Good Judgment Project. It was a series of prediction tournaments sponsored by the Defense Department to pit groups of experts in various fields against each other and arrive at better forecasts. Although the two movements began with differing goals, they arrived at some similar conclusions. Both rediscovered a venerable piece of wisdom—the critical importance of humility.

0.15

0.10

0.1018

0.0661 0.05

0.00

CME FedWatch Tool

Superforecasters S O U R C E S : Good Judgment Inc. and the CME FedWatch

Accurate forecasting begins with reliable data. That’s why this special section of Luckbox combines two of our favorite movements: ALL IN THE FAMILIES The late Hans Rosling, a professor of internationFactfulness and Superforecasting. Think of Factfulness as the quest to ban- al health at Stockholm’s Karolinska Institute, coish wrong-headed but commonly held mis- wrote Factfulness with his son, Ola Rosling, and conceptions about the world and then re- daughter-in-law, Anna Rosling Rönnlund. In a different time and place, Philip Tetlock, a placing them with the truth. It cleans the slate for making useful predictions. Superforecasting begins with a foundation of truth News coverage and applies scientifically proven techniques to estemporary setbacks tablish the probability of certain outcomes—instead of guessing what may happen. Factfulness can professor at The Wharton School of the University of Pennsylvania, wrote Superforecasting with be a good place to start. Readers who want to hone their prognos- journalist Dan Gardner. They based the book on tication skills can pursue Factfulness and research Tetlock performed with his wife, BarSuperforecasting in the pages of two books. bara Mellers, who’s also a Wharton professor. Both books have earned praise in high One is called Factfulness: Ten Reasons We’re Wrong About the World—and Why Things are places. Billionaire Bill Gates called Factfulness Better Than You Think, and the other is ti- “one of the most important books I’ve ever tled Superforecasting: The Art and Science of read.” The Wall Street Journal lauded Superforecasting as “the most important book on Prediction. decision-making since Daniel Kahneman’s Both books are family affairs.

AVOIDING OVERCONFIDENCE Discouraging people from thinking they know more than they do became one of the chief goals of the Factfulness book and the Gapminder Foundation the family formed to gather and share the data that informs Factfulness, Rönnlund said. “The whole book,” she declared, “is about becoming more humble about what we know about the world and make us realize that we need to spend a little time actually checking the numbers before we trust our gut feeling when we make decisions.” Overconfidence in a set of facts can also undermine group decision-making, noted Mellers, who’s been instrumental in the foundational and ongoing research that underlies Superforecasting. “When you don’t know the people you’re dealing with, you use the confidence they express in their answer as a cue to knowledge,” she said. “If that confidence is uncorrelated to accuracy, it can take you south.”

emphasizes

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the majority instead of the outliers.

To be more data-driven, focus on Research in both the Factfulness and Superforecasting camps also indicates experts exhibit a strong tendency to overestimate the importance of whatever is happening in their areas of specialization. Nuclear physicists, for example, tend to overstate the probability of nuclear war. So, let’s keep humility in mind as we look more closely at how the two movements have addressed interrelated problems.

Almost everything resides along a continuum between the poles, not at the ends of the spectrum. That fact bears directly upon the outdated view so many cling to about the distribution of wealth in the world. Fifty years ago, most of the planet’s population lived in either extreme poverty or relative wealth. Plotted on a chart, people tended to fall into either the rich group at one end or the poor group at the other—with a wide gap in between. These days, the chart looks more like a solid line with most people somewhere in the middle instead of at the extremes. It changed because of great strides forward in many parts of the world. (See sidebar on p. 32.) Luckbox views the gap instinct as a liability in financial commentary. Pundits issue endless predictions of bear or bull markets, even though conditions fall between those extremes 90% of the time.

FACTFULNESS The Rosling family identified 10 “instincts” that prevent us from seeing the world as it really exists. They called the two most important the “gap instinct” and the “negativity instinct.” “When we’re talking about the gap instinct, we have the tendency to always talk about the extremes and the outliers and we forget the majority,” Rönnlund said.

Increasingly accurate forecasts

As an event approaches, we can make better predictions about the outcome—as this chart shows. The first update usually corrects an error, adds the views of more forecasters or incorporates additional research. The second may acknowledge new developments, recognize changes that have come with the passage of time or allow for reevaluation of assumptions. (The lower the Brier score, the more accurate the forecast.)

SUPERFORECASTING

Brier score (lower is better)

0.6

FIRST UPDATE=15% MORE ACCURATE 0.5

SECOND UPDATE=ANOTHER 15% 0.4

0.3

0.2

Perceiving such gaps where they don’t exist hampers decision-making, Rönnlund cautioned. “If we’re going to be more data-driven, then we need to focus on the majority, rather than the few outliers,” she asserted. Negativity, another instinct that impairs decision-making, tends to come naturally to many of us because of what constitutes “news,” Rönnlund said. “Even though we might have a positive trend overall, the only thing people hear about will be the dips,” she noted. “Something may be on the rise or getting better and better, and we think that it is getting worse and worse.” Besides the negativity instinct and the previously mentioned gap instinct, some of the other instincts with more or less self-explanatory names include fear, size, generalization, blame and urgency. Others might require definitions. They include “straight line,” which conveys the false impression a trend will continue unchecked forever; “destiny,” which implies an unalterable fate; and “single perspective,” which results from relying on just one source of information. Does subduing those instincts promote accuracy? Editors at The Washington Post apparently think it does, as evidenced by the paper’s decision to work with the Gapminder Foundation to use Factfulness to refine its newsgathering. Plus, it’s our contention at Luckbox that keeping those 10 instincts at bay to achieve a state of Factfulness could serve as a basis for becoming a lot more like a Superforecaster.

Number of updates

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S O U R C E : Good Judgment Inc.

The Good Judgment Project, which began in 2011, has attracted tens of thousands of volunteers eager to hone their forecasting skills. The top 2% displayed the prowess to earn the Superforecaster designation, and tests show they’re 30% better than government intelligence experts at making accurate predictions. These days, an extension of the project is continuing to take the guesswork out of predictions, thanks to the collaboration of four professors working on something they call the BIN model of forecasting. The model improves predictions by helping would-be prophets identify and deal with three components of forecasting: bias, information and noise. Hence, the B-I-N designation. Let’s examine each of those factors as understood through research led by Ville A. Satopaa, a professor at INSEAD, a graduate

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Rosling’s Poverty Paradox

Discovering we’ve been wrong can be a pleasant surprise or a rude awakening. Let’s look at two common misperceptions that illustrate that point. On the pleasant side, poorer countries are making much more progress than most people in rich Western nations generally realize, said Anna Rosling Ronnlund, vice president of the Sweden-based Gapminder Foundation. “We’re underestimating the positive trends when it comes to improved economy and improved lifespans and improved education and improved health all over the world,” she said. But while we’ve been failing to notice the dizzying pace of positive change in developing countries, we’re also ignoring a dark potential threat. “People are totally underestimating how far along China is in sort of defining things,” Ronnlund warned. “We are stuck with a view that Europeans and North Americans still dictate everything that happens.” Those two startling views on relative prosperity and creeping hegemony are among many perspectives researched and promoted by the Gapminder Foundation. It’s a group dedicated to gathering and sharing accurate information to dispel the public’s many false perceptions. The foundation is tied to the Factfulness movement described in the article beginning on p. 28.

business school with campuses in several countries. He has worked on the research with Tetlock, Mellers and Marat Salikhov, a professor at the New Economic School in Moscow. Information: The more facts we have, the better our forecasting. With no information, it’s best to predict a 50% chance an event will occur, meaning we simply don’t know. But as intel flows in and indicates a certain event will or will not happen, we can place ever-greater probability on the outcome. The more evidence we gather that something will occur, the closer we are to assigning a probability of 100%. But if the informa-

tion we’re compiling makes it more and more likely an event won’t take place, we can assign a probability closer to 0%. So, information is the stuff of good predictions. But what interferes with good forecasting? Bias: Forecasting errors that occur in a systematic way are called bias. Positive bias makes us forecast too high a probability of something happening, while negative bias pushes us to assign a probability too low. As mentioned earlier, experts often show signs of bias in their forecasts because they place too high a value on the significance of their fields of study. Noise: The other impediment to good forecasting is noise. It differs from bias because it’s not systematic. Instead, it occurs at random. If three financial analysts review the same accurate report and come away with three different conclusions, that’s an example of noise.

THE BIN MODEL The four professors working on the BIN model studied what separates Superforecasters from the rest of us. They found that elite group’s excellence at making accurate predictions breaks down this way: 50% of their advantage comes from eliminating noise, 25% results from setting aside bias and 25% occurs because they have more information. Three so-called “interventions” can enhance the good factors and minimize the bad. First, almost any forecaster can be taught to think more probabilistically, avoid overconfidence and seek information from reliable sources—like prediction markets and scientific polls. Second, Superforecasters can be brought together to tap into the “wisdom of the crowd,” which the professors say is like putting them on the intellectual equivalent of steroids. Third, forecasts can be tracked as the time for an event grows closer. Over time, bias decreases, information increases, and noise remains about the same. But then there’s another approach altogether.

HUMANS OR MACHINES Relying on an algorithm instead of human Superforecasters eliminates the problems of headaches, moods and all sorts of inconsistencies. But the AI approach also has drawbacks, noted Mellers, who’s been instrumental in Superforecasting since the beginning.

“How would you feel if an algorithm decided if you should be charged with a crime?” Mellers asked rhetorically. That nightmare of legal jeopardy illustrates why the future of forecasting belongs to a hybrid of human and machine, she maintains. While awaiting that symbiosis, we can take individual or group action to improve our forecasting. And organizations based on Factufulness and Superforecasting are there to help.

IMPROVE YOUR FORECASTS Individually, those seeking to make better predictions can avail themselves of the wisdom between the covers of the Factfulness and Superforecasting books. Or they can take the additional step of contacting the organizations created by the movements. Factfulness is promoted by the Gapminder Foundation, and Superforecasting’s results and methods are spread by Good Judgment Inc. The nonprofit Gapminder Foundation has been amassing reliable data and pushing aside falsity since its inception in 2005. A year later, it began offering TED Talks to share its optimistic but realistic vision. Its website is brimming with innovative visual aids that make its facts easier to understand, remember and apply. The foundation also makes Factfulness speakers available to groups and companies.

The Delphi Method of Forecasting

Simply stated, the Delphi method bases forecasts on the consensus of a group instead of on the thoughts of a single individual. These days, we often refer to the result as “the wisdom of the crowd.” A time-tested approach to making accurate predictions, the Delphi method demonstrates that old doesn’t necessarily mean outdated. It was developed at the Rand Corp. in the 1950s, but scientists still find it useful. The Delphi name goes back much farther. The ancient Greeks sought advice on politics and warfare from the Oracle at Delphi, a priestess believed privy to the thoughts of Apollo.

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Facts Banish Folk Tales

We’re often wrong about the world simply because we don’t keep up with the times, and these two graphics from the Factfulness book illustrate the problem. Many of us divide the planet into two camps—the developed world and the developing world. Let’s analyze that viewpoint by considering two propositions we know to be true. Families in poorer countries tend to have lots of children but many die early, while people in richer nations have fewer children and most live to reach adulthood or even old age. The illustration below that’s marked 1965 reflects data from that year—a time when the perception of a bifurcated planet made sense. The circles represent countries, and their size corresponds with their population. Clearly, the distribution of the circles shows that when it comes to childbearing and survival most countries were either developed or not in those days. But much has changed since then. People in most places are giving birth to fewer babies these days, and those children are more often growing up and surviving to a ripe old age. That’s why the illustration marked 2017, which illustrates data from that year, shows the preponderance of countries now qualify as developed or have progressed toward that status. So, the recent data discredits the outmoded idea of a world neatly divided into two groups—one of richer countries and another of poorer ones. What’s more, the seemingly insurmountable gap between the two categories has disappeared. The numbers also dispel the cynical notion of a planet in decline. Contrary to out-of-date beliefs, the inhabitants of Planet Earth are becoming richer, healthier and better-educated. DEVELOPED

Children surviving to age 5

100%

DEVELOPING

90%

End of the World? Not Yet.

Small families and few children die

80%

70%

1965

60%

50%

Big families and many children die

Babies per woman

1 S O U R C E : United Nations and Gapminder

Children surviving to age 5

100%

DEVELOPING

90% Small families and few children die 80%

70%

2017

60% Big families and many children die

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Babies per woman

Humanity probably doesn’t face extinction in this century, but tens of millions might perish in foreseeable mass catastrophes. At least that’s the upshot from a project called the Existential-Risk Persuasion Tournament, which brought together subject-matter experts and trained prognosticators known as Superforecasters. (See the article on the next page for more on the project.) The good news is both groups view human extinction as somewhat unlikely in the next 80 or so years. Superforecasters said the probability is 1%, and subject-matter experts placed it at 6%.

DEVELOPED

50%

The Good Judgment Project at Wharton spun off a commercial enterprise called Good Judgment Inc. to offer forecasts and forecasting training. It provides daily updates on the future of political, economic and social issues. Partners and clients include corporations and government agencies. Luckbox recommends its two-day forecasting course. Factfulness and Superforecasting both aim to create a better world by convincing the population to think mathematically and keep their facts straight. But will it ever happen? “It will be many slow steps before we have people being totally data-literate,” said Rönnlund. “We need to find a way where most people realize or learn in school that some basic statistical thinking or data literacy is more or less necessary to make proper decisions in life and at work.”

1 S O U R C E S : United Nations and Gapminder

But the bad news is both groups foresee a much greater probability of impending catastrophe, defined here as 10% or more of humans dying in a five-year period. Superforecasters placed the odds at 9%, while subject-matter experts collectively view the probability of a nearly unprecedented tragedy as a frightening 20%.

More Factfulness

One of Hans Rosling’s TED Talks

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Is AI Exciting New Tech or an Existential Threat?

Experts and Superforecasters can’t reach consensus on humanity’s fate by ED MCKINLEY

Smart people disagree about how much we should worry about artificial intelligence going haywire and harming humans. AI experts seem a little apprehensive, but trained forecasters aren’t nearly as concerned. In a dire scenario, specialists in the field place the probability AI will snuff out humanity at 3%, while the forecasting generalists see it as less than 1%, a recent scientific project indicates. But even though the chance of extinction seems slim, the research results weren’t all good news. Experts project there’s a frightening 12% chance AI might set off a chain of events that kills 10% or more of the world’s population before the year 2100. The generalists rated the odds of such a catastrophe at a less-pessimistic 2%. Scary or hopeful, those findings emerged from an undertaking known as the Existential-Risk Persuasion Tournament (XPT). The project pitted subject-matter experts in several fields against trained prognosticators known as Superforecasters.

A FOR ECASTI NG EXTR AVAGA NZA Researchers set up the project to study the likelihood of four potential global nightmares: bioterrorism, nuclear holocaust, severe climate change and runaway artificial intelligence.

12%

L ASTI NG DISAGR EEM EN T

Research Institute. Forecasting guru Philip Tetlock served as the XPTs chief scientist and helped lead the Superforecasting work at Wharton. Besides the predictions concerning AI calamities, The XPT researchers elicited some other AI-related forecasts from the two groups. Collectively, AI experts in the experiment say they see a 6.6% chance that by 2030 computers will achieve artificial general intelligence—defined as human-level

Experts project a chance AI will kill of humanity before the year

10%

From June through October of last year, 80 subject-matter experts on those existential risks worked on predictions alongside 89 seasoned, hand-picked Superforecasters who were trained in the Good Judgment Project at The Wharton School of the University of Pennsylvania. The XPT was conducted at the Forecasting

2100.

cognitive ability. The Superforecasters set the odds at 3.8%. The experts foresee the amount of money spent on computational resources for the largest AI experiments coming to $156 million by 2030, while the Superforecasters placed the figure at a somewhat more modest $100 million.

The disparity between the forecasts of experts and the generalists seemed striking, a scientist attached to the project tells Luckbox. The researchers also released a white paper describing their methods, presenting the results and addressing the gap between forecasts by the two groups. “Pundits and researchers have incentives to make bold claims that attract audiences and funding—and to keep their predictions vague enough so they can never be proven wrong,” they said in the paper. To little avail, the members of both groups were urged to collaborate to refine their visions of the future and work toward agreement. They tended not to budge, and the chasm remained. Even the most active participants couldn’t change each other’s opinions much, according to the paper. Monetary incentives for persuading others didn’t work, either, the researchers note. “We document large-scale disagreement and minimal convergence of beliefs over the course of the XPT, with the largest disagreement about risks from artificial intelligence,” the researchers wrote. The pressing practical question for future work is why Superforecasters were not moved by experts’ much higher estimates of AI extinction risk, and why experts didn’t respond to the Superforecasters’ lower estimates, the research team said in the white paper. “The most puzzling scientific question,” they continued, “is why did rational forecasters, incentivized by the XPT to persuade each other, did not converge after months of debate and the exchange of millions of words and thousands of forecasts?”

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A Superforecaster Looks Ahead

by ED MCKINLEY

Forecasting’s foreman offers a glimpse of the future and shares tips on making better predictions

as ceo of good judgment inc., Warren Hatch leads a cabal of Superforecasters whose mission is to provide accurate forecasts and vital forecasting training to businesses and government agencies. Before joining Good Judgment Inc. nine years ago, Hatch worked as a partner and portfolio manager at Catalpa Capital/McAlinden Research and as an analyst and portfolio manager at Morgan Stanley Investment Management. He earned the Chartered Financial Analyst designation from the CFA Institute and holds a doctorate in politics from University of Oxford in the United Kingdom. His employer, Good Judgment Inc., was spun off from the Good Judgment Project, a research undertaking conducted at the Wharton School of the University of Pennsylvania to study and refine forecasting. Wharton selected naturally talented forecasters and trained them to become Superforecasters, some of whom now work for Good Judgment Inc. Hatch not only manages those Superforecasters—he’s a Superforecaster himself. So, that’s why we were eager to hear Hatch’s forecasts and his thoughts on forecasting in this Luckbox Q&A. 34

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WHAT WAS THIS YEAR’S BIGGEST BREAKTHROUGH IN THE SCIENCE OF FORECASTING?

forecast that something will happen is also a 25% forecast that it will not happen. And events with 25% probability occur pretty often! So, if you forecast 75% for an event and it ends up not happening, it is not necessarily the case that the forecast was “wrong.” Rather, you may simply have entered that 1-in-4 likelihood future. In a probabilistic world, you are “correct” if you are well calibrated and assign 75% probabilities to events that occur 75% of the time.

In terms of applied forecasting, an exciting area of development is the impressive advances in large language models and other AI tools, which might not yet have pushed forward the frontiers of forecasting accuracy but certainly can help forecasters gather data on the questions at hand to be more accurate themselves. HOW ELSE HAS AI CHANGED FORECASTING? WHAT LIES AHEAD?

We already see early benefits, particularly in synthesizing vast amounts of information far more quickly than a human. In our view, hybrid forecasting [that combines AI and human input] isn’t the future; it’s here. We can think of forecasting as a full process: First, it identifies what decision needs to be made, which involves a moment of judgment where humans aren’t (yet) replaceable—at least for the tough, messy real-world questions. Second comes defining which questions we should ask to inform those decisions, where we really, really depend on the experts. Third, there’s developing the probability forecast itself, where we see AI taking a great role in areas that are well-structured and relatively straightforward but less so for loose and complex topics. The fourth step is summarizing the information that the forecasters generate, including often-lengthy commentary, to be delivered in a format useful for decision-makers, where we again see a lot of promise with AI tools. HOW ELSE CAN AI HELP?

We are in the process of deploying AI-generated alerts to clients on forecasts that have materially changed. The output is not yet perfect, but it gets us 90% there and a human can tidy things up in a fraction of the time it took a human alone a year ago. Humans and machines working together has been our model since inception, and we look

WHY DO THE PREDICTIONS OF DOMAIN EXPERTS DIFFER SO MUCH FROM THOSE OF TRAINED SUPERFORECASTERS?

BUT LET’S LEAVE AI FOR A MOMENT. MOST LUCKBOX READERS ARE SELF-DIRECTED TRADERS AND INVESTORS. WHAT SHOULD THEY KNOW ABOUT MARKET FORECASTS? WHAT CAN THEY DO TO IMPROVE THEIR FORECASTING SKILLS?

Market forecasts often come in the form of a target. From a probabilistic point of view, it’s good to know that target is consistent with a 50% probability estimate or some other threshold. In addition to a base case, it’s also good to have bull and bear cases—again, attached to an explicit probability, like 75% and 25%. They get a more precise understanding of the market forecasts as well as a method for keeping score. And as for what they can do to improve their forecasting skills, they can join us for one of our Superforecaster training sessions! LUCKBOX HAS TAKEN THE COURSE AND FOUND IT FASCINATING. BUT ON TO SOME OTHER QUESTIONS. WHAT DO MOST PEOPLE GET WRONG ABOUT FORECASTING?

For folks who are newer to the idea, they will often conflate a forecast with a poll. So, if the

We really like to have a mix of experts and Superforecasters working together whenever possible. For Daniel Kahneman [a pioneer of scientific forecasting], experts bring the “inside view” with their models of how the world works for a particular topic, while Superforecasters can bring the “outside view” of how the world might be without the preset models. But experts can be good forecasters too. It really seems to depend on how much attention they pay to their forecasting track record. WHAT PREVENTS SOME DOMAIN EXPERTS FROM MAKING FORECASTS AS ACCURATELY AS SUPERFORECASTERS?

In our many workshops and public tournaments, we have seen some general tendencies. First, experts tend to assign higher probabilities to events in the area of their expertise than skilled forecasters. Second, when we can score the forecasts, experts tend to lag skilled forecasters. However—and this is the big point—if experts continue to apply themselves and pay attention to their track record, they can become better forecasters across the board. WHAT WILL BE THE MOST STARTLING (OUTLIER) EVENT OF 2024?

By definition, if it’s a black swan, we don’t

want.

Polls show what people Forecasts show how likely something is to forward to exciting advances in the year ahead and beyond. After all, “computers” used to be people sitting in a room doing routine calculations. Once the machines became sufficiently sophisticated, they took over all that heavy lifting, and we even reassigned the label to them. What we see today is another step in that process of resetting the division of labor between humans and machines. Exciting times, indeed.

Superforecasters say there’s a 20% chance of some event occurring by a particular date, oftentimes that will be misinterpreted as 20% of Superforecasters think that will happen. Polls show what people prefer to happen. Forecasts show the probability of how likely they think something will be to happen. Also, folks who are newer to the idea sometimes forget that a forecast has two sides: A 75%

happen.

know! But there are also a lot of dark gray swans with low probabilities and high potential impact. There are good candidates: an unexpected AI breakthrough opening up new areas of science, a decisive rout in the U.S. elections by either party, resolution of the conflict between Israel and the Palestinians. I’m not confident enough to say those events will happen, but I’d be around 5% that any of them might.

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Can These Two Trading Strategies Really Predict a Stock’s Direction? Momentum and insider activity are anomalies that defy the efficient market hypothesis—a theory that says you can’t win big by G A R R E T T BA L DW I N The efficient market hypothesis (EMH) holds that stock prices reflect absolutely every bit of public information, leaving zero room for investors to make additional profits—let alone beat the market. If that’s true, hedge funds should shut down, active equity managers should quit, and everyone should either passively purchase index funds or trade options the tastylive way. But even though some academics may buy into the EMH, traders aren’t about to stop trading. The fact is that active investors are always looking for identifiable and sustainable advantages to guide their trading. After all, the price/earnings (P/E) ratio indicates companies trading at lower P/E multiples often generate higher returns. Plus, the neglected firm effect posits that companies that aren’t subject to rigorous market analysis are sometimes underpriced. Then there’s the January effect that occurs when stocks surge after the first of the year—particularly smallcap stocks. What’s more, the EMH ignores the drivers of speculative bubbles, the basis of trend investing, and other behavioral explanations or “anomalies” that contradict it. For more than 40 years, executive insider buying has proven an exception to the rule. Academic data suggests corporate insiders outperform the market when buying shares in their own companies and that cluster buying (when multiple executives buy the same stock) has given in36

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vestors an edge. Investors also gain an advantage from the combination of mean reversion and momentum indicators. In fact, that combo has produced surprise rebounds that have crushed short positions. Over the last 18 months, an odd series of patterns and narrative shifts in the markets have fueled remarkable short squeezes and massive losses for the hedge funds that are victims of surprise reversals. The practice of selling something they don’t own has turned into a massive loss for hedge funds and anyone else betting on capitulation in U.S. and European markets. Short sellers had roughly $120 billion in mark-to-market losses in this year’s first half, according to Data group S3 Partners. The losses continued to pile up in November. Shorts lost $42.8 billion in four days in

mid-November as markets priced in higher odds of rate cuts in 2024, S3 said. Shorts continued to follow the narrative that valuations are too high, economic conditions will drive further losses and the next liquidity crisis is right around the corner. But the markets have been resilient—with short squeezes punishing funds over the last 18 months. Could funds improve their knowledge of when squeezes are looming? Yes. The adage goes that market timing is impossible. A combination of technical analysis and Securities and Exchange Commission Form 4 documents can tell shorts when to head for the exits. More importantly, it has produced a reliable strategy for short-term trading opportunists or long-term investors seeking conviction in strong, capital-efficient companies.

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EYEING MOMENTUM In 2018, hedge fund manager Stanley Druckenmiller famously noted that markets have lacked a trend. The rise of algorithmic trading has stopped selloffs in their tracks, as dip-buying continues to drive volume and reversals across the market. As stocks move into the third standard deviation of price, a common trend of dip-buying has occurred during intraday events. However, markets have adhered to shortterm reversals in an era of increasing or elevated interest rates since January 2022. To understand such reversals, closely examine two momentum oscillators on the S&P 500 SPDR ETF (SPY). The relative strength index (RSI) and the money flow index (MFI) can help traders understand overbought and oversold conditions, trend movements, and price and volume momentum. The RSI is a momentum oscillator that measures the speed and change of price movements in a stock, asset or index. It ranges from 0 to 100, identifying overbought or oversold conditions. When the RSI hits 70, a stock or index is considered overbought. When it falls to 30 or under, it is considered oversold. The MFI is a momentum indicator that combines price and volume to measure the strength of buying and selling pressure. It also oscillates between 0 and 100, identifying potential overbought or oversold conditions based on money flow into or out of an asset. The MFI is overbought at 80 and oversold at 20. The chart above summarizes the RSI for the S&P 500 ETF Trust (SPY) from January 2021 to November 2023. On three occasions over the last 18 months,

Buy on the sound of cannons

The S&P 500 SPDR ETF (SPY) has had sharp reversals when the relative strength index falls below 30, a territory known as “oversold.” 73.75 70.00 66 62 58 54 50 46 42 38 34 30 26 2021 MAR 2 MAY 3 JUL 2

SEPT 2 NOV 2 2022 MAR 2 MAY 2 JUL 5

the Daily RSI and MFI readings of the SPY ETF have simultaneously fallen into oversold territory. Those periods are January 2022, October 2022 and October 2023. Not long after, markets began to trend the other way, with the moving average convergence/divergence indicator (MACD) following a few days later into positive territory. This period has coincided with sharp, short-term rebounds and noticeable short squeezes.

Using technical indicators doesn’t tell the whole story of confidence in the financial markets once they move into oversold territory on those three occasions. It’s essential to look to other financial anomalies for clues on the timing of a potential reversal. In the

Follow the “collective” money

The green line is the five-day moving average of insider buying to selling in total dollars. When the green line goes high, it’s “time to buy.” INSIDER NET BUY/SELL RATIO (IN DOLLAR AMOUNT)

JAN 2022

APR 2022

JUL 2022

OCT 2022

JAN 2023

APR 2023

—— 22-DAY MA

JUL 2023

—— S&P 500

OCT 2023

NOV 2 2023 MAR 2 MAY 2 JUL 3 SEP 5

last 18 months, one of the best signals has been the collective insider buying-to-selling ratio in dollars in the chart below.

TRUTH

2% Higher

is the average excess return corporate insiders enjoy in the month following their legal insider buying activity.

S O U R C E : SECFORM4.com

The five-day moving average for insider buying-to-selling reached its second-highest level in 12 months in late October, coinciding with the recent near-term bottom. The blue line is the five-day moving average for that reading. The red line is the performance of the S&P 500. As you can see, insiders were busy buying their stocks as markets bottomed in October, while RSI and MFI were oversold. The S&P 500 rallied more than 9% since hitting its bottom on Oct. 27. The same situation appeared twice in 2022. The January 2022 rally came after markets speculated that the Fed wouldn’t need to raise interest rates above 2.5% last year. Buying was the most aggressive in the previous two years compared to selling during the liquidity bottom in October 2022. After the Bank of England pivot and the Federal Reserve’s pullback in mortgage security sales, the SPY has rebounded from its 350 level. Large amounts of insider buying are expected after significant policy changes among central banks and governments to provide monetary and fiscal support to markets. Insider buying

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NOV 5

S O U R C E : YCharts

—A 2023 FORTUNE STUDY OF SEC DATA

INSIDER TRADING ACTIVITY

—— 5-DAY MA

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was robust in December 2022 after the People’s Bank of China provided easing during the nation’s economic reopening. The Bank of Japan also provided QE support around that time. The beginning of 2023 saw the SPY pop more than 10% in the first five weeks. Analysts can see similar dip-buying frenzies corresponding with sizeable insider buying over the last 15 years. The following chart is a breakdown of insider buying to selling on the S&P 500 since 2008. The high points of the chart all represent the strongest periods of insider buying over 15 years. It isn’t a coincidence that the strongest periods happened during major monetary or fiscal policy shifts that directly influenced market liquidity. In that case, the moves higher coincide with major policy shifts to accommodate the economy—but end up turbo-charging risk assets like equities.

Insider Buys

purchasing and when the S&P 500 reaches oversold levels. Insider buy Price as of Stock Ticker 1. If the stock goes up, the value of (Date anounced) Dec. 15 close the spread goes down. As a result, we make money. Frontier Cluster: $18.93 2. If the stock trades sideways, the FYBR $24.79 Comm. (10/20) value of the spread will decay. As a result, we’d make money. Director: $50.89 3. If the stock pulls back, we’d be $74.21 Block SQ (11/13) happy to own these companies at a lower level. But if the trade drops the value of the targeted premium, traders CEO: $36.80 Intel INTC $46.16 (11/2) can cut their losses and look for an opportunity to reenter this position. In October, capital-efficient compaAmerican Director: $143.93 AXP $180.51 Express (10/25) nies with significant options volume and strong insider buying activity included Delta (DAL), Intel (INTC), Director: $30.75 Delta DAL $42.34 American Express (AXP), Fron(10/31) tier Communications (FYBR) and Square (SQ). In each instance, the S O U R C E : Sec.gov companies’ stock price increased significantly in the weeks that followed. In high insider buying environThe strongest monthly 50-day insider buyments in oversold conditions, traders can ing readings include the following: sell put spreads below the executive’s price HOW TO TRADE THE REVERSAL • October 2008 (Lehman’s collapse to maximize the probability of profit and tarSelling a credit put spread is an options tradand government stimulus) get double-digit gains. • March 2009 (After the first massive ing strategy involving two transactions: selling QE program) a put option and buying another with the same • August 2011 (After the first debt ceiling crisis) expiration date but a lower strike price. This TRADER’S TAKEAWAYS • January 2016 (After China’s yuan crisis) strategy is also known as a bull put spread or a • December 2018 (After the bond-equity The financial markets are halfway through put credit spread. crash and the Fed’s pivot) the Great Refinancing Crisis, fueled by WashThe maximum profit is limited to the net • April 2020 (After the Fed pumped $5 trillion) ington’s substantial spending and questions premium received from the option sales, • October 2022 (After the British Gilt/global about the Treasury Department’s ability to while the maximum loss is limited to the liquidity crisis) refinance trillions of dollars in short-term difference in strike prices minus the premiIn each case, the markets rallied after the um obtained. Traders can pick through the debt while funding a likely deficit north of large move on the insider buying/selling ratio. extensive list of insider buys during heavy $1.5 trillion in 2024. In addition, the narrative on elevated interest rates is shifting from “how high” to “how long.” Previous central bank pivots suggest the significant choppiness of the markets has not concluded, and investors should be wary of continued shortContrarian Buy? term spikes and drops that take markets from Heavy insider buying compared to selling in dollars has coincided overbought to oversold and back again. with market bottoms and policy shifts over the last 15 years. Pay close attention to short-term, oversold conditions and sell credit spreads on stocks you want to own for the long term with solid INSIDER NET BUY/SELL RATIO (IN $USD) fundamentals, a track record of capital effi—— 5-DAY MA —— 22-DAY MA —— S&P 500 ciency and excellent management. More adventurous traders should turn to tastytrade’s platform to take advantage of stocks with high implied volatility ranks (IVR) to exploit options pricing and compare those stocks to SEC Forms to help build conviction around similar trades. 2008

2010

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S O U R C E : SECForm4.com

Garrett Baldwin, an economist who studies market anomalies, is Luckbox editor-at-large and author of the financial blog Postcards from the Florida Republic on Substack.

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33 Predictions for 2024 Our respect for the science of forecasting doesn’t prohibit us from engaging in the fun (and folly) of prediction. While we can’t promise outcomes, we can confirm our convictions, prepare ourselves mentally and position ourselves financially. b y G A R R E T T B A L DW I N & J E F F J O S E P H

FINANCIAL MARKETS, BUSINESS AND THE ECONOMY

Emerging market stocks rebound dramatically in the second half of 2024, anchored by a broad decline in the U.S. dollar. One of the top performers of the year from emerging markets is Coca-Cola Femsa SAB de CV (KOF). 40

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The Fed does not cut interest rates until the third quarter of 2024. The Department of Justice wins its landmark antitrust case against Alphabet-owned Google (GOOGL). Alphabet spins off YouTube in a boon for Google shareholders who receive stock in the new public company, which quickly exceeds the market value of Netflix (NFLX). A string of weak Treasury auctions draws attention to the trillions in refinancing required by the U.S. Treasury Department and presses the 10-year bond back to the 5% range.

PHOTOGRAPHS: GETTY IMAGES

The S&P 500 suffers two 10% or more “corrections” in 2024: One in March because of questions and concern about the Federal Reserve’s bank lending program, and the second in September when polls suggest one of the two unpopular major presidential candidates will be elected. Look for a strong rally in November-December, regardless of who wins the election.

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No housing market crash. The 30-year mortgage rate remains above 7% for most of the year. Two years after telling viewers to avoid Meta Platforms (META) at $90 per share, Jim Cramer tells viewers to buy Meta … at $360 per share. Conversational AI assistants and co-pilots become ubiquitous. Multi-modal AI platforms and interfaces transcend language and enter the realm of perception. Yes, that’s scary. Nvidia (NVDA) continues to dominate the chip market, and its stock continues to outperform the broader market. A fed pivot on interest rates raises concerns about global liquidity and leads to a drop in Bitcoin back under $30,000, but a strong Q4 rally takes it over $60,000. Gambling stocks outperform the market. Penn Gaming (PENN) and Caesars Entertainment (CZR) stocks both increase by more than 40%.

Demand for GLP-1 inhibitor drugs for weight loss such as Ozempic and Wegovy will exceed $10 billion, more than double current pharma industry forecasts.

back against Net Zero and immigration policies. More countries initiate steps to leave the European Union, straining the economic bloc’s stability.

DOMESTIC POLITICS

SPORTS

Gov. Wes Moore of Maryland delivers a keynote speech during the Democratic Convention, sparking early chatter around a 2028 election run.

In six games, the Atlanta Braves beat the Baltimore Orioles in the 2024 World Series.

Despite concerns about the border and a slowing economy, Democrats win the House of Representatives by focusing on women’s rights in close district races. Joe Biden will not be the nominee of the Democratic Party.

Chicago Bears 2021 No. 1 draft pick Justin Fields becomes the 2024 starting quarterback for the Las Vegas Raiders. In a rematch of Super Bowl 57, the Philadelphia Eagles blow out the Kansas City Chiefs, but the sports commentators are more interested in Taylor Swift, who’s sitting in a box with Kamala Harris.

Paul Krugman, New York Times columnist and Nobel Prize winner in economics, calls for Congress to provide stimulus checks to Americans to help spur the economy and prevent a recession in 2025. Florida Gov. Ron DeSantis fades early in the 2024 primaries, and his waning political career mirrors another former Florida Governor: Jeb Bush. Despite repeated threats on social media, no American celebrities leave the country because of the results of the 2024 presidential election. Robert F. Kennedy Jr. will receive over 10% of the votes in three states.

INTERNATIONAL POLITICS Mexico elects Claudia Scheinbaum as its first-ever female president. China doesn’t invade Taiwan but forces a showdown with U.S. Naval ships in the South China Sea that prompts an emergency summit. Congress bungles national security by failing to allocate money for nuclear icebreakers in the Arctic. Russia and China continue to establish footholds on the “Roof of the World,” which promises to become the next geopolitical flashpoint. Europe continues to move to the right politically because of push-

The New York Rangers finally crack the Eastern Conference for the first time in the Igor Era but the upstart Vancouver Canucks win the Stanley Cup Finals. Rumors swirl that Swift will replace Harris as vice president on the Democratic ticket. Baseball rookies of the year are Carter Young of the Texas Rangers in the American League and Jackson Chourio of the Milwaukee Brewers in the National League. France defeats England in the UEFA Euro 2024 soccer final. Harry Kane leads the tournament in goals. The Chicago Bears tap Marvin Harrison as the No. 1 pick in the NFL draft. He’s the first wide receiver to achieve that feat since Keyshawn Johnson in 1996 and only the fourth in NFL history.

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Existential Threats Aside, AI Will Be Good For Your Health by JA M E S M E LT ON

Algorithms are already surprisingly good at diagnosing ailments, recommending treatment and predicting 10-year heart attack risk. But don’t get too excited.

You shouldn’t expect to have a robot doctor—at least not anytime soon. But artificial intelligence (AI) is revolutionizing health care faster than you might imagine. It’s already creating fresh opportunities to help doctors forecast future ailments and personalize care for individual patients. The main advantages of using AI in medicine come from its super-human ability to read and analyze gargantuan amounts of data and find patterns humans might not see, even if given years to study the same information. That gives AI the potential to make your doctor more efficient, better informed and more likely to make the right medical decisions. Studies in the United States and United Kingdom show AI is already surprisingly good at predicting 10-year heart attack risk, diagnosing ailments and recommending treatment options to address them. But don’t get too excited just yet. AI still lacks the intuition and self-awareness of a human doctor. And all the rapid calculations performed by AI algorithms can produce mistakes and electronic “hallucinations” that don’t make sense. Plus, issues of cultural and racial bias and medical privacy raise important concerns. Limitations aside, AI’s number-crunching and pattern-recognition prowess opens the door to making algorithms among the most important gadgets in the medical bag, along with stethoscopes and pulse oximeters. And this not far-off, science-fiction-level speculation. If they haven’t already, patients can expect to start seeing the impact at the exam-room level soon.

PR EDICTI NG H E A RT ATTACKS Suppose you had chest pain. Your doctor could respond by ordering imaging tests and find an obvious problem. But not all heart problems are obvious. Symptoms that could kill you in 10 years—including some that might be addressed if you changed your lifestyle now—can be hard to spot. But AI technology developed at University of Oxford in the United Kingdom can help clinicians look deeper. The AI identifies problems not visible to the human eye and, if implemented across the U.K.’s National Health Service (NHS), could lead to 20% or more fewer heart attacks and 8% fewer cardiac deaths compared with traditional treatment methods, the Oxford team says. Caristo Diagnostics—an Oxford-connected tech spinout company—incorporated the technology into a “cloud-based medical device,” called CaRi-Heart. Put simply, the technology combines information extracted from a CCTA scan and other risk factors—like diabetes, high cholesterol, smoking and 42

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Arya Rao is a researcher and student in the M.D./ Ph.D. program run jointly by Harvard Medical School and the Massachusetts Institute of Technology.

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Dr. Girish Nadkarni is a professor at the Icahn School of Medicine at Mount Sinai.

hypertension—to calculate a patient’s risk of having a fatal cardiac event over the coming decade. It’s already in clinical use in the U.K., Australia, Germany, France and other European Union countries. The CaRi-Heart technology proved its worth quickly when put to the test, according to an email response to Luckbox from Dr. Charalambos Antoniades, who led the Oxford study and serves Caristo as a co-founder and chief scientific officer. “Introducing it into the first five hospitals in the British NHS resulted in change of management in 39%-45% of the patients, suggesting that without this technology, we treat inappropriately nearly half of our patients undergoing CCTA,” Antoniades says. Caristo expects CaRi-Heart to receive United States Food and Drug Administration clearance by the end of 2024 or early 2025 at the latest and in clinical use here soon after that, he notes. Besides his work at Caristo, Antoniades is chair of cardiovascular medicine at the British Heart Foundation and director of University of Oxford’s Acute Multidisciplinary Imaging and Interventional Centre. Scientists at the University of Edinburgh developed an AI tool that

Big Data Doctors Increasingly, your doctor’s recommendations will be less about the study of people like you and more about you, as an individual. To get there, scientists are using artificial intelligence tools to find patterns human researchers might take decades to uncover.

Among other things, scientists use AI to identify indicators referred to as biomarkers, which can indicate how likely it is a patient will get sick. Once discovered, the biomarkers—which include data ordinary measurements such as body mass index and new kinds of data from the study of genomics, RNA, proteins and metabolites—could give doctors greater insight into the health of individual patients.

Combing through data

The U.S. health care community already collects an unfathomable amount of data on patients. That alone gives the medical community the raw material for discovering and analyzing new biomarkers. For human brains, reading through gargantuan numbers of patient files to find patterns could take years. But this is where AI shines.

super-human ability

AI possesses a to read and analyze gargantuan amounts of medical data and find patterns doctors might not see. can diagnose—and rule out—heart attacks with astonishing accuracy. Compared to current testing methods, the algorithm, CoDEACS, could rule out a heart attack in more than double the number of patients, with 99.6% accuracy. The university says the technology could greatly reduce hospital admissions.

ASSESSING CHATGPT In the U.S., research shows that ChatGPT—an AI model that has already shown it can pass medical licensing board and bar exams—can be trained to diagnose patients with as reliably as an inexperienced doctor. ChatGPT’s accuracy rate at diagnosing health problems was almost 72% across 36 “clinical 44

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vignettes,” or instructive scenarios, according to a study published in May by researchers at Massachusetts General Hospital. Its rate was nearly as good as that of a typical recent medical graduate. Another study found ChatGPT an impressive 98.4% accurate at making appropriate breast cancer screening recommendations. Arya Rao, one of the authors for each of the two studies, says the results show the infor mation-crunching ability of large-language AI models gives them potential as valuable diagnostic tools. “By myself, I’m not going to be able to read through every single patient file at Massachusetts General Hospital, not just because of [the Health Insurance Portability and Accountability Act], but because that’s an inhumane level of effort and time that just no one

Once the data is compiled AI algorithms can comb through tens of thousands of case files, cotton-gin style, at mindboggling speeds. Researchers apply the same kind of raw computational power to applications like drug development and medical imaging.

Prophylactic use

In theory, the use of predictive AI algorithms in medicine “is basically a crystal ball, which tells you what’s going to happen, or not, to each individual patient,” says Dr. Girish Nadkarni, director of the Charles Bronfman Institute for Personalized Medicine at Mount Sinai Health System. At the clinical level, Nadkarni says AI is best for situations in which the level of certainty necessary to make decisions is low and there are ample opportunities to reverse course. Good examples would be “scheduling clinic appointments, deciding when patients need to be moved from the emergency room to the hospital floor, things like that,” Nadkarni says. “Everything is a continuum, but where the certainty required is high and the reversibility is low—there you definitely require a human in the loop,” he says.

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TRUTH

has,” Rao told Luckbox. Rao, who has a bachelor’s degree in biochemistry and computer science from Columbia University is a student in the MD/PhD program run jointly by Harvard Medical School and the Massachusetts Institute of Technology.

result, researchers found, is that the performance of such models can degrade over time. Predictive AI models need regular maintenance to keep them running at peak efficiency, said a co-author of the study, Dr. Girish Nadkarni, director of the Charles Bronfman Institute for Personalized Medicine at Mount Sinai Health System. “The hypothesis is that if you can figure JUNK (OR BIAS) IN, JUNK OUT out what will happen to a patient well in adThe problem with using AI in medicine is that vance, you will take steps to change it and the algorithms can become out you will change the outcome, so of date or can include cultural a bad outcome gets converted HOW WOULD YOU FEEL or ethnic biases that lead them to a good one,” Nadkarni told IF YOU FOUND OUT YOUR to the wrong conclusions. Luckbox. “And instead of dying, DOCTOR USED AI TOOLS IN YOUR TREATMENT? Algorithms can fall victim the patient survives, which is a to their own ability to learn great outcome for the patient.” 34 % and establish correlations But that process introduces HAPPY between incoming patient data issues, he noted. AI models 28 % data and patient outcomes, must be retrained on a regular NEUTRAL / a study in October by the basis because of changes in pracCOMPLETELY UNFAZED Icahn School of Medicine at tice patterns, patient popula33% Mount Sinai and the Univertions and hospital systems. sity of Michigan found. Nadkarni described AI as “a SKEPTICAL, BUT WILLING TO SEE WHERE IT GOES The study indicated that tool in your toolkit” that should using the AI models to adjust be regularly sharpened. “And if 5% treatment can, in turn, alter you don’t maintain it and if you READY TO SHOP FOR A NEW DOCTOR the baseline assumptions just let it run without proper used to train the models. The oversight, proper governance —LUCKBOX READER SURVEY and proper maintenance,” he said, “then that is not going to be the best thing for anyone.” Another problem he has observed is that bias can creep into AI models and unintentionally put minority communities at a disadvantage.

THE DANGER OF BIAS AND MISUSE

Dr. Charalambos Antoniades is director of University of Oxford’s Acute Multidisciplinary Imaging and Interventional Centre.

None of AI’s potential problems and opportunities are reasons to either avoid using AI in health care, or rely on it without caution, said Nadkarni, who is also a medical professor at the Icahn School of Medicine at Mount Sinai. He said the world seems divided into those who fear the advent of Skynet—the fictional evil artificial general superintelligence system depicted in the Terminator movies—and those who think the technology will be unequivocally safe and beneficial. “I think both these groups of people are missing the point,” Nadkarni said. “It’s going to be a great tool,”

99.6%

The accuracy of an AI tool, from University of Edinburgh scientists, designed to diagnose heart attacks

he said, “but we are missing the short-term dangers that are right in front of us without worrying about Skynet. We’re seeing things like biased decision making, both by physicians, patients and health care entities, because of biased data and biased algorithms. We are missing misinformation that can now be weaponized and almost industrialized.” The alleged misuse of predictive algorithms is at the core of a class-action lawsuit filed against UnitedHealth Group (UNH) in Minnesota on behalf of two deceased UnitedHealthcare Medicare Advantage beneficiaries. It’s claimed in the lawsuit that the health insurer used an AI model called nH Predict, to set “rigid and unrealistic predictions for recovery” of Medicare Advantage-enrolled patients in post-acute-care rehabilitation facilities. UnitedHealth staffers used the platform “to wrongfully deny elderly patients care owed to them under Medicare Advantage Plans by overriding their treating physicians’ determinations as to medically necessary care,” the Plaintiffs said in the lawsuit. They also claim the AI model has a 90% error rate.

TIME FOR REGULATION? “Obviously, industry collaboration is critical,” Nadkarni said. “And I’ve started companies myself. But at the same time, the incentives have to align in order to make sure that it’s good for the commonwealth.” He said the government needs to step in to make sure AI algorithms aren’t used by health insurers and others to discriminate against patients or use their data in other ways that could hurt them. “There needs to be regulation around that soon,” Nadkarni said. “Now there’s precedent for this with the [The Genetic Information Nondiscrimination Act of 2008] GINA ... no one can discriminate against you based upon your genetic mutations.” He said the U.S. needs a similar law dealing with AI algorithms. President Joe Biden signed an executive order on Oct. 30 to seek to address privacy and safety issues related to AI, including AI-facilitated misuse of private medical information. Nadkarni praised the order but worries that it doesn’t provide enough protection and lacks the authority that a law passed by Congress would convey.

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Your Doctor, by Byline Name

Well-trained and properly maintained artificial intelligence (AI) algorithms could revolutionize how doctors collect and analyze data from physical exams. It could improve outcomes by making physicals more efficient, data-driven, accurate and thorough. The physical, one of the pillars of medical diagnostics, is primarily a hands-on exercise. But it also involves tasks like data collection, analysis and pattern recognition that can benefit from assistance from AI. Already, researchers are using algorithms to help find skin, mouth and throat cancers and to improve auscultation—the process of listening to and analyzing internal body sounds. Furthermore, deep learning technology could enable doctors to perform physical exams remotely. That could enhance care in places with limited medical infrastructure. Here are some of the ways AI research is augmenting physicals.

AI will help make physicians better at identifying red flags in your physical exam by DR. GIRISH NADK ARNI & DR. ROHAN KHER A

gorithm called AI-ECG, which analyzed ECG recordings in patients with heart failure. The study, which included a racially diverse population, found that AI-ECG accurately detected cases of reduced left-ventricular ejection fraction (LVEF) of 40% or more. Combining inputs from multiple positions further improved accuracy. LVEF measures how much blood the heart’s left ventricle pumps out with each contraction.

Only Smarter

On your skin, AI can help identify lesions, provide quantitative metrics and aid in accurate diagnosis. Researchers can, for example, train a deep-learning model on a dataset of labeled images of skin lesions to identify whether they contain an abnormality or condition. Dermatologic exams already benefit from AI used to identify melanocytic lesions— those involving pigment-producing skin cells. One study investigated the benefits of dermatologists collaborating with market-approved AI technology in classifying melanocytic lesions. The AI achieved comparable sensitivity, higher specificity and diagnostic accuracy compared to dermatologists working alone. Moreover, when dermatologists collaborated with the AI, their diagnostic performance significantly improved. Dermatologists with less experience in dermatoscopy—skin examinations involving microscopes—showed the most improvement, indicating the intersection of clinical experience and AI augmentation. Researchers are also investigating ways to use AI to enhance routine eye inspections and facilitate better oral- and throat-cancer screening. Researchers are studying AI that could automate the analysis of retinal diseases, such

OLD MODA LITI ES, N EW TR ICKS Auscultation is one of the most vital components of the physical. However, it’s a highly subjective process, dependent on the healthcare professional’s training and experience. AI can address this gap. Scientists can train algorithms to analyze recorded body sounds, such as heart or lung sounds, to classify them into distinct categories or identify specific abnormalities. The technology can aid in detecting conditions such as heart murmurs and arrhythmias or abnormal lung sounds associated with respiratory disorders. In one clinical trial, researchers assessed the ability of a deep-learning algorithm to detect murmurs and significant valvular heart disease using recordings from a commercial digital stethoscope platform. The algorithm was trained using over 34 hours of previously recorded heart sound data and tested on 962 patients. The algorithm demonstrated a sensitivity of 76.3% and specificity of 91.4% for detecting murmurs. The results suggest that deep-learning algorithms can be valuable for screening cardiac murmurs caused by valvular heart disease. In another trial, researchers assessed an al-

SOM E PER SPECTI V E Like any tools, AI algorithms must be sharpened, maintained and continually improved. AI will not produce immediate miracles. But the integration of AI into physical exams is part of the emerging new era of personalized health care that promises to give doctors a nuanced understanding of individuals they care for. Physicians and patients alike should embrace it. Dr. Girish Nadkarni, director of the Charles Bronfman Institute of Personalized Medicine at the Ichan School of Medicine at Mount Sinai, is a medical professor and system chief of Mt. Sinai’s Division of Data-Driven and Digital Medicine.

Rohan Khera is an assistant professor of medicine at the Yale School of Medicine and assistant professor of biostatistics at the Yale School of Public Health.

ILLUSTRATION: TYSON COLE

A I A N D BODY I NSPECTION

as retinopathies and macular degeneration. Another study researched an inexpensive smartphone-based oral cancer probe paired with a proprietary deep-learning algorithm designed for screening high-risk populations in places with limited resources. The results were promising.

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AI Picks Up the Pace in 2024 Get ready for a big year for artificial intelligence by JA M E S M E LT ON 2024 will bring more shots fired in the war for AI chatbot and chip supremacy. We’ll also almost certainly see discoveries and scientific breakthroughs from researchers using AI and growth in commercial applications of the technology. Below are some things to expect next year and beyond.

As of Dec. 6, the Pro version powers Google’s Bard chatbot. • Gemini Nano: The smallest version, Nano now runs on Google’s Pixel 8 Pro smartphone. Over 2024, Google says Gemini technology will be available in products and services like Google Search, Google Ads, Chrome and Duet AI.

A N EW CH I P ON TH E BLOCK In early December, Advanced Micro Devices (AMD) introduced an AI chip called Instinct MI300X. The company says it hopes to participate in what it expects will become a $400 billion-plus market for AI chips by 2027. Meta (META), Microsoft (MSFT) and OpenAI will be among the customers for AMD’s new chip. Other users will include Oracle (ORCL), Dell (DELL) and Hewlett Packard Enterprise (HPE), according to AMD. Several applications of MI300X—including new AI servers and cloud-based uses—were already in the works at press time.

PHOTO: VPNSRUS.COM, CC BY 2.0, VIA WIKIMEDIA COMMONS

GEM I N I COM ES TO E A RTH The Google DeepMind unit of Alphabet (GOOGL) started rolling out its long-awaited Gemini technology with fanfare Dec. 6. Gemini—not to be confused with the 1960s space program or Castor and Pollux of Greek and Roman mythology—is DeepMind’s chatbot answer to OpenAI’s ChatGPT. Built on “multimodal” technology integrating text, image, video, audio and coding capabilities, it’s coming out in stages. When fully released, Gemini will come in three “sizes.” • Gemini Ultra: Due out in 2024, this will

be the top-of-the-line version, designed for “highly complex tasks.” • Gemini Pro: This is the mid-range version.

800 Y E A R S OF PROGR ESS A week before its Gemini unveiling, Google DeepMind announced it used its Graph Networks for Materials Exploration (GNoME) AI tool to find 2.2 million new crystals. Google says the work represents 800 years of progress, based on the rate of new material discovery over the past decade. Among those crystals, Google says, are 380,000 stable materials that are candidates for experimental synthesis. That includes materials with the potential to develop transformative technology for superconductors, supercomputers and batteries for electric vehicles, Google says.

and the other 12% said they planned to do so. The video cloud platform Kaltura (KLTR) polled 500 marketing executives at companies with 1,000 or more employees in the United States, Germany, France, Italy and the United Kingdom. Of those surveyed, 84% viewed AI tools as “somewhat” or “greatly” valuable, 69% of respondents purchased subscriptions to AI platforms and 29% planned to subscribe.

42% CAGR OV ER 10 Y E A R S The generative AI market is about to explode, growing to $1.3 trillion globally by 2032 from just $40 billion in 2022, according to a June 2023 Bloomberg Intelligence analysis. That’s a 42% compound annual growth rate. Also, “demand for generative AI products

Google DeepMind’s Gemini tech is built on text, image, technology that

integrates video, audio and coding capabilities.

M A R K ETER S LOV E USI NG A I Targeted online ads could get improved aim. In a summer/fall 2023 survey across several countries, 88% of marketing executives said they had at least experimented with AI tools—

could add about $280 billion of new software revenue, driven by specialized assistants, new infrastructure products and copilots that accelerate coding,” Bloomberg Intelligence found. The largest beneficiaries are likely to be the likes of the Amazon Web Services unit of Amazon. com (AMZN), the Google unit of Alphabet, Microsoft and Nvidia (NVDA), Bloomberg said.

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MATHBOX

25 BACON BITS VANILLA 29 BROWNIES AND ALLSPICE 2

ART: THE MASTER THEOREM

Synesthesia The Master Theorem: A Book of Puzzles, Intrigue and Wit is brimming with word scrambles and brainteasers. It’s perfect for anyone looking to become better at solving problems. (See Gift Guide, p. 13.) The author, known only as “M,” presents each puzzle with a short introduction seeded with hidden clues to the solution. Here’s the prompt to one of the puzzles M considers “easy:” For whatever reason, I strongly associate letters and numbers with specific colors. When I look at printed text, I don’t see the various colors—I know the text is black—but my subconscious immediately calls up the related color in my head. Sometimes that association is so strong that when I’m trying to remember some word or name, I can often recall the color of the word before the word itself. This phenomenon, called synesthesia, is well-documented, but the actual text-color associations work differently for everyone. My associations are documented [above], and my personal synesthesia seems to follow these rules:

• Whole words appear to me as the same color as their first letter • Multi-digit numbers are beautifully multi-colored, as determined by their individual digits Makes the whole world just a touch more colorful, you know? Now, use the author’s “hints” to discover the phrase: • In the box above, translate the phrase at bottom into colors. • Because some of the colors in my synesthetic associations repeat, it’s possible certain words and numbers remind me of other letters. • Decode the phrase based on the colors. Some colors have multiple letters, so you’ll have to choose which one belongs. • Whole words look like the same color as their first letter, so BACON looks pink and therefore very similar to an E. Now keep going. • Write down the colors in relation to the numbers and words. Stumped? For the answer, see the bottom of p. 49 (Breakout).

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by Jermal Chandler

100-day MA

ACTIONABLE TRADING IDEAS Resistance

50-day MA

Handle BUY Above $11.70 RESISTANCE $11.70 EXIT $16

Cup

Breakout

Social Finance SOFI TECHNOLOGIES (SOFI) is poised to break out after spending most of 2023 in single digit territory. The personal banking stock is nearing the end of a 20-monthlong cup with handle pattern, and shares are trading well above the stock’s 50-day moving average of $7.31. The next level of resistance will be $11.70, which occurred after its Q2 2023 earnings announcement. Additionally, 15.91% of shares are being sold short which could add some kindling to the fire. At the December meeting, the Federal Reserve held interest rates steady and signaled three rate cuts in 2024, which bodes well for the online lenders business.

Jermal Chandler, is host of Engineering the Trade, a show that helps tastylive traders get a sense of the way the market is moving from an analytical point of view.

Beyond Meat

(As of Dec. 19, 2023)

(SOFI)

Industry: Market Cap: Employees:

Financial services $9.53 billion 4,200 (2022)

Beta vs. SPX: One-year return: Analysts’ target (Avg.):

1.72 24.55% $11.70

MATH BOX ANSWER: SWEET SMELLS

2311-12_trades_breakout.indd 50

12/22/23 12:04 PM

THE UNLUCKY INVESTOR

by Julia Spina

The Skinny on Zero DTE Options These options provide volatility —but they’re risky

0DTEs considerations

If you choose to accept the risk, remember the important limitations that come with choosing the underlying security. • Liquidity: Stick with highly liquid options that enable you to get out of a position quickly and easily. • Settlement method: Index and futures options tend to be cash-settled (requiring cash value of options at expiration) while exchange-traded funds (ETFs) and stock options tend to be physically settled (requiring delivery of underlying shares). • Account size and the PDT rule: For accounts of less than $25,000, the pattern day trading rule applies to 0DTE options that are managed before they expire, except in the case of futures, forex and crypto. The choice of underlying is limited by liquidity and account size because small accounts may not be able to fulfill the physical

ZERO DAYS TO EXPIRATION (0DTE) options have exploded in popularity among retail investors because they can offer volatility during otherwise calm markets and may offer cheaper alternatives to longer-term trades. However, intense volatility makes 0DTE trades highly speculative, and investors should not consider them a reliable source of income. Traditional options risk metrics tend to break down for such short-dated contracts, and the expiration mechanics of options become much more relevant with 0DTEs, compared to longer-term options. 52

2311/12_trades_bad trader.indd 52

delivery of the underlying security. Management style is also limited by account size, as summarized in the table below. The most important risk management techniques for 0DTE options are position sizing and, to a lesser extent, early management. Because of their speculative nature, position sizes should be exceptionally small relative to account size. If the choice of underlying allows for early management, risk-averse investors often close 0DTE SPX strategy Short 16Δ strangle

Short 16Δ-10Δ Iron Condor

BPR $86,829 $1,245

their positions at a low profit target (20%-30% or lower) and avoid holding positions past noon or for more than a few hours. Julia Spina is the CEO of Bad Trader and author

of The Unlucky Investor’s Guide to Options Trading. She holds bachelor’s degrees in engineering physics and applied mathematics and a master’s in physics. @financephoton

0DTE strategies accounted for 43% of options volume in 2023, compared to 6% in 2017. — C H I C A G O B OA R D O P T I O N S E XC H A N G E

The right strategy

Here’s how account size and management style affect the choice of a 0DTE underlying.

Large account any management style

Small account no management style

Small account active management style

Most flexibility (stocks, ETFs, indexes, futures)

Some flexibility (indexes, futures)

Little flexibility (futures)

LU C KBOX

12/22/23 12:09 PM

A New App for the Aspiring Speculator Internet searches for the term ‘0DTE’ peaked in 2023, according to Google Trends, and business reporters have taken notice. Bloomberg has published articles with headlines like Day Traders Lose $358,000 Per Day Gambling on Zero-Day Options and ‘Degenerate Gambling’ in Zero-Day Options Thrills Retail Traders. Complaints about 0DTE degeneracy have appeared on platforms like Reddit and X, but disparaging messages may not be the best way to address the phenomenon. Let’s look back at what happened with meme-stock trading. The resulting chaos demonstrated that many less-engaged (and less-informed) investors want to trade the financial markets but are often discouraged by the scale, power and judgment of large institutional investors.

That’s why many inexperienced traders invested in GameStop (GME), AMC Entertainment (AMC) and other stocks as an act of rebellion. Many lost money because they invested without a real understanding of market nuances and risk management. In fact, the primary takeaway from memestock trading lunacy is that financial literacy is critical. Enter “Bad Trader,” a new community for active investors. It was created to experiment with risk and share the inevitable blunders that come with it. Risk management techniques for 0DTE options are among the first topics featured. The Bad Trader app, available for iOS and Android, combines social media with finance. It offers daily trading livestreams, speculation opportunities with an in-app

TRADES&TACTICS

Meet Bad Trader

Download the Bad Trader app to join a community where conversation centers on experimentation, speculation and calculated risk in the financial markets.

currency, and live chat you can use to roast friends for impulsive decisions. Bad Trader users can also watch markets, set up orders and connect directly to a broker through its engaging neon interface. This platform is the place for aspiring traders to experiment, share experiences and come to a better understanding of how to take calculated risks.

LOSING SUCKS

But it sucks less with friends.

Download to join the legion of Bad Traders. The Bad Trader Terms of Service are located at badtrader.com/legal. The Bad Trader Terms of Service, including without limitation, our Privacy Policy, are incorporated by reference in their entirety into this EULA. In order to use the Bad Trader mobile application, you must agree to the Bad Trader Terms of Service.

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12/22/23 12:09 PM

THE POKER TRADE

TRADES&TACTICS

by Jonathan Little

Counting Outs and Calculating Pot Odds A WSOP poker pro teaches the math you need to succeed

Essential poker math

Even a casual poker play should know how to determine pot odds. Bet size you are facing 10% pot

25% pot

2311/12_trades_poker.indd 54

29%

0.67/(1 + .67 + .67)

33%

1/(1 + 1 + 1)

150% pot

200% pot

300% pot

Pot odds determine how often you need to win a pot to break even. It’s based on the bet you’re facing in relation to the size of the pot. Here’s

0.1/(1 + .1 + .1)

0.25/(1 + .25 + .25)

67% pot

100% pot

Calculating pot odds

17%

Calculation

20%

75% pot

probability that they hold the best hand in the game. Here’s how you do it.

% You must win

33% pot

50% pot

SAVVY POKER PLAYERS can forecast the

hand (which will be discussed soon), then you should call and continue in the pot. If it wins less than 33% of the time, you should consider folding. The chart below lists bet sizes you may face and the percentage of the time you must win to continue profitably. You may be surprised that no matter how much your opponent bets, the most you will ever need to win is only 50% of the time to

25%

30%

0.33/(1 + .33 + .33) 0.5/(1 + .5 + .5)

0.75/(1 + .75 + .75)

38%

1.5/(1 + 1.5 + 1.5)

43%

3/(1 + 3 + 3)

40%

the equation: % Required to win = bet/(pot + bet + bet). It can determine how often you need to win to continue anytime you’re facing a bet when against one opponent. Suppose your opponent bets $100 into a $100 (100%) pot. In this situation, you have to call $100 to win $300 total (the $100 pot, your opponent’s $100 bet and the $100 you are putting in). That means you need to win the pot 33% of the time or more to profit 100/(100 + 100 + 100). See Essential Poker Math, above. If you know it will win more than 33% of the time based on your hand’s strength or the likelihood your hand improves to the best

2/(1 + 2 + 2)

break even. That said, you will find almost no one in the real world bluffs too often using a bet of three times the size of the pot. Facing a bet with players yet to act behind you, consider how often you will be raised and thus forced to fold your hand. With players yet to act, you usually need to win far more than your pot odds dictate to continue.

Counting outs

When you have a draw (a hand that’s almost certainly behind at the moment but could im-

LU C KBOX

12/21/23 6:59 PM

prove to the best hand if the next card is a specific required card), you must figure out how many outs you have to improve. • For a gutshot straight draw (6-5 on a 9-82 flop), you have four outs (four 7s). • With two overcards (K-Q on 8-7-2), you have six outs (three Ks and three Qs). • With an open-ended straight draw (7-6 on 8-5-2), you have eight outs (four 10s and four 5s). • With a flush draw (two cards of the same suit in your hand and two cards of that same suit on the flop), you have nine outs (the remaining nine cards of the same suit). • With a flush draw and a gutshot straight draw, you have 12 outs (notice one of the straight cards also makes a flush). Note that all of your outs may not actually improve your hand enough to make it the best. When you have two overcards, such as J-10 on 7-6-2, if the turn is a 10, you could be drawing dead if your opponent has 9-8 or way behind if they have 7-7, 6-6, 10-7, 7-6 or Q-Q. If you have a low flush draw, such as 4♠-3♠ on Q♠-J♦-6♠, if the turn is a spade giving you a flush, you could lose to numerous better (higher high card) flushes. For this reason, draws to the best possible hand are always much better than draws to strong but potentially second-best hands. As a shortcut to determine roughly how often your draw will complete, take the number

Pot odds determine how often you have to win a pot to break even. of outs you have, multiply it by two and make it a percentage. That will let you know how often your draw will complete on the next card. For example, if you have an eight out open-ended straight draw, it will arrive on the next card roughly 8 x 2 = 16% of the time. If you have a 15 out straight flush draw, it will arrive 15 x 2 = 30% of the time. If there are two cards to come, assuming

2311/12_trades_poker.indd 55

Poker requires complex math because players have so much to consider.

you will see them both (which may or may not be the case), you can multiply your number of outs by four and make it a percentage. If you have an eight out open-ended straight draw, for example, it will arrive on the next card roughly 8 x 4 = 32% of the time. If you have a 15 out straight flush draw, it will arrive 15 x 4 = 60% of the time.

Not that simple

Poker math is complex because players have so many things to consider, even in somewhat simple situations. If you have an open-ended straight draw with 7-6 on 8-5-2, consider what happens if the turn is a 6 or 7, giving you a pair. If your opponent bets again, you certainly can’t fold because of having more outs when you are behind and potentially even being ahead. Another likely possibility is you could check/call your opponent’s flop, the turn checks through and you fail to improve by the river. You may then have a profitable bluffing opportunity. Alternatively, you may hit your draw on the turn, check/call a bet, and then have a check/raise all-in on the river get called, winning your opponent’s stack. Yes, poker requires thought. But if you break it down to its basic building blocks, you can begin developing reasonably sound strategies. If you consistently consider the basic math in this article, you’ll be well on your way to success. Jonathan Little, a professional poker player and

WPT Player of the Year, has amassed more than $7 million in live tournament winnings, written 14 best-selling books and teaches at pokercoaching. com. @jonathanlittle

12/21/23 6:43 PM

FUTURES

Forecasting Futures Two trading ideas for 2024

TRADES&TACTICS

by Christopher Vecchio

yield chart: in Q4 ’23, it fell below the rising trendline from the May, July and September swing lows, as well as the neckline of a head and shoulders topping pattern around 4.472%. Technically, charts have turned the corner, suggesting tops have formed in yields and bottoms have formed in prices. TICKERS TO WATCH: /ZN, /ZB PREFERRED STRATEGY:

Selling OTM put spreads IDEA #1:

Sell bond volatility when it rises

The Federal Reserve has finished raising rates, and rate cuts will materialize in 2024 before the presidential election. The U.S. economy is slowing; whether that means a recession or simply a period of slower growth is still open for debate. Either way, U.S. Treasury bonds have bottomed, and receding growth and inflation expectations should further undercut yields in 2024. Unlike 2023, when bond market volatility was elevated along all parts of the curve effectively all year long, the shifting fundamental environment suggests bond market volatility should steadily recede over the coming months. If yields spike higher and bond vol rises alongside, fade it. The directional assumption for U.S. Treasury yields goes beyond fundamental prognostications. Take the U.S. Treasury 10-year

THE YEAR 2023 HAS BEEN remarkable. It began with high volatility and depressed asset prices, only to see stocks surge while volatility fell back to levels not seen consistently since the 2010s. And while U.S. equity markets may be ending the year at or near their 2023 highs, the year was a quagmire for two markets: bonds and foreign exchange (FX). Nevertheless, the persistently elevated volatility in the former and the complete lack thereof in the latter may offer the greatest opportunities in the new year.

IDEA #2:

Long deltas in the Japanese yen

If we’re looking at a world where the Federal Reserve is finished raising rates and U.S. Treasury yields are coming down, one currency stands to benefit more than others: the Japanese yen. Widening interest rate differentials and a growing chasm between Bank of Japan (BOJ) monetary policy and other central banks’ rate hike efforts proved to be a death knell for the yen in 2022 and 2023. But as tightening cycles around the world are finishing up, the BOJ appears ready to end its extraordinarily accommodative policies. Divergence between the Fed and the BOJ will yield toward converge, which can only stand to help the beleaguered yen—particularly if the global economy lurches into a recession. As global bond yields receded at the end of 2023, the Japanese yen (/6J) was able to break

U.S. 10-year note yield technical analysis: daily chart (/10Y) (May to December 2023)

5.2 5.0 4.8 4.6 4.4 4.349 4.280 4.240 4.237 4.0 3.8 3.6

The Japanese yen will be the currency to watch in 2024. 56

2311/12_trades_furtures 3.indd 56

3.4 3.2 SOURCE:

LU C KBOX

12/21/23 7:35 PM

2023 was great for most equity markets but not for bonds or foreign exchange.

Japanese yen: daily chart (/6J) (November 2022 to September 2023)

0.0079 0.0078 0.0077 0.0076 0.0075

0.0074 0.0073 0.0072 0.0071 0.0070 0.0000000 0.0068495 0.0069890 0.0067940 0.0067 0.0066 SOURCE:

its multi-month downtrend from the March and July 2023 swing highs. The technical tailwind, coupled with the shift in fundamentals, makes for an appealing trade setup for at least the first half of 2024. TICKERS TO WATCH: /6J PREFERRED STRATEGY:

Long futures or short OTM puts + long OTM calls. Christopher Vecchio, CFA, head of futures and

forex at tastylive, forecasts economic trends in a number of countries. @cvecchiofx

tastylive.com/cherry-picks

2311/12_trades_furtures.indd 57

12/21/23 10:44 PM

MACRO

by Ilya Spivak

Macro Moves in 2024 Mexico is looking up, China down, and recession risk is “on”

rich-world consumers. Its share of worldwide trade volume has fallen to 12.7% from 15% in a mere three years. For the United States—which became China’s largest trading partner in 1998—a deepening rift over Beijing’s increasingly assertive geopolitics and Washington’s newly bipartisan appetite for mercantilism has spurred a search for alternatives closer to home. Mexico looks to be the prime beneficiary of this pivot.

Mexico’s time has come

Shifting supply chains from China to just INVESTORS MAY LOOK BACK on 2023 as a year of macro-driven market volatility. A series of events sure to cause whiplash began in March when the failure of Silicon Valley Bank plunged credit markets into crisis. Wild swings continued past mid-year as U.S. debt-ceiling woes abated but stubborn inflation prompted central banks to raise interest rates. Then tragedy struck in October as war broke out in the Middle East. What pitfalls lie ahead in 2024 is unclear. Nevertheless, here are two themes to keep in mind as the new year approaches: Mexico will strengthen its position as America’s biggest trading partner, and stock prices will be in danger from the threat of global recession and a possible debt debacle.

Failure to recover

China may never bounce back completely from the economic setbacks caused by the COVID-19 pandemic. Data from the purchasing managers’ index (PMI) documents the decline. COMPOSITE PMI: CHINA REOPENS INTO SLOWDOWN

MAY 2021

70 65

—— US

—— EUROZONE

MAR 2023

55 50 45

2311/12_trades_macro.indd 58

DEC 2022

Investors dreamed of a splashy recovery in the world’s second-largest economy as China began to scrap “zero-COVID” lockdowns in December 2022. Meanwhile, the end of the Federal Reserve’s cycle of interest rate hikes came into view, so a lucrative 2023 seemed likely. But that misplaced optimism soon dimmed. China didn’t shake off its pandemic restrictions until more than a year after its main customers in the U.S. and Europe. By then, China’s clientele was busy switching to other supply chains. Those markets had also come down from a pop of sharp catch-up economic growth linked to their own reopening, exhausting most of the stimulus money left in consumers’ pockets. Combative central banks’ efforts to force down inflation didn’t help, either. 58

- - - CHINA (CAIXIN)

JULY 2021

CHINA’S LOSS, MEXICO’S GAIN

—— CHINA (CLFP)

30 May 20

Sep 20

Jan 21

May 21

Sep 21

Jan 22

May 22

Sep 22

Jan 23

May 23 SOURCE:

China loses plum position

As 2024 approaches, a brief upswell in the service sector has unraveled and economic growth has stalled. Growth in real gross domestic product (GDP) has ominously outpaced nominal expansion for two consecutive quarters, suggesting a yawning deflationary gap of close to 1.5%. That points to anemic economywide demand. The way back to prosperity looks tenuous. China may have suffered lasting damage to its role as the go-to middle step in the global supply chain—the place where raw materials become finished goods and are shipped to

Sep 23

Bloomberg

south of the U.S. border offers a slew of benefits beyond sheer proximity to consumers. Mexico’s largest population cohort is aged 10-25 years old, while China’s is 30-55 years old. Mexico’s birth rate is over 1.4 times higher. It spends 4.3% of GDP on education to China’s 3.6%, and its pupils are in school for an extra year on average. Meanwhile, a whopping 42% of Mexico’s population lives below the poverty line. Put all this together and Mexico offers a younger, faster-growing and possibly more educated workforce at a lower price than China. Also, the U.S. and its southern neighbor already have a free trade agreement, making cross-border business comparatively easy and

LU C KBOX

12/21/23 6:19 PM

Currency markets to capture transition

Constructing a synthetic short Australian dollar to Mexican peso (AUD/MXN) position in the spot foreign exchange (FX) market by triangulating the two currencies’ exchange rates against the U.S. dollar may be the most straightforward way to gain exposure to the shift in capital flows underlying this historic change. The trade would call for selling AUD/USD and USD/MXN in comparable USD-equivalent size. This ratio had been trending in the Aussie dollar’s favor since 1993 as China grew more dominant. It peaked in early 2021 and now looks to have broken the long-term trend. That sets the stage for a long-term push in the opposite direction.

STOCK MARKET: RISK ON

As 2023 draws to a close, Wall Street is cheering signs that the Federal Reserve is finished raising interest rates. That isn’t surprising. Telltale surveys of purchasing managers suggest global economic growth came to a standstill in October. A catch-all recession is almost certainly on the menu. On the one hand, that situation makes it logical for investors to celebrate the end of a blistering rise in global borrowing costs and

15% to 12.7% The three-year decline in China’s share of worldwide trade volume

A growing superiority

Mexico appears ready to keep expanding its lead over China as the leading U.S. trading partner. US TRADE VOLUME: CHINA-MEXICO SPREAD (USD) 10

0 BILLION

cost-effective. Therefore, it isn’t surprising Mexico already surpassed China to become the largest U.S. trading partner in 2022. As this transition continues, assets linked to Mexico’s improving fortunes—like the iShares MSCI Mexico ETF (EWW) and the Mexican peso (MXN)—appear likely to outperform those anchored to China. These include popular funds like the iShares China Large Cap ETF (FXI) and the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR), as well as currencies like Australian dollar (AUD).

-10

-20

-30 2013

2014

2015

2016

2017

2018

2020

2021 SOURCE:

signs of an incoming turn in the opposite direction. On the other hand, it warns that stocks’ heady gains may not continue beyond the very near term. Policymakers aren’t pivoting because things are going well, but quite the opposite.

Managing vast debt

Perhaps the scariest proposition is managing a historically large mountain of public- and private-sector debt at sharply higher interest rates. As of September 2023, the global debt stock stood at a record-high $307 trillion, according to the Institute of International Finance (IIF). Not all or even most of this vast sum will roll over next year. Still, a pile this large and financed at far lower interest rates means issues with repayment are likely to appear even if a small share of the load comes due. Moreover, S&P Global estimates that about a third was incurred at floating rates, so servicing costs present a risk even before maturity. That will become more onerous still as growth sputters. A rare benefit from surging inflation is that it helps make debts more manageable because debtors repay with money that inflation depreciated in real terms. Now, IIF data shows that the global debt-to-GDP ratio has ended a two-year decline as economic output stalls and inflation cools. More of the same appears likely, making

2022

Bloomberg

it harder for troubled borrowers to swallow pressure from higher funding costs. Stock markets will fall, and the U.S. dollar will rise if this becomes a forcing function triggering investors to liquidate portfolios and raise cash. Trading the greenback’s exchange rate to the euro (spot EUR/USD or 6E futures)—the U.S. currency’s most liquid pairing—can offer

A mountain of public and private debt at sharply higher interest rates presents a scary proposition. broad-based exposure to its overall direction. Dialing up sensitivity to market-wide sentiment swings to capitalize on the risk-off mood might also make the Australian dollar (spot AUD/USD or 6A futures) an attractive vehicle. Whatever happens with currencies, the coming year feels fraught with uncertainty. But staying mindful of factors like Mexico’s rise and the probability of recession can present opportunity and soften adversity. Ilya Spivak heads tastylive global macro and hosts the network’s Macro Money show. @ilyaspivak

WI NT ER 2 02 3 /2 4

2311/12_trades_macro.indd 59

2019

12/21/23 6:19 PM

CHERRY PICKS

by Michael Rechenthin

MORE CHERRY PICKS

Trading Volatility in 2024 Look to energy, gold & consumer discretionary STABILITY OR VOLATILITY—what’s your pleasure? From the most price fluctuation to the least, the table below displays the volatility rankings of a grab bag of sectors and indices. The energy sector, denoted by XLE, is perpetually near the top of the volatility spectrum and that appears likely to continue in the new year. Within that sector, behemoths like Exxon Mobil (XOM) and Schlumberger (SLB) stand out. Trailing the energy sector are the small caps, typically companies with market capitalization of less than $1 billion. The Russell

2000 index (IWM), the go-to instrument for engaging with small caps, has recently shown improved performance after a sluggish presence throughout much of 2023. Next in line is the consumer discretionary sector, with its representative exchange-traded fund (XLY). This sector thrives on increased consumer spending and includes renowned companies, such as Nike (NKE) and Starbucks (SBUX). Gold, generally on the lower end of volatility, has recently increased significantly in price and volatility. A popular way to play gold is the Gold ETF (GLD). Don’t just buy gold—use

Weekly in your inbox

options to make it “work” for you. A covered call is one way to play it. Industrials, represented by the ETF (XLI), are decreasing in volatility notably as the year ends. The sector includes major players like Boeing (BA) and 3M (MMM). On the stable end of the spectrum lie the consumer staples (XLP) and health care (XLV) sectors, both of which have exhibited lower volatility. Michael Rechenthin, Ph.D. (aka “Dr. Data”),

is head of research & development at tastylive. @mrechenthin

SECTOR VOLATILITY (HIGH TO LOW)

JAN-23

FEB-23

MAR-23

APR-23

MAY-23

JUN-23

JUL-23

AUG-23

SEP-23

OCT-23

NOV 23

DEC-23

Energy

Consumer Discretionary

Real Estate

Consumer Discretionary

Real Estate

Small Caps

Real Estate

Technology

Real Estate

Small Caps

Real Estate Technology

Communication Services Materials

Energy Technology Communication Services

Technology

Small Caps

Technology

Small Caps

Technology

Consumer Discretionary

Small Caps

Financials

Consumer Discretionary

Consumer Discretionary Technology

Small Caps

Technology

Consumer Discretionary

Real Estate

Communication Services

Real Estate

Utilities

Technology

Consumer Discretionary

Small Caps

Utilities

Financials

Technology

Materials

Financials

Technology

Consumer Discretionary

Real Estate

Communication Services

Financials

Technology

Financials

Real Estate

Small Caps

Materials

Communication Services

Utilities

Communication Services

Utilities

Financials

Communication Services

Industrials

Small Caps

Materials

Financials

Utilities

Financials

Communication Services

Gold

Developed Markets

Utilities

Industrials

Utilities

Communication Services

Utilities

Materials

Industrials

Materials

Communication Services

Utilities

Financials

Utilities

Industrials

Large Caps

Industrials

Developed Markets

Materials

Financials

Large Caps

Developed Markets

Large Caps

Developed Markets

Large Caps

Developed Markets

Large Caps

Gold

Consumer Staples

Health Care

Gold

Consumer Staples

Gold

U.S. Aggregate Bonds

(No USA or Canada)

2311/12_trades_cherry picks.indd 60

(No USA or Canada)

Developed Markets

Communication Communication Services Services

(No USA or Canada)

Developed Markets

Large Caps

Materials

(No USA or Canada)

Developed Markets

(No USA or Canada)

Developed Markets

(No USA or Canada)

Developed Markets

Gold

Large Caps

(No USA or Canada)

Developed Markets

Gold

Health Care

Consumer Staples

Industrials

Health Care

Gold

Industrials

Consumer Staples

Health Care

Consumer Staples

U.S. Aggregate Bonds

Gold

Health Care

U.S. Aggregate Bonds

LU C KBOX

12/21/23 4:56 PM

1. Watchlist of stocks I carry with me everywhere

2. Brokerage account and news feed

3. Options scanner built in python to estimate options flow effect on free float

How did you start trading?

I began in 2019 when a friend introduced me to wallstreetbets and options trading. He turned $1,000 into almost $50,000 on Investco QQQ exchange-traded fund calls before blowing up. Personally, I did the reverse by turning $50,000 into $1,000 before still blowing up. But I’ve always believed that if someone can do it, anyone can do it. It helps that I don’t think anyone is smarter than anyone else or that there’s some hidden secret baked into their personality.

Favorite trading strategy?

I love a good merger arb (arbitrage) with naked call options on X (formerly Twitter). The risk is always perfectly defined, and nothing is more interesting than a good lawsuit. If I were not a trader, I would’ve been a lawyer.

Average number of trades per day?

It’s 0.25. It used to be much higher, but I’ve worked really hard to take trades only when I have a defined edge. When I’m not in school, this number tends to go way up. During market turmoil I might take 10 setups a day, whereas on a slow day I might just watch the market in class and play around with $100 on illiquid SPACs (special purpose acquisition companies).

Meet the Trader

BRIAN CHUNG

TRADES&TACTICS

What percentage of your outcomes do you attribute to luck?

It looks like a graph that goes from 100% to 45%. When I started trading, I really had no understanding of what moved markets. I would short Tesla (TSLA) for a week because I saw a graphic saying it was worth more than the top ten car companies combined. Eventually, I started to get some idea of what edge looked like and how to accumulate data and information early. Still, no setup is perfect, and the market can even be “wrong” for longer than I can be solvent. I could flip a weighted coin 100 times and still only get heads. You have to play the game to win. You can’t get lucky if you don’t put yourself in a position to get lucky. So, is it still luck? Favorite trading moment?

Location: Indiana University Age: 23

Years Trading: 4

Favorite Trading Book?

The Beginning of Infinity by David Deutsch (2012)

More Brian

Watch on Money Makeover

Trading meme stocks in 2021. There’s still nothing like the feeling of texting all your friends that Cathie Wood bought more Palantir Technologies (PLTR) and everyone is celebrating and making money. It really felt like a tipping point even though many people proceeded to return all their gains to the market. I’m still rooting for everyone to make it, and for a brief moment in time it felt like it was possible. WI NT ER 2 02 3 /2 4

2311/12_trades_trader brian.indd 61

12/21/23 6:22 PM

CRYPTO CURRENTLY

Bet on Bitcoin in 2024 The crypto complex is looking up (again)

half of Bitcoin’s market cap sits in the hands of investors who first bought the cryptocurrency more than two years ago. Those who bought at the end of 2022 and the beginning of 2023 are sitting on gains of 100% or more and still aren’t selling. If anything, they’re buying more. It’s the type of conviction that sets a strong foundation for any market. Meanwhile, the cryptocurrency’s protocol will reduce the new supply coming into existence.

Fewer new coins

In April 2024, Bitcoin’s protocol is scheduled to begin creating half as many new bitcoins each year. The new bitcoins always go to miners, the only people who sell them all the time in all market conditions to cover their costs and make money.

lative investments, appears likely to retain the crown in 2024. In the coming year, the world’s first and still-largest crypto may not beat its 2023 return of more than 150%, but will also go above $60,000—near its previous all-time high of $70,000. Thanks to the transparency of Bitcoin’s blockchain, we can see strong holding, hoarding and accumulation patterns among investors since June 2022’s collapse of the crypto lending platforms. Look what happened during that time. Beneficial global financial conditions evaporated. The largest crypto market makers collapsed. The second-biggest crypto exchange imploded. Central banks hiked rates. And people bought more Bitcoin. The number of wallets with one or more bitcoins set record highs this year. More than

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With 50% fewer bitcoins going straight to market, investors only need to continue holding and accumulating at the same pace they already do. Bitcoin’s price will have to go up.

Wall Street’s involvement

Expect a slew of U.S.-based spot bitcoin exchange-traded funds (ETFs), including some from established brands like Fidelity (FNF), Blackrock (BLK) and Franklin Templeton (BEN). A U.S. court told regulators they can’t deny these ETFs, and a bipartisan group in Congress has demanded the Securities and Exchange Commission approve them. But spot ETFs alone won’t bring money into Bitcoin. Many Bitcoin investment funds already exist, and they’re not having a big effect. They saw only $1 billion in net global inflows for the year, as of November, according to the Coinshares research firm.

What will bring more money in?

Wall Street incentives. With ETFs, they have a reason to sell broker-dealers, advisors and their clients a low-cost, easy way to gain

Upswing

BITCOIN, THE REIGNING KING of specu-

TRADES&TACTICS

by Mark Helfman

After a period of stabilization, Bitcoin has surged in anticipation of government approval for additional exchange-traded funds. $70K $60K

BITCOIN: U.S. TO THE REST RESERVE RATIO

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—— PRICE USD

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S O U R C E : Data courtesy of CryptoQuant

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Strong holding, hoarding and accumulation patterns have held true for Bitcoin. exposure to bitcoin in a diversified investment portfolio. Bitcoin’s connection to well-established legacy firms will enhance its image and make investment allocators feel more comfortable putting client funds into a product that must buy bitcoin from the spot market.

Immune to economic woe

Some worry about a U.S. recession. That may matter for stocks and bonds, but most of the world’s population can’t buy or sell stocks and bonds. Either they don’t have a

broker, or they live somewhere without access to U.S. financial markets. But anybody can buy or sell bitcoins from anywhere. That’s why the U.S. share of the market peaked in 2021 and has declined more than 50% with no signs of turning around. The shift appears in other metrics, too— like a falling correlation with U.S. stocks and a declining percentage of reserves on U.S. exchanges. As a result, Bitcoin is protected somewhat from a U.S. recession. If anything, Bitcoin will benefit from subsequent easing of financial conditions in response to U.S. economic distress. At the same time, China is stimulating its economy and trying to bail out its troubled economic sectors. In June 2023, the Chinese government let Hong Kong open its doors to crypto.

Expect Chinese money to filter into bitcoin

the financial potency of the U.S. or China, they now have a growing share of the crypto market. According to flows of bitcoins and stablecoins, a type of cryptocurrency pegged to the U.S. dollar, almost $4 billion in new money came from Asian sources in November. Surely, more will come. Shrinking supply and rising demand. Seems like a safe bet. Mark Helfman, crypto analyst at Hacker Noon, publishes the Crypto Is Easy newsletter at cryptoiseasy.beehiiv.com and wrote Bitcoin or Bust: Wall Street’s Entry Into Cryptocurrency. @markhelfman

$70,000

Mark Helfman’s expected high for Bitcoin in 2024

Moreover, most of the world’s economies are growing. While those countries don’t have

The Future of Finance The self-custody wallet that lets you do more with your crypto.

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LASTPICTURE

2024 is poised to establish how U.S. buyers really feel about electric cars. Automotive services and technology provider Cox Automotive expects U.S. new vehicle sales to come in at about 15.4 million units— including a record of 1 million-plus electric vehicles. For 2024, Cox expects new-vehicle sales to nudge upward less than 2%. That’s a long way from the 17-million-plus annual unit sales from 2015-2019. Even in that slow-growth environment, the Cox team expects the market share for all-electric vehicles to top 10% for the first time since early in the automotive era. Key factors for the market-share march of EVs will include better performance, an improved charging infrastructure and an abundance of new models. Tesla (TSLA) made a splash in late 2023 with the launch (finally) of its Cybertruck. Planned new offerings in 2024 include the DeLorean

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Alpha5, pictured here, expected to cost something north of $150,000. The car, from the relaunched DeLorean Motor Co., is billed as an electric reboot of the classic DeLorean, built from 1981 to 1983. Established brands planning new EVs for 2024 include Ford (F) and its Lincoln brand; General Motors (GM) with its Buick, Cadillac, Chevrolet and GMC brands; Honda (HMC) and its Acura brand; Hyundai (HYMTF) and its Kia unit; Stellantis (STLA)with its Dodge, Jeep and Fiat brands; and Volkswagen (VWAGY) and its Audi subsidiary. Will the new models sell? Investors better hope so, and they can get the Luckbox perspective in the magazine’s upcoming auto industry issue. Look for plenty of coverage on the car makers’ dependence upon lithium, nickel, cobalt, graphite, manganese, aluminum and rare earth minerals—among many other themes.

PHOTOGRAPH: DELOREAN MOTOR COMPANY

A Bellwether Year for Electric Cars

LU C KBOX

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November/December 2023

Articles inside

Factfulness Meets Superforecasting

Bet on Bitcoin in 2024

Macro Moves in 2024

Counting Outs and Calculating Pot Odds

The Luckbox Gift Guide

Is Yard Act the Future of Post-Punk Rock?

2024 Grammys