Portfolio Hedging – what is it good for?
“The fact that there’s a highway to hell and only a stairway to heaven says a lot about anticipated traffic numbers.” – Bill Murray. (re-quoted from The Price of Everything blog).
Evidence Based Investing
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Who’s the Dummy?
“If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.” – Warren Buffett
University Challenge
“There are times when wisdom cannot be found in the chambers of parliament or the halls of academia but at the unpretentious setting of the kitchen table.” ― E.A. Bucchianeri
Factoring it all in
Entia non sunt multiplicanda praeter necessitatem.No more things should be presumed to exist than are absolutely necessary. (Occam’s Razor). One of the defining trends of recent years has been the rise of ETF’s /Index funds which have taken hold over the course of the period post the Financial Crisis. There have been a proliferation of “Factors”, or possibilities of Alpha generation, many of which turn out to be either useless (i.e. they never worked) or redundant (they don’t now). This study suggests that there have been 59 new Factors “discovered ” between 2010 and 2012 alone!
‘Til Debt us do part…
After only the briefest of pauses post 2007-09, debt in all its forms is on the rise again and on a global scale; it now represents a staggering 327% of World GDP (or output). From Chinese state enterprises, to US Auto loans and here in the shape of consumer borrowing, debt is back and in a larger way than ever. As the chart below demonstrates, undeterred by Brexit, Trump’s victory or worries over North Korea etc, outstanding Credit Card debt is at all time highs (again).
The Consultant will see you now.
“A consultant is someone who saves his client almost enough to pay his fee”. -Arnold Glasow (US Businessman, Humourist). 1905-98.
For Whom the Bell Tolls…
“Life is a series of natural and spontaneous changes. Don’t resist them that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.” ― Lao Tzu
Skewered by Skewness
“If it’s true that our species is alone in the universe, then I’d have to say the universe aimed rather low and settled for very little.” George Carlin, US Comedian. We posted a tweet recently highlighting one of the major impediments Active Managers face in trying to beat the Markets, namely the impact of “Skewness” in the returns of Index constituents. (The original article is available in the EBI Repository here).
Plus Ca Change…
“He who is not contented with what he has, would not be contented with what he would like to have” – Socrates. Imagine taking your clothes to a Dry Cleaners, only to discover that the moment you hand them over the counter they are no longer yours; the Dry Cleaning company can now lend them on to someone else. As time goes on, the Dry Cleaner becomes less stringent in choosing to whom to lend your Dry Cleaning, even to those who have a history of damaging or failing to return them. Pretty soon, nobody has any idea who “owns” your clothes, such that it is impossible to get them back. Should the original firm sustain losses on these “transactions”, the Government will be on hand to bail them out, however, so they don’t really need to take too much care about their lending processes.