In cryptocurrency, stocks, and life in general, many people continuously refer to "black swans" - events that are so rare as to be almost inconceivable, but which have a world-changing impact if they do occur. Some events have been termed black swans include Trump's election and the pandemic.
Indeed, these events did disrupt life for many in both positive and negative ways - but they were not impossible, nor were they unexpected by those who performed research into the topics. I projected that the sanctions against Penn State in the Sandusky case would not hold up, stated that Trump would win more than a year before the election, believed that litecoins, Ethereum, and other altcoins would rise from single digits to be worth hundreds of dollars (viewtopic.php?f=11&t=1644, viewtopic.php?f=11&t=1168), and wrote in January and February that the pandemic would be one of the greatest catastrophes in the history of the world, causing the price of everything to crash (viewtopic.php?f=11&t=7128).
There's nothing special about me that others don't have, and I certainly am not the smartest or wealthiest person in the world. What I did do, and which many people do not, is to gain a full understanding of the topics that I'm writing about or taking action upon. One can only have a full understanding of the topic if if (s)he reads the original sources, not articles published in the mainstream media (or worse, on facebook.) A further rule of thumb is to completely ignore anything on Wikipedia - they have a stated policy of "no original research" (https://en.wikipedia.org/wiki/Wikipedia ... l_research), so what is published on Wikipedia is exactly the opposite of what we want to read.
I'll review how the source material led those who consumed it to a different conclusion on these four topics, and then finish with some present events where the prevailing wisdom is incorrect. The key to making a lot of money is to read the material closest to the source, and to take action when the source material does not support the prevailing view of the media, public, and experts.
The Sandusky scandal
The first of the four events I mentioned was the Penn State scandal with Jerry Sandusky, when Sandusky was charged with over 40 offenses involving children, sex, and violence. For two entire weeks in November 2011, the scandal was wall-to-wall coverage on every station and in every newspaper, not just in the sports media. Sandusky was a vile man with clear evidence against him, and the jury quickly convicted him on all but one of the charges. The only real question was what liability Penn State had for Sandusky's actions as an assistant coach in the football program, and that answer hinged largely on what Joe Paterno, the coach, knew about Sandusky.
The press crucified everyone even remotely involved - Penn State, its president, Paterno, other coaches, and more - and discussion on online forums was highly negative. Many of those people clearly had fault in the matter, particularly the athletic director. The NCAA eventually decided on four years of severe sanctions against Penn State and its athletics programs, and the furor continued for some time. A report to investigate all the allegations was commissioned by a former FBI director, Louis Freeh.
A few months later, the 267-page report was released (https://archive.nytimes.com/www.nytimes ... aafootball), and it ignited much of the same controversy all over again. Headlines focused on how some administrators concealed records, and how some allegations were known as long before as 1998. What the report also says, and what was not reported anywhere I read, was that Paterno did not use E-Mail. Since there were no E-Mails, there were no documents proving that coach Paterno was actively involved in a long-term coverup.
The sanctions against the program were soon eased, and all of them were gone in 2 years, far shorter than the 4 year punishment originally prescribed. While the furor raged among the news outlets, anyone who spent a few hours reading the actual report could clearly see that the evidence was not convincing enough for the sanctions to hold.
Throughout 2015, the news coverage about Donald Trump presented him as a clown who was running for President to start a television station, or simply to earn profits for himself. He won debate after debate, gained wall-to-wall coverage, and had rallies televised in their entirety. At one point, John Kasich won Ohio, a single state, and the media covered that as if it were some sort of turning point.
Throughout all of this, Trump led the polls from the start. Politicians that lead the polls from the start usually go on to win the nomination. Mitt Romney and Joe Biden are two examples of nominees who started out with the lead, held it for almost the entire primary season, and won convincingly. All one had to do to predict that Trump would win the primary election was to look at the polls. What else is a better predictor of who would win?
For the general election, the polls were also correct, despite popular opinion that they were not. The polls showed that Clinton would win by a few points. People who have read the Constitution, another critical source document, know that the College could be won despite a popular vote loss.
The rise of altcoins in 2016
Many people were surprised by the rise of altcoins in 2016 and the first half of 2017, but the fundamentals clearly supported their rise all along. Of all the projections I made, I had the most confidence in this one, because there was very little research needed.
There were only two facts one needed to know to project that the future was not going to consist of one coin. First, Michael Marquadt (theymos) split the bitcoin community in August 2015 when he banned discussion of Gavin Andressen's BIP101 blocksize upgrade from all of his forums. At that point, it became clear that the only way to resolve the blocksize debate was either for a fork to be created, or for excess demand to spill over to altcoins. Nobody was going to took any action to fork bitcoin to bitcoin cash until years later because, as I said of my own reasons for not doing it myself, being the new bitcoin's leader didn't pay the bills.
The other reason one could project the rise of altcoins was simply to look at the transaction fees being paid to bitcoin miners, and looking at how they were rising. https://bitcoinfees.info is a place where that can be done today; I don't recall if back then there was a public website to do that. The fees were increasing, the Bitcoin Core did not have a solution that could be developed in a reasonable time, and now that bitcoin itself was unaffordable to trade directly on-chain at high volume, people trading it needed a way to send value between exchanges.
Litecoins became valuable simply because they were there and worked at that time, but the bitcoin media, particularly its forums, is so controlled by theymos's cronies that many were misled. Forums where discussion is censored include reddit's "bitcoin" and "bitcoinmarkets," opposition posts are downvoted at other subreddits like "btc" and "litecoin," and bitcointalk.org is a cesspool of one-sided discussion.
Cryptocurrency is one of the easiest places to make money today simply because Marquadt controls all the discussion. Look for the times when his and the Bitcoin Core's agenda diverges from reality to make big moves, then stay away when the posts on their forums and the source material (like trading charts and the actions of corporations) align.
Many people were surprised by the pandemic's sudden appearance early this year. I myself recall sending an E-Mail as late as Feburary 29 to a Toastmasters member asking if the Spring conference would be cancelled, and I received an almost rude reply asking why I would suggest the conference was going to be cancelled. That conference was still in planning for an in-person event on March 14.
The media treated the pandemic almost as a curiosity early this year, despite that the entire city of Wuhan was closed for months, well before the virus spread far into the world. But it was trivial to see that the virus was extremely serious, it was easy to see that events like the NCAA basketball tournament were nonstarters, and everyone could have easily understood that the virus was going to spread for years. I remember going about my business on March 6, knowing that was the last day I planned to go to public spaces, and marveling at how oblivious everyone was at what about to happen.
Here, the source documents were pretty obvious and easy to obtain - just read the medical journals. Here are a few articles from January and February that led me to predict a catastrophe:
- https://onlinelibrary.wiley.com/doi/10.1002/jmv.25722 - 14% case fatility rate
- https://www.nature.com/articles/s41586-020-2012-7 - "we propose the disease could be transmitted by airborne transmission"
- https://www.bmj.com/content/368/bmj.m606 - images of lung abnormalities and suggestions of long-term damage
For whatever reason, the mainstream media didn't pick up on either of those two issues until months later, and the stock market didn't start to fall until well after these articles were published.
Let's look at how source material can be applied to predict the outcome of the presidential election. A careful review of the data leads one to conclude that there is likely to be a Democratic wave. By reviewing pollster ratings at FiveThirtyEight, you can see that the ABC News/Washington Post has an A+ poll rating, and it shows Biden leading by 12 points. But rather than looking at the headline, read the actual document at https://www.langerresearch.com/wp-conte ... Update.pdf.
First, you'll notice that the poll was taken entirely after Trump's diagnosis with the virus and after his disaster at the debate, so the sample is of voters who were informed with the latest events. There are very few undecided voters; even if all of them supported Trump, that would not be enough to swing the election. Most importantly, if you read the entire document, you'll read in one of the later pages that 6% have already voted in this election. That means that, taking the average case where the cast votes were evenly distributed, Trump needs to gain 13 points to win the popular vote, not 12, because he can now only affect the minds of 94% of voters. It's not as if Trump has three weeks to stage a comeback - every day that he trails so badly locks in Biden's lead.
This level of statistical analysis is rarely, if ever, covered in mainstream articles. Those articles publish poll result headlines only. If Biden loses some of his lead next week, but by that point 17% have already voted, then Trump needs to actually make up 7/6 * the then polling difference. It's possible that a final poll could somehow show Trump leading by 5 among likely voters, and that he would still lose because that lead isn't great enough to make up for all those who voted early.
How can you use this information to make money? It clearly is not baked into the markets. One way is to buy Democratic stocks, like green energy and electric car makers. Another is to bet on prediction markets, such as https://www.predictit.org/markets/detai ... l-election. On October 13, when Biden was leading by 10.5 points in polling averages, that market showed Trump with an absurd 40% chance to win. Betfair, similarly, has had Trump at 40% for much of the year. Most computer models show Trump with odds between 9% and 13%, and a look at the source code and documentation shows these models have already accounted for the errors that were made in interpreting the correlations between 2016 state polls.
One can also make money investing about the outcome of the pandemic. While initial forecasts about the pandemic were too rosy, the current forecasts are too grim. First, the predictions about an influenza disaster are completely wrong. Not only has there been a run on flu vaccines this year, but government reports (https://www.cdc.gov/mmwr/volumes/69/wr/ ... 37a6-H.pdf) demonstrate that there was no flu season at all in the Southern Hemisphere this year. Second, while there will be a lot of COVID-19 cases this winter, there are currently 11 vaccines in trials. It is extremely improbable that not one of the vaccines will be authorized for emergency use by the end of the year.
While people are projecting a shortage of vaccines, I expect the opposite to occur because of vaccine hesitancy. As many as 50% of Americans are hesitant to be vaccinated against COVID-19 (https://www.sciencemag.org/news/2020/06 ... -over-rest,) so we'll probably see something similar to what happened during the H1N1 pandemic. At first, vaccines were limited to healthcare workers, but within two months there were so many excess vaccines that I simply walked into a Target and asked for one. There's no reason to suggest that this time will be any different, especially when so many Republicans so strongly reject science.
If it is true that 50% are hesitant to be vaccinated, it will be impossible to justify continuing to cancel gatherings more than six weeks after 50% of doses are manufactured. People will continue to get sick and die, but that will be seen as a choice. In-person events will resume, although we will still be living permanently in a "virtual first" world, given that people now understand that much travel is unnecessary and can be eliminated. The disruption to life will suddenly end, much sooner than many people expect, perhaps as soon as half a year from now. The pandemic, is likely already more than half over, and since the public opinion is grim, buying stocks might be a good choice, while keeping in mind that permanent behavioral changes may hinder the outlook for places like movie theaters, bars and cruise ships.
The difference between those who are successful and those who are not largely comes down to how much time one takes to read the material that is closest to the source of the information. The media is like a game of "whisper down the lane" - much gets lost and information becomes erroneous during the transition from the medical paper to the mainstream newspaper to the facebook feeds that many people read.
In summary, to make accurate predictions and to make money off of them:
- Identify rare events that, if they did occur, would have a huge impact on the world. Read books by authors like Nick Bostrom and Ray Kurzweil to see two opposing views of the future of humanity, and identify the type of events that are seminal in that development.
- When browsing the news, pay attention to coverage of those type of events. Find the source document the article is based upon, read that, and forget what the mainstream article said.
- If the source document suggests that an high-impact outcome is at least somewhat probable, search the Internet for articles and talk to people to see if the prevailing opinion is the opposite. If you get laughed at or if a lot of trolls appear, invest in companies or goods that benefit from the event.