• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Fat Tail Daily

Investment Ideas From the Edge of the Bell Curve

  • Menu
    • Commodities
      • Resources and Mining
      • Copper
      • Gold
      • Iron Ore
      • Lithium
      • Silver
      • Graphite
      • Rare Earths
    • Technology
      • AI
      • Bitcoin
      • Cryptocurrency
      • Energy
      • Financial Technology
      • Bio Technology
    • Market Analysis
      • Latest ASX News
      • Dividend Shares
      • ETFs
      • Stocks and Bonds
    • Macro
      • Australian Economy
      • Central Banks
      • World Markets
    • Small Caps
    • More
      • Investment Guides
      • Premium Research
      • Editors
      • About
      • Contact Us
  • Latest
  • Fat Tail Series
  • About Us
Latest

In the Spirit of the Quant King

Like 0

By Callum Newman, Wednesday, 15 May 2024

How the legend of Wall Street can live on

In today’s Fat Tail Daily, Callum Newman explains how he uses algorithms to detect stress, risk and trades in the market

Today I’m going to introduce you to my friend Chewbacca.

We call him Chewie for short.

You might be thinking he’s a very tall, hairy, sidekick type of character.

Well…he’s not that hairy…or that tall.

But he’s certainly my sidekick — for trading the market.

You see…

Chewie builds algorithms to digest the gigantic data the stock market generates every day.

There was another man that did that too — Jim Simons. He died last week at 86.

Jim is Chewie’s hero.

Why?

Jim Simons is the greatest market player you’ve never heard of.

His Medallion fund, part of his firm Renaissance Technologies, returned over 30% a year for 30 years.

They called him the Quant King. And no wonder — Jim turned himself into a multibillionaire.

Even more amazing, he didn’t really hit his trading straps until he was in his 50s.

He didn’t follow in the classic footsteps of Warren Buffett or Phillip Fisher.

Simons was a mathematician and a codebreaker before he took on Wall Street.

Bloomberg had this to say…

‘Simons avoided employing Wall Street veterans. Instead he sought out mathematicians and scientists, including astrophysicists and code breakers, who could ferret out usable investment information in the terabytes of data his firm sucked in each day on everything from sunspots to overseas weather.’

Simons loved to smoke and fagged his way through life for 70 years.

Suffice it to say…he trod his own path!

Well done, that man.

That brings me back to Chewie…

We’d never claim he’s the next Jim Simons. No one can be!

But Chewie’s algorithms are still very potent tools.

Let’s take right now as an example…

Should you be aggressive or defensive in your market positioning?

You might be feeling a little wary given the news cycle. The next set of US consumer price data could be ‘make or break’, as the Australian Financial Review penned yesterday.

That data is due this week.

Indeed, there’s a whole list of worries that might be on your mind…

  • Geopolitical tension
  • The Australian federal budget
  • High interest rates
  • Depressed consumer spending
  • High inflation
  • Big debts

And on and on I could go…

It’s enough to freeze you into inaction.

Sometimes it’s enough to put the stock market in the ‘too hard’ basket.

That would be a mistake…at least as far as one of Chewie’s algorithms is concerned.

One of its signals is a measure of stress in the market. It does this using volatility indicators.

Contrary to the list above, and the way you might be feeling, Chewie’s algo is currently signalling very low stress.

This is not to say it can’t change on a dime or go up tomorrow.

But, right now, the market is not pricing in any calamity.

A maths whiz like Jim Simons would say, I imagine, that probability suggests now is a good time to go ‘long’ the share market.

Of course, no trader would use one indicator to make a move with their cash. It’s one brush stroke on a canvas.

Is there another one we can see?

Well, yes.

The price of copper is breaking out.

See for yourself…

Fat Tail Investment Research

Source: Market Index

[Click to open in a new window]

Some people say that ‘Dr Copper’ has a PhD in economics. It’s such a versatile metal used across the industrial economy that its price is a good barometer for conditions on the ground.

It’s hard to get too bearish with copper moving like that.

Again, it’s not to say copper can’t fall back, or the current rally won’t fizzle out.

Only, it’s another signal that the share market is likely to be less volatile and risky to the downside than it’s been over the last few years.

This is all part of the case I’ve been making to investors since last year.

We’re moving away from the high volatility and uncertainty that plagued investors over 2022 and 2023.

If you’ve been in the market, or following it, over this time, you’ll know what I mean.

Last year I suggested the market was moving into a period called ‘reviving confidence’. Another way of saying this is ‘Stage 1’ of a new bull market.

That’s what we saw with the big rally between November and March.

Now we’re moving into what I call ‘Stage 2’.

This is when the market is starts chasing stocks that can grow profits, market share and revenues.

I mention copper breaking out above. Look at copper producer Sandfire [ASX:SFR] lately…

Fat Tail Investment Research

Source: Market Index

[Click to open in a new window]

The stock has shot up right alongside the copper price.

Again, there’s no guarantee it will keep going up. But it’s been a bankable move — at least up until now.

My subscribers had the opportunity to get on that trade…and it was thanks to another of Chewie’s algorithms.

This one uses machine learning and artificial intelligence to find stocks exhibiting high momentum.

It’s certainly not faultless. Nothing in the market is.

However, it’s an example of how AI is impacting the markets today. And in similar way to Jim Simons pioneered over the last three decades.

There are other ways to exploit AI on the index.

That’s finding companies that can use its benefits in their operations.

I put down five stock ideas in a recent report.

There are no guarantees there, either.

But I’m pretty sure Jim Simons would be curious to see if there was an edge he could exploit.

It’s working so far. One of the stocks hit 52-week highs last week. Four out of five are up from their original recommendation. And while there are no guarantees this will continue…

I’d like to think Jim Simons would be chuffed at that.

RIP to one of the best.

Best,

Callum Newman Signature

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Comments

Subscribe
Notify of
guest
guest
0 Comments
Inline Feedbacks
View all comments
Callum Newman

Callum Newman is a real student of the markets. He’s been studying, writing about, and investing for more than 15 years. Between 2014 and 2016, he was mentored by the preeminent economist and author Phillip J Anderson. In 2015, he created The Newman Show Podcast, tapping into his network of contacts, including investing legend Jim Rogers, plus best-selling authors Jim Rickards, George Friedman, and Richard Maybury. He also launched Money Morning Trader, the popular service profiling the hottest stocks on the ASX each trading day.

Today, he helms the ultra-fast-paced stock trading service Small-Cap Systems and small-cap advisory Australian Small-Cap Investigator.

Callum’s Premium Subscriptions

Publication logo
James Altucher’s Investment Network Australia
Publication logo
Australian Small-Cap Investigator
Publication logo
Small-Cap Systems

Latest Articles

  • From geek to God: the trillion dollar maven
    By Callum Newman

    Here’s a few things I discovered this month after reading The Thinking Machine: Jensen Huang, Nvidia, and the World’s Most Coveted Microchip. If you want to be a billionaire, have a read of this!

  • The stock market prices in peace in the Middle East
    By Brian Chu

    Will the conflict between Israel and Iran escalate? Today, I present my views on why it could de-escalate sooner than many are made to believe.

  • Ignore the bores and the bears: some shares are going gangbusters
    By Callum Newman

    All year you and I have been on a mission. It’s to discover if now is the time to be upping your exposure to risk assets, or dialling it down. I put my stake in the ground ages ago: get bullish! It’s working.

Primary Sidebar

Latest Articles

  • From geek to God: the trillion dollar maven
  • The stock market prices in peace in the Middle East
  • Ignore the bores and the bears: some shares are going gangbusters
  • The Perfect Marriage: Combining Fundamental AND Technical Analysis
  • Your best chance to be in the top 10% will come from here

Footer

Fat Tail Daily Logo
YouTube
Facebook
x (formally twitter)
LinkedIn

About

Investment ideas from the edge of the bell curve.

Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.

Quick Links

Subscribe

About

FAQ

Terms and Conditions

Financial Services Guide

Privacy Policy

Get in Touch

Contact Us

Email: support@fattail.com.au

Phone: 1300 667 481

All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

Fat Tail Logo

Fat Tail Daily is brought to you by the team at Fat Tail Investment Research

Copyright © 2025 Fat Tail Daily | ACN: 117 765 009 / ABN: 33 117 765 009 / ASFL: 323 988