Edward Quince's Wisdom Bites: The Power of the Right Filter

In an age of relentless information, the most valuable skill might be the art of ignoring.

We are constantly bombarded with data: economic reports, market movements, expert opinions, and social media trends. Yet, as the blog's philosophy often suggests, "the more data you get, the less you know what’s going on". This concept, known as the "Noise Bottleneck," implies that large quantities of data can be "toxic," as the ratio of "spuriousness" (noise) to valuable "signal" increases the more immersed one becomes.

The author has highlighted the "irony of maintaining a daily economic update blog while firmly believing it is best to ignore all of the noise and false stimuli". This underscores a core message: "Clarity comes from subtraction, not addition. Remove the noise, the distractions, and the unnecessary. What truly matters will emerge".

Consider the wisdom of the "wise old owl" that Rockefeller used to recite: "The more he saw the less he spoke, The less he spoke, the more he heard, Why aren’t we all like that old bird?". This speaks directly to the power of discernment and filtering. It's about prioritizing insight over raw data.

The human "need for certainty is the greatest disease the mind faces", making us susceptible to these enticing, yet often misleading, narratives.

To navigate this landscape effectively, you need a filter.  This focus on the long-term helps to filter out much of the daily "noise" that consumes attention but offers little enduring value. Remember also that "time is the best filter. It is the only filter I trust".

By cultivating the discipline to filter out the trivial and focus on fundamental, timeless principles, you can gain a clearer understanding of the world and make more robust decisions.

Edward Quince's Wisdom Bites: The Unseen Battle for Your Returns

Today, let's explore the often-overlooked battleground of investing: your own mind and behavior.

In financial markets, the constant flow of news, data, and opinions creates an almost irresistible urge to "do something". Yet, the author of this blog often highlights the "cruel irony of investing", where this impulse can be detrimental. The real challenge isn't external, but internal. As Warren Buffett's biographer, Alice Schroeder, recounted, Buffett himself noted that most of the truly important things in his life happened after he thought he had accomplished everything. This underscores that patience and perseverance are far more valuable than constant activity.

Charlie Munger, whose wisdom is frequently celebrated in these pages, famously stated, "It's waiting that helps you as an investor, and a lot of people just can't stand to wait". The "big money is not in the buying and selling, but in the waiting". This isn't passive inaction; it's disciplined non-action, recognizing that "your behavior matters more than your forecast".

The financial world, unfortunately, often profits from this human tendency to act. As the blog has noted, providing a continuous stream of data and opinion is a business "predicated on a demand by investors (including speculators) to be told by someone else what to do". This system has "incentives such that adding noise, complexity and a constant pressure to do something is part of the business".

Instead of chasing fleeting narratives or reacting to every headline, focus on what you can control: your own discipline, your process, and your long-term perspective. Remember the XTOD wisdom: "Stop trying to be spectacular. Start being consistent". The path to success is often quiet and requires consistent effort that goes unseen, because "the price of success is paid in private. Visible triumphs are built on invisible toil". Ultimately, "you don't need to worry about progressing slowly. You need to worry about climbing the wrong mountain".

Mastering your mindset, rather than trying to master the market, is the true unseen battle that determines your long-term returns.

Edward Quince's Wisdom Bites: The Unsung Power of Patience

In a world clamoring for instant gratification and quick wins, today we shine a light on an often-overlooked virtue: patience.

The market's daily gyrations, the ceaseless flow of economic data, and the drumbeat of breaking news can create an almost irresistible urge to "do something". Yet, as the blog has frequently reminded us, much of this is simply "noise and false stimuli". As the late Charlie Munger, an intellectual giant admired in these pages, profoundly stated, "It's waiting that helps you as an investor, and a lot of people just can't stand to wait". Indeed, Munger taught that "The big money is not in the buying and selling, but in the waiting".

This wisdom extends beyond mere investing; it's a philosophy for life. Many profound human achievements are "long-term, constructed events" where progress comes "bit by bit". The world doesn't always conspire to line up the perfect conditions; "the timing always sucks" for the most important things. This is why the counterintuitive advice, "Don't just do something, sit there!" can be so powerful, allowing for clarity and discernment.

A core principle underpinning this patient approach is compounding. Whether in money, knowledge, relationships, or habits, "All benefits in life come from compound interest". Munger's first rule of compounding is simple: "Never interrupt it unnecessarily". Time, as a critical exponent in this equation, "confers exponential powers upon those who think and act long term".

The ability to maintain this long-term view requires intellectual humility and a strong focus on preparation over prediction. The financial memory is "extreme[ly] brevity", leading many to forget past market "pain" or "setbacks" once conditions improve. However, "The ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference". This "survival" is crucial, as Howard Marks emphasizes, because "Margin of safety...is the only effective way to safely navigate a world that is governed by odds, not certainties".

So, while others chase fleeting narratives and "bonanzas" that could lead to "catastrophe", remember the power of patience. Focus on cultivating discipline and a robust process, because ultimately, "Your behavior matters more than your forecast".

Edward Quince Wisdom Bites: The Signal Amidst the Noise

In an age where information is abundant and often overwhelming, the real challenge isn't finding data, but discerning what is meaningful from what is merely noise.

The author of this blog has often highlighted the "irony of maintaining a daily economic update blog while firmly believing it is best to ignore all of the noise and false stimuli". This isn't just a personal quirk; it's a reflection of a core principle: "the more data you get, the less you know what’s going on". The financial services industry, as Ben Graham noted, will always supply forecasts because "Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do". Yet, these predictions are often unreliable, even from so-called experts.

This perpetual demand for answers creates an environment ripe for "charlatans" who offer "vague, simple messages often wrapped in a well crafted veneer that is alluring". The fundamental human "need for certainty is the greatest disease the mind faces", making us susceptible to these enticing, yet often misleading, narratives.

So, how do we navigate this? The answer lies not in consuming more, but in filtering more effectively. As the blog has suggested, "Clarity comes from subtraction, not addition. Remove the noise, the distractions, and the unnecessary. What truly matters will emerge". This involves a disciplined focus on timeless principles and a willingness to "not have an opinion on everything—and shouldn’t listen to those who do". Remember, "If it won’t matter in 5 YEARS don’t give it more than 5 MINUTES attention".

Ultimately, the goal isn't to predict the unpredictable, but to cultivate intellectual humility and discernment. By focusing on what you can control – your goals, your process, and your long-term perspective – you build resilience against the constant barrage of fleeting narratives and unnecessary complexity.

Edward Quince's Wisdom Bites: The Enduring Power of "I Don't Know"

Welcome to Edward Quince's Wisdom Bites, your daily reminder to cut through the noise and focus on what truly matters. Today, let's reflect on perhaps the most honest, and often most difficult, answer in finance: "I don't know."

The author of this blog has long advocated for the powerful response, "I don't know and I don't care," when faced with questions about the direction of markets or the economy. This stance is not apathy, but rather a profound recognition of the inherent uncertainty of the future. As Jason Zweig wisely noted, "investing on the basis of projection is a fool's errand; even the forecasts of the so-called experts are less reliable than the flip of a coin". The financial services industry, driven by demand, is compelled to supply forecasts, even if "most couched in gibberish that gives the person a way to hedge if they are wrong".

A key insight from Robert Greene is that "The need for certainty is the greatest disease the mind faces". This desire for clear, simple answers often leads people to accept vague, alluring promises from "charlatans". Yet, as the blog cautions, "the world is too complex, too erratic and too full of surprises to make spot forecasts of anything of significance". Nassim Taleb reinforces this by stating that "the more data you get, the less you know what’s going on", making constant market monitoring a potential "waste of your time".

Instead of striving for precise predictions, the focus should shift to preparation over prediction. Warren Buffett's "Noah Rule" succinctly captures this: "Predicting rain doesn't count, building an ark does". This means accepting uncertainty, managing risk, and cultivating disciplined behavior, rather than being swayed by fleeting headlines or the "constant pressure to do something". Ultimately, "it’s better than acting" prematurely; instead, it calls for "committing far more time to learning and thinking than to doing".

Embracing "I don't know" is not a weakness, but a strength, fostering the intellectual humility needed to navigate complex financial landscapes and make truly prudent decision

Daily Economic Update: June 6, 2025

Broken Bromance

Trump and Xi talk, but Trump and Musk spar.  I don’t know which headline matters more for markets, but shares of Tesla didn’t like the news ending the day down 14%.

As economist Brad DeLong posited, “Musk thought he had a deal—he backs Trump all the way, and in return Trump would provide him with EV subsidies, tariff carve-outs, and control of the NASA budget. Musk was wrong. And so we get to watch what happens next…”

With the Trump and Musk spat centered on Trump’s “One Big Beautiful Bill”, the fiscal talk isn’t going away.

Repressing Emotions

Yesterday I talked about monetary rules as a pre-commitment policy and in the past I’ve talked about the possibility of financial repression.  

In a substack post, economist Josh Hendrickson married these two ideas (monetary policy pre-commitment and financial repression).  In his post Hendrickson expresses a growing recognition that the U.S. government lacks a commitment to fiscal discipline and as a result he sees inflation or financial repression as the likely answers to the current fiscal problems. So where does that dovetail with Central Banking?  Well, Hendrickson provides a history lesson on the origins of the Bank of England. 

Hendrickson’s lesson - central banks that own or require the financial system to hold more government debt than it otherwise would effectively create a poison pill that in essence aligns private interest with that of the government because a default would significantly disrupt the financial system (and likely topple the government).   Said more plainly, if you distribute the risk of default on government debt to the banking system you raise the stakes of a default, because default permanently impairs economic activity via the banking channel. “The cost of purchasing this commitment is that there will be less private investment in the economy than there would be otherwise.”

And if you thought central banks were independent, Hendrickson would agree and as a result of that Federal Reserve independence, he doesn’t believe that the Fed would simply not respond to an attempt to inflate our way out of the debt problem.  And that’s where Financial Repression comes in.

As independent as the Federal Reserve is, Hendrickson posits that “Congress could always change the statute to eliminate the Federal Reserve’s authority to pay interest on reserves and declare that the Federal Reserve can determine reserve requirements above some explicit, statutory amount.” as means of forcing banks to hold more Treasuries while allowing the Federal Reserve to maintain its large balance sheet, effectively financed at zero from banks.

Hendrickson’s overall warning, “It is naive to think that the U.S. will not attempt to use this tool in the event that politicians perceive a looming debt crisis. And, unlike the other options, the connection between the actions of the government and the costs are largely hidden from the public….Or maybe AI will save us.”

Rolling In The Mud

Speaking of Central Banks that aren’t immune to having to deal with debt crises, we had the ECB lower interest rates to 2%.  Remember when the focus was on PIGS debt back in 2008?  This is what we’ve come to….and Trump would definitely be happy with 2% treasury yields…if only there were a way to make that happen - hello financial repression.

At least we’ve got jobs….right? 
I guess we’ll find out this morning, though jobless claims seemed to be going in the wrong direction.

Literary Therapy for the Disoriented Investor

You’ve got Kyla Scanlon out there on X saying, "In order to understand the present moment you must read the screwtape letters this is not a joke”, while also reminding us to read Rilke (if you’ve never read Letters To A Young Poet, you’re missing out).   

And you’ve got author Luke Burgis out there on X saying to understand the current environment you need to understand mimetic rivalry, how it erodes social structures, and how our often preferred solution, the “scapegoat mechanism”, creates just an illusion of order.   Ask your favorite AI to interpret the meaning of this X post from Luke, “It's time for everyone to read, or re-read, I SEE SATAN FALL LIKE LIGHTNING—the most important book so far of our century. 

Published in French as "Je vois Satan tomber comme l'éclair" in 1999, and in English as the above on January 1, 2001. It was the perfect book-end to the turn of the millennium, and a dire warning.  Satan continues to cast out Satan.”

Until next time.

XTOD’s

XTOD: Who gets custody of Joe Rogan?

XTOD: Time to drop the really big bomb:  @realDonaldTrump  is in the Epstein files. That is the real reason they have not been made public.  Have a nice day, DJT!

XTOD: Elon’s stance is principled.  Trump’s stance is practical.  Tech needs Republicans for the present.  Republicans need Tech for the future. Drop the tax cuts, cut some pork, get the bill through.

XTOD: The problem w/MMT charlatans is that they naively take a static equality (assets = liabilities), even a tautology, & forget it is reached via a stochastic process.  It is equivalent to saying: there are necessarily always equal numbers of buyers and sellers therefore let's forget about price fluctuations in the financial markets.  Aside from resource allocation, dynamically, you  have supply & demand for debt, w/the price of debt varying as a function of demand, with consequences.

XTOD: One of the best hacks in the investment field is learning to be happy doing nothing.

- The Joys of Compounding.

https://x.com/0liviajulianna/status/1930717965487624451

https://x.com/elonmusk/status/1930703865801810022

https://x.com/naval/status/1930721134368129164

https://x.com/nntaleb/status/1930629872122052932

https://x.com/joyofcompoundin/status/1930449335503774207

Daily Economic Update: June 5, 2025

ADP Is Always Volatile

In my experience the ADP report rarely provides much of a read through to the Jobs report on Friday, nonetheless ADP employment came in light at +37K.  Offering a conflicting signal the ISM Services employment component increased slightly, though remains relatively weak.  Overall the ISM services index fell into contraction for the first time in nearly a year, the reason, you guessed it, uncertainty caused by tariffs.

Nevertheless the S&P was ever so slightly up to 5,971.

Guesses Followed By Excuses

Your guess for the read through to Jobs on Friday is as good as mine.  And of course no matter the number we’re likely to hear some form of narrative as to how it does or doesn’t yet show the impact of tariffs, or the impact of immigration, DOGE, or whatever else.

No matter the outcome of Friday’s jobs report some economist will be sure come up with some excuse as to why their job guess was wrong.

We’re A Service Based Economy

In the meantime the weakness ISM showed in the service sector was enough to send bond yields lower, with the 2Y treasury now at 3.89% and the 10Y yield falling to 4.37%, both down solidly from the day prior.

“Uncertainty Remains High”

Says Tiff Maclen, Bank of Canada governor, as the BoC held their policy rate at 2.75%.  I’m pretty sure what all economies need is to hear more officials stating the obvious. 

We’ll get to hear from the ECB today, I think I’m willing to bet that “uncertainty” makes an appearance.

Maybe Rules Solve Some of This

The Hoover Institute recently honored John Taylor.  Every so often some central banker or media outlook remembers the Taylor Rule.  Economist John Cochrane reported that Fed Governor Waller spoke about the possible benefits of having rules as part of the policy toolkit. With so much tension and pressure on Central Banks facing criticism in some circles that they are being too slow to cut rates and pressure from others not to take their eye of inflation, maybe they can fall back to rules as a way to help alleviate the tension.

Because when vibes fail, math has to pick up the slack.

As Cochrane summarized:  

“The Fed wants people now to believe it will be tough on inflation in the future, so that today’s inflation-output tradeoff is favorable. But once the future comes, the Fed will want to goose the economy with some inflation. People know that, so they expect inflation and the Fed face a poor tradeoff today. Somehow the Fed has to commit today to do things it will not want to do in the future. A rule helps to do that. That is special about the Fed.”

Waller talking about Taylor rules isn’t new, he did it in this BIS speech in October 2024 and we talked about his thoughts on Taylor Rules back in March 2024.

Uncertainty Is The New Certainty

The Fed Beige book showed elevated uncertainty across districts, so you might as well spend the rest of the day worrying about tariffs, debt levels, geopolitics, AI and whatever bothers you.

Since we can’t solve all our troubles, let's just read some XTOD’s.

XTOD’s:

XTOD: The Senate Banking Committee plans to eliminate all mandatory funding for the Consumer Financial Protection Bureau and restrict the pay of many Federal Reserve employees

XTOD: The Beige Book just put the stamp of approval on the recession call.  In the past six weeks, the economy has shifted from “little changed” to “declined slightly”.  There you have it.  Fully 75% of the country is now in either contraction or stagnation mode, up from around 50% in the April 23rd Book. I know – how does that comport with a +4.6% real GDP growth forecast for Q2 out of the Atlanta Fed?  The answer:  it’s not too difficult to generate the illusion of GDP growth when imports fall out of bed as they did in April. Looking at the sequential monthly pattern of the “hard” data, the economy is losing momentum at a fast clip.

XTOD: Finance has four simple rules: maintain a clear mind, figure out asymmetries, detect circularities, and never talk to idiots.

XTOD: Acquiring knowledge is easy, the hard part is knowing what to apply and when. 

That’s why all true learning is “on the job.”   Life is lived in the arena.

XTOD: Confidence is king in our game. To get the most out of EVERY player on our roster, we need to find ways to help them ALL believe in themselves. How we treat them, communicate with them, teach them and the relationships we build with them all play a major role. Never forget, this is THEIR game, we are here to help, teach, mentor and support.

https://x.com/business/status/1930431059415482589

https://x.com/EconguyRosie/status/1930350782089703623

https://x.com/nntaleb/status/1930267765488673260

https://x.com/naval/status/1930058059172458665

https://x.com/BaseballDudes48/status/1930225993253269527

Daily Economic Update: June 4, 2025

Yeah, we’ve got ‘em

Jobs that is, 7.4 million job openings. The internals were pretty steady.  Who has the upper hand? It’s a bit of “it depends”. If you work in healthcare, great, in other industries the story is more mixed.

But at least a few things are going nuclear.

Radioactive Facebook?

When I think of social media companies and the term “radioactive”, I tend to associate them in a pejorative way, one in which both can cause harm.  But nowadays when social media is going radioactive, it literally means they are buying nuclear power, specifically to power AI that sits inside data centers.  Yesterday, Meta announced they’ve entered into a 20-year agreement to buy nuclear power from Constellation Energy’s Clinton nuclear facility in Illinois. 

20 years seems like forever in the AI timeline, but things take time. Like growing the Federal debt level.

Like Radioactive Decay, There Are Exponents

Speaking of things that seem exponential, Ray Dalio promotion and his fears of the U.S. decline.  Yesterday, Ray promoted his new book, “How Countries Go Broke” with a LinkedIn post.

In the post, Dalio reminds us that no matter how you cut it, even when you can print and tax, credit cycle dynamics are the same as Hyman Minsky theorized and we discussed back in January.  

Dalio uses the human circulatory system as his analogy. Deficits are like plague, the deficits drive the supply of debt, the amount of which can overwhelm demand and act as plague breaking off, which ultimately causes a heart attack. Central banks’ can print to try to alleviate the blockage, but it distorts the normal flow of the system and doesn’t solve the problem. For Dalio the only solution is austerity and the accompanying lower rates.

Both Dalio and Treasury Secretary Scott Bessent both share a solution that is focused on 3% interest rates, reducing the budget deficit to 3% of GDP.

But What If You Created The Circulatory System In The First Place?

That’s likely what MMT proponents would retort to Ray’s analogy, after all, it’s your system, your currency, only you can cause the heart attack.  The debt Dalio’s worried about, that’s not plague, it’s actually the blood, if you don’t create the money, the system stops. And interest service on debt, that’s nothing more than a policy choice.  The real constraint isn’t the debt or the interest costs, it’s inflation.  Unless you have inflation, you have fiscal space and the MMT crowd would say you should use it.

And Speaking Of Inflation

Fed Governor Lisa Cook didn’t sound overly convinced that inflation won’t remain a problem in light of trade policies and other factors.

Bridging Common Ground

What if both Dalio and the MMT crowd are right?  What if you just need a way to connect them.  Perhaps there’s where the concept of Fiscal R-Star comes into play.  Remember, this concept is the equivalent of the neutral rate of interest for monetary policy, it’s the interest rate where fiscal policy is neutral.  In essence it’s the idea that deficits can be destabilizing, but only when they exceed the economy’s ability to absorb them without excessive inflation or crowding out.

Just Say What’s On Your Mind: “It’s A Disgusting Abomination”

One Big Beautiful turd?  Maybe, at least if you’re Elon. He’s certainly not ascribing to MMT - he tends to be a fiscal theory of the price level guy.  In a sense, good for Musk for calling out the pork in this bill, as someone who at least reportedly cares about government waste, he at least needs to be consistent.

But That’s A Problem For Another Day

Until the fiscal problem is our fiscal problem, it doesn’t seem to be a problem (for now). The S&P rose to 5,970 led by AI chip stocks and optimism that falls into the TACO trade narratives.

The 2Y treasury yield moved up to 3.96% and the 10Y was at 4.47%, both flirting with their somewhat key levels.

We’ll see what ISM Services and the Bank of Canada has in store today. 

Until then you can debate fiscal narratives.

XTOD’s:

XTOD: Bitcoin’s whole story is a staged illusion, scripted by insiders to convince you governments and institutions are “all in” — and that this market is booming on real demand.  

This is the LARGEST bubble in human history, set to go down as the largest financial scandal ever.  Ask yourself: If Bitcoin is so decentralized and powerful…Why do the same few entities control the narrative, the wallets, and the laws?  It's all smoke and mirrors. Here’s proof. 🧵

XTOD: "Diplomacy turns out to be quite different from reality TV and real estate. The best diplomacy is conducted secretly, not on live TV. And when a national security strategy goes awry, bankruptcy is not an option. There is no Chapter 11 for a failed foreign policy."

XTOD: hot ai summer lfg…lots of great releases coming!

XTOD: In November next year, we fire all politicians who betrayed the American people x.com/matt_vanswol/s…

XTOD: Learn to ask, “If this is the only thing I accomplish today, will I be satisfied with my day?” 

Don’t ever arrive at the office or in front of your computer without a clear list of priorities. You’ll just read unassociated e-mail and scramble your brain for the day.    Compile your to-do list for tomorrow no later than this evening. I don’t recommend using digital to-do lists, because it is possible to add an infinite number of items. I use a standard piece of paper folded in half three times, which fits perfectly in the pocket and limits you to noting only a few items.   There should never be more than two mission-critical items to complete each day. Never. It just isn’t necessary if they’re actually high-impact.   If you are stuck trying to decide between multiple items that all seem crucial, as happens to all of us, look at each in turn and ask yourself, If this is the only thing I accomplish today, will I be satisfied with my day?  To counter the seemingly urgent, ask yourself: What will happen if I don’t do this, and is it worth putting off the important to do it?

https://x.com/JacobKinge/status/1929798518744449522

https://x.com/nfergus/status/1929900199369158949

https://x.com/sama/status/1930040146034078061

https://x.com/elonmusk/status/1929984535456035202

https://x.com/tferriss/status/1929988784684220586