Intelligence Trap

The (literal) small print: this newsletter is mostly stories, pop-psychology, and half-baked trading ideas. This is NOT financial advice. Best to think of this as a community of like-minded gamblers. If you are having a punt, make sure you restrict your trade size to whatever change you can find down the back of the couch.

Kary Mullis won the Nobel Prize in Chemistry in 1993. By all accounts, he was a genius.

But he also believed in astrology, alien abductions, and claimed he had a conversation with a glowing raccoon.

And it wasn’t just him (except for the raccoon thing): Brian Josephson won the Nobel Prize in Physics in 1973. Then he got into some very public spats about telepathy - claiming it was real.

They even have a name for this: “Nobel Prize Disease”. Where Nobel Prize winners start to believe some questionable things.

So… what’s going on here? How can people so intelligent be so wrong?

Well, turns out it’s pretty simple.

Take Josephson: he ended up using his knowledge of quantum physics to convince himself telepathy was real.

In short, he was overthinking - and his intelligence actually ended up being part of the problem.

In markets, this kind of overthinking can cost us trades.

The Intelligence Trap

Mostly, being intelligent is a good thing.

But sometimes it means we overthink, when the simple answer is right in front of us.

Here at Market PSYOPs, we don’t run into the problem of being too intelligent very often (you might have already guessed this).

But even we find ourselves overanalysing at times, using far too many indicators for a single trade.

Take oil for example…

Here’s a simple thesis: the war goes on for longer than expected, disrupting supply. And people fail to factor in lag times for shipping.

So…. oil go up?

But then we start to overthink it: what if an inflationary impulse is short lived because it leads to deflation? Then growth slows? So dollar up? Rates up? OPEC response? Money printer on? And will one stray headline ruin this trade?

And suddenly we’ve 50 indicators, we’re guessing short-term monetary policy, and we’re turning on notifications for Trump’s tweets.

That’s the trap. And it leads to indecision.

Now, we’re not saying the solution is to lower your IQ. It’s just to do the simple things well: Follow macro trends - they’re your friend. Why own one stock when you could own a basket. Look for pick-and-shovel plays.

And keep your trading strategy simple.

So… oil go up?

Keep it Simple

It’s a tough trading environment out there right now. Things are complicated, but also just flat-out weird. Wars are starting and stopping on a daily basis, blockades are being blockaded, and Allbirds is now somehow an AI company.

It’s all a bit nonsensical.

So we’re going to try to keep it simple.

United States Brent Oil Fund LP (NYSEARCA: BNO) 🛢️

We’re doing it. We’re taking our own advice. For better or worse.

BNO is probably the most straightforward way to be short-term bullish oil. If disruption drags on and markets are underestimating the full extent of the supply shock, then oil could have another leg higher in the next month or two.

I’m buying: BNO, July 17 $52 calls.

The thesis here might be simple, but as always there’s a risk the trade goes to zero. There’s a disclaimer at the top of this newsletter for a reason.

No Trade ✅

The ultimate form of not overthinking: don’t think at all. Sometimes no trade is the best trade.

Keep your money in your pocket and wait for a set-up that makes sense to you.

There’s psychological traps everywhere in life. They shape how we think, how we make decisions, and spend money.

But that’s enough jargon for today. Let’s gamify this:

💲💲You’ve €2k to put to work in the market. But no time for deep research. You’re looking to rely on a strong tip and your own instinct.

What do you back?

The answer - and the psychology behind it - will be revealed in the next edition.

Last Week’s Answer:

The trap here was overthinking the entry. We’re tempted to wait until we’ve a handle on the full macro picture. But the perfect moment to buy usually never arrives. For most of us, most of the time, the right answer when investing is to dollar-cost average.