life. money. probability.

PLUS
FIBONACCI, CRYPTO,
CANCEL CULTURE,
ALLBIRDS, THE GRAMMYS,
OCCULT ROCK & MORE
JANUARY / FEBRUARY 2022

THE ANNUAL
FORECASTING 88
FORECA
STS
ISSUE F O R ‘22

SPECIAL REPORT

How policymakers could

set aside their hostility and
perform in harmony
2201_ELEMENTS_toc.indd 3 12/17/21 3:42 PM
2201_ELEMENTS_toc.indd 1 12/17/21 3:43 PM
2201_ELEMENTS_toc.indd 2 12/17/21 3:44 PM

Forecasting
14 Adversarial Collaboration:
Bickering for Better
When ideological foes set aside their
differences, they can work together to
arrive at especially accurate predictions.
Here’s how.
19 Money Over Mind
Traders unconsciously alter their beliefs
to fit ideas that are making money for
them in prediction markets, according to
a neuroscientist who teaches business.
2201_ELEMENTS_toc.indd 3
20 A Tale of Two
Prediction Markets
Executives from Kalshi and Nadex explain
why their nascent industry is here to stay.
22 Fibonacci’s Arithmetic
Revolution
Can a string of numbers introduced
in Europe in the 13th century reliably
predict stock prices? Luckbox
investigates.
25 Experts Meet the Masses
Five veterans of the equities markets
make predictions for the coming year.
But for good measure, we compare their
projections with those of our readers.
January / February 2021
12
28 Crypto Doomsday
The bear market of 2022 will bring a
slowdown in bitcoin gains, a collapse
in altcoin prices and the end of
cryptocurrency’s Wild West era.
30 20 Predictions for
’22 and Beyond
Luckbox takes a shot at forecasting
outlier events for the next two years in
the markets, economy, politics, sports
and the media.
January / February 2022 | Luckbox 3
12/17/21 6:16 PM
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2201_ELEMENTS_toc.indd 4 12/17/21 3:45 PM
 Allbirds' Wool
Runner-up
Mizzles in Atlas
(Black Sole)
See p. 42

editor in chief
ed mckinley
managing editor
yesenia duran
associate editors
mike reddy
kendall polidori
editor at large
garrett baldwin
technical editor
mike rechenthin
contributing editors
vonetta logan, tom preston
creative directors
katherine bryja
tim hussey
contributing photographer
garrett roodbergen
editorial director
jeff joseph

trends trades&tactics
comments, tips & story ideas
feedback@luckboxmagazine.com
life, luxury & the pursuit actionable trading ideas contributor’s guidelines, press
of happiness releases & editorial inquiries
editor@luckboxmagazine.com
RECORD HIGH CHEAT SHEET FAKE FINANCIAL NEWS
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TECHNICIAN
publisher: jeff joseph
SOMETHING VENTURED 50 Dark Days Ahead? jj@luckboxmagazine.com
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NORMAL DEVIATE
SENTIMENT 54 Probability Reigns Luckbox magazine, a tastytrade
40 Is Cancel publication, is published at
DO DILIGENCE
Culture Toxic? 19 N. Sangamon, Chicago, IL 60607
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Editorial offices: 312.761.4218
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Printed at Lane Press in Vermont
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FUTURES
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46 The Luckbox Bookshelf Tool @luckboxmag
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Tigers & Groundhogs 63 The Wisdom On the cover: 2019 & 2020 Best New Magazine
of Crowds Illustration by Paul Lachine Folio Award for Custom Content

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, transaction or investment
strategy is suitable for any person. Trading securities and futures can involve high risk and the loss of any funds invested. luckbox magazine, a brand of tastytrade, Inc., does not provide investment or financial advice or
make investment recommendations through its content, financial programming or otherwise. 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. luckbox magazine and tastytrade are not in the business of executing securities or futures transactions, nor do they direct
client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. luckbox magazine and tastytrade are not licensed financial advisers, registered investment
advisers, or registered broker-dealers. Options, futures and futures options are not suitable for all investors. Transaction costs (commissions and other fees) are important factors and should be considered when evaluating
any securities or futures 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 tastytrade, or any of its subsidiaries, affiliates or assigns. While luckbox magazine and tastytrade 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 herein. Active investing is not easy, so be careful out there!

January / February 2022 | Luckbox 5

3:49
1:09 PM
AM
2201_ELEMENTS_toc.indd 5 12/17/21 6:17 PM
 FALSE PROPHETS
In the year 2525, if man is still alive
If woman can survive, they may find
In the year 3535
Ain’t gonna need to tell the truth, tell no lie
Everything you think, do and say
Is in the pill you took today
In the year 4545
You ain’t gonna need your teeth, won’t need your eyes
You won’t find a thing to chew
Nobody’s gonna look at you
—2525 (Exordium & Terminus), Zager and Evans (1969)
As we wrap up the annual prediction issue
of Luckbox, our thoughts turn to Michel de
Nostradame (aka Nostradamus), an enterpris-
ing early master of the side hustle. Although he
was kicked out of med school for prematurely
practicing apothecary, he continued practic-
ing medicine during the plague. He was highly
regarded as an astrologer and dabbled in the
occult. But he established his true legacy as a
seer with the publication of his Les Prophéties
in 1555.
As a result of that book, Nostradamus is
credited with predicting outlier events that
include the Great Fire of London in 1666, the
French Revolution in 1789, the rise of Napo-
leon in 1799, the rise of Hitler in 1933, the
atomic detonations at Hiroshima and Naga-
saki in 1945, the Apollo moon landings in
1969, and the 9-11 attack on the World Trade
Center in 2001.
But most of his estimated 6,338 prophecies
fell flat. His prediction that in 2021 a Russian
scientist would develop a biological weapon
that turns the living into zombies was espe-
cially wacked-out.
Still, Nostradamus deserves credit for being
Thinking Inside the Luckbox
Luckbox is dedicated to helping active investors achieve skill-derived, outlier results.
1 Probability 2 Greater market
is the key to volatility brings
improving outcomes greater opportunity
in the markets for traders and
and in life. investors.
6 Luckbox | January / February 2022
2201_ELEMENTS_edletter.indd 6
smart enough to play the long game—like the
one-hit-wonder pop duo Zager and Evans. But
the Italian prophet’s prediction that the world
will end in 3797 still isn’t a good excuse to stop
funding your IRA.
Nostradamus also understood the value of
forecasting big events. Why go small when you
can go big and really attract some attention?
He also had the foresight to predict the
outrageous, a trait that author Nassim Taleb
(The Black Swan) finds lacking among today’s
popular financial forecasters. “Our predictors
may be good at predicting the ordinary, but not
the irregular and this is where they ultimately
fail,” Taleb wrote. “Economic forecasters tend
to fall closer to one another than to the result-
ing outcome.”
But any way you look at it, forecasting poses
a reputational risk.
Two years before the Great Depression,
famed economist John Maynard Keynes confi-
dently declared that “we will not have any more
great crashes in our time.” Wrong.
In 2006, as Alan Greenspan was complet-
ing his fifth and final term as Federal Reserve
chair, he proclaimed that “the worst is behind
3 Options are 4 Don’t rely
the best vehicle on chance. Know
to manage risk your options because
and exploit luck smiles upon
market volatility. the prepared.
us” with regard to the housing slump. Wrong.
The evening of Donald Trump’s presidential
election victory, Paul Krugman, a Nobel Prize
laureate in economics, predicted an immediate
global recession. Wrong.
In light of the persistence of noise and false
prophets, why does Luckbox insist on revisit-
ing the art and science of prediction each year?
It’s the science that attracts us. From cover-
ing forecasting and the prediction markets
for previous issues of Luckbox, we’ve learned
that nearly anyone can learn to become better
at divining the future—an invaluable skill
for any active investor, gambler or predic-
tion-market trader.
This issue continues our exploration of
prognostication with an article on “adversar-
ial collaboration,” a proven method of making
better predictions that deserves the attention
of America’s political class.
Next comes research that indicates
winning—or losing— in the prediction markets
can change the way one views the world. That’s
followed by reports on what’s up with a couple
of prominent prediction markets.
Then there’s an assessment of whether to
trust the Fibonacci sequence to predict stock
prices. That’s followed by long lists of jarring
predictions for cryptocurrency, the Grammys,
the political scene, the world of sports and life
in general. It’s a total of 88 Luckbox forecasts
for this year and beyond.
So the magazine’s packed with stories about
the science of forecasting, but what about the
art? Readers may recall economist Nouriel
Robini’s warning on the eve of the mort-
gage meltdown in 2008, Lehman Brothers
analyst Elaine Garzarelli’s bearish vision of the
markets just days before 1987’s Black Monday,
and Lawrence Summers’ early 2021 alert on
imminent inflation.
They were right.
Ed McKinley Jeff Joseph
Editor in Chief Editorial Director
Two ways to send
comments, criticism and
suggestions to Luckbox
Email
feedback@luckboxmagazine.com
Visit
luckboxmagazine.com/survey
A new survey every issue.
12/17/21 6:18 PM
 SCAN
THIS
OPEN OUTCRY

Take our reader survey!

IN OUR MOST RECENT SURVEY, WE ASKED
LUCKBOX READERS ...

Will Amazon begin to accept

cryptocurrency for purchases on its
U.S. site before Oct. 1, 2022?
No ................................................................. 44.6%
Yes.................................................................41.7%

Will ethereum increase its market cap

relative to bitcoin by March 31?
Yes ................................................................ 76.2%
No ................................................................. 23.8%
Inflation Station
There’s more
I like Luckbox because it goes off the beaten
to Luckbox than
What will President Biden’s approval rating be path. The inflation issue was spot on.
meets the page.
as of March 31? —Tom Anderson, Chesapeake, VA
Lower than 40%.......................................... 49.8%
Look for this QR
Between 40% and 45%.............................. 32.7% I like that Luckbox presented both the
code icon for videos,
Between 45% and 50%................................ 9.5% “inflation is with us now” and the “inflation
websites, extended
Above 50%..................................................... 8.0% is transitory” positions. Economics is not
stories and other
a science, it is an art, and no one has all
additional digital
Which party will win control of the U.S. the answers.
content. QR codes
House of Representatives in the 2022 —William Cooper, North Little Rock, AR
work with most cell
midterm elections?
phones and tablets
Republican Party......................................... 64.0% Probably my favorite issue of Luckbox
with cameras.
Democratic Party......................................... 36.0% since subscribing a few months ago. Loved
the balanced coverage for both camps,
Which party will win control of the U.S. as well as the comparisons to historical 1
Senate in the 2022 midterm elections? data and events.
Republican Party......................................... 76.0% —Scott Mason, NC Open your
Democratic Party......................................... 24.0% camera
Reader Predictions
Cardano will go from sixth to third in market
cap for crypto.
—Rahim Jiwani, Hamilton, Ontario 2
Hover over
There will be military aggression because
the QR code
of China’s planned establishment of a
permanent base in Africa.
—Anthony Primozich, Edmonds, WA

—Luckbox Reader Survey Federal legalization of cannabis may happen. 3

I’m betting on it.
—Greg Van Meter, Long Beach, CA Click on the link
that pops up
China’s withdrawal from markets will cause
redeployment of capital elsewhere. In other
words, banning crypto mining will cause
companies that own mining machines to 4
redeploy equipment to countries with
Your thoughts on this issue? Take the reader low-cost energy. Enjoy the
survey at luckboxmagazine.com/survey —Stuart Cohen, Katy, TX additional content

2201_ELEMENTS_openoutcry.indd 7 12/17/21 6:19 PM

 SHORT INTEREST

[The Fibonacci sequence]

THE ART & SCIENCE OF FORECASTING has continued to identify key

trading opportunities in the
markets since 1989, and it
Virtually every consequential thing we has never failed me.
—Carolyn Boroden, aka the Fibonacci Queen
do in the world is an implicit forecast
because we’re making assumptions SEE
PAGE 22

about what will follow later … SEE

PAGE 14
It’s central to public policy. It’s
central to human life. Whenever Ethereum’s price
you decide to get married or not to get will rise at a much
married or get divorced or whatever, it faster rate than
rests on claims about possible futures. bitcoin due to
—Philip Tetlock, co-author of Superforecasting: The Art and Science of Prediction
the move to
proof of stake.
If you want people to care —Tom Higgins, CEO of Gold-i

about politics more, give them SEE

free stock in a prediction SEE

PAGE 28

market and they’re going to

PAGE 19
The crypto-economy market
capitalization will rise from
now start caring a lot about a peak of $3 trillion in 2021

that because they stand to to over $7.5 trillion at

some point in 2022.
make money. —Rohit Talwar, CEO of Fast Future
—Moran Cerf, neuroscientist and business professor at Northwestern University

Two stocks destined to double in 2022 SEE

PAGE 30
—Garrett Baldwin and Jeff Joseph reveal their top 20 predictions for this year

8 Luckbox | January / February 2022

2201_ELEMENTS_shortinterest.indd 8 12/17/21 6:20 PM

 79
—Paul McCartney’s total Grammy
nominations. He has won 18.
$23 million
The amount
of money
SEE
PAGE 33
Facebook spends
annually on
+32% Mark Zuckerberg’s
Allbirds
quarterly
security and
revenue protection
—Business Insider
increase
—Year-over-year,
SEE
PAGE 38

SEE
PAGE 42

“IT’S THE BEATLES, THE MUSIC THEY’RE PUTTING

OUT. THESE KIDS LISTEN TO THIS MUSIC AND PICK
UP THE MESSAGE. IT’S SUBLIMINAL.”
—Charles Manson to the judge who sentenced him to death row
for the 1969 murders of actress Sharon Tate and six other people

SEE
PAGE 36

January / February 2022 | Luckbox 9

2201_ELEMENTS_shortinterest.indd 9 12/17/21 6:20 PM

 FAKE FINANCIAL NEWS

Cartoon Clairvoyance
The Simpsons displays an uncanny ability to tap into the zeitgeist
and a knack for predicting the future
By Vonetta Logan

M
ethods of predicting the future include old-school toys like the mystifying Magic 8-Ball and the Keep an eye on
slightly haunted Ouija board. But a local psychic or astrologist on TikTok can provide a slightly
more high-powered approach: “I see you paying me $59.95.” the first family
Still, there’s no better soothsayer than a film or television writer. Think about it: They’re
sleep-deprived and subsist on takeout sushi, Red Bull and Funyuns as they race to provide fresh and of Springfield
innovative stories. They go beyond the mundane and the plausible to create seminal pop culture to find out if
moments. They imagine not just what is, but what could be.
Take the writers of Star Trek. They thought up the PADD (Personal Access Display Device), an eerie Elon is going to
harbinger of the iPad that preceded the Apple device by 23 years. Let’s not belabor the fact that the
props department’s limited budget—not just the writers’ power to see the future—kept the PADD as
become president.
simple as the no-nonsense iPad.
But a show that has spanned 31 years and produced nearly 700 episodes possesses not only an
uncanny ability to tap into the zeitgeist but also a knack for predicting the future: The Simpsons.
Writing in Esquire about The Simpsons, Justin Kirkland maintains that “despite many of its
COURTESY OF FOX

storylines being asinine beyond belief, they end up getting mimicked in real life later on.”
Whether that’s prescience, good luck or bad luck, it’s a jarring trend. “Even creepier,” Kirkland
writes, “the show seems to be getting it right with increasing accuracy.”
Some take The Simpsons very seriously, devoting college-level courses to studying the show. With
that in mind, here’s a rundown on Luckbox’s favorite Simpsons predictions that have come true.

10 Luckbox | January / February 2022

2201_ELEMENTS_ffn.indd 10 12/17/21 5:59 PM

 MURDER HORNET/
CORONAVIRUS PARLAY
⊲ SEASON 4, EPISODE 21,
MARGE IN CHAINS (1993)
A Japanese factory worker spreads the
“Osaka Flu” by coughing into a package
bound for Springfield. Mass confusion
ensues as the authorities prescribe bed
rest, declare there’s no cure and predict
everything will return to normal soon.
Panicked townspeople overturn a truck filled
with killer bees, and BOOM that’s the 2020
pandemic/murder hornet parlay.
APPLE’S ENTIRE
PRODUCT LINE
⊲ S6, EP8, LISA ON ICE (1994)
⊲ S6, EP19, LISA’S WEDDING (1995)
Was Steve Jobs a visionary, or just a huge
fan of The Simpsons? In the 1994 episode,
the school bullies dictate a memo to their
Apple Newton, but the device changes
“Beat up Martin” to “Eat up Martha,” eerily
foreshadowing how ducking hard it is to
use autocorrect.
The episode provided a rallying cry
for engineers developing software for
the iPhone keyboard, Megan McCluskey
reported in Time.
“If you heard people talking and they
used the words ‘Eat up Martha,’ it was
basically a reference to the fact that we
needed to nail the keyboard,” an Apple exec
told McCluskey.
A year later, in an episode about Lisa’s
future nuptials, she wore what appears to
be a prototype for the Apple Watch 15 years
before its introduction.
POLITICAL
SHENANIGANS
⊲ S11, EP17,
BART TO THE FUTURE (2000)
⊲ S20, EP4,
TREEHOUSE OF HORROR XIX (2008)
⊲ S4, EP21, MARGE IN CHAINS (1993) OF EVERGREEN TERRACE (1998)
President Lisa tells her Oval Office staff,
“We’ve inherited quite the budget crunch
from President Trump,” thereby predicting
the 45th president some 16 years before he
took office. In a 2016 interview with The
Hollywood Reporter, writer Dan Greaney
explained that the joke was meant as a
warning to the country.
“That just seemed like the logical last
2201_ELEMENTS_ffn.indd 11
Betting pools are accepting wagers on what
The Simpsons may foretell during the 2022 season—
hover cars, Mars colonization or a robot takeover?
stop before hitting bottom,” he said. “It was
pitched because it was consistent with the
vision of America going insane.”
Eerily, the purple pantsuit Lisa wears as
commander-in-chief seems almost identical
to the outfit Vice President Kamala Harris
wore to the inauguration in 2021.
In the 2008 Treehouse of Horror intro,
Homer tries to cast his ballot for Barack
Obama, but the voting machine keeps
changing his vote to John McCain. In 2012,
footage emerged of a voting machine that
switched votes from Obama to Mitt Romney.
And who could forget the scapegoating of
Dominion voting machines in 2020? (Please
don’t sue Luckbox.)
In the Marge in Chains episode, Mayor
Quimby leaves town for warmer climes in
the middle of a high-profile crisis (the Osaka
Flu), foreshadowing the junket Republican
Sen. Ted Cruz took to Cancun during the
Great Texas Winter Blackout.
GREECE DEFAULTS
⊲ S23, EP10, POLITICALLY INEPT,
WITH HOMER SIMPSON (2012)
Homer appears on a cable news show
called Head Butt, and the chyron across the
bottom of the screen reads, “Europe puts
Greece on eBay.” This was a full three years
before Greece had the honor of becoming
the first developed country to default to
the International Monetary Fund. Too bad
Greece couldn’t “buy now, pay later.”
TRULY NERDY
PREDICTIONS
⊲ S10, EP2, THE WIZARD
⊲ S22, EP1, ELEMENTARY SCHOOL MUSICAL (2010)
“Higgs boson” may sound like an internet
personality test, but the “God particle”
is actually a scientific breakthrough
that helps explain how everything in the
universe has mass. Scientists didn’t confirm
its existence until 2012, but in the 1998
Simpsons episode, Homer is pictured in
front of a blackboard bearing an equation
that predicts the mass of the yet-to-be-
discovered particle.
“If you work it out, you get the mass of
a Higgs boson that’s only a bit larger than
the nano-mass of a Higgs boson actually
is,” science writer Simon Singh said in an
interview with The Independent. “It’s kind of
amazing as Homer makes this prediction
14 years before it was discovered.”
In the episode Elementary School
Musical, Martin holds up a Nobel Prize
betting pool bingo card with the name of
MIT professor Bengt Holmström circled in
red. Holmström won the prize six years later
for his work in economics.
Other Simpsons predictions that came
true include the National Security Agency’s
scandalous practice of spying on innocent
Americans, the tragedy of a Las Vegas
entertainer killed by a white tiger and Lady
Gaga’s intense Super Bowl halftime show.
How do they do it? The showrunner
of The Simpsons, Al Jean, who has been
writing for the show since it debuted in
1989, had this to say: “One of our writers,
the guy whose episode predicted Donald
Trump as president, said it best: ‘If you
write 700 episodes, and you don’t predict
anything, then you’re pretty bad. If you
throw enough darts, you’re going to get
some bullseyes.’”
And the public can get involved. Betting
pools are accepting wagers on what
The Simpsons may foretell during the
2022 season. Could it be hover cars, the
colonization of Mars or a robot takeover?
While prognostication is fun, The
Simpsons feels eerily good at it. But it’s
a numbers game. It’s why trading small
and trading often in the stock and options
markets can improve the odds of success.
In the meantime, keep an eye on the first
family of Springfield to find out if Elon is
going to become president.
Vonetta Logan, a writer and comedian, appears daily
on the tastytrade network and hosts the Connect the
Dots podcast. @vonettalogan
January / February 2022 | Luckbox 11
12/17/21 5:59 PM
 Luckbox Presents...

THE ART
& SCIENCE
OF FORECAST
12 Luckbox | January / February 2022

2201_TOPICS_Intro.indd 12 12/17/21 5:56 PM

 14
Foes Unite
Adversarial collaboration lessens
hostility and improves predictions

19
Money Talks
Beliefs shift when traders earn
cash in prediction markets

20
Predictive Markets
Two exchange CEOs
assess their industry

22
Fibonacci Sequence
Can a 2,200-year-old string of numbers
predict stock prices?

25
Experts Speak
Veterans of the markets hold
forth on what lies ahead

28
Crypto Chango
Cryptocurrencies are about to
become unrecognizable

30
STING Divining 2022
Two Luckbox editors offer predictions
for the new year

January / February 2022 | Luckbox 13

2201_TOPICS_Intro.indd 13 12/17/21 5:56 PM

 the art & science of
FORECASTING
LUCKBOX LEANS IN WITH
PHIL TETLOCK
WHERE is adversarial
collaboration
used, and where
do you see the most potential for it?
The idea of adversarial collaboration has
deep roots in the sciences. A famous ex-
ample is the adversarial collaboration
between prominent psychologists Daniel
Kahneman and Gary Klein. Kahneman
and Klein each won acclaim by develop-
ing such seemingly contradictory schools
of thought that each scholar appeared to
be a threat to the legacy of the other. They
could have chosen to hunker down and
fire off rival polemics, but instead they got
together to discuss why they had such dif-
ferent views and how those views could be
reconciled. The result was a 2009 paper in
which they concluded, “We agree on most
of the issues that matter.” On the rest, they
could disagree without being disagreeable.
Superforecasters apply this concept regu-
larly to collaborate and derive more accu-
rate forecasts.
The same concept can be used in other
domains, from personal investment deci-
sions to policymaking on critical issues of
the day. With a debate like “is inflation tran-
14 Luckbox | January / February 2022
2201_TOPICS_Adversarial_Collab.indd 14
sitory or roaring back,” key figures could
work together—with the help of trusted
third parties—to identify what they dis-
agree about and how to meaningfully test
those disagreements.
Why hasn’t adversarial
collaboration been adopted
on a larger scale?
Adversarial collaboration requires good
faith and the ability to say, “I was wrong” in
the face of evidence. It needs a neutral plat-
form and clear tests of one’s beliefs. But in
noisy public arenas, that doesn’t make good
television. This is probably why the media
often turn to the loudest talking heads who
do make good television no matter how bad
their track record may be. Sadly, those voic-
es usually have zero interest in adversarial
collaboration.
In other areas also, people tend to find a
confident “yes” or “no” more satisfying than
“maybe” and “on the other hand.” Research
shows people trust more confident financial
advisers over those who are less confident,
even when their track records are identical.
People all too often equate
confidence and competence
and mistakenly see conces-
sions in a debate as a sign of
weakness.
Would politicians be likely
to embrace adversarial
collaboration to reach
policy decisions?
Individual politicians can
be adversaries and collab-
orators. Sen. Bob Dole had
strong views about how the
world should be yet reg-
ularly reached across the
aisle to craft legislation. Ted Kennedy and
Orrin Hatch were strong adversaries in de-
bate but collaborated productively on many
issues. So it can be done. It’s really up to
the politicians to do it, and right now the
emphasis seems to be more on “adversary”
than “collaboration.”
Philip Tetlock, a professor at
the Wharton School of the University of
Pennsylvania, has helped a generation of
forecasters hone their prediction skills.
At the university’s Good Judgment Project,
Tetlock worked alongside his wife and
research partner Barbara Mellers to form a
team of forecasters so accurate that they
outperformed intelligence analysts who
had access to classified data.
He and journalist Dan Gardner were co-
authors of an influential New York Times
bestseller, Superforecasting: The Art and
Science of Prediction.
For this article, Tetlock agreed to field
questions about adversarial collaboration,
a process that creates solid predictions
by combining differing views.
What challenges stand in the way of more
widespread adversarial collaboration?
The biggest obstacle is the reluctance of
most political leaders to take the risk and
present their beliefs in a way that can be rig-
orously put to the test. The answer is for all
of us to hold them accountable and recog-
nize leaders who are willing to take that risk.
A psychological mechanism is at work
here. Studies show that if people feel they
will be held accountable for their views,
they tend to avoid cognitive pitfalls such
as overconfidence and the failure to up-
date beliefs in response to
new evidence. But if people
make predictions that can
never be disproved, it poses
no reputational risk, and, in
turn, encourages overconfi-
dence and even more extreme
predictions. If we get serious
about keeping score, with it
will come accountability that
is dismally lacking in public
discourse today.
What’s the most important
thing to know about adver-
sarial collaboration?
Adversarial collaboration is about disagree-
ing without being disagreeable. It is about
having the integrity to examine one’s beliefs
in a set of clear tests. It is about making
more accurate forecasts and getting a little
wiser each time. Ultimately, it’s about im-
proving public discourse.
12/17/21 4:35 PM
 ADVERS
ARIAL
COLLAB
ORATION (Bickering for Better)
Congress battled bitterly over domestic policy in 2021.
Is there a cure for the country’s polarized politics?
BY WARREN HATCH
L
awmakers’ disagreements over government
spending—from the bipartisan infrastructure
bill to President Joe Biden’s “Build Back Better”
agenda—have at times seemed insurmountable.
Concerns about inflation have played a central
role in many of those disputes.
Experienced forecasters recognize this as a battle of predic-
tions. Proponents of more government spending predict
legislation will help address inequality and strengthen the
economy, both now and in the long run. Opponents predict
that additional social spending risks unleashing inflation and
exacerbating poverty.
Strong views have led to heated debates but, alas, little
agreement. Concepts remain nebulous, hedge words like
“might” and “could” are used to prop up weak arguments, and
cognitive pitfalls, such as overconfidence, result in extreme
ideologically driven predictions.
AGREEABLE DISAGREEMENT
“Adversarial collaboration” offers a better way to conduct
these important debates. Forecasting is implicit in policy posi-
2201_TOPICS_Adversarial_Collab.indd 15
tions, a fact politicians often fail to realize. Philip Tetlock, a
professor at the Wharton School of the University of Pennsyl-
vania and co-author of Superforecasting: The Art and Science
of Prediction, suggests this creates a hugely detrimental lack
of accountability.
Running lab studies since the 1980s, Tetlock has discovered
that if people feel their predictions will be evaluated by others,
they start to think preemptively of ways they might be wrong
and then construct their predictions more carefully.
Adversarial collaboration, as Tetlock describes it, involves
disagreeing without being disagreeable. This seemingly
simple concept requires the courage to seek out those who
hold different views and find common ground with them.
Even now in his semi-retirement as a scientist, Nobel
Prize winner Daniel Kahneman maintains his commitment
to adversarial collaboration. Good forecasters, and certainly
those few who have attained the status of Superforecaster,
practice this, too.
The science behind Superforecasting shows that greater
cognitive diversity correlates with improved insight. Accu-
rate forecasters harness the benefits of a healthy debate. They
January / February 2022 | Luckbox 15
12/17/21 4:35 PM
 the art & science of
FORECASTING
produce forecasts on contentious issues in a
non-contentious way.
Good Judgment Inc, the forecasting
company spawned by the research of Tetlock
and his colleagues, uses its international team
of Superforecasters to answer clients’ ques-
tions about the future. The Superforecasters
don’t always agree on everything, but their
exchanges on Good Judgment’s private Super-
forecaster platform provide strong evidence
that debate can be civil and inclusive of diverse
views, even on highly divisive issues.
Tetlock’s spouse, research partner and
fellow UPenn professor Barbara Mellers
observed the same results on Good Judg-
ment’s public platform, GJ Open, through-
out the 2020 election cycle. It confirmed her
earlier findings that forecasting can greatly
reduce political polarization.
A THOUGHT EXPERIMENT
Effective adversarial collaboration requires
asking questions that reflect the vast array
of views across the political spectrum of a
hot-button issue. Right now, few issues are
hotter than inflation. Is it transitory and
likely to fade away in upcoming quarters? Or
is it just getting started, with the specter of
double-digit inflation of the 1970s looming if
action isn’t taken now?Now imagine: What
if prominent politicians holding opposing
views on the subject came together to engage
in adversarial collaboration? While each side
would certainly want to be right, what if they
wanted even more to develop the best-in-
formed policy direction?
The adversarial collaboration among them
would start with identifying what they disagree
about. The next step would be to decide which
forecasts would meaningfully test those
disagreements. It’s crucial that the forecasting
questions are precise: How much inflation is a
problem? Measured by what benchmark? Over
what period? What are the drivers?
The Superforecasters
GOOD JUDGMENT INC, an international company that provides forecasts and forecasting training to businesses and government agencies,
bases its services on the work of the Good Judgment Project academic research at the Wharton School of the University of Pennsylvania.
The company, which draws upon the work of a diverse group of people scientifically identified as Superforecasters, is challenging politicians
and other policymakers to set aside their differences and use the Good Judgment platforms to work together.
They could avail themselves of a process called “adversarial collaboration” that the Good Judgment Superforecasters have demonstrated can
produce actionable results. It’s the process of discovering common ground by agreeing to disagree without being disagreeable, says Good
Judgment CEO Warren Hatch.
16 Luckbox | January / February 2022
2201_TOPICS_Adversarial_Collab.indd 16
The imaginary debate could feature, for
instance, Sen. Ted Cruz (R-TX), Rep. Alexan-
dria Ocasio-Cortez (D-NY), Sen. Joe Manchin
(D-WV) and Sen. Rand Paul (R-KY). For
Cruz, Manchin and Paul, the solution is to
cut spending. For Ocasio-Cortez, increased
fiscal spending, higher wages and universal
GREATER
COGNITIVE
DIVERSITY
CORRELATES
WITH
IMPROVED
INSIGHT.
child care are the way forward. So we begin
to have an intersection of forecast topics that
each side believes will support their position
and undermine the other side.
A FORECASTING CHALLENGE
Let’s pose some key questions to the forecast-
ers and then assign probability estimates to
see how each side fares.
The idea of adversarial collaboration, with
its deep roots in the scientific literature, is an
integral part of effective forecasting. Super-
forecasting is a data-driven empirical process
that leads to better forecasts, both for indi-
viduals and for teams.
To ensure the accuracy of their forecasts,
Superforecasters at Good Judgment Inc
engage in adversarial collaboration on a regu-
lar basis. On the issue of inflation, they start
by asking whether the currently elevated infla-
tion numbers are transitory.
They also seek to identify the effect on
unemployment, the likelihood that supply
chain bottlenecks will persist and what actions
the Federal Reserve is likely to take.“
A single dot on a canvas is not a painting
and a single bet cannot resolve a complex
theoretical dispute,” writes Tetlock. “This will
take many questions and question clusters.”
To get a more accurate picture of the infla-
tionary pressures of today and tomorrow,
Good Judgment’s Superforecasters weigh in
on such questions as:
• What will the percentage change in the
Personal Consumption Expenditures Price
Index be in the fourth quarter of 2022 relative
to the fourth quarter of 2021?
• What will the U.S. civilian unemployment
rate (U3) be in the fourth quarter of 2022?
• When will the Federal Reserve conclude
its monthly quantitative easing bond
buying?
• By how much will the U.S. Congressio-
nal Budget Office’s FY 2022-2031 budget
authority projections for the “Nondefense”
and “Other Spending” categories increase in
FY 2022 as compared with July 2021?
• Will legislation raise the top marginal tax
rate for long-term capital gains to more than
20% before Jan. 1, 2023?
This example of an exchange on the Super-
forecaster platform occurred in September
2021:
Forecaster A: “Given the data to date,
including the latest [Consumer Price Index
figures and not the Personal Consumption
Expenditure Index statistics], there’s virtu-
ally no chance of inflation being less than 4%.
Forecaster C’s posts are instructive in pointing
toward the 4%-5% range.”
Forecaster B: “But doesn’t Forecaster C’s
latest post suggest less than 4%? Either way,
I’m surprised how extreme these forecasts
are.”
Forecaster A: “Good point. I believe the
supply chain issues are substantial and are
not ending soon. The delays that cause short-
12/17/21 4:35 PM
 ages and the increased costs of shipping will
continue to drive inflation this year.”
You don’t have to be a Superforecaster to
weigh in on similar questions in the Infla-
tion Challenge on GJ Open, a public platform
that Good Judgment runs to promote better
forecasting practices. Tetlock sees value in
such forms.
“Sadly, in noisy public arenas, strident
voices dominate debates, and they have zero
interest in adversarial collaboration,” he
wrote. “But let’s not make the cynic’s mistake
of thinking that those who dominate debates
are the only debaters. If learning, not gloating,
is the goal, that is progress.”
The sweet sound of collaboration
IN THIS THOUGHT EXPERIMENT, FOUR PROMI-
NENT POLITICIANS HOLDING OPPOSING VIEWS
ABOUT WHAT DRIVES INFLATION AND HOW TO
MITIGATE IT USE ADVERSARIAL COLLABORA-
TION TO DEVELOP A MORE COMPLETE PICTURE
FOR DETERMINING POLICY. THE IMAGINARY
DEBATE BELOW USES ACTUAL STATEMENTS
MADE BY SENS. TED CRUZ (R-TX), JOE MANCHIN
(D-WV) AND RAND PAUL (R-KY),
AND REP. ALEXANDRIA OCA-
SIO-CORTEZ (D-NY).
Sen. Ted Cruz: The tril-
lions that are being spent,
the trillions in debt that is
being racked up—it’s histor-
ic and not in a good way. …
We’re seeing skyrocketing
inflation.
Rep. Alexandria
Ocasio-Cortez: If you’re
worried about inflation, it’s
important to understand why
it’s happening: supply chain,
labor and healthcare com-
plications. We can address
these issues by investing in
infrastructure, wages, healthcare and
benefits.
Ocasio-Cortez: Conservatives argue
against raising wages by claiming it’ll raise
prices. But that isn’t reliably supported with
2201_TOPICS_Adversarial_Collab.indd 17
A POWERFUL TOOL
Backed by experiments in cognitive psychol-
ogy and the science of Superforecasting, Good
Judgment’s approach to forecasting aims to
show how adversarial collaboration can enrich
the debate and lead to improved forecasts.
When it comes to thinking about the future,
the wisdom of the crowd is an effective tool.
Given the right practices and a supportive
environment, forecasting platforms such as
Good Judgment’s private Superforecaster
platform and GJ Open enable people to
become more accurate forecasters.
And better forecasting rewards accuracy
over extreme, ideologically driven predic-
historic data. However, what
we’re seeing now is perhaps
an example of prices rising
when wages and benefits
are too low—not enough
workers, hurts supply chain,
prices hike.
Sen. Joe Manchin: There’s
not one senator out of 100
that does not want to raise
the minimum wage.
Sen. Rand Paul: The
people who lose their
jobs first when
you hike up the
minimum wage
are black teenagers.
… Even the government
says that nearly four million
people will lose their jobs.
Paul: In [Joe Biden’s and
the Democrats’ socialist]
America, inflation and supply
chain issues are apparently a
“high-class problem,” even
as working Amer-
ican families are
seeing the greatest
of impacts. … Don’t
let the Democrats fool
you—nothing is free,
tions. Adversarial collaboration can indeed
provide the cure to today’s woes of political
polarization.
The Superforecasters invite politicians and
other key figures in the inflation debate to
join in on inflation adversarial collaboration.
Everything’s ready to go: We have the plat-
form and we have the best forecasters. We just
need the political adversaries in Washington
to come and collaborate.
Warren Hatch, a former Wall Street investor, is CEO
of Good Judgment Inc, a commercial enterprise that
provides forecasts and forecasting training based on the
expertise and research of the Good Judgment Project.
@wfrhatch
and ultimately you will pay the price of their
agenda through taxation and inflation.
Manchin: Some in Congress have a
strange belief there is an infinite supply of
money to deal with any current or future
crisis and that spending trillions upon tril-
lions will have no negative consequence
for the future. I disagree.
Ocasio-Cortez: For
folks saying “We have
inflation because we
printed a bunch of mon-
ey last year,” if you want
to trim down needless
spending in these bills
to address inflationary
issues, the answer isn’t
to cut basic benefits
for people. It’s to target
the massive corporate
giveaways.
Cruz: Biden has proposed
a $6 trillion budget,
and Congress already
passed a $1.9 trillion bill Biden wanted
ostensibly for COVID-19 relief. But
only 9% of that bill went to actual
COVID-19 relief, and the huge price tag
on the bill is part of what’s driving the
inflation we’re seeing today.
January / February 2022 | Luckbox 17
12/17/21 4:35 PM
page18.indd 18 12/17/21 5:05 PM
 the art & science of
FORECASTING

S
tock and options traders are
continually trying to predict
the future. After all, every
market decision boils down to
the same question: “Will this
or won’t this make money?”
But not all markets are created equal.
Investors and economists have had
hundreds of years to study markets like
the New York Stock Exchange, which was
established in 1792. Other markets, such as
event-contract prediction markets, are
still in their infancy.
It was only last July that Kalshi, the
first-ever federally regulated events
“It’s hard for the human brain to think about
Prediction
the future, and we thought that using technol-
ogy we can make it easier for us to transport Markets
ourselves to the future and imagine it better.”
AUGUR was developed by Forecast
They picked the topic of climate change
and recruited self-described believers and Foundation as a global no-limit decen-
skeptics. The point was to see if participat- tralized prediction market platform
ing in a climate-themed prediction market built on the ethereum blockchain.
would shift beliefs because the market would
serve as a non-partisan arbiter of truth. BETFAIR, a London-based online gam-
Following the experiment, some did change
bling company, operates the world’s
their beliefs, but not merely because
they participated. Participants shifted largest online betting exchange and
toward stronger concern about climate hosts prediction markets on domestic
change proportional to the amount of and international politics.
money they won, regardless of whether

MONEY
they were believers or skeptics.
KALSHI, a new federally regulated
“The nuance is that giving you a
stock that’s contrary to your beliefs prediction market based in the United
that constantly makes money does States, began its beta in July 2021 with

OVER
change your mind,” Cerf said. “When markets based on COVID-19, climate,
you constantly get feedback that your politics and pop culture.
stocks that go against your beliefs are
making money, you get feedback that
NADEX (NORTH AMERICAN
says your beliefs are not aligned with

MIND
reality and it would have been more DERIVATIVES EXCHANGE), a regulat-
financially rewarding for you to have ed financial exchange, specializes in
the other beliefs.” short-term binary options and spreads.
Then, gradually, you shift your It recently introduced a suite of
beliefs without realizing it—even if your
prediction markets for forecasting
exchange, opened its identity doesn’t change.
virtual doors for a public Climate skeptics who economic events.
beta. Users are already Making—or losing— began acting more like
trading hundreds of thou- believers still identified
sands of shares in its larg-
money in prediction as skeptics, Cerf said, “So
POLYMARKET, a prediction market
platform built on the Polygon block-
est-volume markets, each markets can change I think the shift is not chain, uses USD Coin (USDC),
share representing some- complete—it is in prac-
body’s expectation for the beliefs. But how does tice, but not in theory.” a cryptocurrency stablecoin, to
outcome of a future event. The experiment was make trades.
With more-established that work? repeated focusing on
prediction market plat- sports instead of climate PREDICTIT, a New Zealand-based
forms, such as Predic- change, and the results
tIt, it’s not uncommon
by Mike Reddy suggested that fandom is
prediction market, was launched as a
research project in 2014 with a no-ac-
for trading volume in a not as closely tied to one’s
number of markets to surpass millions of shares. identity as environmental beliefs. It’s easier tion letter from the Commodity Futures
That was more than enough to catch the to accept a favorite team losing a game than Trading Commission. It emphasizes
attention of Moran Cerf, a neuroscientist being wrong about ideological principles. politically themed markets.
and business professor at Northwestern But for prediction markets to change
University. He and his team decided to beliefs, Cerf said, participants must accept
construct a prediction market for a research a common arbiter of truth.
project—not to learn what the markets do, “It only works if when you lose, you accept
but instead to find out what could be done that you lost, and if you win, you accept that
with the markets. In practice, the project you won,” he said. “And in this game, you
accomplished a bit of both. entered knowing the rules, and you got an
“We thought that we can use technology to outcome that’s like going to trial. The jury
change people’s minds,” Cerf told Luckbox. says ‘yes’ or ‘no.’”

January / February 2022 | Luckbox 19

2201_TOPICS_PM_Cerf_Kalshi_Nadex.indd 19 12/17/21 4:43 PM

 the art & science of
FORECASTING
HOW PREDICTIVE
ARE PREDICTION
MARKETS?
Kalshi’s co-founder discusses
what she’s learned about the
exchange’s forecasting power
since it launched last summer
by Luana Lopes Lara
W hen Tarek Mansour and I started
Kalshi, we had a vision of an “every-
thing market,” an exchange where
people could hedge, forecast and trade on the
things they were talking about. Forecasting was
always an important part of the vision: Both
of us had read the classics from Philip Tetlock
and Robin Hanson, and one of us had done
BINARY OPTIONS:
THE ORIGINAL
PREDICTIVE MARKETS
Investors can derive valu-
able market forecasts from
binary options. To learn
more, Luckbox spoke with
Travis McGhee, CEO of
Nadex, a binary options
exchange pending acquistion
by crypto.com.
20 Luckbox | January / February 2022
2201_TOPICS_PM_Cerf_Kalshi_Nadex.indd 20
research in forecasting using statistics and
machine learning.
We dove deeper into the literature on fore-
casting, reading papers from economists, such
as Justin Wolfers and Eric Zitzewitz, that
showed why prediction markets were theo-
retically optimal information aggregators,
and psychology papers that showed how the
markets could fail.
In the process of building the exchange, we
used every shred of this acquired knowledge
to choose the order book model, design the fee
structure and craft the trading mechanics—all
with an eye toward maximizing the forecasting
power of our markets.
Let’s take an example market category,
COVID-19, and see how it has performed in
the wild.
T ell us about Nadex’s new
prediction markets.
We’ve recently added approximately 11
new contracts on recognizable economic events,
such as retail sales, crude oil inventories and the
Consumer Price Index (CPI)—to name a few.
We have plans to offer more, many of which
will step outside standard economic event clas-
sification. What we have seen with more retail
traders entering the financial markets is that
there is increased demand for access to oppor-
tunity. Ten years ago, opportunity came in the
form of the S&P 500 or Apple stock. Now, trad-
ers across the globe are looking to speculate or
hedge with events—both financial and non-fi-
nancial—whose outcomes may directly or indi-
rectly impact underlying financial markets.
One of the most interesting
COVID-19 markets is one that
hasn’t yet settled: VOHC-001.
This market asks if the CDC will
identify a “variant of high conse-
quence” (VOHC) by March 1,
2022. Vaccines and therapeutics
are ineffective against VOHCs, and no variant
has yet been labeled one. The Delta variant,
for instance, is a “variant of concern,” which
is one tier below.
From the market’s launch on Sept. 6 to the
time of this writing, traders have indicated that
the probability of a VOHC emerging is at least
20%. Already, this is notable because predic-
tions from news media, politicians and even
scientists have been—and continue to be—far
more optimistic about the continued usefulness
of vaccines and COVID prevention measures.
A spike appeared in the “YES” probability
on Nov. 25. What changed? That was the day
South Africa reported news of the new, highly
transmissible Omicron variant. There wasn’t
much information about the variant at the time,
except that the World Health Organization
What inspired you to launch
these markets?
Funny enough, we’ve listed many of these
markets at various points throughout our
history. A lot of these new prediction markets
are top-of-mind for world citizens and impact
the global economy. So, we thought finding
the right markets to fit the current macroeco-
nomic landscape made a lot of sense. With
the recent pandemic, economic downturn and
ongoing recovery, we have been busy adding
many markets that are debated in the news
and at the dinner table around the country.
12/17/21 4:43 PM
 quickly labeled it a “variant of concern.” Trad-
ers drove yes-side prices up to 50%.
In the days after, media reports questioned
the new virus’s transmissibility and lethal-
ity, causing the probability of “YES” to swing
rapidly before eventually settling around 40%.
By early December, as even more was learned
about Omicron, the probability was back
within the mid-20% range.
The market is still predicting a higher prob-
ability of a VOHC than is reported in the news
or suggested by scientists. What does this
mean? Prediction markets can produce very
different and more frequently updated fore-
casts than other sources.
Kalshi has another series of markets, called
VAXX, forecasting the number of vaccinated
Americans. The underlying data source is
published daily by the Centers for Disease
Control, and it’s updated with a one-day lag.
VAXX markets were structured to fit a
weekly schedule, which means that if the
market is functioning properly, it will become
more determined over time as the possible
variation in the weekly number is reduced by
the trickle of daily data points.
Over the weekly markets’ lifetimes, prediction
error drops significantly as the market nears
resolution, suggesting the markets responded
extremely quickly to new information and
updated probabilities without succumbing to
narratives or biases prevalent in other sources.
COVID-19 is just one example, but the rest
Prediction markets can produce
different forecasts than other sources
and update them more frequently.
of Kalshi’s markets work the same way. They’re
constantly updating, taking into account new
information and providing facts-first forecasts.
Our experience with Kalshi has reaffirmed
our belief in the power of prediction markets,
and we’re excited to share this powerful tool
with the world.
Luana Lopes Lara co-founded Kalshi, the first-ever
federally regulated events-contract prediction market.
@luanalopeslara2

The insights gleaned from Nadex’s prediction markets

are exciting, but their value is often overlooked.
What do traders need to know before
participating in these markets?
Each contract is effectively a yes-or-no
(binary outcome) question. For example,
“Will the next CPI release be greater than
0.9%?” Most prediction markets on Nadex
have five strike prices—or price levels—
to choose from. If you think the next CPI
release will be greater than 0.5%, you can
trade that as well. Nadex contracts provide
traders with extra options and flexibility in
prediction markets. These contracts typically
open and are available to trade about a week
before the prediction numbers are released
and the contracts expire. Once they open,
people can trade these markets 23 hours a
day, five days a week.
Are there any contract limitations?
While the possibilities for new prediction
contracts are nearly endless, Nadex, as an
exchange regulated by the Commodity Futures
Trading Commission, is prohibited from offer-
ing some of them. Political elections would be
one of those areas where we’re prohibited from
listing markets. That said, we plan to expand
our offerings in the coming months to include
predictions around current issues relating to
crypto, pop culture, travel, the pandemic and
many other interesting topics.
What makes Nadex’s prediction
markets different?
Beyond prediction markets, Nadex members
can also speculate on stock indexes, commodi-
ties and currencies—all from the same account
they use to participate in event contracts.
What trends will these markets
be able to capture?
The insights gained from these markets may
be the most exciting, but also the most over-
looked aspect of their value. As these markets
continue to grow in popularity with people
from all walks of life, we can begin to get a
statistically significant indicator of the real
day-to-day experience of Americans and their
views on the probability of future outcomes.
Additionally, because these are not just ques-
tions that may have been hastily answered
on some survey but opinions and predictions
backed by real money, they may arguably be a
more accurate gauge of the current economic
temperature.
What do you hope the future holds
for Nadex’s prediction markets?
We are continuously researching and evalu-
ating opportunities to list contracts, both in
the economic realm and outside, to continue
offering our members the most innovative
and interesting trading opportunities avail-
able anywhere.

January / February 2022 | Luckbox 21

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 the art & science of
FORECASTING

FIBONACCI’S
A series of numbers known as the Fibonacci sequence revolutionized

ARITHMETIC
commerce and science. But can it help traders pick the right stocks?

REVOLUTION
by Ed McKinley

A
13th-century Italian mathemati-
cian known these days as “Fibo-
nacci” helped create the modern
world of commerce and finance by
introducing Hindu-Arabic numer-
als and mathematics to Western civilization.
The decimal-based system he popularized in
Europe arose in India in the 6th or 7th century
and uses the numerals 0, 1, 2, 3, 4, 5, 6, 7, 8
and 9, notes Keith Devlin, a Stanford professor
emeritus of mathematics who’s devoted three
of his 33 books to Fibonacci.
Before Fibonacci enlightened them, West-
erners were still relying on clunky Roman
numerals and counting on their fingers. That
was holding them back in business, science and
the arts, Devlin said.
But Fibonacci set out to change that. In
1202, he published the book Liber Abaci—
which is now spelled several different ways—
to teach modern math in the Late Middle Ages.
Yet the book’s revelations didn’t end there.
Fibonacci wrote at length about how to run
a business. That included the best practices
for dividing profits, employing weights and
measurements, dealing with foreign currency
exchange rates, and assessing the value of the
alloys contained in coins, Devlin said.
Within 20 to 30 years of its publication,
Liber Abaci helped establish the banking and

22 Luckbox | January / February 2022

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 accounting principles that form the
basis of commerce. Fibonacci lived
until 1250—long enough to see the
changes he had wrought.
“It was always assumed that [Fibo-
nacci’s] Liber Abaci started that
revolution,” Devlin noted. “That
assumption was proved true in 2003
with the discovery of a manuscript in

T H E F I B O N A C C I S E Q U E N C E : 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, . . .

a library in Florence.”
He can testify from personal experience Some stock traders have latched onto the
that it’s “awesome” to hold in one’s hands a
hefty piece of parchment that launched such
profound and lasting change. And don’t forget
idea that the Fibonacci numbers might
predict the movement of equities prices.
that the hand-written tome predated the
invention of the printing press by more than
two centuries.
But the modern ideas contained in the
age-old volume continue to foster debate and
spawn myths. The mythology begins with the
man himself. For one thing, he wasn’t really
named Fibonacci. That’s just the appellation a
19th-century historian gave him.
During his lifetime the man now known
as Fibonacci was called Leonardo. When he
became famous, people began referring to him
as Leonardo of Pisa to distinguish him from
others with the same name. “The Math Guy”
But let’s call him Fibonacci just the same.
He was born in 1170 in Pisa, one of several KEITH DEVLIN, the Stanford University
Italian cities that rode the crest of international mathematician who helped put the
trade in that era. His father was engaged in that Fibonacci sequence into perspective for
commerce, which exposed the young Fibonacci
Luckbox, has a history of bringing math to
to the business practices of merchants from the
the masses.
Muslim world.
Those practices remain relevant to this day, Devlin became known as “The Math
including a series of numbers now known Guy” during his tenure with National
as the Fibonacci sequence. (See “The Rabbit Public Radio, and he’s a co-founder and mathematical cognition, models of
Problem,” p. 24). Devlin calls the numbers “a the president of BrainQuake, a company reasoning, the theory of information and
simple little recursion that incorporates enor-
that creates video games that teach applications of mathematical techniques
mously interesting mathematical properties.
“Numbers from the sequence appear often in mathematics. in the study of communication.
mathematics—in the measurements of penta- But he backed those expeditions into He’s written 33 books and earned the
grams and pentagons, for example. They pop popular culture with impressive academic Carl Sagan Award and the Joint Policy
up with an eerie frequency in nature, like the credentials that include directing a long Board for Mathematics Communications
patterns in the seeds of sunflowers or the
list of university programs and projects Award. The California State Assembly
number of petals in a flower. Centuries ago,
and serving as a fellow for numerous recognized him for his “innovative work
they provided the rhythm for Sanskrit poetry.
Instructors use the Fibonacci sequence to institutions. and longtime service in the field of
teach induction proofs in advanced high school Besides designing information systems mathematics and its relation to logic and
math classes or in introductory college math that analyze intelligence, he has studied linguistics.”
courses. Students can use it in 40 to 50 exer-
cises that prove “this or that,” Devlin noted.

January / February 2022 | Luckbox 23

2201_TOPICS_Fibonacci.indd 23 12/17/21 4:37 PM

 “It’s a wonderful little piece of pure mathe-
matics that’s quickly accessible and attractive
The Rabbit Problem
and brings students in very early,” he says.
FIBONACCI, author of a lengthy 13th-cen- year and none of them die.
In fact, the sequence has been attractive
enough to inspire a whole mythology. The tury missive that revolutionized the way Suppose it takes a month for the first
mythologizers have convinced themselves and the Western world does business, used the two bunnies to reach maturity and have
many others that the Fibonacci numbers corre- example of rabbits to teach readers how two offspring—one male and the other
spond with the dimensions of the human body to use the Fibonacci sequence of numbers. female. That makes for a total of four
and influenced classical architecture and clas-
The sequence generally starts with zero rabbits.
sical music—none of which is true, according
and then adds one. From there, users find The second generation takes a month
to Devlin.
But now for the big question: Can traders use the next number by adding the two num- to mature, and then they have two off-
the Fibonacci sequence to make better invest- bers before it. The resulting sequence is: spring, once again a male and a female.
ment decisions by accurately predicting the 0, 1, 1, 2, 3, 5, 8, 13, 21, 34 … And so it continues. Every month, all
movement of equities prices? The rabbit problem begins with a single of the mature rabbits produce another
Legions of investors have become unshak-
pair of bunnies. The question is how many male/female pair.
ably convinced that charts tracing the move-
ment of stock prices that reflect the Elliott there will be if the original rabbits and Can you figure out how many rabbits
Wave principle of recurring fractal patterns their descendants keep reproducing for a there would be at the end of the year?
will pinpoint future prices and result in a
better-than-average return.
Those traders often rely on Fibonacci
retracement levels, the horizontal chart lines
that indicate where support and resistance are
likely, according to the Investopedia website.
Each level is associated with a percentage
that shows how much of a previous move the
price has retraced. The Fibonacci retracement
levels of 23.6%, 38.2%, 61.8% and 78.6% are
created. While 50% isn’t an official Fibonacci
ratio, it’s also used.
Traders often find the indicator useful
because they can draw it between any two
significant prices. The indicator creates the
levels between those two points.
But does it really work? Can it predict prices?
“I’m just going to say it’s bogus,” Devlin
reluctantly concludes. “There’s no mathemat-
ical reason this would work.”
Still, that’s not his last word on the subject.
“If enough traders believe [the sequence can
ferret out future prices], that imposes some year, there would be 233 pairs or a total of 466 rabbits.
structure on the market,” Devlin notes. “If you of each month this way: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 and 233. So, at the end of a
know how all of the other traders are going to Answer: The Fibonacci sequence would yield the number of pairs of rabbits at the end
go, that gives you an edge.”
What’s more, using technical chart patterns
that reflect the Fibonacci numbers won’t cause
traders any harm if they keep them in perspec- the Fibonacci numbers has reached a similar CHECK OUT THE NEXT ISSUE OF LUCKBOX
tive. Savvy investors might use them as one of conclusion. He’s Tim Knight, a Luckbox colum- TO SEE HOW THE FIBONACCI SEQUENCE—
many pieces of evidence for taking a bullish or nist and tastytrade web show host who’s been AND THE GOLDEN RATIO AND GOLDEN RECTAN-
bearish position, he suggested. using technical analysis to trade the markets
GLE ASSOCIATED WITH IT—HAVE INFLUENCED
“I’m fine with that, but that’s not mathemat- for decades.
HUMANITY’S UNDERSTANDING OF MATHEMAT-
ics,” Devlin maintained. “That’s just being very “In my experience with charting, I’ve found
smart and using evidence in different ways.” precious few instances in which anything Fibo- ICS, NATURE, ARCHITECTURE, MUSIC AND
Another expert with broad experience of nacci-related was helpful,” Knight said. THE VISUAL ARTS.

24 Luckbox | January / February 2022

2201_TOPICS_Fibonacci.indd 24 12/17/21 4:37 PM

 the art & science of
FORECASTING

LUCKBOX
READERS
VS.
WHAT WILL THE MARCH
CONSUMER PRICE INDEX (TO BE
RELEASED MID-APRIL) LOOK LIKE?

3%-4%
MARKET Chris Beauchamp: Pricing pressures

EXPERTS
are likely to moderate as supply chain
problems ease and production increases
slow price increases.

Dylan Ratigan: Moderate inflation

will persist.

Anthony Scaramucci: Still slightly hot.

The Luckbox editorial team uses polls to gauge
reader sentiment ahead of every issue. This time, Tom Sosnoff: It’s just a guess.
The majority of
the editors posed the same questions to a panel of Luckbox readers (31.5%)
financial experts. Here’s how the results compare. 4%-5%
Ed Yardeni: Too much money chasing
Meet the panelists too few goods. Once supply chain disruptions
ease, some of the inflationary pressures
should dissipate. I also expect strong
CB
CHRIS BEAUCHAMP: Chief market analyst at IG Group. productivity growth to help moderate
@chrisb_ig inflation later next year.

DR DYLAN RATIGAN: Former global managing editor

for corporate finance at Bloomberg News and current co-
host of the Truth or Skepticism podcast with Tom Sosnoff.
@dylanratigan

ANTHONY SCARAMUCCI: Founder and managing

AS
partner of SkyBridge Capital.
@scaramucci EY TS

AS

TS TOM SOSNOFF: Co-CEO of tastytrade who appears

daily on the tastytrade financial network. DR

@tastytrade
<2% ......................................................................... 5.0%

2%-3% ................................................................... 19.0%

EY ED YARDENI: President and chief investment
strategist of Yardeni Research Inc. 3%-4% ................................................................. 31.5%,
@yardeni
4%-5% ................................................................... 28.5%

5%+ ....................................................................... 16.0%

January / February 2022 | Luckbox 25

2201_TOPICS_Forecast_Roundtable.indd 25 12/17/21 5:07 PM

 the art & science of
FORECASTING

WHAT WILL THE RETURNS ON THE WHAT WILL THE RETURNS ON GOLD BE WHAT WILL THE RETURNS ON BITCOIN
S&P 500 BE FROM ITS CLOSING PRICE FROM ITS CLOSING PRICE ON JAN. 1 BE FROM ITS CLOSING PRICE ON JAN. 1
ON JAN. 1 THROUGH CLOSING THROUGH CLOSING ON MARCH 31? THROUGH CLOSING ON MARCH 31?
ON MARCH 31?
A loss of 5% to 10% A gain of less than 5%
A loss of 5% to 10%
Anthony Scaramucci: Bitcoin is Dylan Ratigan: Bitcoin doesn’t move
Tom Sosnoff: The market will normalize replacing gold. as much as you think it does.
after the huge rally from 2021.
A gain of less than 5% A gain of 5% to 10%
A gain of less than 5%
Chris Beauchamp: A potential weakening Ed Yardeni: Bitcoin will continue to
Chris Beauchamp: Strong likely gains of the Federal Reserve’s hawkish narrative trend higher as long as there are more
into year-end will set up the risk of a pullback should weaken the dollar and help gold. buyers than sellers, a situation that is likely
in the first quarter. to persist well into next year.
Dylan Ratigan: Inflation will persist.
Dylan Ratigan: Markets will be calm in Q1. The majority of
Tom Sosnoff: Gold has been quiet for
Luckbox readers (24.7%)
Anthony Scaramucci: The markets so long, it’s time to move.
are built to go higher.
Ed Yardeni: Cryptocurrencies are
A gain of more than 15%
Ed Yardeni: Strong economic growth is providing an alternative hedge against
likely to support solid growth in earnings of central banks. Real interest rates are likely
Anthony Scaramucci: Network
around 8% next year. Profit margins are likely to rise next year, which is a negative
effects and supply shock.
to remain high, thanks to productivity. for gold.
Tom Sosnoff: Bitcoin may not go lower
The majority of The majority of
for quite some time.
Luckbox readers (24.9%) Luckbox readers (42.8%)

AS
AS

TS

TS

CB
CB
DR
DR
DR EY
AS
EY TS EY

A LOSS OF MORE THAN 15% ............................ 5.0% A LOSS OF MORE THAN 15% ............................. 2.5% A LOSS OF MORE THAN 15% ............................. 7.4%

A LOSS OF 10% TO 15% ..................................... 7.5% A LOSS OF 10% TO 15% ..................................... 3.5% A LOSS OF 10% TO 15% .................................... 45.0%

A LOSS OF 5% TO 10% ..................................... 16.9% A LOSS OF 5% TO 10% ........................................ 7.5% A LOSS OF 5% TO 10% ....................................... 7.5%

A LOSS OF LESS THAN 5% ................................. 17.4% A LOSS OF LESS THAN 5% ............................... 15.9% A LOSS OF LESS THAN 5% ................................. 6.0%

A GAIN OF LESS THAN 5% ............................... 24.9% A GAIN OF LESS THAN 5% ............................. 42.8% A GAIN OF LESS THAN 5% ................................ 15.4%

A GAIN OF 5% TO 10% ..................................... 22.9% A GAIN OF 5% TO 10% ..................................... 22.9% A GAIN OF 5% TO 10% ..................................... 24.8%

A GAIN OF 10% TO 15% ..................................... 4.5% A GAIN OF 10% TO 15% .................................... 3.0% A GAIN OF 10% TO 15% .................................. 18.3%

A GAIN OF MORE THAN 15% ............................. 1.0% A GAIN OF MORE THAN 15% ............................. 2.0% A GAIN OF MORE THAN 15% ........................... 14.4%

26 Luckbox | January / February 2022

2201_TOPICS_Forecast_Roundtable.indd 26 12/17/21 5:07 PM

 TRADING VOLUME FOR NON-FUNGIBLE WILL STRIPE HAVE AN INITIAL PUBLIC THE YEAR 2021 HAS BEEN A CRAZY ONE,
TOKENS SURGED 700% TO $10.7 BILLION OFFERING AND SUBSEQUENTLY TRADE AT AND MORE UNCERTAINTY IS COMING.
IN Q3 2021. IN 2022, DO YOU EXPECT THE A MARKET CAP EXCEEDING $100 BILLION WHAT LIES AHEAD FROM NOW THROUGH
NFT MARKET TO GROW, SHRINK OR STAY AT ANY TIME BEFORE MARCH 31? THE END OF MARCH?
ABOUT THE SAME?
No Chris Beauchamp: Markets will
Grow continue to be briefly distracted by fear
Chris Beauchamp of a global slowdown. But, overall, the rise
Chris Beauchamp: The supply of Dylan Ratigan in earnings provides a foundation for
people fascinated by a new asset—no Anthony Scaramucci further gains. However, years like 2021
matter how useless it is—remains strong! that are quieter in terms of volatility can

Dylan Ratigan: NFTs are just Yes be followed by noisier ones. So be prepared
for markets to be busier than last year.
getting started.
Tom Sosnoff
Dylan Ratigan: Asteroid.
Anthony Scaramucci: It’s the Ed Yardeni
beginning of a new era of culture. Anthony Scaramucci: Algorand
becomes a Top 5 Layer-1 blockchain
Tom Sosnoff: It’s in its infancy.
protocol.
Ed Yardeni: Asset diversification.
Tom Sosnoff: Less uncertainty and
The majority of more normalization.
Luckbox readers (65.3%)
Ed Yardeni: Geopolitical crisis.

AS

DR

TS

EY

CB

L WIN
VI?WIL
EAM
L
LT
GROW ................................................................... 65.4%
H
OW
WHIC
SHRINK ................................................................. 19.8%

R B
STAY THE SAME ................................................. 14.9%
SUPE
Brady
an e e rs, Tom nse
a Bay
Buc c at defe
T a m p a tr io ts, gre
n: nd P
Ratiga Engla
Dylan c i : New s fan!
aram u c a Bear back
tho ny S c
os n off : I’m
at q uarter
An Tom S fs, g r e 6.5%)
s C it y Chie u ccaneers (2
Kans a ay B
rdeni: mpa B
Ed Ya R e ad ers: Ta
uckbox
ity of L
Major

January / February 2022 | Luckbox 27

2201_TOPICS_Forecast_Roundtable.indd 27 12/17/21 5:07 PM

 the art & science of
FORECASTING

CRYPTO W
hen forecasters get a prediction right,
critics often chalk it up to little more
than coincidence. But let’s give it a go:
2022 will bring the end of cryptocur-

DOOMSDAY
rency as we know it.
Begin with bitcoin. Its price can’t increase forever,
and the parabolic rise in its value that began in
December 2018 broke in November 2021. (See “End
in sight?” below.)
Whether bitcoin’s price continues to decline,
trends sideways or recovers and moves higher, we can expect a bear market
in 2022.

The year 2022 THE GREAT ALTCOIN PURGE

What about ethereum and the thousands of other cryptocurrencies that

will mark the demise aren’t bitcoin?

During the last bear market in 2018, every altcoin declined more than 90%
from its peak. Some plummeted 99%, and a handful went to $0.
of cryptocurrency While the technology has improved and the best altcoins actually do some-
thing other than “go up,” every altcoin has problems—even the biggest ones.
Ethereum can’t scale and costs too much for small users. ETH 2.0 keeps
as we know it getting delayed and nobody knows if it will work as expected. New ethereum
tokenomics screw up some DeFi (decentralized finance) protocols, and behind-
the-scenes conflicts breed drama that developers may never resolve.
by Mark Helfman Binance, a cryptocurrency exchange company, is a walking magnet for FUD
(fear, uncertainty and doubt). Cardano, a public blockchain platform, doesn’t
work. The leader of EOS, an entrepreneurial operating system for businesses,
bailed on the project after raising $4
billion in an unregistered securities
End in sight? offering. The cryptocurrency DOGE
Can the price of bitcoin bounce back from a recent decline and find its way higher in 2022? Not likely. has an unlimited supply. SushiSwap,
a decentralized exchange that oper-
100000.00
USD ates as an automated market maker,
60000.00 started as a scam. Early investors in
48810.79
40000.00
Internet Computer (ICP), which facil-
itates smart contracts, dumped their
24000.00 tokens on innocent newcomers at the
16000.00 peak of the last altseason, that brief
period when money flows out of bitcoin
10000.00
into altcoins. Thorchain, a protocol
6000.00 that offers cross-chain liquidity, has
4000.00 suffered at least three hacks, but at least
2750.00
it works—unlike most projects.
Don’t expect any of those early-stage,
1750.00 experimental technologies with uncer-
1150.00 tain product-market fits and novel struc-
750.00
tures to hold up in a bear market. At least
510.00
bitcoin has users and proven technol-
2017 Jul 2018 Jul 2019 Jul 2020 Jul 2021 Jul 2022 ogy, and lots of people have a stake in its
Source TradingView
success. Most altcoins have none of that.
Once the hype dies down, 2022 will

28 Luckbox | January / February 2022

2201_TOPICS_Crypto2.indd 28 12/17/21 4:38 PM

 bring a collapse in altcoin prices. Many will drop 99% or more from their
high. Most will never recover. The only question is how high they will go
before they fall.
99%
HOW MUCH SOME ALTCOINS
WALL STREET AND REGULATION WILL DECLINE THIS YEAR
The bear market of 2022 will end cryptocurrency’s stint as the Wild West of
finance.
Already, global financial regulators are probing stablecoins, the privately
issued cryptocurrencies pegged to the U.S. dollar and other major currencies. Investors will get bored the way they did during each
They regard stablecoins as digital versions of the wildcat banks of the Old West. of bitcoin’s three previous bear markets. But some-
With both, customers have had to trust a private company instead of the full thing has changed. Now, investors have ways of gain-
faith and credit of the U.S. government to back their dollars. ing exposure to bitcoin without actually buying it.
At least one stablecoin likely doesn’t appear to have enough money in reserve to Plenty of people will continue to accumulate
pay out everybody who asks to redeem their tokens. Perhaps all of them fall short. bitcoin, but the 13-year speculative phase of crypto
When the bear market arrives, investors will find out who’s swimming naked. will end, and a new phase will begin.
Some will go to jail, and others will pay huge fines. Even crypto die-hards will What will that phase look like? That’s a subject for
realize governments should regulate who can create and distribute digital dollars. 2023 predictions. Suffice it to say that builders will
That’s why society will probably turn over control of crypto to Wall Street keep building, developers will keep innovating and
and big banks. some platforms will adapt, persist and bloom.
U.S. regulators have already begun to create a framework that banks can use The technology will evolve while the price bleeds
to put bitcoin in their reserves, and U.S.-based companies are working on cryp- for months, as it did in each of the three previous
to-based financial products. Other countries have gone even further. bear markets.
Derivatives will boom as speculators take out short positions and institutions Frankly, that may be the best thing for bitcoin.
choose to keep bitcoin off their books. It can finally prove it has value beyond just going
With the proliferation of futures, exchange-traded funds and other derivatives up in price.
for bitcoin and some large altcoins, big buyers and sellers can already move in
and out of the market without pumping or crashing prices. As more money flows
Mark Helfman, crypto analyst at Hacker Noon, edits and
to paper-traded investment products instead of the spot market, it’ll take a lot publishes the Crypto Is Easy newsletter at cryptoiseasy.
more enthusiasm to pump the crypto market again. substack.com. He is the author of Bitcoin or Bust: Wall Street’s
The longer it takes for bitcoin’s price to go back up, the less fun it will be. Entry Into Cryptocurrency. @mkhelfman

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November 2021 | Luckbox 29

2201_TOPICS_Crypto2.indd 29 12/17/21 4:38 PM

 the art & science of
FORECASTING

PREDICTIONS
FOR 2022
AND BEYOND
After a respectable showing with
last year's predictions, Luckbox
returns to forecast 20 outlier events Sheryl Sandberg

for the next two years

A
BUSINESS & MEDIA
s Mark Zuckerberg shifts his atten-
tion to the dystopian hellscape
by Garrett Baldwin and Jeff Joseph known as the metaverse, Meta
announces a surprising depar-
ture. Sheryl Sandberg , COO of
Meta Platforms, sets her sights on
Dianne Feinstein’s California
Senate seat.

PHOTOGRAPHS: (SHERYL SANDBERG) REUTERS; (CNN AVATAR) SHUTTERSTOCK;

OPPOSITE PAGE: (LARRY HOGAN) REUTERS; (BINOCULARS, MARSHALL ISLANDS,
Twitter is acquired after a

ENGLISH FOOTBALL FANS, CANADIAN HOCKEY FANS, ROBOT) SHUTTERSTOCK

dismal showing during the
first three quarters of 2022
without Jack Dorsey at the
helm. The company goes
private or merges with a data
company that already has too
much information on Ameri-
can citizens.
ESPN spins off from Disney,
and the new company’s stock
doubles in price in the first
two days of the initial public
offering. Investors love its new
coverage of sports gambling,
especially the ESPN-branded
sportsbooks.
Following Discovery’s take-
over of CNN (WarnerMedia)
and Chris Cuomo’s firing,
Brian Stelter and Don Lemon
are ousted in a dramatic over-
haul. The network decides to
test an avatar host.

30 Luckbox | January / February 2022

2201_TOPICS_2022_Predictions.indd 30 12/17/21 5:10 PM

 MARKETS & THE ECONOMY
The U.S. economy lands in a rut in the second
quarter of 2022 and falls into recession in Q4.
Some question whether Jerome Powell will
complete his term.
Bitcoin surpasses $100,000 in 2022, thanks
to another wave of institutional and retail capi-
tal. While bitcoin hits six figures, Peter Schiff is
still tweeting about the great opportunity in gold.
The percentage of able-bodied Americans
working full time falls POLITICS
below 61% for four straight
While territorial disputes in Ukraine and Taiwan
months, raising concerns
continue to make headlines, a new hot spot emerges as
about robots taking jobs and
China cozies up to the Marshall Islands. It's happening
workers leaving the labor
as America’s Compact of Free Association with several
force permanently.
Micronesian nations expires in 2023, and China seeks
The Sigma variant of Maryland Gov.
to expand its influence in the Pacific.
COVID-19 makes the male Larry Hogan
Poland and Italy both announce separate plans to
penis shrink, quickly driving
depart the European Union.
American male vaccination
Sen. Raphael Warnock (D-GA) and Sen. Maggie Hassen (D-NH) lose their bids for
levels above 97%.
reelection, as does Sen. Ron Johnson (R-WI), sending mixed messages across party lines.
Oil prices reach $120 at the end of 2022
But the shocker comes in Maryland as Republican Gov. Larry Hogan enters the race late
because of flagging capital investment in forward
and knocks off Democratic Sen. Chris Van Hollen.
production and constraints related to company
After an unsuccessful bid for the Democratic nomination for governor of New York in
scores in environmental, social and corporate
2022, former Secretary of State Hillary Clinton announces her candidacy for the 2024
governance (ESG) tests.
Democratic presidential nomination. Political prediction markets rank Clinton, Sen. Amy
The New York Stock Exchange
Klobuchar (D-MN), Illinois Gov. J.B. Pritzker and Rep. Alexandria Ocasio-Cortez (D-NY)
delists Alibaba amid concerns
as early frontrunners for the Democratic presidential nomination.
about compliance and the rift
Florida Sen. Marco Rubio, wins his bid for reelection by a healthy margin as more
between the United States and
Hispanic Americans turn toward the GOP. Along with Rubio, political prediction
China.
markets rank Florida’s Gov. Ron DeSantis, Former Secretary of State Mike Pompeo,
After doubling in 2021,
former U.N. Ambassador Nikki Haley and former President Donald Trump as early GOP
cobalt prices rise more than
PHOTOGRAPHS: (SHERYL SANDBERG) REUTERS; (CNN AVATAR) SHUTTERSTOCK;
OPPOSITE PAGE: (LARRY HOGAN) REUTERS; (BINOCULARS, MARSHALL ISLANDS,

presidential nominee favorites.

50% to historic highs in 2022
ENGLISH FOOTBALL FANS, CANADIAN HOCKEY FANS, ROBOT) SHUTTERSTOCK

because of insatiable demand

for electric vehicle batteries.
DraftKing’s and Penn National Gaming’s
stock price doubles as more Americans embrace
online wagering.

SPORTS
A Canadian hockey team wins
the Stanley Cup for the first time
since 1993.
It comes home. England wins
the World Cup at +700 odds.
The Purdue Boilermakers win
the NCAA National Basketball
Championship.

January / February 2022 | Luckbox 31

2201_TOPICS_2022_Predictions.indd 31 12/17/21 5:11 PM

2201_TRENDS_Rock_Grammys.indd 32 12/17/21 2:29 PM
 trends
life, luxury & the pursuit of happiness

RECORD HIGH

Rockhound Picks
the Grammys
By Kendall Polidori
Robin Pecknold of
Fleet Foxes

T
he creation and consumption of music have changed
profoundly. So many artists are competing for attention
BEST ALTERNATIVE MUSIC ALBUM
that the average listener may know the names of only a
NOMINEES:
fraction of them and would have trouble naming more
Shore (Fleet Foxes)
than a few of their songs. If I Can’t Have Love, I Want Power (Halsey)
So, do award nominations mean much in this new age of music? Jubilee (Japanese Breakfast)
Maybe not as much as they did before Spotify, YouTube and TikTok Collapsed In Sunbeams (Arlo Parks)
came on the scene. But musicians still deserve recognition, and Daddy’s Home (St. Vincent)
nominations for Grammy Awards still make sense in pop culture. Who will win: Daddy’s Home (St. Vincent)
PHOTOGRAPH: (FLEET FOXES) RICHARD GRAY/EMPICS ENTERTAINMENT

The 64th Grammy Award ceremony is scheduled for Jan. 31, and Who should win: Shore (Fleet Foxes)
here are my predictions for some of the top categories, based on
This is by far one of the strongest categories, and whoever
music charts and the artists’ presence in pop culture.
wins is well-deserving. Annie Clark of St. Vincent is a veteran
in the alternative/rock world and proved her range with her
BEST CONTEMPORARY BLUES ALBUM ‘70s-esque Daddy’s Home. Fleet Foxes shouldn’t be ignored
but often slides under the radar of listeners who aren’t in tune
NOMINEES:
with alternative folk-rock. Not one song on Shore deserves to
Delta Kream (The Black Keys)
be skipped. Listen to it from start to finish. It’s cohesive and
Royal Tea (Joe Bonamassa)
adds to their long discography of accomplished recordings.
Fire It Up (Steve Cropper)
662 (Christone “Kingfish” Ingram)

Who will win: Delta Kream (The Black Keys) The Beatles, Stones and
Zeppelin were awesome—
Who should win: Delta Kream (The Black Keys)
but rock lives on. Why not
Delta Kream, one of the picks for Rockhound’s break out of the classic rock
Top 5 Rock Albums of 2021, is meant to win a cocoon and give new rock
Grammy. The 10th Black Keys album, an ode to classic blues, reflects the band at a chance? Rockhound is
its core. The album reached No. 1 on multiple music charts, including Billboard’s here to help. Think of it as a bridge from
rock and blues charts. 1967 to today and beyond.

January / February 2022 | Luckbox 33

2201_TRENDS_Rock_Grammys.indd 33 12/17/21 2:29 PM

 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.

190219_FEW_luckbox-ad-fullpg.indd
2201_TRENDS_Rock_Grammys.indd1 34 2/19/19
12/17/216:16 AM
2:29 PM
 BEST ROCK SONG
NOMINEES:
All My Favorite Songs (Weezer)
The Bandit (Kings Of Leon)
Distance (Mammoth WVH)
Find My Way (Paul McCartney)
Waiting On A War (Foo Fighters)
Wolfgang
Who will win: Waiting On A War (Foo Fighters) Van Halen

Who should win: Distance (Mammoth WVH)

Although Paul McCartney may seem like the best choice for a rock Grammy Award,
his latest album McCartney III Imagined did not meet expectations. Foo Fighters
stuck with their signature sound on their new album, a sound that attracts flocks of
rock fans. But Mammoth WVH’s song Distance is the heartfelt response to the loss
of one of rock ‘n’ roll’s greatest, Eddie Van Halen. The song, written and performed
by Van Halen’s son, Wolfgang, is a beautiful tribute to the legendary songwriter and
guitarist. It is the perfect reflection of what the rock world lost in 2020. Taylor Swift

BEST ALBUM OF THE YEAR

Who will win: Planet Her (Doja Cat)

Who should win: Evermore (Taylor Swift)

SONG OF THE YEAR

Who will win: drivers license (Olivia Rodrigo)

Who should win: Leave The Door Open (Silk Sonic)

BEST NEW ARTIST

Who will win: Olivia Rodrigo

Who should win: Japanese Breakfast

Eric Burton of the

LUCKBOX ASKED READERS WHAT WILL
Black Pumas WIN THE BEST ROCK ALBUM AWARD
AT THE 2022 GRAMMY AWARDS.
HERE’S WHAT THEY SAID:
BEST ROCK ALBUM Medicine at Midnight by Foo Fighters: 35.6%
NOMINEES: McCartney III by Paul McCartney: 26.4%
BANG SHOWBIZ; (BLACK PUMAS) FUTURE IMAGE;

Power Up (AC/DC) Capitol Cuts - Live From Studio A by Black Pumas: 16.1%
Capitol Cuts - Live From Studio A (Black Pumas) Power Up by AC/DC: 12.1%
PHOTOGRAPHS: (WOLFGANG VAN HALEN)

No One Sings Like You Anymore Vol. 1 (Chris Cornell) No One Sings Like You Anymore, Vol. 1 by Chris Cornell: 9.8%
Medicine at Midnight (Foo Fighters)
(TAYLOR SWIFT) IMAGINECHINA

Who will win: Medicine at Midnight (Foo Fighters)

Who should win: Capitol Cuts - Live From Studio A (Black Pumas)

There’s no doubting Foo Fighters’ talent or their place in rock music. The band
has earned 29 Grammy nominations and won 12 of them. But with newer bands
breaking into rock, it’s time for a new Grammy Award winner. In 2019, the Black Kendall Polidori is The Rockhound, Luckbox’s
Pumas delivered a soulful, instrument-driven self-titled debut album. Their new More Grammy resident rock critic. Follow her reviews on
live-in-the-studio album captures the power of the band and the nuances of Nominations Instagram @rockhound_luckbox and Twitter
frontman Eric Burton’s vocals. It’s crisp and full of life. @rockhoundlb.

January / February 2022 | Luckbox 35

6:16 AM 2201_TRENDS_Rock_Grammys.indd 35 12/17/21 2:29 PM

 trends

RECORD HIGH

Rockin’ the Occult

A look at rock ‘n’ rollers’ infatuation with the supernatural
By Kendall Polidori

R
ock ‘n’ roll often embodies the paranor-
mal. In the late 1960s, bands like Coven
and Black Widow helped create a
1956 Screamin’ Jay Hawkins recorded the
single I Put a Spell on You, launching
what seems like a thousand covers. The song
subgenre called occult rock that and Hawkins’ onstage histrionics bring to mind
incorporated elements of hard rock, Hoodoo, a set of spiritual beliefs and practices
proto-metal, psychedelic rock, progres- that arose among enslaved Americans.
sive rock and blues. The most notable
example was Iron Butterfly’s 1968 track
In-A-Gadda-Da-Vida.
The new wave of music had lyrics
1967 The Beatles released the album
Sgt. Pepper’s Lonely Hearts Club
Band with a cover that depicts a crowd of
referencing the occult, horror movies celebrities, including Aleister Crowley, an early
and occult-related novels. But the other- 20th-century English occultist who founded a
worldly themes didn’t necessarily include religion called Thelema.
worshiping the devil. Just the same, some
alleged that satanic rituals led to the recent
Astroworld incident, where eight concertgoers
died and 300 were badly injured during a perfor-
1967 The Rolling Stones album Their
Satanic Majesties Request may have
marked the first time the demon’s name
mance by Travis Scott. A TikTok video even labeled the appeared on the cover of a major pop record.
festival a “ritual to sacrifice souls.” The Stones’ musical career has connected with
Earlier this year, rapper Lil Nas X ignited an uproar when he released a video for satanic imagery a number of times, including
his song MONTERO (Call Me By Your Name) that showed him performing a lap on the song Sympathy for the Devil on the 1969
dance for a satanic figure. album Let it Bleed. The group’s reputation for
So, is there a deeper connection between music and the occult? It might be a matter the occult worsened that same year with the
of personal belief. accidental death of member Brian Jones.

36 Luckbox | January / February 2022

2201_TRENDS_record high.indd 36 12/17/21 2:26 PM

 1969 The band Coven released Witchcraft
Destroys Minds & Reaps Souls, an album
rife with occult and satanic themes. The jacket
blatantly displayed satanic horns and inverted
crosses. It broke ground for the occult in rock
but was soon removed from stores during the
hysteria surrounding the Manson Family murders.

1970 Led Zeppelin’s Jimmy Page bought

Boleskine House, a home in Scotland
that occultist Aleister Crowley once owned.
Rage Against the
Machine spliced
The house graced the cover of Led Zeppelin footage from
III, accompanied by a Crowley quotation that Donald Trump’s
abortive first
matches the rock ethos: “Do what thou wilt /
campaign for
Shall be the whole of law.” The band was plagued president into a
by rumors of the occult, some based on the death 1999 music video,
of singer Robert Plant’s son in 1977 and the death presaging what
was to come.
of drummer John Bonham in 1980. And the band
has had to endure rumors of their song Stairway
to Heaven delivering a subliminal message when
played backward: “There is no escaping / Whose
Songs that Seemed
path will make me sad, whose power is Satan /
He will give you 666 / Here’s to my sweet Satan.”
to Foretell the Future
Rage Against the Machine appeared to predict the Donald Trump presidency

1970 Conspiracy theories arose surrounding

the death of Jimi Hendrix, one of a
number of notable people who died at the age
18 years before he took office. In 1999, the video that accompanied the band’s track
Sleep Now In The Fire showed activists brandishing Trump signs on Wall Street.

of 27. The so-called “27 Club” also includes

Jimi Hendrix seemed to predict climate change in 1967 with his song Up From
musicians Robert Johnson, Brian Jones, Jim
The Skies, which included the lyrics, “The smell of a world that has burned / Well,
PHOTOGRAPHY: (LIL NAS X) IMAGE PRESS AGENCY/NURPHOTO; (GHOST) BANG SHOWBIZ

Morrison, Janis Joplin and Kurt Cobain.

maybe, maybe it’s just a change of climate.”

1972 Blue Öyster Cult, the band whose logo

became a symbol of the supernatural,
released its self-titled debut album. The band
Radiohead probably predicted society’s reliance on technology with their 1997
album OK Computer.

went on to inspire a host of occult rock bands,

Wilco seemingly predicted 9-11 on the 2001 album Yankee Hotel Foxtrot, which was
including Ghost.
supposed to be released on Sept. 11, 2001, but was pushed back a week at the last
minute. The album includes tracks like Poor Places, with noisy waves of feedback

1977 Members of KISS lent their band’s name

and their likenesses to a Marvel comic
series, which was said to be printed with their
and radio-like static overpowering the instruments, perhaps foreshadowing 9-11.
The song Jesus, etc. had these lyrics: “Tall buildings shake / Voices escape, singing
sad, sad songs.” The track Ashes of American Flags seemed to foretell the tragedy,
blood. The band has denied rumors that its name
and War on War addressed the post-9-11 world, including the U.S.-led invasion of
is an acronym for Knights in Satan’s Service.
Iraq in 2003.

1978 Black Sabbath released the album

Never Say Die, one of its many
collections of music devoted to demonism and
the supernatural. Guitarist Tony Iommi recalls
that members of the band once returned to their
hotel after a show and found the
corridor outside their rooms
2006 The occult rock act Ghost was
formed in Linköping, Sweden,
in the belief that music can bring
band members are referred to as “nameless
ghouls.” Notably, Foo Fighters frontman Dave
Grohl once took on the role of a ghoul in a
full of followers wearing salvation and that live shows can Ghost performance. On stage, members wear
black coats. The band’s serve as religious services. skull makeup and three-pointed papal mitres
devotees were sitting Frontman Tobias Forge while playing odes to Lucifer and songs about
on the floor holding plays the role of a satanic zombie queens, psychic powers and Hungarian
candles and chanting. priest, while backing countesses bathing in the blood of virgins.

January / February 2022 | Luckbox 37

2201_TRENDS_record high.indd 37 12/17/21 2:26 PM

 trends

H
ere’s how a rookie mistake provided the
founding principles for a thriving busi-
ness. Todd Sheets was working as a cop
in a medium-sized city in 2008 when his
part-time gig in private security took him to a
beautiful hotel in Brazil. He was assigned to
guard an A-list tech CEO, and he and his client
were assigned adjoining rooms.
Everything seemed quiet early one morn-
ing, so Sheets decided
to squeeze in a work-
out on a treadmill in the
hotel basement. He was
SAFETY FIRST
jogging on the machine
Want to secure a house from
when his squawk box
intruders? Security expert
blurted his name and
Todd Sheets recommends having
summoned him to the
a dog, a chain-link fence and
command center.
motion-sensing lights.
It seemed that Sheets
had left his BlackBerry
in his room, and the device had automati-
cally turned itself on and sounded a wake-up
alarm. It rousted his justifiably displeased
client out of bed.
Prepared for the worst, Sheets presented
himself to the client, explained what happened
and asked for forgiveness.
“Don’t even worry about it,” the client said.
“Have a nice morning.”
By responding so reasonably, the client—
Facebook CEO Mark Zuckerberg—taught
Sheets the importance of direct communica-
tion and owning mistakes. What’s more, he
was reminded that people make mistakes but
learn and move on.
Those insights became mantras for Big
Bison, the Atlanta-based security business
Sheets launched in 2014.
SOMETHING VENTURED
Beyond law enforcement

Private
After 20 years as a cop, Sheets had sometimes
found the job dull. “You can only write so many
traffic tickets and catch so many jaywalkers
before that becomes a bit stagnant,” he said.

Security
A veteran of the $48.1 billion industry tells
what it’s like protecting the rich and famous
By Ed McKinley
So, he welcomed an opportunity that
arose to manage arena security part-time for
big-name entertainers, professional athletes
and other wealthy VIPs.
He liked dealing with the varied personali-
ties and found it challenging to figure out how
to work with those clients without annoying
them or disrupting their routines. The early
gigs tended to last from one to three days at
the arena and beyond.
But ensuring the security of celebrities can

38 Luckbox | January / February 2022

2201_TRENDS_bison.indd 38 12/17/21 2:31 PM

 feel unnecessarily risky because the clients
often welcome or at least tolerate the free
publicity that comes with crowds of fans or
droves of paparazzi.
Now, Big Bison caters to clients who are
well-heeled but not necessarily well-known.
About 10% are top executives from public
companies, 15% to 20% have accumulated
wealth but want to live normal lives, and the
rest are mostly tech gurus.
“I’m really drawn to people in the tech sector,
especially those with startups or blossoming
unicorns,” Sheets said. “There’s a real drive to
innovate and to move fast and break things.”
Whatever their background, clients
with high net worth face the risk of theft,
kidnapping or extortion. Part of Sheets’
job is to evaluate their exposure to such
dangers and share his assessment with the
people who hire his firm. Some clients under-
estimate their vulnerability, while others
worry too much.
HOOKED
ON THE
MARKETS?
2201_TRENDS_bison.indd 39
Today’s bodyguards increasingly rely on brains instead of
brawn to facilitate travel, move clients in and out of buildings,
or place them in the right seat for an emergency evacuation.
“Some see a boogeyman around every His hires don’t necessarily flex bulging
corner, and some perceive that because no one muscles or tower over normal people. They
knows who they are, there’s no risk to their use brains instead of brawn to facilitate inter-
livelihood,” Sheets noted. “It’s a challenge national transportation, ensure quick ingress
because I don’t like to sell fear.” and egress from a building, arrange for dinner
reservations at the right time or make sure
Clients seek trust to place clients in the right seat for an emer-
Whatever they’re thinking about risk, they gency evacuation.
tend to seek the same thing: a security provider That emphasis on planning and logis-
they can trust to do the job and keep it confi- tics causes Sheets to shy away from terms
dential. They connect with the low-profile Big like “security” and “bodyguards.” For him,
Bison after hearing about it from peers. it’s all about making every aspect of a client’s
Trust also motivates Sheets. He hires only daily life work smoothly—and that includes
people he knows or who come to him with keeping the alarm clock from going off
recommendations from people he knows. too early.
Visit DailyFX.com
for continuous
updates on global
markets in currencies,
commodities, and
stock indices.
12/17/21 2:31 PM
 trends
SENTIMENT
IS CANCEL CULTURE TOXIC?
I N T E L L I G E N C E S Q U A R E D U.S.
invites some of the world’s brightest thinkers
to debate issues of the day. The organization
was founded in New York in 2006 to promote
intellectual diversity by fostering respect for
differing opinions.
The debates are organized in the traditional
Oxford style. The side that convinces more au-
dience members to embrace its arguments wins.
The excerpts below come from a debate in
November about the cancel culture’s bene-
fits—or lack thereof.
FOR
KASPAROV: Schools and universities are where we most need to
challenge and be challenged, but how can we learn what’s right if
we’re afraid to ever be wrong? Well, increasingly you hear, “Oh,
we’ll tell you what’s right and good,” but it reminds me too much of
the ideological education I grew up with in the Soviet Union. If you
disagreed, you were wrong. If you were wrong too loudly, you were
silenced. The good news is that the United States is not Russia or
the Soviet Union. No one is going to be sent to the gulag for failing
to draw the line. But just because there’s no party with a capital
“P” does not mean there’s no party line.
FOSTER: Love, hate, freedom and various other things are all
somewhat difficult to define but nevertheless exist and have real
and profound consequences. The fact that polling has consistently
demonstrated that people believe cancel culture is there—whether
one believes that is a result of the media sensationalizing it or
because of realities that they experience in their everyday lives—
actually illustrates our point. The reality is that the fact that people
believe this suggests they will in fact curtail their behavior, which
is another thing that they acknowledge doing. There’s a universe
of people who stay silent because they fear cancelation, and that is
the dynamic we are concerned about.
Garry Kasparov: Russian chess grandmaster
Kmele Foster: Political commentator and co-founder
of Freethink
40 Luckbox | January / February 2022
2201_TRENDS_SENTIMENT_Debate.indd 40
More Debate
See who won
the debate
68% 15% 17%
FOR AGAINST UNDECIDED
–AUDIENCE OPINION BEFORE THE DEBATE
THE “CANCEL” IN CANCEL CULTURE REPUTEDLY
ORIGINATED FROM CHIC’S 1981 SONG YOUR LOVE IS CANCELLED
71%
OF REGISTERED VOTERS SAID THEY STRONGLY
OR SOMEWHAT BELIEVE CANCEL CULTURE HAS
GONE TOO FAR –HILL HARRISX POLL
69%
OF REGISTERED VOTERS SAID CANCEL CULTURE
UNFAIRLY PUNISHES PEOPLE FOR THEIR PAST
ACTIONS OR STATEMENTS –HILL-HARRISX POLL
AGAINST
MATTHES: You might say that cancel culture isn’t just about public
shaming. It’s also about the loss of jobs or opportunities—the function
of that public shaming. But it seems like cases where people do lose
their jobs as a function of being canceled are vanishingly small, and
indeed it seems like often it’s more likely that people acquire new oppor-
tunities as a function of being canceled: speaking opportunities, book
deals, etc. So, it’s really hard to see how the claim that being canceled is
harmful is supposed to be established.
ATTIAH: I do not see it as a coincidence that cancel culture is now being
turned against marginalized communities as a way to stifle what is ac-
tually happening, which is actually the opening of space. We have more
voices than ever before—Latinx voices, nonbinary voices, transgender
voices—who are now speaking out against those systems and those
who perpetuate the systems that have long participated in what I would
say is erasure culture. That has led to generational wealth being disap-
peared. It has led to literal incarceration, and it has led to basically just
a deep systemic continued erasure. And I would say this is the same for
women and #MeToo, so it’s not an accident to me that this supposed
boogeyman of cancel culture is really status anxiety and discomfort in
the fact that there are more voices.
Erich Hatala Matthes: Author of the book Drawing the Line: What to
Do with the Work of Immoral Artists from Museums to the Movies
Karen Attiah: Washington Post columnist
12/17/21 1:57 PM

FINANCIAL FITNESS
Your 2022 Physique
Here’s what will determine how your physical presence will change
as another year unfolds
By Jim Schultz
T
he two paths to fitness in 2022
couldn’t differ more. There’s
the familiar sun-drenched
path that’s littered with the
footprints of heavy traffic, while the
dimly lit unfamiliar path is over-
grown with weeds from lack of use.
You and you alone will choose
your path. Think of it as the amalga-
mation of the dozens, hundreds or
even thousands of micro-decisions
you make every hour, day, week,
month and year. One trajectory
propels you closer to your goals, and
the other distances you from what
you desire. It’s that simple.
Obstacles will arise on both
paths. You’ll sail through some days
and struggle through others. Some
people on the path may seem to have
an innate advantage, while the rest
of us labor for every hint of progress.
But there’s plenty to consider
when it comes to planning for
fitness in 2022. How do you want
your physique to look? How will you
train? An upper/lower alternating
program that works the upper body
one day and lower body the next?
Or a bro split that trains each muscle
once a week?
What’s the nutritional strategy?
Something quantitative like macros
based on protein and carbs, or some-
thing qualitative like clean eating
based on unprocessed foods? You
call the shots.
A lot of micro-decisions will
occur along the way, but let’s look at
the big picture. Two characteristics
far outweigh your training strategy
and nutritional choices: consistency
and stamina.
2201_TRENDS_financial fitness.indd 41
trends
Think of the path to fitness
Consistency
and stamina
will make all as the amalgamation of dozens,
the differ-
ence. Train
hundreds or even thousands
heavy or train of micro-decisions.
light, you either
keep showing up
or you don’t. Whether
you count calories or cut
carbs, you either keep working
or you stop. Until you go all-in on
consistency and stamina, nothing
else really matters.
“OK, Jim, fine,” you may be
thinking, “I’m interested, but this
is all fluff and flowery stuff. Give
me something practical that I can
use today.”
Here you go: Train when you feel
like it and train when you don’t.
Eat broccoli when you’re digging
it and eat it when you’re not. Do
that over and over, again and again,
for as long as it takes. This is the
open secret. When you consistently
show up and refuse to give up,
it’s difficult not to change your
physique radically.
So, as 2022 begins, you can fool
yourself into thinking that the well-
worn familiar path represents the
only way forward. But that’s as false
as the belief that consistency and
stamina are special skills reserved
for the elite.
The choices are yours.
Jim Schultz, Ph.D., a derivatives trader,
fitness expert, owner of livefcubed.com and
the daily host of From Theory to Practice
on the tastytrade network, was named
North American Natural Bodybuilding
Federation’s 2017 Novice Bodybuilding
Champion. @jschultzf3
12/17/21 2:05 PM
 trends
Men’s Wool Piper Mids
$120 allbirds.com
TRENDLINES
High-flying Allbirds
Celebs, consumers and investors are flocking to Allbirds,
a footwear unicorn made from sheep By Mike Reddy
B
efore Allbirds appeared on the
Nasdaq, its shoes appeared
on the feet of Paul McCart-
ney, Matthew McConaughey,
Jennifer Lawrence and former Pres-
ident Barack Obama, to name just
a handful of its celebrity clientele.
But as the company’s footwear grows
more common, its business model
remains anything but.
The customers who sport any of
the more than eight million pairs of
Allbirds shoes sold since their 2016
debut probably didn’t discover them
through advertising, and they defi-
nitely didn’t stumble upon them in
42 Luckbox | January / February 2022
2201_TRENDS_allbirds.indd 42
chain shoe stores.
That’s because at least 60% of
the company’s business is driven by
word-of-mouth marketing, accord-
ing to Footwear News. And if that
weren’t contrarian enough, Allbirds
was launched with a direct-to-con-
sumer sales model powered by
e-commerce—something virtually
unheard of for brands whose prod-
ucts depend on perfect fits.
Since then, the company has built
a brick-and-mortar presence, open-
ing its first stores in 2017. From its
headquarters in San Francisco to
locations in Tokyo, Allbirds now has
35 stores scattered across the world.
That said, with roughly 89% of its
revenue coming from internet sales
last year, Allbirds’ primary customer
base irrefutably remains where it
started: online.
For what’s now a multi-bil-
lion-dollar footwear industry disrup-
tor that defies all expectations, it’s
only fitting that the Allbirds origin
story is comparably unconventional.
If it weren’t for 970 backers on the
crowdfunding website Kickstarter,
the shoe brand might never have
taken off.
New Zealander Tim Brown, a
former professional soccer player
and the co-founder of Allbirds,
launched the pivotal Kickstarter
campaign in early 2014 with the
goal of creating natural, anti-bacte-
rial and anti-odor wool shoes. The
idea was to make them with merino
wool, an especially fine and soft
type of wool said to be stronger—
yet feel lighter—than cotton. The
campaign was aptly named “The
Wool Runners: No Socks. No Smell.”
With a $30,000 funding goal, the
project raised over $100,000 after
just five days.
Leonardo Barack Jennifer Matthew
DiCaprio Obama Lawrence McConaughey
12/17/21 2:10 PM
 Following the campaign’s success,
Brown teamed up with Joey Zwill-
inger, a San Francisco-based biotech
engineer and renewable materials
expert, and together the duo offi-
cially founded Allbirds in 2015. The
company name, Brown told CNBC,
pays homage to New Zealand and
its early settlers. Legend has it that
upon recognizing a distinct lack of
mammals on the Kiwi landmasses,
explorers called it a land of all birds.
It didn’t take long for investors
to take notice of the innovative
shoe-selling startup. The company
attracted the attention of Seat-
tle-based venture capital firm Mave-
ron, which led its $7.25 million Series
A funding round in 2016—the same
year Time magazine called Allbirds
“the world’s most comfortable shoes.”
Things snowballed from there.
ALLBIRDS’
Last year, roughly 89% of Allbirds’ revenue
WINGSPAN came from internet sales.
⊲ January 2014
Kickstarter campaign
In five different funding rounds crucial for creating a more sustain-
⊲ July 2015
from 2016 to 2020, the company able future. I am proud to join the
Allbirds founded
raised more than $200 million. company as an investor.”
⊲ September 2016
During that venture capital bonanza, Last November, Allbirds procured
$7.3 million Series A
Allbirds joined the unicorn club in the suitable ticker symbol BIRD and
funding round
2018, a distinction reserved for IPOed on the Nasdaq, opening up
⊲ April 2017
private companies that reach valu- the investment opportunity to the
First store
ations of $1 billion. public. After an initial surge in the
⊲ October 2018
In that same year, Leonardo market, the company reached a valu-
Unicorn status
DiCaprio drew more eyes—and ink— ation of more than $4 billion.
⊲ November 2021
to Allbirds’ shoes when he announced Only time will tell what’s ahead
Nasdaq debut
he was investing in the company. for Allbirds now that it’s a publicly
“Allbirds is on the forefront of traded company. It may continue its
developing new materials that will ascent to the heavens, or it could fly
serve as a model for the footwear too close to the sun. But with more
industry,” DiCaprio said in a state- than eight million pairs sold, Allbirds
ment. “This kind of innovation is isn’t going anywhere anytime soon.

Listen Here
Truth or Skepticism The Prediction Trade
Tom Sosnoff, entrepreneur, options trader If you can trade it, or bet on it, you can bet
and co-CEO of tastytrade, joins Dylan they will talk about it on The Prediction
Ratigan, businessman, author and former Trade—the only podcast for gamblers, traders,
host of MSNBC’s The Dylan Ratigan Show, investors, math freaks, data geeks and
for a weekly podcast covering everything superforecasters devoted to the intersection of
from sports and investing to politics and probability, prediction and profit. Each episode
monetary policy. One’s an iconoclast, features expert guests with proprietary
and the other’s a forecasting models
contrarian. Tune and insights into the
in each week find outcomes of prediction
out who is who. market events. So
It’s unscripted and whether you live to bet
unpretentious—some or bet to live, check out
like to think of it as the next episode of
rants, but refined. The Prediction Trade.

Truth or Skepticism and The Prediction Trade are available on your favorite podcast platform.

2201_TRENDS_allbirds.indd 43 12/17/21 2:10 PM

 trends

4
2
1
7

Home/Office location I’ve also used traditional advisors. I 1. Brokerage accounts

MEET Long Island, NY had a “friend” sell me Class A shares on two screens

JOSEPH
in a mutual fund instead of the Class
Age B shares that I requested. On Class
59 A shares he gets his commission
upfront. When I confronted him
2. Vectorvest for
writing scripts and find
trading ideas
3. Daily market trends
4. ETFDB for trade ideas

BARBUTO
Years trading
25
How did you start trading?
Around 1987, I was working for
a small electronics company that
Bear Sterns took public. This gave
me some insight into the reality of
small public companies. I started
playing with penny stocks. What I
learned about penny stocks was that
I didn’t want to trade penny stocks.
& Finviz heatmap
about this, he said that “it’s because 5. tastytrade
this is a great fund, so they don’t offer 6. Echo Show for calendar
B shares.” I reminded him that there updates
7. iPad for Zooming
are thousands of mutual funds. I with trader friends
concluded it’s human nature for my
friend, the broker, to put his needs
before mine. My financial advisor
friend once told me that “I don’t have
time to follow the market like you
do because I have to spend my time
looking for clients.” Eventually, I
learned how to trade naked puts and

44 Luckbox | January / February 2022

2201_TRENDS_trader.indd 44 12/17/21 2:42 PM

 covered calls with the Long Island
Stock Traders Meetup Group. Over
the years I’ve read dozens of books
on trading, taken classes, tried differ-
ent products, like forex, and talked to
people at traders expos. Although I’m
not a purist, trading options the tast-
ytrade way is by far the most engag-
ing for me.
Favorite trading strategy for what
you trade most?
My go-to strategy is selling stran-
gles at the expected move using
the feature built into tasty-
works against high-volume index
exchange-traded funds (ETFs).
Learning how to trade futures from
tastytrade’s Tom Sosnoff at a New
York futures symposium opened
a whole new world of trading tax
advantages for me.
2201_TRENDS_trader.indd 45
Average number of trades per day?
Five to 10
What percentage of your outcomes
do you attribute to luck?
Around 35%? Making money in the
stock market is easy. Keeping it is
the hard part. Where I take a bullet
is when the market shifts from some
news headline that has little correla-
tion to the real world and creates a
pullback. It’s part of the reason I
like trading more ETFs more than
individual underlyings. Personally,
I think that we find a headline to
correlate with whatever the market
does on any given day. As my tennis
friend with a Ph.D. in economics
likes to remind me, the stock market
is not the economy. I like to say that
you’re only as good as your last trade
and your second serve.
Favorite trading moment?
When I realized that it was more
important to learn how to manage
losers and stay mechanical with a
written trading plan than it was
to hold onto a bad trade because I
wanted to be right.
Worst trading moment?
The May 6, 2010, flash crash. I had
just put on a bunch of new positions
with no trading plan and no exit FAVORITE
strategy. I also had a few 0 DTE SPX TRADING BOOK
Iron Condor trades I’d rather not talk Trading in the Zone:
about. (An iron condor is two credit Master the Market with
spreads. One on the put side and one Confidence, Discipline and
a Winning Attitude
on the call side.) The problem with 0 By Mark Douglas
DTE trades is there’s nowhere to run $20.90 hardcover,
if it goes against you. 240 pages
Want to be featured as the next issue’s trader? Have story ideas?
Let us know: yd@luckboxmagazine.com
12/17/21 2:42 PM
 trends
BOOK VALUE
The Luckbox
Bookshelf
New and not-so-new books that captured
our attention this month
The Man of Numbers:
Fibonacci’s Arithmetic
Revolution
By Keith Devlin
In this scholarly 2011 biography
of Leonardo of Pisa—the 13th-
century math whiz better known
as Fibonacci—author Keith
Devlin documents a life of nearly
unparalleled achievement. At the
same time, Devlin shoulders the
task of dispelling some of the
many flawed theories Fibonacci’s
work inspired.
While it’s true that Fibonacci
reshaped the Western world by
introducing it to mathematics from
the East, his work also inspired an
incredible array of false theories
in disciplines ranging from
architecture to music. (See p. 22.)
But don’t let the tall tales
woven by others overshadow Fibonacci’s
astounding contributions. After all, he’s
credited with popularizing the Hindu
Arabic numerals 0-9 in Europe. Before
that, the West was still relying on unwieldy
Roman numerals.
He also introduced Westerners to an
Eastern series of numbers that came to
be known as the Fibonacci sequence.
It’s a progression of numbers that recur
in mathematics and nature, but not
necessarily in investing.
46 Luckbox | January / February 2022
2201_TRENDS_bookshelf.indd 46
Far too often, book reviews drive
away readers. But reviews present
just one stranger’s view, and
taking them to heart leaves great
books undiscovered. The Luckbox
Bookshelf offers profiles instead of
reviews. Don’t look to these pages
for opinions. Think of Bookshelf
as a place to discover books that
educate, entertain and challenge
entrenched beliefs.
Principles for Dealing with The
Changing World Order: Why
Nations Succeed and Fail
By Ray Dalio
In another installment of his
Principles series, veteran investor
Ray Dalio demonstrates in his
new book that a long string of
tumultuous moments in economics
and politics indicate the future
won’t resemble the past.
In recent years, Dalio has witnessed dynamics unlike
anything he has seen before in his years of following
markets. Globally, they include staggering amounts of
debt and near-zero interest rates in the world’s three
major reserve currencies. Inside individual countries,
he sees political polarization, inequality of wealth and
cultural conflict. Add to that the escalating tension
between China and the United States.
His research shows the convergence of such
conditions tends to precede shifts in power and
redistribution of wealth. But there’s hope even
in the face of monumental change, he suggests.
Policymakers, business leaders and investors must
look to the last 500 years of history to learn the lessons
taught by nine empires that have risen only to fall.
Connect The Dots: The Art and
Science of Creating Good Luck
By Christian Busch
The Serendipity Mindset, subject of
a feature in the May 2021 Luckbox,
is coming out in paperback with
an additional chapter. Latch onto
it to learn how author Christian
Busch teaches the art of turning
uncertainty into opportunity.
Through his work at New York University and
the London School of Economics, Busch has studied
hundreds of people and has found an intriguing
common denominator: The most joyful and successful
people have developed the skill of “connecting the dots.”
That means they recognize opportunities and
turn them into positive outcomes. They do it by
tapping into a seldom-mentioned force in the
universe—serendipity.
Many define serendipity as an accidental
coincidence with a happy ending. But Busch insists
that people can learn to think in ways that invite
serendipity into their lives.
He backs up that belief with anecdotes that show
how certain habits set the stage for serendipity to
occur. Once that’s established, he offers exercises
to help train readers to attract serendipity. It’s his
formula for happiness and success.
12/17/21 2:22 PM

CALENDAR
JANUARY
1 New Year’s Day
9 Golden Globes
11 Trading Options
with Tom Sosnoff
17 Martin Luther King Jr. Day
17 Australian Open
Melbourne Park
19 Elton John’s Farewell Yellow
Brick Road Tour kicks off
Smoothie King Center, New
Orleans
20-30 Sundance Film Festival
Park City, Utah
28 Data Privacy Day
31 Grammy Awards Ceremony
FEBRUARY
1 Chinese New Year
2 Groundhog Day
3 The Day the Music Died
4-20 2022 Winter Olympics
Beijing
13 Super Bowl LVI
SoFi Stadium, Inglewood, CA
14 Valentine’s Day
2201_TRENDS_calendar.indd 47
trends
Learn the Trade
Join veteran trader
Tom Sosnoff, on
tastytrade.com,
at 3:40 p.m. Central Time Tom Sosnoff
for a live 30-minute demo
on trading options and using the tastyworks platform to apply
earnings strategies.
Tiger Kings
Adherents of the Chinese zodiac expect the Year of the Tiger—
Feb. 1, 2022 to Jan. 21, 2023—to bring positive change. They
believe babies born during that period will become vigorous,
ambitious and confident.
Furry Prophet
For more than 120 years, Americans
have turned to Punxsutawney Phil,
a groundhog, to let them know
how much longer winter weather
will last. If Phil sees his shadow
on his designated day, observers
expect six more weeks of winter.
If he doesn’t see his shadow, they
lightheartedly predict spring will
arrive early. As many might expect,
it turns out Phil isn’t all that reliable.
According to a meteorologist, Phil only
has a 47% accuracy rate.
American Pie
So bye-bye, Miss American Pie / Drove my Chevy to the levee, but the
levee was dry / And them good old boys were drinkin’ whiskey and rye /
Singin’ “This’ll be the day that I die / This’ll be the day that I die”
Don McLean’s song American Pie, Pt. 1 became a major hit in 1971,
but younger listeners may not know that it commemorates the loss of
innocence of the early rock ‘n’ roll generation. The eight-and-a-half-
minute song serves as a cultural touchstone of the day in February
1959 when musicians Buddy Holly, Richie Valens and J.P. Richardson
(the Big Bopper) died in a plane crash while flying to a venue in
Moorhead, Minnesota. It happened during their “Winter Dance
Party” tour across the Midwest when the artists were expected to
put on 24 shows without a day off, travel up to 400 miles between
stops and endure freezing winter weather. Some of the traveling
musicians contracted the flu, and some were hospitalized for frostbite.
To reduce travel time and get some rest, Holly, Valens and Richardson
chartered a plane. But instead of getting a respite, they met their
untimely demise. The tour ended early, but their influence on rock
‘n’ roll lives on.
January / February 2022 | Luckbox 47
12/17/21 2:09 PM
2201_TRENDS_calendar.indd 48 12/17/21 6:09 PM
 trades&
tactics

Cheat Sheet #19 Rem

and ve
s
o
this ave
page
!

It’s Your Move

Trading platforms offer built-in tools that point toward expected stock prices
By Mike Hart

T
he market is defined from Great expectations

1
moment to moment by every
single decision made by each Determine a short option’s probability of success
trader—combined with all of by choosing a delta and subtracting from 100.
the decisions made by all of the other
traders—and instantly processed Delta To calculate
Probability
and displayed. of success
With each tick up, down or 16 (100 – 16) = 84 84%
sideways, the winners and losers 30 (100 – 30) = 70 70%
prepare for their next trade. For most
traders, that preparation centers on 40 (100 – 40) = 60 60%
forecasting future movement.

2
While some traders rely on instinct
Most trading platforms determine the expected move. The tastyworks
to predict the movement of the
platform displays this in two different ways. The first is by looking at the far right
market, others improve their odds of
of the options trade page. There you will find a +/- expected move. Another way
success by using tools built into their
is looking for the orange-brown line on the trade page. Finally, you can use the equation
trading platform.
below for the expected move.
Those tools can do the math and
point to the expected movement of a The expected move =
market over a given period of time. Price of an at-the-money (ATM) straddle x 60%
Then the tools take another step and + Price of strangle one strike away from ATM x 30%
+ Price of strangle two strikes away from ATM x 10%
determine the probability of a future
move and the probability of touch.
Apple Inc. (AAPL) $174
The probability of touch is the
likelihood that a stock will trade up or Date Days Implied volatility Expected move
down to a strike price at some point Jan. 21, 2022 44 33.5% ±$11.76
between now and expiration. But it Feb. 18, 2022 72 35.8% ±$16.94
may not stay at that level.
Using options, traders can estimate March 18, 2022 100 35.1% ±$20.01
the movement of a market over a April 14, 2022 127 35.2% ±$22.72
given time period. They can take that May 20, 2022 163 35.2% ±$26.72
another step further and determine
the probability of a future move,
including when it may occur. They
can also determine the probability
of touch.
Mike Hart, a former floor trader at the Chicago
3 The probability of touch is the statistical likelihood that a strike price will be
reached at some point prior to expiration. It is useful to consider because it
gives context to expectations for a trade.

Delta To calculate Probability of touch

Stock Exchange and proprietary futures trader,
specializes in energy markets and interest 16 Multiply by 2 32%
rates. He’s a contributing member of the
tastytrade research team. @mikehart79

January / February 2022 | Luckbox

2201_TACTICS&TRADES_CHEATSHEET.indd 2 12/13/21 3:12 PM

 TRADING INSPIRATION
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 trades&tactics actionable trading ideas

CHERRY PICKS R I PE & J U I CY T RADE IDEAS

Seeking Diversity
Rather than seeking to predict On their own
Buying these equities, which have not been moving in sync with the markets,
the next big thing, consider buying could diversify a portfolio.
any of these 20 tickers to diversify
3-month 12-month
a portfolio in the new year Symbol Name Industry IV Rank
Expected
volatility
price
change
price
change

By Michael Rechenthin BDX Becton, Dickinson

and Co.
Surgical & medical instruments
& apparatus
28% Medium -5% 1%

BIO Bio-Rad Laboratory analytical instruments 35% Medium -9% 32%

Laboratories Inc.
Class A

hen all of the stocks and exchange-traded funds CPB Campbell Soup Co. Food & kindred products 28% Medium 0% -9%

W (ETFs) on a portfolio page are colored either CHD Church & Dwight
Co. Inc.
Soap detergents, cleaning
preparations, perfumes, cosmetics
18% Medium 15% 11%

green for profit or red for loss, those holdings CLX Clorox Co. Specialty cleaning, polishing 18% Medium -1% -17%
aren’t diversified. & sanitation preparations

But diversification is worth pursuing because it gener- CMS CMS Energy Corp. Electric & other services combined 16% Medium -2% 5%

ally strengthens a portfolio by combining a variety of CAG Conagra Brands

Inc.
Food & kindred products 25% Medium -3% -9%

companies, components and strategies. It often reduces DG Dollar General Retail trade 30% Medium 2% 8%
risk without reducing returns. Corp.

While simply adding stocks generally helps diver- ED Consolidated

Edison Inc
Electric & other services combined 36% Low 11% 13%

sify a portfolio, it doesn’t if they all come from the same ES Eversource Energy Electric Services 57% High -1% 2%
sector—such as technology, for example. HOLX Hologic Inc. X-Ray apparatus & tubes & related 36% High -7% 1%
That’s where data science can come into play. Trad- irradiation apparatus

ers can easily scan the most liquid stocks and ETFs to SJM JM Smucker Co. Canned fruits, vegetables,
preserves, jams & jellies
27% High 10% 15%

diversify a portfolio that’s heavy in the S&P 500 Index. K Kellogg Co. Grain mill products 23% Medium 0% 1%
The table tracks 20 tickers and ETFs that have been KMB Kimberly-Clark Converted paper & paperboard 24% Medium -1% 0%
trading without correlation to the overall market, as Corp. products (No containers/boxes)

measured by their six-month historical relationship with MRNA Moderna Inc. Biological products 30% High -43% 63%

the S&P 500. NEM Newmont Corp. Gold & silver ores 18% High -2% -5%

For many traders, the easiest way to diversify is by PKI PerkinElmer Inc. Laboratory analytical instruments 22% High 0% 28%

purchasing shares. But another method calls for buying PFE Pfizer Inc. Pharmaceutical preparations 60% High 16% 28%

100 shares of the underlying and then selling a covered GLD SPDR Gold TR Gold
SHS
ETF 16% Low 0% -3%

call against the shares held. That has the advantage of KR The Kroger Co. Retail grocery stores 40% High 4% 42%
increasing “cash flow” because the money received for
selling the call acts as an extra dividend to the portfolio.
Michael Rechenthin, Ph.D., aka “Dr. Data,” is the head of research
and development at tastytrade. @mrechenthin

For more information on this quantitative way of

trading, subscribe to cherry picks and market insights
at info.tastytrade.com/cherry-picks

January / February 2022 | Luckbox 49

2201_TACTICS&TRADES_cherrypicks.indd 49 12/17/21 11:40 AM

 trades&
tactics

THE TECHNICIAN A V E T E RA N T RADER TAC K LES T EC HNICALS

Dark Days Ahead?

Technical analysis of stock prices indicates the markets’
“everything bubble” may burst in 2022
By Tim Knight

nhelpful pundits often

U make technical analysis A down period
seem terribly complicated. A long-term view shows prices stayed relatively low during the 1970s.
But the basic tenets of good charting
focus on supply, demand, support, 0.30
resistance and trend lines. Using a 0.28
0.26
limited palette of tools, a skilled 0.24
chartist can glean great insight from 0.22

long-term charts about possible 0.20

directions and their likelihood.

0.18

One interesting twist to the world

0.16

of charting is using those tools and 0.14

techniques on ratio charts instead of 0.12

standard charts. Traders can distin-
0.10
guish between a standard chart and
a ratio chart by the number symbols 0.08
used to construct it.
If a single symbol is used (such
as AAPL for Apple or MSFT for 0.06

Microsoft), then it’s a standard

chart. If more than one symbol
is used—sometimes dividing one
by another—then it’s a ratio chart.
In other words, it displays the
ratio of the first symbol compared
with the second.
Any given financial instrument
can be divided by another. The
resulting chart might be interest-
ing, but it might not be useful. For
example, one could divide the price
history of Apple on a daily basis for
the past 40 years by the price data
for wheat over the same timespan.
But as unrelated as those two things
are, the resulting chart would likely
be pointless.
There are, however, ample oppor-
tunities to create ratio charts from
instruments that have power-
ful, long-term relationships. Let’s
examine a variety of such charts and
determine what they suggest for the
year ahead.
1959 1969
The money supply
The S&P 500 did not ascend in a
financial vacuum. Instead, stocks
increased in price in recent years
thanks to a tidal wave of liquidity
provided by an endlessly accommo-
dating Federal Reserve. Thus, trad-
ers could create an honest picture of
the performance of the S&P 500 by
simply dividing the value of the daily
data of the S&P 500 cash by the level
of the M2 money supply, as reported
by the Federal Reserve. The result-
ing chart is called “Mostly upward.”
The second chart accompanying
this article, “A down period,” above,
goes back farther in time than the
first. The second chart begins in the
1950s and breaks down into some
broad component parts:
1979 1989 1999 2009 2019
slopecharts.com
Phase One: This is the steady
descent of equity markets through Classic charting
the 1960s and 1970s. Even though
the nominal value of the S&P didn’t
techniques suggest
take on the appearance of a quar- that stock prices
ter-century bear market, in reality,
that’s what was happening beneath could be in for
the surface—if one measures the
stock market through the lens of the
serious trouble
money supply. This relentless grind in 2022.
lower ended in the middle of 1982.
Phase Two: This was when the last
long-term organic bull market took
place, and it was gargantuan. From
1982 until early 2000, the stock
market roared higher. The fact that
the M2 money supply was chang-
ing through this period is taken into
account by virtue of the fact this is

50 Luckbox | January / February 2022

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 trades&
tactics

a ratio chart, and the M2’s growth

didn’t hinder the genuine strength
of stocks. The green basing pattern
that straddles these first two phases
illustrates the clarity, longevity
and cleanness of the bullish base
that formed and launched stocks
30 YEARS OF THE S&P 500
The S&P 500 cash index identifies three distinct market phases
during the past few decades:
into their greatest bull market of
the century.
1992-2002
Back when the equity markets were still relatively organic and the Federal Reserve
Phase Three: Here we have the
more or less left them alone, a large boom-and-bust cycle occurred, as some might
reversal pattern that preceded the
expect from natural market conditions. High tech led a strong bull run from 1992
2000-2002 bear market.
through early 2000, followed by a bear market of about 18 months when the Nasdaq in
particular was dealt a devastating blow.
Phase Four: From 2002 through
2007, the market recovered, but take
2002-2009
note of how weak the recovery was
Another boom-and-bust cycle occurred, permitted by the relatively organic conditions
when the M2 money supply is taken
of the day. The equity markets remained strong from 2002 through 2007, led by the
into account. Although the nomi-
housing bubble. A financial crisis followed that was far stronger than the bear market
nal indexes were making new highs,
of 2000-2002. The crisis wrought extraordinary damage that ushered in the virtual
the truth beneath the surface is that
nationalization of the equity markets that continues even now.
this was a flimsy rally propped up by
growth in the money supply, and the
2009-Present
facade all came crashing down with
In sharp contrast with the ascent, rounded top and subsequent descent of the previous
the great financial crisis.
two phases, this 12-year period has been a relatively uninterrupted ascending channel.
The most severe interruption came with the COVID-19 crash, which lasted a mere three
Phase Five: Finally there was the
weeks but sliced a staggering sum from the value of the market. But all of that loss was
steady lift in equities from 2009
recovered with the Federal Reserve’s deployment of trillions of dollars in cash. Since
to date. What’s remarkable about
then, markets have ascended to unthinkable levels, and companies such as Rivian
this phase is that even though stock
(RIVN)—with literally $0 in revenue—have attained market caps approaching a fifth of
indexes are much higher than ever
a trillion dollars.
before (the Nasdaq, for example,
soaring well over 200% above its
year 2000 high), the M2-normalized Mostly upward
data shows that the true strength of With the help of the Federal Reserve, the S&P 500 has been on the ascent most of the
the stock market is well shy of the time since 1994.
glory days of the 2000 top. In addi-
tion, the COVID-19 crash pushed 4500
4000
this line chart beneath its ascend- 3500
ing trend line, and the strength 3000
that followed (based on more tril- 2500
lions from the Fed in 2020) served 2000
only to push the line back up to the 1500
now-broken uptrend.
In a sense, this ratio chart illus- 1000
trates how phony the market’s nomi-
nal highs have been for the past
couple of decades. The true organic
peak of the bull market occurred at 500

the turn of the millennium. ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10 ’12 ’14 ’16 ’18 ’20

Interest rates slopecharts.com

Interest rates clearly have an enor-
mous effect on the economy, influ-
encing different sectors of the

January / February 2022 | Luckbox 51

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 trades&
tactics

market in different ways. Higher

interest rates tend to discourage Interest rates
consumers from buying real estate, For a full half-century, a price channel has bound the ratio chart of the S&P and interest rates.
but they help banks prosper. For
lower interest rates, the converse is 5500
4500
true. Generally, interest rates peaked 3500
2500
in the early 1980s and steadily fell
1500
for decades after that. In 1981, no
one would have believed that the
30-year mortgage rate would be 500

2.5% in 2020.
The next chart, “Interest rates,”
right, illustrates the value of the
S&P 500 divided by the 10-year
interest rate and shows the relation-
ship between those two components.
It yields a fascinating chart. For a
full half-century, the ratio chart was
steadfastly bound by a price chan-
1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018
nel. That’s interesting with not just
the defining trend lines but with the slopecharts.com
midline as well. The one exception
to that “bounding” of the data took
place during the pandemic, when
interest rates were battered so long Tech stocks
and stocks went so high that the ratio Stocks in semiconductors, electric vehicles, personal electronics manufacturers and internet sites
actually escaped the ancient bound- have appreciated by hundreds or even thousands of percentage points.
aries of that channel. It has since
re-entered its familiar path, yet is Pullquote ipsunt 2.8
2.6

still in the upper half of the channel

pattern, indicating the risk of lower
remque de volore, 2.4
2.2
2.0

stock prices ahead. poccaborecero 1.8

1.6

magnis nulloribus,
1.4

Overvalued technology 1.2

Of all the sectors that have increased

in value since the pandemic stim-
nosaepe ditatibus 1.0

ulus began, none has benefited as sitatas 0.8

as much as technology. Semicon- 0.6

ductors, electric vehicles, personal

electronics manufacturers and
internet sites have seen their stocks
appreciate by hundreds or even
thousands of percentage points in
a matter of months.
An objective way to view this sector,
which is historically overvalued, is by
way of the RYT/IEF chart in “Tech
stocks,” right. The RYT is an ETF dedi-
cated to the technology sector, and the
IEF is an instrument that represents
yield. In a way, this is similar to the
previous chart, except it focuses
specifically on technology stocks.
There is a channel in this instance
as well, although it extends back to
0.4
2006 2008 2010 2012 2014 2016 2018 2020
slopecharts.com
2008 (as opposed to 1973). Nonethe-
less, the channel is well-defined and The descent of stock prices in
provides an excellent “quick take”
as to the relative value of this sector
2022 could aggravate an already
over the long haul. It illustrates how acrimonious political landscape
in 2012, 2015 and early 2019, tech
stocks were relatively cheap, whereas for the midterm elections.
the data in late 2021 shows this

52 Luckbox | January / February 2022

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 trades&
tactics

sector to be at its maximum poten-

tial (assuming the ratio chart stays The Nasdaq
confined within the pattern). A ratio chart of the Nasdaq Composite and the M2 money supply illustrates three cycles
If more evidence is needed, the of boom and bust.
chart, “The Nasdaq,” right, divides
the Nasdaq Composite by the M2
1.00
0.95
0.90
money supply. The rationale, again, 0.85
0.80
is to view the more honest valuation 0.75
0.70
of this index through the lens of a 0.65
0.60
changing money supply. This chart 0.55
goes back quite a bit farther, all the 0.50

way to 1996, and shows three major 0.45

events. First came the boom and 0.40

bust of the internet bubble; second, 0.35

the boom and bust of the housing 0.30

bubble; and third, the boom (and
yet-to-bust) ascending channel of 0.25

the “everything bubble.” Even if this 0.20

channel continues to rise until the
end of time, as surely the Fed would
desire, present price levels show 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

that the tech sector is by no means

slopecharts.com
bargain-priced.

The risk of small caps

The charts clearly suggest that the
stock market is richly valued, with
Small-cap woes
Combining two indexes in a ratio chart suggests that small-cap stocks won’t fare as well as large-cap
the tech sector “fully valued,” to put it
stocks in the coming years.
politely. Traders might consider one
last ratio chart that doesn’t compare
0.64
a stock index or ETF to an outside 0.62
economic data set but instead directly 0.60
0.58
compares one index to another. 0.56

See: “Small-cap woes,” right. 0.54

0.52
Specifically, it divides the price 0.50
data of the Russell 2000 small- 0.48

cap index by the much more highly

0.46
0.44
valued S&P 500 stock set. If history 0.42
serves as any guide (specifically, the 0.40
small tinted dome on the left side of 0.38
the chart), it seems logical to believe 0.36
the years to come will be much worse 0.34
for small-cap stocks than large-cap 0.32
stocks because this is an enormous
“rounded top” pattern. If the value
1991 1995 1998 2002 2006 2010 2014 2018
of this contrived chart falls, it means,
at a minimum, that the ascent of the slopecharts.com
S&P 500 will be much heartier than
that of the Russell 2000 or, more
likely, that the Russell 2000 will fall combinations seem to suggest clearly Tim Knight has been using technical
more swiftly than the S&P 500. Both for the year 2022 is that stocks could analysis to trade the markets for 30
years. He’s the host of Trading Charts
produce the same outcome. be in serious trouble. Their descent
with Tim Knight on the tastytrade
It’s fascinating to examine combi- could create a particularly acrimo- network and offers free access to his
nations by way of classic chart- nious political landscape for the charting platform at slopecharts.com.
ing techniques. What these simple midterm elections. @slopeofhope

January / February 2022 | Luckbox 53

2201_TACTICS&TRADES_technitian.indd 53 12/17/21 9:18 AM

 trades&
tactics
NORMAL DEVIATE
Probability Reigns
Unless we know the chances they’ll come true,
predictions mean almost nothing By Tom Preston
he new year brings resolu-
T tions and predictions.
Spend time with friends
or family in late December or the
first few days of January, and you’re
likely to hear about their plans to get
more exercise, lose weight or save
money—all admirable choices.
But despite those good inten-
tions, the chances are they’ll break
every resolutions in less than
a week, which makes them kind
of useless.
Similarly, turn on the TV or visit
a news website, and you’re likely
to hear predictions for the coming
year. They often come from Wall
Street analysts, stock prognostica-
tors and talking heads who have
opinions to share on where the
market might go.
How useful are those predictions?
About as useful as the personal
resolutions.
Why? Because even though
market predictions are (hopefully)
well-intentioned, they’re based
54 Luckbox | January / February 2022
2201_TACTICS&TRADES_normaldeviate.indd 54
on guesses about one or more of
dozens of potential talking points,
including how well companies will
perform, whether the economy will
grow or contract, and how much the
Federal Reserve might cut or hike
interest rates.
Without attaching a likelihood—a
probability—to those guesses, it’s
hard to use them to try to make
money, which is why investors watch
those market predictions in the first
place. After all, making profitable
investments and trades could go a
long way toward meeting a few of the
personal resolutions.
Figuring out the probability
requires volatility. Without volatil-
ity, it’s impossible to quantify the
probability of a stock or the over-
all market reaching a certain price,
higher or lower, in the future.
Volatility helps predict future
asset prices because it’s derived
from options prices and thus
represents the opinions of hundreds
or even thousands of traders who
are risking real live dollars trading
those options.
The cumulative buying and sell-
ing of an option pushes it to a fair
value, and converting that option’s
value into a volatility—specifically
the option’s implied volatility that
can then be converted into a prob-
ability—makes for the best estimate
Volatility helps of how high or low a stock or index
predict asset might go.
Once traders know the probabil-
prices because ity of a stock or an index reaching a
price, they can use an options trade
it’s derived from to take advantage of that. Options
the opinions trades that are tied to probability
quantify risk and potential reward.
of hundreds or That’s useful, and can be the basis
even thousands of profitable trading and investing.
But a question arises. With
of traders. hundreds or thousands of options
at different strike prices and differ-
ent expirations, each with its own
implied volatility, which is the
best one? For example, the Apple
(AAPL) 160 put in the March expi-
ration has a 31% implied volatility,
while Apple’s 100 put in the March
expiration has a 50% implied vola-
tility. If a trader is trying to deter-
mine the probability of Apple hitting
$200 in the next three months, 31%
gives a very different probability
than 50%.
Instead of picking one option and
12/17/21 11:57 AM
 its implied volatility to determine
a probability of a stock reaching a
certain price, it can be smarter to use
a cumulative volatility that combines Two-Sigma stock prices
the prices of many of a stock’s or an
Statisticians consider 95% probability a significant level of confidence and call it a two-Sigma
index’s options to capture more of
event. They apply the three-Sigma designation to events where their level of confidence
those traders’ opinions. One cumu-
reaches 99.7%
lative volatility is the CBOE’s VIX,
Here’s where some major stocks and indexes may land at the end of this year, based on the
based on SPX options.
overall volatilities of their options in the December 2022 expiration and a 95% probability.
But a similar cumulative volatil-
ity is available for individual stocks, Apple between $75 and $305 Gold between $1,210 and $2,550
exchange-traded funds and other Alphabet between $1,400 and $5,100 Oil between $25 and $150
indexes on the tastyworks plat- S&P 500 between $2,350 and $7,900 Bitcoin between $10,000 and $170,000
form. For instance, it boils down
Apple’s 160 put, 100 put and all of
Apple’s other options into an over-
all implied volatility for Apple that
captures the cumulative knowledge form, each option expiration has covered in previous Normal Devi-
of every trader in Apple. That’s what its own overall implied volatility, ate articles.
makes this style of cumulative vola- which enables traders to calculate
Tom Preston, Luckbox contributing editor,
tility reliable for predicting stock or the probability of a stock hitting a is the purveyor of all things probability-
index prices. certain price for different times based and the poster boy for a standard
Moreover, on the tastyworks plat- in the future. How that’s done is normal deviate.

2201_TACTICS&TRADES_normaldeviate.indd 55 12/17/21 11:57 AM

 trades&
tactics
DO DILIGENCE QU I E T FOU N DAT I O N HELPS INV ESTO RS FIND NEW T RADING O P P O RT UN I TI ES
Essential Market
Forecasting Tools
Traders benefit from understanding market trends that repeat over time
By James Blakeway
hile the saying “history
W repeats itself” may seem
like a nauseating cliche, it
often holds true in economics,
finance and trading.
Take the example of positive drift
in the stock market, which suggests
that an aggregate index of stocks
will continue to rally over time. Not
every stock will increase in price,
but a broad-based index will grow
as innovation continues at new and
established companies.
Positive drift has generally held
true since the advent of indexes such
as the Dow Jones Industrial Average
in 1882 and the S&P 500 in 1860.
Another idea that tends to repeat
itself is that fear is overstated in the
markets. Financial assets with liquid
options markets have implied vola-
tility values, which can be utilized
to estimate the magnitude of future
expected movement. An asset
should fall within the expected the
expected range 68% of the time. But
history shows that stock indexes stay
within that expected range more
often than anticipated.
Take the iShares Russell 2000
exchange-traded fund (ETF) for
example. It represents a portfolio of
2,000 small-cap U.S. stocks. Unlike
iShares Russell 2000 ETF (IWM)
Short 30 Delta Put backtest results
Win Average Average
rate premium profit
collected per trade
86% $187.39 $32.73
Data from lookback by tastytrade
56 Luckbox | January / February 2022
2201_TACTICS&TRADES_do diligence.indd 56
iShares Russell 2000 ETF bullish trade
This trade has a breakeven price far below the current price. “Positive drift” means
IWM at $213.38 the overall stock market
IVR: 57% increases over time.
Bullish to neutral Jade Lizard
Buy 1 IWM 232.0 Call in February-18’22 (66 DTE)
Sell -1 IWM 229.0 Call in February-18’22 (66 DTE) of positive drift and overstated fear
Sell -1 IWM 180.0 Put in February-18’22 (66 DTE) by investigating the short put strat-
egy in index ETFs. The short put is
240
a simple bullish strategy where a
230
trader sells a single put option with
220
a strike price typically below the
210 current price of the stock or ETF.
200 The strategy’s goal is for the stock
190 or ETF to increase in price, stay the
Downside Breakeven 180 same price or not fall too much.
Sep 15 Oct 01 Oct 15 Nov 01 Nov 15 Dec 01 Dec 15
For example, if XYZ stock is trad-
ing for $100 per share, a trader may
Estimated buying power
Credit/debit: $3.16 credit
reduction: $2,010 look to sell the 95 strike to express
the assumption that the stock will
Max profit: $316.0 Max loss: $17,684
increase or at least not drop below
Downside breakeven: Upside breakeven: $95. This trade wants the stock to
176.84 No upside risk stay above $95 and the 95 put to
Max profit zone: Between 180.0 and 229.0 expire worthless, meaning the trader
keeps the credit received for selling
the put option.
New traders who are learning
the Dow, S&P 500 and Nasdaq-100, about implied volatility and expected
the Russell 2000 holds no more than movement can use the delta values to
1% of its portfolio in any single stock. help them pick their options strikes.
From 2004 to the present, the The delta value tells a trader the
Russell 2000 has landed within its expected probability that an option
expected 30-day range 82% of the will not expire worthless.
time. Keep in mind that it’s only Think of the example above. If the
supposed to stay in the range 68% of 95 put has a delta of 30, then there’s
the time. Thus fear—in either direc- a 70% theoretical chance the option
Average tion—is overstated. will expire worthless. If the delta was
profit
per day 40, there’s a 60% chance the option
Benefitting from history will expire worthless.
$0.78 Traders can begin taking advantage But because fear is overstated,
12/17/21 9:13 AM
 Overstated fear distorts Another IWM bullish trade
This trade can make money even if the ETF price falls.
traders’ expectations for IWM at $213.38
future stock prices. IVR: 57%
Neutral to bullish Put broken wing butterfly
it makes sense to assume these Buy 1 IWM 191.0 Put in February-18’22 (66 DTE)
numbers may play out differently in Sell -2 IWM 205.0 Put in February-18’22 (66 DTE)
Buy 1 IWM 210.0 Put in February-18’22 (66 DTE)
reality and the percentage of options
that expire worthless is higher than
240
the market projects.
230
Time for a test 220
Traders can use Lookback, tasty-
trade’s free new backtesting and 210

analysis software, to test these ideas. Downside Breakeven

200
It enables them to see how a chosen Sep 15 Oct 01 Oct 15 Nov 01 Nov 15 Dec 01 Dec 15
strategy, such as a short put option,
performed in the past for a specific Credit/Debit: $1.45 credit
Estimated buying power
stock or ETF. reduction: $755
Consider again the Russell 2000 Max profit: $645 Max loss: $755
ETF. Traders who sell a 30 delta short Downside breakeven: Upside breakeven:
put option in this ETF can assume the 198.55 No upside risk
trade is profitable around 70% of the
Max profit zone: Pin 205.0
time. Asking Lookback to simulate
the results of selling a 30 delta short
put in the Russell ETF over the past
10 years, they can see the trade was
actually profitable 86% of the time,
with an average profit of $33. (See the
iShares Russell 2000 ETF defined risk trade
table “iShares Russell 2000,” p. 56.) The risk here is only $133.
No matter how much skill or expe-
rience traders have, they can bene- IWM at $213.38
fit from knowing financial history. IVR: 57%
On average, the stock market will
continue to rise despite dips and sell- Bullish Short put spread
offs along the way. But regardless of Buy 1 IWM 207.0 Put in February-18’22 (66 DTE)
direction, the market will continue Sell -1 IWM 209.0 Put in February-18’22 (66 DTE)
to overprice fear and overestimate
240
future movement.
235
Traders seeking additional prob-
230
abilistic trade inspiration should
225
check out Alpha Boost, the free trade 220
idea email service from Quiet Foun- 215
dation. Luckbox used Alpha Boost Downside Breakeven 210
to generate a variety of trade ideas Sep 15 Oct 01 Oct 15 Nov 01 Nov 15 Dec 01 Dec 15
in the Russell 2000 ETF. As always,
in the markets and in life, be sure to Estimated buying power
Credit/debit: $0.67 credit
do your due diligence. reduction: $133

James Blakeway serves as CEO of

Max profit: $67.0 Max loss: $133.0
Quiet Foundation, a data science-driven Downside breakeven: Upside breakeven:
subsidiary of tastytrade that provides fee- 208.33 No upside risk
free investment analysis and trade ideas for
self-directed investors @james.blakeway Max profit zone: Above 209.0

January / February 2022 | Luckbox 57

2201_TACTICS&TRADES_do diligence.indd 57 12/17/21 9:13 AM

 trades&
tactics

FOREX F R E E- F LOAT I N G M AC RO I N S IG HTS FRO M G LO BAL CU R R ENCY T RADERS

COVID-19 Redux?
News of the Omicron variant made markets plunge,
but the mutated virus might buttress the dollar By Ilya Spivak

n the second half of 2021, investors

I worried about inflation and specu-
Omicron wreaks havoc
lated on how the Federal Reserve
The S&P 500 and the price of oil both declined precipitously with news of the new
would respond. Meanwhile, the Fed tried to
COVID-19 variant.
allay fears of rising prices—insisting gains
were merely “transitory” side effects of the
COVID-19 pandemic—even as it pivoted to 4700.00
84.00
step up stimulus withdrawal. S&P 500 E-mini futures 4595.75 80.00
The matter seemed mostly settled as
the holidays drew near. Market pricing of 4500.00
76.00
the expected rate hike path, as reflected in 4400.00
Fed Funds futures, evolved over the fourth WTI Crude oil futures
4300.00
72.00

quarter to match the Federal Open Market 68.15

Committee’s September forecast of about 180 4200.00

basis points in rate increases through 2024. Markets react to Omicron 4100.00
64.00

Jerome Powell was renominated as chair, COVID-19 strain discovery

60.00
signaling continuity. 4000.00

But the backdrop changed suddenly as 3900.00

56.00

markets wound down for Thanksgiving. The 3800.00 52.00

World Health Organization warned that
the new Omicron variant of COVID-19 was 3700.00 48.00

spreading across the globe, and a slew of coun-

tries promptly imposed travel restrictions.
Investors rushed for the exits at the pros-
pect of another broad-based shutdown.
The bellwether S&P 500 stock index, a bench-
mark for overall market sentiment, plunged
2.2% to record its largest one-day decline
in nine months. Crude oil prices shed an
eye-watering 13%.
At press time, it appears that Omicron may
not warrant such alarm or could perhaps have
demanded even more forceful liquidation.
Scientists didn’t know how effective existing
vaccines would be against the mutated virus,
and a U.K. health official warned that they
would “almost certainly” prove less potent.
Stagflation risk
However the Omicron saga unfolds, the episode
highlights the increasing risk of stagflation.
Reimposing barriers on cross-border economic
activity would limit growth, and supply chain
disruptions would push prices upward.
How the Fed’s policy calculus might evolve
to achieve the dual mandate of price stability
2021 Mar May Jul Sep Nov 2022 A B
Source: TradingView
and maximum employment would seem to call
for divergent actions. Uncertainty about the Investors rushed for the
response would probably stoke volatility and
cool the appetite for risk.
exits at the prospect of
This seems likely to put a premium on the Omicron variant
liquidity for two reasons. First, liquidity and
volatility tend to be inversely related: Price causing another
action in assets that are more widely traded
tends to be less jittery when all else is equal.
broad-based shutdown.
Second, greater liquidity confers maneuver-
ability, making risk easier to manage amid
difficult market conditions.
The rising dollar
Liquidity probably bodes well for the dollar,
especially against pro-cyclical so-called
“commodity” currencies like the Australian
dollar. The monthly chart of the Australian
dollar/U.S. dollar exchange rate hints that a
major top—with implications for deep losses

58 Luckbox | January / February 2022

2201_TRADES&TACTICS_forex.indd 58 12/17/21 9:17 AM

 in the coming weeks and months—might be
taking shape.
Prices appear to be carving out a bearish
head-and-shoulders (H&S) technical pattern
after retesting support-turned-resistance at
a 20-year rising trend line, as well as a price
Bolstering the dollar
Greater liquidity may strengthen the U.S. dollar, especially against so-called “commodity”
currencies like the Australian dollar.
1.10802

inflection zone approximated in the 0.80-0.82 AUD/USD monthly chart

region. Confirming the setup seems to call for 1.0000

0.95810
a close under “neckline” support just below
the 0.70 figure. 0.90000
0.86604
If prices manage a breach, the H&S forma- Head 0.81840
tion would imply a measured downside objec- Shoulder?
0.80000
Shoulder 0.75560
tive within the support region, marking the
crisis bottoms from 2008 amid the financial Neckline? 0.69913

crisis and 2020 at the onset of the COVID-19

0.60090
outbreak. That’s anchored at the 0.60 handle.
0.55093
Invalidating the setup would begin with a close 0.50000
back above 0.7556. 0.47780

Negative RSI divergence 80.00

Ilya Spivak is head strategist for Asia-Pacific markets RSI 46.30
at DailyFX, the research and analysis arm of retail
trading platform IG. @ilyaspivak 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Source: TradingView

Experience Fast-Paced
Market Action
Trade 5-Minute to Weekly
Contracts. Access Forex, Gold, Oil,
Stock Indices Markets & More.

Discover more.

Trading on Nadex involves risk and may not be appropriate for all market participants.

2201_TRADES&TACTICS_forex.indd 59 12/17/21 9:17 AM

 trades&
tactics

FUTURES A SAV V Y F U T U R ES T RA D ER’S TAK E O N T HE M AR K ETS

Slippery Oil Prices

Predicting the future price of black gold isn’t easy By Pete Mulmat

he economy has apparently Oil futures prices reflect what the

T withstood this year’s
45% rise in the price of
oil, but monetary policymakers
remain concerned about the
commodity’s future.
Higher oil prices can dampen
demand in general, as consum-
ers and businesses spend a larger
portion of their budgets on oil-re-
lated products and less on other
goods and services. Passing higher
oil prices on to other goods and
services can result in higher wages
and cause inflation.
But is the price of oil likely to rise
further or will it decline precip-
Price check buyer and seller agree will be the
The forward price curve of crude oil shows that the price is price of oil upon delivery at some
higher in the front months than in back months. point in the future. So, those prices
provide direct information on
Crude oil futures
Price
(Dollars per traders’ expectations for the future
barrell) price of oil.
76
Like the price of every other risky
75 asset, however, oil futures prices
74 include risk premiums to reflect the
73
possibility that spot prices at the
time of delivery may be higher or
72
lower than the contracted price.
71 Traders can also use the forward
70 term structure of crude prices
to forecast prices. The shape of
the futures curve is important to
Jan ’22

Feb ’22

Mar ’22

Apr ’22

May ’22

Jun ’22

Jul ’22

Aug ’22

Sep ’22

Oct ’22

Nov ’22

Dec ’22
itously as it did in April 2020 in commodity hedgers and specu-
response to the pandemic? A natu- lators. Both care about whether
ral place to look for an answer is in commodity futures markets are
the markets, where oil traders know contango markets or normal back-
the industry and where their profits ride on making sound investments. wardation markets. However, these two curves are often confused for
Perhaps traders can base forecasts of oil price movements on infor- one another.
mation from both the oil futures market and the spot market. To find Contango and normal backwardation refer to the pattern of prices
out, forecasting exercises have been conducted to determine whether over time, specifically if the price of the contract is rising or falling.
future prices of futures have predictive power in the present for the • Contango occurs when the deferred-month futures price is above the
future pricing of oil. expected near-term futures price.
Let’s review three ways of trying to determine future oil price • Normal backwardation occurs when longer-dated futures prices are
movements. below the near-term or “spot” future price.
1. The random walk model predicts spot oil prices will remain at current To test the accuracy of forward futures contracts to predict crude
levels. price, compare the three-month forward futures contract prices against
2. With the opportunity cost assumption, the current—or spot—oil where spot oil is actually trading in three months’ time.
price might help predict future oil price movements. Given certain For example, in August 2021, spot oil was trading at $71.26, and the
simplifying assumptions, the opportunity cost of storing oil is the three-month forward (the November contract) was trading at $69.15. But
foregone interest rate. Therefore, in theory, the expected rate of by November, spot crude was trading at $84.05, a difference of almost $15
return for holding oil should be identical to the interest rate. In other from what the three-month forward “predicted” oil would be in November.
words, the price of oil is expected to appreciate at the interest rate. In Oil futures prices contain important information about future oil
practice, however, holding oil stocks often provides manufacturers price movements, especially for the near term. Considering the rela-
advantages or offers flexibility in managing operational risks. Such tionship between current spot and futures prices instead of considering
benefits, commonly called “convenience yields,” should be reflected as only the raw futures price can possibly improve forecasting accuracy.
a premium, mostly positive, in the current oil price. Thus, the expected The variation between predicted and actual prices has no upward or
rate of return of oil inventories may not be identical to the interest rate, downward bias, and in the one-year sample set had a variance in accu-
and a forecast based on the current spot price may tend to over-pre- racy of almost 20%. Prediction errors are substantial, and accurately
dict future oil prices. predicting the future price of oil seems as elusive as ever.
3. The futures-spot spread model uses the spread between the current
Pete Mulmat, tastytrade chief futures strategist, serves as host of Splash Into Futures
futures prices and the spot price to predict movements in the future on the tastytrade network. @traderpetem
price of oil.

60 Luckbox | January / February 2022

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TACTICS: BASIC
A Prognostication Tool
Standard deviations can help predict the price of futures anytime
between listing and expiration By Michael Gough
utures contracts lock in the
F price of a commodity or
index. The former can
include oil, gold, soybeans or wheat,
while the latter can include the
S&P 500, U.S. Treasury Bond yields
or foreign exchange rates.
By design, futures eventually settle
to the published price of the under-
lying they track. But how can traders
predict the price of a future at any
point between the time it’s listed and
the time it expires?
Fortunately, several statistical
measures can help. One of the most
useful is standard deviations, which
traders often refer to as histori-
cal volatility. Standard deviations
capture spread size compared with
mean value.
In a normal distribution, one
standard deviation captures 68.2%
of the values around the mean.
Two standard deviations capture
95.4%, and three standard devi-
ations capture 99.6%. (See “Stan-
dard moves.”)
By capturing the average move
and the variability around it, stan-
dard deviations provide traders with
a reference point for how much an
underlying typically moves over a
given period.
While standard deviations don’t
provide insight into the direction of
movement, they help set expecta-
tions for a trade’s potential profit and
loss and may reveal opportunities.
So, how should traders use stan-
dard deviations? Let’s look at one of
the most popular and volatile futures
markets: crude oil.
At the time of this writing,
small crude oil futures are trading
for around $70 per barrel. Is it
reasonable to expect $80 crude oil
2201_TRADES&TACTICS_basic.indd 61
trades&
tactics
by the end of the next month? What
about $90? Standard moves
Well, the last several months of Stock prices tend to fall within two standard deviations
historical data show that roughly of the norm.
68% of the time (one standard devi- σ = standard deviation
ation) the one-month move in small
crude oil was within +/- $5.50. And
95% of the time (two standard devi-
ations) the one-month move was
within +/- $11.
The one-, two- and three-stan-
dard deviation monthly moves
in small crude oil are depicted in 68.2%
“Slim moves,” right. 95.4%
While it seems reasonable that 99.6%
small crude oil could trade up to -3σ -2σ -1σ +1σ +2σ +3σ
$75.50, the possibility of moving
above $80 over the next 21 trad-
ing days appears slim. Those levels
are valuable for setting entry points,
Slim moves
profit and loss targets, and realistic
While it seems reasonable that small crude oil might trade up to
expectations before entering any trade.
$75.50, a look at standard deviations indicates the possibility of
As another example, suppose
moving above $80 is slim.
small crude oil sinks from $70 to
$60. Contrarians could view that as $70
a grossly oversold market because
the price moved roughly two stan-
dard deviations lower. If they buy
in at $60, they may look to make a $75.50
$64.50
$2 or $3 profit or cut their losses at
$2 to $3 after a few days or weeks,
keeping in mind that the normal $59
68.2%
$81
monthly move in the market is $53.50
95.4%
$86.50
+/- $5.50. 99.6%
The fact that standard devia- -$16.50 -$11.00 -$5.50 +$5.50 +$11.00 +$16.50
tions use historical data means
they aren’t a perfect measure, and
traders should always be aware of
the possibility of outliers. However,
having a statistical baseline beats
trading blindly.
Michael Gough enjoys retail trading Standard deviations help set expectations
and writing code. He works in business
and product development at the Small for a trade’s potential profit and loss, and
Exchange, building index-based futures and
professional partnerships. @small_exchange they may reveal opportunities.
January / February 2022 | Luckbox 61
12/17/21 9:01 AM
2201_TRADES&TACTICS_advanced.indd 62 12/17/21 9:08 AM

TACTICS: ADVANCED
The Wisdom of Crowds
To predict next year’s stock prices, look where investors are putting their money
By Michael Rechenthin
ew variants of COVID-19
N might drive stock prices
lower, or President Joe
Biden’s infrastructure plan might
push them higher. But what do the
markets themselves suggest about
the coming year? Let’s estimate
2022 price ranges based on the
“wisdom of crowds” by looking at
where thousands of traders are actu-
ally placing money.
The S&P 500, Nasdaq and Russell
2000 are expected to rise or fall by
roughly 25% by the end of December
2022. But notice that the S&P 500
is slightly skewed to the downside,
with observers expecting a greater
fall (22%) than rise (17%). They view
the Nasdaq and Russell as almost
equally likely to rise or fall.
But what’s the source of those esti-
mates? Look at the options Greeks—
especially the delta, which traders
can use as a proxy for probabili-
ties. A 16 delta is an estimated 16%
probability of an option being in the
money on expiration. Thus 100% -
16% = 84% probability of being out
of the money on expiration.
The table “What lies ahead” shows
the price of SPY at 464, and the 16
delta put is 360. Thus, there’s an
84% probability that the market will
be above that point on the expiration
of December 2022. And the 16 delta
call is 545, so there’s an 84% proba-
Taking on risk should be
rewarded. That’s why
insurance companies
are profitable.
2201_TRADES&TACTICS_advanced.indd 63
trades&
tactics
What lies ahead
The “wisdom of crowds” indicates the S&P 500 is slightly more likely to fall than to rise in 2022, while the
Nasdaq and Russell both seem equally likely to rise or fall.
Lower bound
Current
Upper bound
price
360 545
S&P 500 | SPY 464
22% below current price 17% above current price
305 500
Nasdaq 100 | QQQ 399
24% below current price 25% above current price
170 275
Russell 2000 | IWM 223
24% below current price 23% above current price
125 180
20+ Year Bonds | TLT 149
16% below current price 21% above current price
Data as of Dec. 1
bility the market will be below that That’s why selling options is
upper bound on expiration. generally an ideal strategy when
About 68% of prices fall between pursued conservatively. Think of it
the upper and lower bounds, which this way: An options buyer is look-
is -1 and +1 standard deviation. (See ing to either offload risk or spend
p. 61.) So by the end of next year, some money with the potential for
the best estimate is that prices will More Lookback a large payday. An options seller is
fall between 360 and 545 for the Your free handle looking to receive money by taking
on future prices
S&P 500 ETF (SPY). on risk from someone looking to
How often do prices fall within offload it.
the lower and upper ranges? Taking on risk should be
At this time last year, SPY and rewarded. It’s why insurance compa-
QQQ fell above the upper bound. nies are generally quite profitable.
They performed slightly better than They’re paid premiums for taking on
the upper range the options market risk. Occasionally a loss occurs, but
was expecting. over time it’s a profitable endeavor.
In fact, 30% of stocks in the Don’t believe it? Test a trade idea
S&P 500 fell above their expected by scanning the QR code to use
upper bound from last year’s esti- Lookback, a free options backtest-
mates—and it was an average of 8% ing application. It draws upon more
above that upper range. But wait. than a dozen years of data to test any
That doesn’t necessarily mean trad- options strategy.
ers should buy options. While 30%
fell outside the upper range, only 17%
Michael Rechenthin, Ph.D., aka “Dr. Data,”
would actually have been profitable.
is the head of research and development at
tastytrade. @mrechenthin
January / February 2022 | Luckbox 63
12/17/21 9:08 AM
 THE LAST PICTURE
High Art
Everydays—The First 5000 Days, a JPG file
created by the digital artist known as Beeple,
sold a year ago at an online Christie’s auction
for $69.3 million. The price set a record for an
artwork that exists only digitally as a non-
fungible token (NFT). That’s a lot of money
but far short of the value of some of the world’s
most expensive paintings. Leonardo da
Vinci’s Salvator Mundi, for example, sold for
64 Luckbox | January / February 2022
2201_ELEMENTS_lastpicture.indd 64
(EVERYDAYS: THE FIRST 5000 DAYS) CHRISTIE’S IMAGES LTD. 2021
more than $450 million at a Christie’s New
York auction in 2016. At the time, it was
arguably the most widely publicized art sale
in history, and the buyer was none other than
Mohammed bin Salman, the Crown Prince of
Saudi Arabia. What’s a Luckbox reader to
make of all this? Check out the March issue for
the magazine’s exploration of the world of art
and design.
12/17/21 6:15 PM TH-ho
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