13. 

A lucky number for some. A floor often removed from a building elevator for those who see it as unlucky. It’s also the threshold age into the teen years, and my oldest baby girl (emphasis on baby since I miss her baby cheeks) has crossed it. It takes approximately 4,745 days to get there for everyone, but as her caretaker, at least the last 1,000 were like a blink. The clock sped up, but in reality her age still took as long as it actually took. 

I've written before about how time seems to speed up, but now AI seems to have put the whole world on fast-forward. Things that took a quarter now take a week. Software that took a team a year can be built over a couple weeks. News cycles, product cycles, and market narratives have all simply turned faster, like a video on 2x. 

The sociologist Hartmut Rosa spent a career on this feeling. In his book, “Social Acceleration”, he argues that modern life speeds up in three ways at once: 

1. technology gets faster, 

2. society changes faster, and 

3. the pace of daily life quickens. 

Despite all the time we save, we feel we have less of it. He also points to what he calls desynchronization: different systems accelerate at different rates, and the mismatches create strain—similar to what AI is doing to markets this year. We are on 2 timelines.

So a fair question: if everything is moving faster, should our investing timelines move faster too? Or is the real challenge just that it's harder to block out the noise, investment analysis for the long term hasn't changed?

I lean toward the second. And this week, a couple of charts made the case for me, because they show what it looks like when investors answer "yes" to the first question with borrowed money.

AI can compress how fast a company ships a product or how fast a story spreads. It may not compress how long it takes for cash flows to show up, for a business to compound, or for a mistake to heal. Those still, for now, run on quarters and years. When a story speeds up but the cash flows don't, the gap gets filled by either patience or leverage and the more the story accelerates, the more tempting it is to close the gap with leverage.

What the leverage looks like right now

Canaccord Genuity's October chartbook has a chart that caught my eye (Figure 19). The top panel compares high-beta stocks to low-volatility stocks in the S&P 500. That ratio is now around 3, the same level it reached in October 1999. So the market's most volatile, most speculative names have been outrunning its calmest ones by about as much as they did at the height of the dot-com run.

The other one shows debit balances in margin accounts, meaning how much investors have borrowed against their portfolios to buy more stock, measured as the change from a 3-year low. It's now roughly 125% above that low. A number of past market highs has lined up with 75%, around 2000, 2007, 2011, 2015, and 2021. In summary, high-beta outperformance is increasingly at risk when it coincides with excessive leverage.

Two caveats:

1. Margin debt has overlapped with peaks but it’s not an exact science.

2. The 1999 comparison cuts both ways. In October 1999, the high-beta ratio was about where it is today, and it kept climbing to roughly 5 by early 2000. The signal was right about the risk and early on the timing. 

Flows are also blinking.

Goldman Sachs' GOAL Positioning note from October 19 shows a different angle on the same leverage story. Momentum ETFs, which are funds that buy whatever has been going up, saw an estimated $5 billion of net outflows in September, among the largest monthly outflows in recent years.

And assets in leveraged tech ETFs, designed to deliver 2x or 3x a single day's move, are well below their June peak.

The mechanism behind unwinds was laid out by Markus Brunnermeier and Lasse Pedersen in a 2009 paper, "Market Liquidity and Funding Liquidity." When prices fall, lenders raise margin requirements or investors get margin calls, which forces selling, which pushes prices down further and triggers more calls. They called these loss and margin spirals. The point for us regular investors: the same borrowed money that amplifies gains on the way up decides, pushes things down more. This is why you are hearing about hedge funds losing returns or their funds.

Leverage is where those two get confused. Margin is a way of acting like your horizon is shorter than it is, because it hands someone else the right to decide when your trade ends. We saw this in 1998 with LTCM, in the 2007 quant quake, and in Archegos in 2021. 

If you're trading, a faster information environment may change how you work, and leverage is a tool with a known price. If you're an investor with a multi-year goal such as retirement, a house, a kid's tuition, the horizon should still be set by your life vs. the news cycle. What AI changes for you is the volume of noise, not the length of time it takes to build wealth. 

A few habits worth keeping when the clock feels fast:

• If you use margin, know the exact price move that triggers a call, and what you'd do the day it happens. 

• When a signal says "risk is rising," ask what you can do about it that doesn't require guessing the date. Position size and leverage are usually the answer. 

• Build in some slowness on purpose. Decide in advance what would change your mind, so a loud week doesn't decide for you. Ask the question I’ve shared before: would you still make the same trade today? 

Time feels like forever when a position is down and quick when it's up, so check your emotional response before you act. When the world feels like it's speeding up, the best answer may be to keep your own clock, not to borrow someone else's.