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Single best idea and the single best idea is for decades, we've tried to lift the conversation. You can only do that with smart people, and we try to do that each and every day an economics, finance, investment and international relations. I'll be honest, sometimes I fail, folks. We have somebody that just doesn't get it done. And then you have magical days like today where we look at esoteric stuff in Wall Street, Global Wall Street, and we try to say it in English and not in Greek like the
Greek letters of derivative and option finance. Simon White of Imperial College in Cambridge is holding court at Queen Victoria Street in London, and he stopped Global Wall Street yesterday with his article on Gamma and on the dynamics of this moment in the market here from London.
Simon White, it ultimately comes down to, you know, I guess highly efficient markets and people have very niche risks that they need to hedge away. But as usual when you start with a real end user demand. You know, we've seen it in commodities, for instance. The oldest futures markets are commodities. They were originally there for end user demand, but very quickly speculators started to use them in different ways, maybe not for how they were originally intended. And I
think that's kind of what's happening in markets. But there is some very good things you can do here. So, for instance, if you take a view and correlation means that you can then express it in the market. Right now, though, the fact that correlation is so low, that's really telling you that the shock risk of the market is high. I mean it really correlation cannot actually go much lower for the market. It can really only go one way.
And what happens in a shortcit something exogynous. Things tend to move together and you see that correlation move, and then I think everything will unravel. Then you'll see that the sparsely move, the gamma will move, and the correlation will move.
The correlation is really complex mathematics. It's much more than you think. It's big, long algebraic functions of taking two things and how tightly are they linked. But if you do it across a thing like the standard Porse five hundred, you get into some serious complexities as well. The key sentence there on correlation is right now, things are very tight and when they move, they all move together, and that is some of the angst out there within this
speculation of twenty twenty six. McMillan at idx's living this. He's off of the London School of Economics and they're hugely prestigious econometrics department. Here is Ben McMillan on the moment at hand.
Always get the question, all right, is this you know, the AI bubble. Everybody's looking at the parabolic moves. This has echoes of you know, nineteen ninety nine. Now the difference is people, you know, people say, well, the revenues are real. This time we're seeing it. We're you know, and we're seeing AI adoption. It's real. It's no longer just you know, people typing into chatchbt saying help this
email sound better. You're seeing it being adopted, you know, across the entire industry, you know, animals and Amazon search bars. But I also remind people, listen, this is a market. When you start looking at a line and you're calculating how many degrees off vertical it is. You had somebody on Alpha Simplex last Friday and you asked about kind of how do you model pair parabolic moves. And the short answer is when you see the parabola, that's the signal to step back and take stock.
Whoa way too math there, That's what you do with Ben McMillan of id X. The person at Alpha Simplex was the wonderful Catherine Kaminski, she of the Massachusetts Institute of Technology. Again, let me translate there. A parabola is a squared function, So it's a curve line up of one, two, four, eight, sixteen, thirty two sixty four. You get the picture. You go up quickly, and certainly that's what we see among others in the Summit conductors right now. How do you get
off a parabolic trend? How do you get the so called draw down? Or you pull back? When do you sell? If you pull back, when do you step again in again within the trend that's parabolic at some of the mysteries for our guests and for all of Global Wall Street on podcasts, we're on YouTube, we're on Spotify. It's single best idea