tag:blogger.com,1999:blog-44796577723213640652024-03-19T04:48:11.341-04:00 Disciplined Systematic Global Macro Views"Disciplined Systematic Global Macro Views" focuses on current economic and finance issues, changes in market structure and the hedge fund industry as well as how to be a better decision-maker in the global macro investment space.Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.comBlogger5055125tag:blogger.com,1999:blog-4479657772321364065.post-41858723721290884872024-03-18T11:33:00.004-04:002024-03-18T16:04:35.389-04:00ARPs - stock and bond betas can be very different<p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7u1wVA9pVTqMazWT0DhnTZeiY6We4MYs3W2XCfLxse-RkTL-oD6gxmcyQvLWSkZqKZecsxrE0R1TUT8d5wFCZWIBRnYLKMiCI02Eu4OVePv1sUTwGh58FMpSKCDPu_v34rI7ZY2StrdA4fO4phkd9Wbttdf4kskYr_XIT7pDNSoHGsM33jDZc5PqclA/s809/Screenshot%202024-03-18%20at%2011.22.16%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="665" data-original-width="809" height="526" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7u1wVA9pVTqMazWT0DhnTZeiY6We4MYs3W2XCfLxse-RkTL-oD6gxmcyQvLWSkZqKZecsxrE0R1TUT8d5wFCZWIBRnYLKMiCI02Eu4OVePv1sUTwGh58FMpSKCDPu_v34rI7ZY2StrdA4fO4phkd9Wbttdf4kskYr_XIT7pDNSoHGsM33jDZc5PqclA/w640-h526/Screenshot%202024-03-18%20at%2011.22.16%20AM.png" width="640" /></a></div><br /><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Investors can buy alternative risk premium products across many styles and asset classes, but there are trade-offs between equity and bond risk. You carry strategies will often have positive equity betas but will also have negative bond betas. Alternatively, trend strategies will have positive bond betas but negative equity betas. Both have betas that are relatively low. This is one of the reasons why many investors or managers find the combination of trend with carry appealing. You give up some directional exposure; however, you gain protection between both up and own moves with equities and bonds.</span></p><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><span>The following analysis is available in a thorough research paper which has been recently published but can still be found in working paper form, </span><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3344586" style="color: #2288bb; text-decoration-line: none;" target="_blank">"A Framework for Risk Premia Investing: Anywhere to Hide" by Kari Vatanen and Antti Suhonen</a><span>.</span><span> </span><span>We have looked at their work in previous posts on beta stability, "<a href="https://mrzepczynski.blogspot.com/2020/01/arp-strategies-and-market-beta-check.html" style="color: #004a7f; text-align: start; text-decoration-line: none;">ARP strategies and market beta - Check the stability when constructing portfolios</a>" <span style="text-align: start;">and with cluster analysis in </span>"<a href="https://mrzepczynski.blogspot.com/2020/01/alternative-risk-premia-and-advantage.html" style="color: #004a7f; text-decoration-line: none;">Alternative risk premia and the advantage of cluster analysis</a>".</span></span></div><span face=""Trebuchet MS", Trebuchet, Verdana, sans-serif" style="background-color: white; color: #666666; text-align: justify;"></span><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-4560507175625744322024-03-16T09:50:00.000-04:002024-03-16T09:50:19.270-04:00Hedge funds versus ARP - Worth a hard look<p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvM-V4O3U4F33whNXvlyeVzFdaAEPc6C_-Zt8S10Gk2eZQBXYpDj9Cgb0cj2DNl8qyABLQTww-5cS2Af0j9ld4tQVaCjeu7Yv522Gfv5XLP5i5mYyQd4jw1qYNK3PCHuhPPbjRv-ZEwjvoPiNHHSRT9ZStJsZnUBeTgyJcjixyJdjnUqzDs_YPUkt8Gg/s252/Screenshot%202024-03-14%20at%204.58.03%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="252" data-original-width="228" height="252" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvM-V4O3U4F33whNXvlyeVzFdaAEPc6C_-Zt8S10Gk2eZQBXYpDj9Cgb0cj2DNl8qyABLQTww-5cS2Af0j9ld4tQVaCjeu7Yv522Gfv5XLP5i5mYyQd4jw1qYNK3PCHuhPPbjRv-ZEwjvoPiNHHSRT9ZStJsZnUBeTgyJcjixyJdjnUqzDs_YPUkt8Gg/s1600/Screenshot%202024-03-14%20at%204.58.03%20PM.png" width="228" /></a></div><p></p><p><br /></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The real battle in hedge fund land is the choice between buying a hedge or buying an alternative risk premia product often in the form of a swap. The ARP products were created to provide a low cost way of gaining exposure to long-short risk premia factors through total return swaps. The risk premium you have often seen described in the finance literature can be packaged in a form that does not have the same high fees as hedge funds and do not include incentive fees. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">They are not perfect. You must manage the exposure as opposed to having a manager control the risks, yet it provides a simple way to gain access to momentum, carry, and value across all major asset classes. This paper is a few years old but it makes a strong case for ARPs, see <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3960793">"Hedge Funds vs Alternative Risk Premia"</a> by Philippe Jorion.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The burden is now on hedge funds to provide a unique return profile that is can dynamically adjust exposures or have a unique strategy that cannot be easily translated into an index that can be placed in a swap form. Bank risk premia swaps are intermediating the hedge fund market with exposure, trading, operating, and leverage expertise. In fact, the ARP products are cheaper so if they can closely match hedge fund gross returns, they will have a cost advantage. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The development of ARP factor exposures is no different than the factor and index boom for long-only investing. If you can buy an index associated with a specific factor like size which will provide most of the desired exposure, the burden is on the active manager to provide alpha relative to that factor or benchmark.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Can you find better hedge fund? Yes, but now there is an alternative which places the burden on the manager to prove their value. </span></p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-jbyZKAgwJYIOOcO-tIRqWMrtxhVAVjHJEX3h2a4RL6bWBeadNEY3IFWhU2uEXBIRq7kkbO_SdfvJKP7p1Vrzqw_2T1j5XE0IFdaWVCyfnl7liMiqWD1eqeXXmZnyh-j7-QueMYwp9D6KbrvzMkOyDttiz5OtlFDdMvW5-W29JaCacR_Tg37dRhHSCA/s921/Screenshot%202024-03-16%20at%209.40.21%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="531" data-original-width="921" height="368" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-jbyZKAgwJYIOOcO-tIRqWMrtxhVAVjHJEX3h2a4RL6bWBeadNEY3IFWhU2uEXBIRq7kkbO_SdfvJKP7p1Vrzqw_2T1j5XE0IFdaWVCyfnl7liMiqWD1eqeXXmZnyh-j7-QueMYwp9D6KbrvzMkOyDttiz5OtlFDdMvW5-W29JaCacR_Tg37dRhHSCA/w640-h368/Screenshot%202024-03-16%20at%209.40.21%20AM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLuyc6VJmTeuLNABRDWlziS-804mdj_pVOXVzBcbulu0HWopyju7XRja_UJ_XQFYchY2rzffsx5n54LyK8IUe9p6tD-OwKkInN5Sj_7Y4OVnof1vumrWk6J6U6skO9VAEdideVTPH5-gTX-PrCHfXPdH2zgwV4ylp4VwQPoKgCbigFy9I-9bzyA6z5tw/s741/Screenshot%202024-03-16%20at%209.40.30%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="607" data-original-width="741" height="524" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLuyc6VJmTeuLNABRDWlziS-804mdj_pVOXVzBcbulu0HWopyju7XRja_UJ_XQFYchY2rzffsx5n54LyK8IUe9p6tD-OwKkInN5Sj_7Y4OVnof1vumrWk6J6U6skO9VAEdideVTPH5-gTX-PrCHfXPdH2zgwV4ylp4VwQPoKgCbigFy9I-9bzyA6z5tw/w640-h524/Screenshot%202024-03-16%20at%209.40.30%20AM.png" width="640" /></a></div><br /><span style="font-family: Lato; font-size: large;"><br /></span><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-66472729968944223872024-03-15T13:19:00.000-04:002024-03-15T13:19:51.194-04:00Private equity dispersion a key risk <p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8-sMq3poMB5ezgicZU6MLVLJBw6i1l_DCXAuOS6SkbZtOxuNLB7QNGHINHo5qBe96tYTCb-wLsQy9-QtAdNMGgO8I6N_-9hYe7N4_Scxm-LR7J2jnW9EHU1WyykNQQi1u8oHX07zl1jfZsdGW2Ry5DCKOvDpDMG2oemUR-VZVrPAh2TlpKcHt81cbVQ/s905/Screenshot%202024-03-15%20at%208.33.13%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="599" data-original-width="905" height="424" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8-sMq3poMB5ezgicZU6MLVLJBw6i1l_DCXAuOS6SkbZtOxuNLB7QNGHINHo5qBe96tYTCb-wLsQy9-QtAdNMGgO8I6N_-9hYe7N4_Scxm-LR7J2jnW9EHU1WyykNQQi1u8oHX07zl1jfZsdGW2Ry5DCKOvDpDMG2oemUR-VZVrPAh2TlpKcHt81cbVQ/w640-h424/Screenshot%202024-03-15%20at%208.33.13%20AM.png" width="640" /></a></div><br /><div style="text-align: justify;"><span style="font-size: large;"><span style="font-family: Lato;">The table above is from the </span><a href="https://www.caisgroup.com/articles/assessing-the-persistence-of-private-equity-performance" style="font-family: Lato;">CAIS group</a><span style="font-family: Lato;"> and shows another risk from private equity beyond the standard deviation of returns over time. There is large dispersion in return, much more than what is seen with traditional asset and hedge funds. Simply put, the risk of picking the wrong manager is much higher in the private equity space. </span></span></div><div style="text-align: justify;"><span style="font-size: large;"><span style="font-family: Lato;"><br /></span></span></div><div style="text-align: justify;"><span style="font-size: large;"><span style="font-family: Lato;">The median return for private equity may be higher than traditional and hedge fund managers but the downside risk is more significant. Investor disappointment versus the median can be significant. This requires extra due diligence on the part of investors. Yes, the upside from picking the right manager is higher, but everyone cannot be above average.</span></span></div><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-59745465726411289172024-03-14T12:13:00.004-04:002024-03-14T12:13:52.750-04:00SHAP and explainable AI - Getting to know your models <p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1Knb0tcerQlJNezn2Dqxe6t_J6aFNnBuqQEinG08sA3kBv-OUqGn1IPpWn4TPrFg-_Eho-OUvSvqBO4JlHdJTXv5fH8jTPloG1lYUDBAtQQ97S5VCqdOEaspwfoaRgcQ_B4HzHzagGzbFTN-GGOYG0GIRnaWu_yjrDTv7KU1IDD6i_3wURBN4rMh6Qg/s216/Screenshot%202024-03-13%20at%206.20.31%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="216" data-original-width="186" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1Knb0tcerQlJNezn2Dqxe6t_J6aFNnBuqQEinG08sA3kBv-OUqGn1IPpWn4TPrFg-_Eho-OUvSvqBO4JlHdJTXv5fH8jTPloG1lYUDBAtQQ97S5VCqdOEaspwfoaRgcQ_B4HzHzagGzbFTN-GGOYG0GIRnaWu_yjrDTv7KU1IDD6i_3wURBN4rMh6Qg/s1600/Screenshot%202024-03-13%20at%206.20.31%20PM.png" width="186" /></a></div><br /><p></p><div><br /></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">ML models are hard to understand relative to classic regression analysis. Some fear that ML is often a black box but there are ways to make these models more transparent or have interpretability. The tool most used for explainable AI is the SHAP values (SHapley Additive exPlanations) uses game theory to measure each player or in this case feature contribution to the outcome. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Each feature is assigned an importance value which represents the contribution to model's output. Features with a positive (negative) SHAP value will have a positive (negative) impact on the prediction. These SHAP values are additive, so each feature can have a contribution to the final prediction and summed. While the SHAP values can tell us the contribution to the prediction, it cannot tell us about the quality of the model. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Given the properties of SHAP values, there several ways to display their information. It can be displayed as a waterfall graph which tells whether each feature is adding or subtracting from the prediction. The sum of all predictions will be equal to E[f(x) - f(x)]. The absolute value of the SHAP tells us the overall importance of the feature. Note, the SHAP values can be calculated for any prediction model. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">It may be interesting to measure the impact of non-price information on a prediction through using the SHAP value. There are many ways to use this tool to help refine forecasts and provide insights on non-linear relationships. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The SHAP values tells us the importance of a specific feature observation, so information is often displayed as a bee swarm plot which tells us the impact of different observations associated with a feature. You can also use violin plots which again will tell the SHAP value for specific observations associated with specific feature. Force, bar, and waterfall plots all tell us something about the drivers of our model, and all these tools are available in python. </span></div>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-4500417095933949812024-03-13T18:18:00.006-04:002024-03-13T18:18:54.055-04:00The information coefficient - Tell me model prediction skill <p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRpJnYTqyCCp08jvGz0bmRbBsl8bX5rXkQV3uvQTZ_PBdAqgyUgwpWBhNRAQZOg7RazyyqOnb94BBz-0rzSiJPFV26kAmdulBCtrH35zNTk5GPPYZhdhxfSDQ37TOebXYU0t9l0EJeUV_hVmIjgDSt5I8zTW6390znAlXHFjkAI9HJyTv6DM51Re802g/s227/Screenshot%202024-03-07%20at%209.15.13%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="189" data-original-width="227" height="333" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRpJnYTqyCCp08jvGz0bmRbBsl8bX5rXkQV3uvQTZ_PBdAqgyUgwpWBhNRAQZOg7RazyyqOnb94BBz-0rzSiJPFV26kAmdulBCtrH35zNTk5GPPYZhdhxfSDQ37TOebXYU0t9l0EJeUV_hVmIjgDSt5I8zTW6390znAlXHFjkAI9HJyTv6DM51Re802g/w400-h333/Screenshot%202024-03-07%20at%209.15.13%20AM.png" width="400" /></a></div><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Measuring trader skill is critical to picking the right manager and just looking at the Sharpe ratio does not clearly answer the question. Of course, skill analysis requires a deep dive into decision making, but a first step is understanding the hit rate. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The information coefficient (IC) does that:</span></p><p style="text-align: justify;"><span style="font-size: large;"><span style="font-family: Lato;">IC = (2 x proportion correct) -1 </span><span style="font-family: Lato;">where the proportion correct is the number of correct predictions versus the total predictions.</span></span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">If the proportion correct is 50%, the IC is zero. if the proportion correct is 100%, then the IC is 1. You want to have a high IC, but it is important that a trader has a large sample of predictions from which to calculate the IC. I want a high IC because it tells me, I am getting the direction right. A good trader may have an IC above .05. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The information ratio (IR) is the excess return relative to the amount of risk taken. Note that I can have a high information ratio on few predictions or few correct predictions. Good to see both. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The active law of fundamental investing ties both of these concepts together. The expected return is equal to the IC times the square root of breadth (number of bets) times the standard deviation or risk taken. This means that the IR is just the IC times sqrt(breadth). There is added a transfer coefficient associated with the structure of the portfolio. It is defined as the constrained versus unconstrained active portfolio. That number in the simple case is equal to 1. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">For a quant model. tell the number of bets you take and tell me the accuracy of predictions from your model. The IC is very informative on model quality. </span></p><br /><span class="col-align-l" style="box-sizing: border-box;"></span>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-84427383326451837152024-03-13T10:56:00.003-04:002024-03-13T10:56:42.144-04:00A theory of investor choice - mix of positive and normative <p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirHMIXe3ZAPM0PZ7DwCDcGDgJm9CqRqIsh9UnVda2YYvaOa6helsWeRGQkq9nkG9Rrl_amNiiPyr8BUFrr6nMmzidpuNlIai-QAQoXkd6yfbTAUIZ_W0c1UgACDRfacAmefIjFozO1-6McPCV5XgNtb_ieg6GlR70stD83u0DuLduLFnvFX0VYcCXOzA/s430/Screenshot%202024-03-12%20at%206.44.21%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="430" data-original-width="339" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirHMIXe3ZAPM0PZ7DwCDcGDgJm9CqRqIsh9UnVda2YYvaOa6helsWeRGQkq9nkG9Rrl_amNiiPyr8BUFrr6nMmzidpuNlIai-QAQoXkd6yfbTAUIZ_W0c1UgACDRfacAmefIjFozO1-6McPCV5XgNtb_ieg6GlR70stD83u0DuLduLFnvFX0VYcCXOzA/s320/Screenshot%202024-03-12%20at%206.44.21%20PM.png" width="252" /></a></div><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">No different than the view of Nobel prize winning professor Thaler in his famous paper "Towards a positive theory of consumer choice", a theory of investor choice is a combination of positive and normative views. There is the rational maximizing model which describes how investors should choose, and then there is the descriptive model of how investors actually choose. We must accept a description of investors is a combination of both. We are not pure rational, and we are not just a behavioral mess. We switch between the two. We strive to be rational but will fail based on our broad set of biases.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">For example, there is prospect theory which is a good way to describe how investors act even though it is not what we would expect from a rational maximizing model. Our behavior in up (winning) markets may differ from our behavior in down (losing) markets. This should not be expected in a rational model, but it is reality. Reality must be accounted for in our thinking and the thinking of others. If we only think about a rational choice world, we will fail. If we only think about a positive world, we will also fail if that world changes.</span></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-58163881465349472642024-03-11T09:25:00.001-04:002024-03-11T09:25:18.481-04:00Non-consensus investing from Rupal Bhansali<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGBZiT-1JEbvYoZipSwZ178tEwWPIOqFsXgZJTVTT0MQmCEE37eOyIzfydgfHEwnwxmhDOV3yQ6meX9cC8x4FzHOcGTQLTdLdsF7ZLCnd0fmks61-a86VS2u4IfiIIxfx88Tfd1xN6wYrLtwJvHjb6UCKnmLveiucRIQdV_YhX1JU4ELfI27Z1QRSUBg/s199/Screenshot%202024-03-10%20at%2010.36.41%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="199" data-original-width="134" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGBZiT-1JEbvYoZipSwZ178tEwWPIOqFsXgZJTVTT0MQmCEE37eOyIzfydgfHEwnwxmhDOV3yQ6meX9cC8x4FzHOcGTQLTdLdsF7ZLCnd0fmks61-a86VS2u4IfiIIxfx88Tfd1xN6wYrLtwJvHjb6UCKnmLveiucRIQdV_YhX1JU4ELfI27Z1QRSUBg/w269-h400/Screenshot%202024-03-10%20at%2010.36.41%20AM.png" width="269" /></a></div><p><span style="font-family: Lato; font-size: large;">Thoughts and quotes from Rupal Bhansali in <b>Non-consensus Investing</b>. </span></p><p><span style="font-family: Lato; font-size: large;"><i><b>"The signature element of an upside down investment process: it focuses on what can go wrong, not just what can go right." </b></i></span></p><p><span style="font-family: Lato; font-size: large;">Great comment. Focus on the downside as well as the upside.</span></p><p><span style="font-family: Lato; font-size: x-large;"><i><b>"You are exposed to a litany of risks with passive investing that are being glossed over.</b></i></span></p><p></p><ul style="text-align: left;"><li><span style="font-family: Lato; font-size: large;"><i><b>crowded trade risk</b></i></span></li><li><span style="font-family: Lato; font-size: large;"><i><b>valuation risk</b></i></span></li><li><span style="font-family: Lato; font-size: large;"><i><b>redemption risk</b></i></span></li><li><span style="font-family: Lato; font-size: large;"><i><b>liquidity risk</b></i></span></li><li><span style="font-family: Lato; font-size: large;"><i><b>front-running risk</b></i></span></li><li><span style="font-family: Lato; font-size: large;"><i><b>permanent impairment of capital risk </b></i></span></li><li><span style="font-family: Lato; font-size: large;"><i><b>behavioral risk</b></i></span></li><li><span style="font-family: Lato; font-size: large;"><i><b>momentum risk"</b></i></span></li></ul><div><span style="font-family: Lato; font-size: large;">Passive investing is not riskless investing.</span></div><p></p><p><span style="font-family: Lato; font-size: large;"><i><b>"Investing is not a confidence game: it is about being more correct, not being more confident."</b></i></span></p><p><span style="font-family: Lato; font-size: large;">You can talk about the odds, but the main issue is always about being correct.</span></p><p><span style="font-family: Lato; font-size: large;"><i><b>"Volatility is an opportunity because it only affects the stock price, while risk is a threat because it impacts the intrinsic worth of the business."</b></i></span></p><p><span style="font-family: Lato; font-size: large;">Volatility is a measure of risk not the actual risk. The risk is about what may happen different form what you expect.</span></p><p><span style="font-family: Lato; font-size: large;"><i><b>"Investing not only must you be right, you must prove everyone else is wrong." </b></i></span></p><p><span style="font-family: Lato; font-size: large;">Being right with the crowd does not help you.</span></p><p><span style="font-family: Lato; font-size: large;"><i><b>"There is a difference between risk experience and risk exposure. You cannot really measure what you have not experienced." </b></i></span></p><p><span style="font-family: Lato; font-size: large;">The real risk is what we have not experienced. </span></p><p><span style="font-family: Lato; font-size: large;"><i><b>"Margin of safety = heads I win, tails I do not lose."</b></i></span></p><p><span style="font-family: Lato; font-size: large;">Nice way to describe the margin of safety.</span></p><p><span style="font-family: Lato; font-size: large;"><i><b>"The cost of the decision is not the same as the risk of the decision." </b></i></span></p><p><span style="font-family: Lato; font-size: large;">Risk as measured by volatility does not tell you the cost of that risk. Need strong analysis of exposures. </span></p><p><span style="font-family: Lato; font-size: large;">The idea that you have to be different from the crowd is critical.</span></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrZnFwO3hIl1MQD-XEG9RZ9OA-9uHzRTNW3fxluVj64LKYTJ-YfO3g8KBL5m4nICUxlixpdxUeDkYfCDBdyDLfvDxAQaHMrg0N3cAeKmGGDUNJye8XWkYX9oSoaQ5ORqmOhUZCLffu54toRdfr8-cA3vYAdo1HHwSZJBVxbof6SlxJA14142_wFEAimg/s1246/Screenshot%202024-03-11%20at%209.21.11%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1212" data-original-width="1246" height="311" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrZnFwO3hIl1MQD-XEG9RZ9OA-9uHzRTNW3fxluVj64LKYTJ-YfO3g8KBL5m4nICUxlixpdxUeDkYfCDBdyDLfvDxAQaHMrg0N3cAeKmGGDUNJye8XWkYX9oSoaQ5ORqmOhUZCLffu54toRdfr8-cA3vYAdo1HHwSZJBVxbof6SlxJA14142_wFEAimg/s320/Screenshot%202024-03-11%20at%209.21.11%20AM.png" width="320" /></a></div><br /><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p><span style="font-family: Lato; font-size: large;">Rupal provides a nice table on what you want to look for in quality firms.</span></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKB7yXmGZa_km4j2wUsHjeL28pPVOS_0E-PRBhkFeeGOLUSJpJNigVKKhO3GpoYPDKieOYjVjScnkMr-36_YuvBXbrviyVCKx343l8d24us5xeAvhkFtFjlvyw5obpsrIqxTr0IZXcEcFtvgOPRzs1Up4PA27ChqsFMYeNT2TnpM4olUWnJ5oO2vIV_Q/s1600/Screenshot%202024-03-11%20at%209.21.46%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1284" data-original-width="1600" height="257" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKB7yXmGZa_km4j2wUsHjeL28pPVOS_0E-PRBhkFeeGOLUSJpJNigVKKhO3GpoYPDKieOYjVjScnkMr-36_YuvBXbrviyVCKx343l8d24us5xeAvhkFtFjlvyw5obpsrIqxTr0IZXcEcFtvgOPRzs1Up4PA27ChqsFMYeNT2TnpM4olUWnJ5oO2vIV_Q/s320/Screenshot%202024-03-11%20at%209.21.46%20AM.png" width="320" /></a></div><br /><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p><span style="font-family: Lato; font-size: large;"><br /></span></p><p><br /></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-1473207283816002602024-03-10T10:21:00.008-04:002024-03-10T10:21:59.694-04:00Being a Non-consensus investor - not that easy <p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpt1339kpXMuL3PwNFztPVJGc9d3fIjIjin38S0z848ZMG09gYZsIP2O_6YaZBZFNSbrvB7jBgCpZWNqLs7G6MCxabtVhvbHGy1vvoXW5VEnNB6qlsD_LMZ2rVUT4MAICLJzo1gb5ly0cQ6hgBdvniyd31WTEf6nZZaHMrrJFYqxNbJl0agGK88QNGtg/s271/Screenshot%202024-03-10%20at%2010.20.08%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="271" data-original-width="233" height="271" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpt1339kpXMuL3PwNFztPVJGc9d3fIjIjin38S0z848ZMG09gYZsIP2O_6YaZBZFNSbrvB7jBgCpZWNqLs7G6MCxabtVhvbHGy1vvoXW5VEnNB6qlsD_LMZ2rVUT4MAICLJzo1gb5ly0cQ6hgBdvniyd31WTEf6nZZaHMrrJFYqxNbJl0agGK88QNGtg/s1600/Screenshot%202024-03-10%20at%2010.20.08%20AM.png" width="233" /></a></div><br /><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The book <b>Non-consensus Investing</b> by Rupal Bhansali is a treasure of insights on how to be a better investor. It is easy to read and offers good advice. Sometimes it is too simplistic, yet I found three tables that were very helpful. One, how do you deal with behavioral biases. Two, how do you run simple thought experiments to avoid biases. Three, what is the mindset you need to be a good investor. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Follow the thought experiments and keep in your head multiple mindsets, and you will do well as an investor. Unfortunately, it is not easy to implement this type of thinking.</span></p><p></p><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmBvU0KH6ULmsyAklAbOIr6Wi4QGHPabfJwr6tl2YCMeZ83aO_SfkZj8GgWOHdiDGrbHHe_yLsLUh2WJCkcdycAWO7He-uxOIsHnoD3CPUrGD1tB5weSkEVOUyFDX_RL_CSB9_8KzSPIImgVpMOLdLCCOF_4bnf5a8u4a0Fn0PeP3703leQ82dLyGiwA/s2815/IMG_0564.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1667" data-original-width="2815" height="378" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmBvU0KH6ULmsyAklAbOIr6Wi4QGHPabfJwr6tl2YCMeZ83aO_SfkZj8GgWOHdiDGrbHHe_yLsLUh2WJCkcdycAWO7He-uxOIsHnoD3CPUrGD1tB5weSkEVOUyFDX_RL_CSB9_8KzSPIImgVpMOLdLCCOF_4bnf5a8u4a0Fn0PeP3703leQ82dLyGiwA/w640-h378/IMG_0564.jpeg" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtdswLGdjiuPD6uJNtqrjZ2awHNWtRV5FPA7ngBjW3nKKRtcmCWR1RJnesD5KPAX8zCG8mdwzD5BHjGqxgXRq0UXwGTNkDRwzQIJFDmJiLM1BxhtebhlpwDmyofFfV0OPcKJ4_cAdZUZXCXQgjq0MfHaZhQK0p-YwJADgpConYQRZwfO4isBhKOs5tbA/s2591/IMG_0563.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1791" data-original-width="2591" height="442" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtdswLGdjiuPD6uJNtqrjZ2awHNWtRV5FPA7ngBjW3nKKRtcmCWR1RJnesD5KPAX8zCG8mdwzD5BHjGqxgXRq0UXwGTNkDRwzQIJFDmJiLM1BxhtebhlpwDmyofFfV0OPcKJ4_cAdZUZXCXQgjq0MfHaZhQK0p-YwJADgpConYQRZwfO4isBhKOs5tbA/w640-h442/IMG_0563.jpeg" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKTsrSCsncVOKbpPqJzZ1IFGNkVjP0nCdndbC72bvIsfjmURhzkXPWcw_Sp3Db0YnM48RkPu0uyVCCEi51vaiHH5nddEJMXupDp628QvyQERj49IxWXUpzDqc5JcRYLCqUWrCdFckLWAUf_BNr1Cxq_gLfSJr-3P1W0jxRNk2IaiYMRe6nU9ULKNl-dg/s2751/IMG_0565.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="977" data-original-width="2751" height="228" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKTsrSCsncVOKbpPqJzZ1IFGNkVjP0nCdndbC72bvIsfjmURhzkXPWcw_Sp3Db0YnM48RkPu0uyVCCEi51vaiHH5nddEJMXupDp628QvyQERj49IxWXUpzDqc5JcRYLCqUWrCdFckLWAUf_BNr1Cxq_gLfSJr-3P1W0jxRNk2IaiYMRe6nU9ULKNl-dg/w640-h228/IMG_0565.jpeg" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-47407892096325210552024-03-09T10:23:00.003-05:002024-03-09T10:23:46.032-05:00Arrow's impossibility theorem and why investment committees don't work <p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiok20nXCuNrLiSjYnRdLVU9Skxi4f7GVldtNqiNJSQxgkCj0fIF3WtqcnQQX2GPv1UcA6AI4D7-RTLwji5Y-JFWGjMN5rpm-8Punv9LoGyUuGUUECS75GNiiem8ZBqvPxAS9w2IXtrFkmlwL_K_dWVW4u0bxwU1H1-EsChqOQ7-jWrW0-vtKi-W0PbHw/s456/Screenshot%202024-03-08%20at%208.58.21%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="237" data-original-width="456" height="208" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiok20nXCuNrLiSjYnRdLVU9Skxi4f7GVldtNqiNJSQxgkCj0fIF3WtqcnQQX2GPv1UcA6AI4D7-RTLwji5Y-JFWGjMN5rpm-8Punv9LoGyUuGUUECS75GNiiem8ZBqvPxAS9w2IXtrFkmlwL_K_dWVW4u0bxwU1H1-EsChqOQ7-jWrW0-vtKi-W0PbHw/w400-h208/Screenshot%202024-03-08%20at%208.58.21%20AM.png" width="400" /></a></div><br /><p></p><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">For some odd reason, I was having a discussion with a friend on Kenneth Arrow and social choice theory. It came up when discussing the jungle primaries out in California. Arrow developed what has been called the impossibility theorem which states that if voters have three or more options or alternatives there cannot be a system that keep everyone happy based a criterion of fairness. I will not go into all the details; however, we should think about Arrow when we discuss how investment decisions are made within a committee.</span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">There may be a set of views from each committee member. At the committee meeting, they will be asked to state or rank their views, yet it will be impossible to have these views fairly reflected in the committee decisions. There will be unhappy members and any voting scheme will not reflect fairly the member preferences. You cannot just have a committee vote and assume you will come out with the best answer. You will have an answer, but not one that will satisfy everyone, so the committee may go around and around until some decision is made. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Perhaps it is better to use a model as a dictator or as the decider of what should be done? Everyone can provide and support the model, but the model will make the preference choices. One voter and one source of action.</span></div>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-29853410836648454812024-03-09T09:43:00.001-05:002024-03-09T09:43:23.286-05:00Misbelief - the next level of behavioral thinking <p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjoIGjtFgV2hiGzg8oX8JMb3cg5rQDymzwPqvAykdHUwNsCNtwaK64oHgE4AGPmWBXm0a-cGV8fWuVb5fCzzsZk_yXNQQNdyAjY-Uyp7QQRmcR9f0JZsFMG9Cs7YW1nQqW-sU0eBqFaAH471Xvf5WaWv6dzA2_sC7LonqltKH3gszArXweaefWgR0soxg/s159/Screenshot%202024-03-08%20at%2010.07.07%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="159" data-original-width="107" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjoIGjtFgV2hiGzg8oX8JMb3cg5rQDymzwPqvAykdHUwNsCNtwaK64oHgE4AGPmWBXm0a-cGV8fWuVb5fCzzsZk_yXNQQNdyAjY-Uyp7QQRmcR9f0JZsFMG9Cs7YW1nQqW-sU0eBqFaAH471Xvf5WaWv6dzA2_sC7LonqltKH3gszArXweaefWgR0soxg/w215-h320/Screenshot%202024-03-08%20at%2010.07.07%20AM.png" width="215" /></a></div><br /><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">By this time everyone in finance and economics knows and accepts that there are behavioral biases embedded in our decisions. We will make mistakes. We are human but strive for rationality. The list of behavioral biases is always growing and constantly being sorted and grouped, yet many biases are in conflict, so it is not always unclear what is driving decisions. We also do not have a solution to behavioral biases other than to note that they will occur, and we should beware. Acknowledge bad behavior and stop it. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The book <b>Misbelief: What makes Rational People Believe Irrational Things</b> by Dan Ariely is the next level of thinking about behavioral biases. Taken to some extreme, these biases will lead to misbeliefs and the acceptance of ideas and "facts" that are not true. Our biases can also distort fact or focus on only some facts to create misbeliefs. Behavioral biases can lead more than just the occasional mistake. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The reason for misbeliefs is within us and is driven by emotions, cognition, personality, and the social environment. Our biases will not lead just to poor decisions but make rational people develop irrational beliefs that will create a world driven to an altered reality. Ariely would say there is a funnel of misbelief which starts with our emotions and leads to cognitive mistakes. These mistakes can start to alter our personality. We will only look for what confirms what we want to belief. Once we focus on these misbeliefs, we look for others to help validate our thinking. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Yes, these misbeliefs can occur with investment ideas which is why it is so important to be driven by the facts and challenge our thinking. Let a model serve as our null and as a guide.</span></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-8718289109667725762024-03-09T09:32:00.001-05:002024-03-09T09:32:16.123-05:00The complexity of Adam Smith and the impartial spectator <p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhczBUFWvvk7Q7Co0xRMEmjXm7-VAKyawNr7BjiZ-4XQA5fuS1GDFfK3-i7da4oTf4kGTuUkwmqkf-SB3JV9S4qv3-xDlhtIQagshP_FPgD_wNEiTH6pIYRmNdkI5-mblhZ3zjbPmmC9zTdGea1KHmF5_E5610Q5GoSsnTaYoPmrSZ2cfLPYylGTLUeg/s154/Screenshot%202024-03-08%20at%209.00.12%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="128" data-original-width="154" height="333" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhczBUFWvvk7Q7Co0xRMEmjXm7-VAKyawNr7BjiZ-4XQA5fuS1GDFfK3-i7da4oTf4kGTuUkwmqkf-SB3JV9S4qv3-xDlhtIQagshP_FPgD_wNEiTH6pIYRmNdkI5-mblhZ3zjbPmmC9zTdGea1KHmF5_E5610Q5GoSsnTaYoPmrSZ2cfLPYylGTLUeg/w400-h333/Screenshot%202024-03-08%20at%209.00.12%20AM.png" width="400" /></a></div><br /><p></p><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">I keep hearing people throw around comments about Adam Smith as if they have read closely all his work and understand what he was trying to say with his writings. There is the Adam Smith the caricature of capitalism and the Adam Smith of reality. Was he a great economist? He was able to popularize thinking about the economy as a system although he did not advance economic theory. The <b>Wealth of Nations</b> was written in 1776, before the great industrial revolution. You could say he was bringing principals of the enlightenment to explain the economy; however, he was foremost a moral philosopher.</span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">You cannot think about the <b>Wealth of Nations</b> without knowing his earlier work, <b>The Theory of Moral Sentiments</b>. If the <b>Wealth of Nations</b> describes the economy and how it works or should work. <b>The Theory of Moral Sentiments</b> which came out in 1759 explores how decision should be made by individuals within the economy. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">He develops the idea of the impartial spectator. All that you do should be judged by a neutral observer who is looking over you. You should be judged by or seek the approval of the neutral observer who can help us decide what is the right thing to do. The effective machinery of capitalism works best not based on the invisible hand but the impartial spectator who will guide the course of action that will maximize all welfare. The economy is not a jungle, but an environment where self-interest is tempered by the observation of the outsider who is looking at our actions.</span></div>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-35817486690991295082024-03-08T08:52:00.001-05:002024-03-08T08:52:34.916-05:00Global macro versus managed futures - Which is better? <p><br /></p><div class="separator" style="clear: both; text-align: center;"><br /></div>
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<p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjfnjK2UjtACmp-mb31FON2-DBPC982yiLR5gclnt7XpQZ6vvprDDwzZEicvMszv5ZY2mYXzjjOaECt15zAOTHyLHVgiQlmd7SGXisJbiDxw51LaXO_Enz13WrjUXVdxVk0dqWgKkwBqC_c0uLpeiy4-dD4-JRQsHDALqn3XgZnBW-Nf-FU5xKDNJ-dg/s459/Screenshot%202024-03-08%20at%208.17.34%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="264" data-original-width="459" height="184" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjfnjK2UjtACmp-mb31FON2-DBPC982yiLR5gclnt7XpQZ6vvprDDwzZEicvMszv5ZY2mYXzjjOaECt15zAOTHyLHVgiQlmd7SGXisJbiDxw51LaXO_Enz13WrjUXVdxVk0dqWgKkwBqC_c0uLpeiy4-dD4-JRQsHDALqn3XgZnBW-Nf-FU5xKDNJ-dg/s320/Screenshot%202024-03-08%20at%208.17.34%20AM.png" width="320" /></a></div><span style="font-family: Lato; font-size: large;"><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></p>An interesting paper, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4625978"><span>Global Macro and Managed Futures Hedge Fund Strategies: Portfolio Differentiators?</span></a>, compares three major hedge fund strategies, global macro, managed futures, and long/short equity. All three generate alpha, but the alpha is different for each strategy when we look at returns through different factor lens.</span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">First, the researchers find that the last decade plus, the post-GFC period, is very different than the pre-GFC period. There is no alpha for long/short equity, limited alpha for managed futures, and a strong decline for global macro.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Second, managed futures loses all its alpha when it is analyzed through an 11-factor model. Many of these factors are asset class trend so this is not surprising. The alpha decay for global macro is less given the different objective function away from trend. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Third, the diversification benefit from hedge funds will differ when looked at through a drawdown analysis. Managed futures will best reduce the downside standard deviation and provide the best Sortino ratio, but it will come at some cost in excess return. The researchers make a strong case for global macro, but if you are risk averse, managed futures still holds a place in the portfolio.</span></p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirUzHgip8X9u3eFwK2vu9BGGlQ838Cz9JSBllclJGmu2faNgN8Sx4de5s0IgYkfWrZGJDQ2CWQyWmOR-RBa0PMgVqHS6YVDNgxhzbYQedyAyKkmUc8KHg31yh714HX0_PfdQ_sWWdv6o8abs3B9O3o0KnzciVEkU2UsGIye8on6_MK4uyiXJ4FxRESvA/s837/Screenshot%202024-03-07%20at%203.36.56%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="548" data-original-width="837" height="420" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirUzHgip8X9u3eFwK2vu9BGGlQ838Cz9JSBllclJGmu2faNgN8Sx4de5s0IgYkfWrZGJDQ2CWQyWmOR-RBa0PMgVqHS6YVDNgxhzbYQedyAyKkmUc8KHg31yh714HX0_PfdQ_sWWdv6o8abs3B9O3o0KnzciVEkU2UsGIye8on6_MK4uyiXJ4FxRESvA/w640-h420/Screenshot%202024-03-07%20at%203.36.56%20PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVGEd1K6D0eY9k53CvU3qxr1HqzgQq2T4sEGjJfakgm8tLiELZx8dY0jdYcW2EU_aN9rnHSSHq4H9UaKrWuao4cX0PnAHB1nSFJhp3XxdIAf7u0Ze5sqbhamChVsLZDh_0PvN_9NXOcPzzlHF15uA_OQQSfsssOWW2ZbHsgzRr2rrodBYpykPTkAelrg/s772/Screenshot%202024-03-07%20at%203.36.30%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="581" data-original-width="772" height="482" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVGEd1K6D0eY9k53CvU3qxr1HqzgQq2T4sEGjJfakgm8tLiELZx8dY0jdYcW2EU_aN9rnHSSHq4H9UaKrWuao4cX0PnAHB1nSFJhp3XxdIAf7u0Ze5sqbhamChVsLZDh_0PvN_9NXOcPzzlHF15uA_OQQSfsssOWW2ZbHsgzRr2rrodBYpykPTkAelrg/w640-h482/Screenshot%202024-03-07%20at%203.36.30%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyZQpir6uGqFWpVo9Q4Jx4dMreCut8ibyW3GvWSxr_lOeUi8zXYK2jMbNrLNExRn9NfGUA0VYQZAeW9T6zwPZgTGMic8c4wZ8oQCLs2L41iBHETRJwBwJ20LVSqZ_fnrXLvMhRr2nLtXooaoAab6avjNFHoV4ZJV1KUmJoS50pyPsYOtXgQcwOe9b1Gw/s940/Screenshot%202024-03-07%20at%203.35.45%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="392" data-original-width="940" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyZQpir6uGqFWpVo9Q4Jx4dMreCut8ibyW3GvWSxr_lOeUi8zXYK2jMbNrLNExRn9NfGUA0VYQZAeW9T6zwPZgTGMic8c4wZ8oQCLs2L41iBHETRJwBwJ20LVSqZ_fnrXLvMhRr2nLtXooaoAab6avjNFHoV4ZJV1KUmJoS50pyPsYOtXgQcwOe9b1Gw/w640-h266/Screenshot%202024-03-07%20at%203.35.45%20PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></p><p style="text-align: justify;"><span style="color: #0000ee; font-family: Lato; font-size: large;"></span></p><div class="separator" style="clear: both; text-align: center;"><span style="color: #0000ee; font-family: Lato; font-size: large;"><br /></span></div><span style="color: #0000ee; font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4625978"><span></span></a></span></p><div class="separator" style="clear: both; text-align: center;"><span style="font-family: Lato; font-size: large;"><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4625978"><span><br /></span></a></span></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: Lato; font-size: large;"><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4625978"><span><br /></span></a></span></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: Lato; font-size: large;"><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4625978"><span><br /></span></a></span></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: Lato; font-size: large;"><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4625978"><span><br /></span></a></span></div><p></p><p style="text-align: justify;"><br /></p><br /><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>
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</div><p style="text-align: justify;"><br /></p><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><br /><br /><br />Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-23259651170960014902024-03-08T08:10:00.003-05:002024-03-08T08:10:50.209-05:00Momentum works - for all sizes and all geographies <p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcUCZ4aE0s6SPi9WARtjKdfwm6FbcC_cQErDbaFwcLcvv9kv70CWAeNtPzj_Cl_u14VocIzjBBrrlRi3UNKdmaMsncQ7OM1ii9AC1smzYDkS89oNF-VYPJhS-c6a3acxRE9l2nZ5T5d38TDVNC5xePxV7mSTQbpGRq3WSJdSeCZ8d4XBB-C9QCen7LAw/s351/Screenshot%202024-03-07%20at%204.02.49%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="351" data-original-width="275" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcUCZ4aE0s6SPi9WARtjKdfwm6FbcC_cQErDbaFwcLcvv9kv70CWAeNtPzj_Cl_u14VocIzjBBrrlRi3UNKdmaMsncQ7OM1ii9AC1smzYDkS89oNF-VYPJhS-c6a3acxRE9l2nZ5T5d38TDVNC5xePxV7mSTQbpGRq3WSJdSeCZ8d4XBB-C9QCen7LAw/s320/Screenshot%202024-03-07%20at%204.02.49%20PM.png" width="251" /></a></div><br /><p></p><p>
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<p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><i><span style="color: #3b3838;">Asness (2014) quote on comparing momentum and value within large cap stocks: “Putting it starkly: in</span><span style="color: #3b3838;">-sample, out-of-sample, calculated
in Greenwich Connecticut, Chicago, Boston, Palo Alto, Santa Monica, Austin, or in the library with a candlestick, wherever or however
you want to look, along any dimension, those who make the claim that momentum fails for large caps, yet being supporters of value
</span><span style="color: #3b3838;">investing, are not simply mistaken, they have it backward.” </span></i></span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><span><i><span style="color: #3b3838;">Charts and quotes taken from </span></i></span><a href="https://eaminvestors.com/insights/">"Momentum Works Everywhere"</a> from EAM Investors </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><span style="color: #3b3838;">The folks form EAM performed one of the greatest comparisons of major factors I have ever seen. They look at momentum, value, growth, quality, and the market and find that momentum is the clear winner across time, geography, and size. It will perform better than any other major factor. Of course, momentum will not do well in every sub-period and may not do well in all markets, but the evidence is very strong as measured by the t-stats and by excess return. Follow momentum even if it is a very simple strategy and simple look-back period. You will do well with this as an adjunct to any strategy. </span></span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><i></i></span></p><div class="separator" style="clear: both; text-align: center;"><span style="font-family: Lato; font-size: large;"><i><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO2RmmMff-bN05TM3a5MkburdQF3qJoELOuol4aQETKo2MkDJ5yRTUGvr-lGVPuk7wpNYZnoNyRgGNxO-V__4GQ422gr6n9-UNdDIOz9Nff4vXS43Uj0HECRbaEnumR_dQIz61XWzbunobdYpc-ZPeKBvv2XoHQpM1pPpS03iXd0_8TO4Rdm7HmS9MnQ/s1208/Screenshot%202024-03-07%20at%204.03.27%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1088" data-original-width="1208" height="576" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO2RmmMff-bN05TM3a5MkburdQF3qJoELOuol4aQETKo2MkDJ5yRTUGvr-lGVPuk7wpNYZnoNyRgGNxO-V__4GQ422gr6n9-UNdDIOz9Nff4vXS43Uj0HECRbaEnumR_dQIz61XWzbunobdYpc-ZPeKBvv2XoHQpM1pPpS03iXd0_8TO4Rdm7HmS9MnQ/w640-h576/Screenshot%202024-03-07%20at%204.03.27%20PM.png" width="640" /></a></i></span></div><span style="font-family: Lato; font-size: large;"><i><br /><br /></i></span></div></div></div></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGlO_UowaMtCtdqJHPhi7xUwrIyIr_4bKKwnCdw1JmIvN6CDkoxjMRubSuzRcUEu_Tq01DRUEBnK2eUHFnTpLwQbmZIqIajGNB_8et2rchmmretl6GM_OZKtm_iNOx5v8ZvdwwEgD0HHF8slVE5CB_JzTThLfv98q__NFPsyEIAqE7k7vxiwd6VwQh2w/s1554/Screenshot%202024-03-07%20at%204.19.56%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1554" data-original-width="1080" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGlO_UowaMtCtdqJHPhi7xUwrIyIr_4bKKwnCdw1JmIvN6CDkoxjMRubSuzRcUEu_Tq01DRUEBnK2eUHFnTpLwQbmZIqIajGNB_8et2rchmmretl6GM_OZKtm_iNOx5v8ZvdwwEgD0HHF8slVE5CB_JzTThLfv98q__NFPsyEIAqE7k7vxiwd6VwQh2w/w444-h640/Screenshot%202024-03-07%20at%204.19.56%20PM.png" width="444" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKArrzq3st_B81jBN_x1biqVU42hDDgCJJJyAcAXz0L7IAx05dz64hN4qHV2jsAsUoOCVD736GZlWm4RDu-IkWBsXG38uLzBd1hyphenhyphenqnyTseAz57zZgdBu137YAAofVYivPS6taWIAeK4VPCEhjHnrW-zfP6KIfB-57Sifaw4OwOfEHWThJT01no4az0rg/s1394/Screenshot%202024-03-07%20at%204.20.06%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1394" data-original-width="1230" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKArrzq3st_B81jBN_x1biqVU42hDDgCJJJyAcAXz0L7IAx05dz64hN4qHV2jsAsUoOCVD736GZlWm4RDu-IkWBsXG38uLzBd1hyphenhyphenqnyTseAz57zZgdBu137YAAofVYivPS6taWIAeK4VPCEhjHnrW-zfP6KIfB-57Sifaw4OwOfEHWThJT01no4az0rg/w564-h640/Screenshot%202024-03-07%20at%204.20.06%20PM.png" width="564" /></a></div><br /><div style="text-align: justify;"><br /></div><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-76779180816360130352024-03-07T14:00:00.002-05:002024-03-07T14:00:12.805-05:00The appraisal ratio - another way of looking at risk<p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdhzmAoqWUIItZA2esoNsyPpXCcRyoLjCrs7HgblTNKCLqIGM0HDNVuCWpMojKT27LYptx-iuYc_mTnh1vgmETTfIZ0pX9JRqt23aOKLFvA4INuucyg3SmabW5OkHfacqLv_591l0zeq1j0zJKDsMQT-SM5rStZ0NF_FiuBmMugCihVZ5pH_II3I1nEA/s320/Screenshot%202024-03-07%20at%201.55.14%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="320" data-original-width="306" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdhzmAoqWUIItZA2esoNsyPpXCcRyoLjCrs7HgblTNKCLqIGM0HDNVuCWpMojKT27LYptx-iuYc_mTnh1vgmETTfIZ0pX9JRqt23aOKLFvA4INuucyg3SmabW5OkHfacqLv_591l0zeq1j0zJKDsMQT-SM5rStZ0NF_FiuBmMugCihVZ5pH_II3I1nEA/s1600/Screenshot%202024-03-07%20at%201.55.14%20PM.png" width="306" /></a></div><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The appraisal ratio is the alpha of an investment strategy divided by the unsystematic risk of the strategy relative to the benchmark. Take the investment return and run a linear regression against a benchmark like SPX. The regression will generate a beta, an alpha, and a residual error which is the unsystematic risk not associated with alpha or beta. The ratio then just looks at how much alpha is generated versus the unsystematic risk. A higher appraisal rate means that the manager can generate more return versus risk unassociated with beta. It is the manger's skill relative to the risk taken adjusted for beta.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The appraisal ratio can be compared with the information ratio which is the strategy return minus a benchmark (excess return) versus the standard deviation of the tracking error. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Both measures attempt to measure sill versus a benchmark excess or tracking risk measure.</span></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-5712665494192353722024-03-07T12:56:00.001-05:002024-03-07T12:56:51.235-05:00What makes trading "bubbles " so difficult?<p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiS7RpCn37NXFq-tusuHU-My5eFH-iDx081ooL6HYBN5plD_rktfDP548_71oyuShmb1wRTs4n98QzN6MX1SLADoxGeYdf3SApgN196CkKkzNFOsuWnixwOrcFRhk04J-pFuUyBSntlkjfna4_msNEW9OW7PC39GhFjVrpbt6fXwEbOaQr7tRfmfqO4Vg/s326/Screenshot%202024-03-07%20at%2012.44.50%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="263" data-original-width="326" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiS7RpCn37NXFq-tusuHU-My5eFH-iDx081ooL6HYBN5plD_rktfDP548_71oyuShmb1wRTs4n98QzN6MX1SLADoxGeYdf3SApgN196CkKkzNFOsuWnixwOrcFRhk04J-pFuUyBSntlkjfna4_msNEW9OW7PC39GhFjVrpbt6fXwEbOaQr7tRfmfqO4Vg/s320/Screenshot%202024-03-07%20at%2012.44.50%20PM.png" width="320" /></a></div><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">A recurring theme has been looking at bubbles in financial markets, or to be more precise, significant moves in price that are greater or less than normal. The simple view is that if there is a significant move over a given period, it will not continue. Hence, fade the large move under the view that prices will mean-revert. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">However, when is a move too big? Look at the NVDA for the stock market. An extreme was hit well before the beginning of 2024. Look at cocoa futures prices over the last 3-6 months. There would have been good reason to sell or sell short these two high profile markets. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The paper </span><span style="font-family: Lato; font-size: large;"><span style="background-color: white; color: #666666;"> </span><a href="http://faculty.chicagobooth.edu/workshops/finance/pdf/Shleiferbff.pdf" style="background-color: white; color: #33aaff;" target="_blank">"Bubbles for Fama"</a> shows that even if we place a high return number as a threshold there are still strong reasons for prices to go higher. It is not a given that there will be mean reversion. The probability of a revision is high and there are factors that will increase the likelihood of a decline but calling a bubble top is not easy and should be done with caution.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">See:</span></p><h3 class="post-title entry-title" itemprop="name" style="background-color: white; color: #666666; font-family: "Trebuchet MS", Trebuchet, Verdana, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 22px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; font-weight: normal; line-height: normal; margin: 0.75em 0px 0px; position: relative;"><a href="https://mrzepczynski.blogspot.com/2017/03/more-on-bubbles-trends-last-longer-than.html" style="color: #2288bb; text-decoration-line: none;">More on Bubbles - trends last longer than expected</a></h3><div><br /></div>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-55365168370348268402024-03-07T07:32:00.001-05:002024-03-07T07:32:23.106-05:00Bubble Time - Perhaps if we look at history <p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijUh6GNJM5wrRZS94vW4JAA5ctUI8MP5pHvAeFwCaIN1-ZsvgPth5VzuoGMh5ECNnS0Q47nguePdybyeRTnDjUv0_pSvciCixAtxJYjApNyAloeUem0qqHwPQh2VEGj6ioap67BIOzaWZfG-N1fuOmiPODo15DbOvBKlIU5vdEcMbIiKylnROLJUa4Zg/s622/Screenshot%202024-03-06%20at%204.21.14%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="342" data-original-width="622" height="352" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijUh6GNJM5wrRZS94vW4JAA5ctUI8MP5pHvAeFwCaIN1-ZsvgPth5VzuoGMh5ECNnS0Q47nguePdybyeRTnDjUv0_pSvciCixAtxJYjApNyAloeUem0qqHwPQh2VEGj6ioap67BIOzaWZfG-N1fuOmiPODo15DbOvBKlIU5vdEcMbIiKylnROLJUa4Zg/w640-h352/Screenshot%202024-03-06%20at%204.21.14%20PM.png" width="640" /></a></div><br /><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">An interesting chart on the history of rolling returns asks the question - Are return extremes associated with the business cycle or bubbles? At the end or just after a recession, there usually is a nice jump in returns. This is a reversal of the past declines. This return behavior makes sense. Prices are driven down in a recession and risk averse investors need a higher return. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The more interesting question is the driver behind high returns not associated with recessions in the business cycle. What causes these infrequent extreme? There is the suggestion of a bubble. This term is thrown around, yet it may not have any substantive meaning. Can high market returns just mean-revert? Returns post a 20% increase are likely to be lower, but that does not mean losses or a bubble. </span></div><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-43592482572652697982024-03-05T08:19:00.002-05:002024-03-07T07:33:01.413-05:00Decompounding - the real risk for a portfolio<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzi_jSJ9nlPAznL15iAc0_9Nt60ak8Df1O4d119zdkkQsEsevqcCjMs7epSZ5jyGpJScbJ5p__dd3y9rY_bgsPOAFrhxavI9Y1k-Lyl0lLHNR54P1z5O0wZ5t9sYF0rPk5PpuVO3sPXyoAQBI2KIpEqxrkMCkJD0jjONrfKt4l6MK6DPwSxLsnhrbuuw/s1094/Screenshot%202024-03-04%20at%209.21.40%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1094" data-original-width="1048" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzi_jSJ9nlPAznL15iAc0_9Nt60ak8Df1O4d119zdkkQsEsevqcCjMs7epSZ5jyGpJScbJ5p__dd3y9rY_bgsPOAFrhxavI9Y1k-Lyl0lLHNR54P1z5O0wZ5t9sYF0rPk5PpuVO3sPXyoAQBI2KIpEqxrkMCkJD0jjONrfKt4l6MK6DPwSxLsnhrbuuw/w384-h400/Screenshot%202024-03-04%20at%209.21.40%20AM.png" width="384" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0rs93Ufciq6u-F5gWwOzL52OTu-FQHDHu4e97hCANLPj7xU0H3y5A3xX3fPNqrdIof081eyS3TJlbbpr9cUvvVHvoN5S_xqHmMlH6Z5RXg6-_UV2yibXQRXWdWeKKGdgKzYlsb9gWP5GNh957q3rBZHY0w9m9tgPq0XzvSv28YQokl-gWbpe9I-rMXQ/s2042/Screenshot%202024-03-04%20at%209.22.31%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1554" data-original-width="2042" height="488" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0rs93Ufciq6u-F5gWwOzL52OTu-FQHDHu4e97hCANLPj7xU0H3y5A3xX3fPNqrdIof081eyS3TJlbbpr9cUvvVHvoN5S_xqHmMlH6Z5RXg6-_UV2yibXQRXWdWeKKGdgKzYlsb9gWP5GNh957q3rBZHY0w9m9tgPq0XzvSv28YQokl-gWbpe9I-rMXQ/w640-h488/Screenshot%202024-03-04%20at%209.22.31%20AM.png" width="640" /></a></div><br /><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">We all love compounding. We hate decompounding. The term is not often used; however, understanding it is critical for any investor.</span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Think about the Warren Buffett rule - Rule #1 -Don't lose money. Rule #2 Refer to rule #1. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The cost of losing money is high for two critical reasons: 1. if you lose a lot, it takes a higher required gain to make up the difference. You lose 20% and you will need to gain 25% to get back to even. 2. The time it takes you to get back to even is significant. If you are down 20%, you not only need to make 25% to get even, but you also need to generate 12% for 2 years to win back those loses.</span></div><div><span style="font-family: Lato; font-size: large;"><i><br /></i></span></div><div><span style="font-family: Lato; font-size: large;"><i>Charts from a post by Ingo Kurpick and comments by Peter Urbani in linkedin.</i></span><p></p></div></div>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-89008562798486529232024-03-04T17:13:00.001-05:002024-03-04T17:13:23.073-05:00Gartner Hype Cycle and markets <p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWEgAdvdZV4C0xWkUDw1p7RC8z4wRHju96Hk6QV-YSGk020b9C9n4DJgHpcJj2TzNX26rbHMr4xe9qDrUzvkoIG_h0kSIGJQysrOFev5M16pNoxQrNWdrwTYizyFwpulbFgp96duhNyHijCg7r4hlmJ0BYTd_TsUbDhyz50xF_06KqeV25QxZXlqd1hw/s1366/Screenshot%202024-03-03%20at%2011.15.27%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1016" data-original-width="1366" height="474" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWEgAdvdZV4C0xWkUDw1p7RC8z4wRHju96Hk6QV-YSGk020b9C9n4DJgHpcJj2TzNX26rbHMr4xe9qDrUzvkoIG_h0kSIGJQysrOFev5M16pNoxQrNWdrwTYizyFwpulbFgp96duhNyHijCg7r4hlmJ0BYTd_TsUbDhyz50xF_06KqeV25QxZXlqd1hw/w640-h474/Screenshot%202024-03-03%20at%2011.15.27%20AM.png" width="640" /></a></div><br /><div style="text-align: justify;"><span style="font-family: Lato; font-size: x-large;">The consulting group Gartner has developed a hype cycle for technology. It can be applied to just about any idea that is associated with investing. This hype cycle includes any idea about a firm, industry, or macro idea. There will be a trigger idea that gains traction which then reaches some form of peak. There will then be a period of disillusionment which will then be converted into some deeper enlightenment or truth until there will be a plateau of productivity which will be a normal set of expectations.</span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: x-large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: x-large;">I may not put a lot of stock in the hype cycle, but I can say that there are memes that develop within the markets which become excess and subject to reversal only to see a normalization. </span><span style="font-family: Lato; font-size: x-large;">For example, i</span><span style="font-family: Lato; font-size: x-large;">n case of an industry we can think about the hype associated with EV cars. In the macro arena, the meme that the Fed will cut rates took the markets by storm only to lead to current disillusion. We will likely see rates decline but base on the same arguments last quarter, but it will be tempered until sometime later. Unfortunately, the time frames for these cycles are highly variable. We will just have to accept there will be a hype cycle. </span></div><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-52920428437024012232024-03-03T12:52:00.003-05:002024-03-03T12:52:59.145-05:00Disorder - Hard Times in he 21st century - Expansive read on current times <p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8UnPmu18Mn1yEANIhB1P136VD51wmUa6H24P_DJOTvfB8JIa5bHJemtVm0hCI-tJWBbxbR6e-yOSoHfSYqZeL7WvWVPpy3ofADmV74FPFDtLEJjn5DDO8a1hxf2nRerom_jkBe0n8AavsAUoTbiK3r6H1FK__YOliNcGDpHvXxx1seNpTFwMTSeSstg/s515/Screenshot%202024-03-03%20at%2012.41.18%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="289" data-original-width="515" height="225" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8UnPmu18Mn1yEANIhB1P136VD51wmUa6H24P_DJOTvfB8JIa5bHJemtVm0hCI-tJWBbxbR6e-yOSoHfSYqZeL7WvWVPpy3ofADmV74FPFDtLEJjn5DDO8a1hxf2nRerom_jkBe0n8AavsAUoTbiK3r6H1FK__YOliNcGDpHvXxx1seNpTFwMTSeSstg/w400-h225/Screenshot%202024-03-03%20at%2012.41.18%20PM.png" width="400" /></a></div><br /><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Helen Thompson, a professor of political economy at Cambridge, has written an expansive book, <b>Disorder: Hard Times in the 21st Century</b>, on the current disorder around the world through three histories. She looks at the geopolitics of the last century, the world economy, and the changes in western democracies. All are in disruption and face uncertainty. All are integrated and lead to a single story. Interestingly, all are tied to the economics of oil.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">This is a dense book with an expansive vision of the world order. Do not expect this to be a fast read, but the result is a deeper understanding of how the world is connected. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Why is this critical for macro investors? The reason is simple, global uncertainty will lead to market disruptions. You need to know the drivers of disruptions. Why is this critical for quant investors? Regimes change and model sensitivities will change with regime switches. If you are not aware of the global disorder, you will be subject to forecast biases and losses. </span></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-16531455552828315992024-03-03T11:43:00.001-05:002024-03-03T11:43:00.122-05:00Outside the Box - Good book on understanding globalization <p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgC6bHbVLUITWiqLAQe2adwtB9yg08bqxnY7HIs2E4bIUp8wvh7b-0ODqGDsTxAzGnNaBtLkI69vxCl7_82L6Sz-he84giT0-z4or4KqAYwymFDJKheQ_8fTkrgNPgXC8A3_UeAUhlueOEi1_rGlaf4MoIf6Lf0kExZEg0Y8UjO4bY2Rl6fEaYjerjL6w/s1044/Screenshot%202024-03-03%20at%2010.24.19%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1044" data-original-width="676" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgC6bHbVLUITWiqLAQe2adwtB9yg08bqxnY7HIs2E4bIUp8wvh7b-0ODqGDsTxAzGnNaBtLkI69vxCl7_82L6Sz-he84giT0-z4or4KqAYwymFDJKheQ_8fTkrgNPgXC8A3_UeAUhlueOEi1_rGlaf4MoIf6Lf0kExZEg0Y8UjO4bY2Rl6fEaYjerjL6w/w259-h400/Screenshot%202024-03-03%20at%2010.24.19%20AM.png" width="259" /></a></div><br /><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">A book on international trade and globalization is not supposed to be interesting reading, but <b>Outside the Box: How Globalization Changed from Moving Stuff to Spreading Ideas</b> by Marc Levinson is an enjoyable book filled with details to truly understand how the world had transformed through trade over the last century. This not a dry thought piece on trade. It filled with stories about container ship, the trafficking of good around the world and details on the consequences of trade policies that have changed the world. If you are at all interested in the question of trade, then this is a good place to start.</span></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-80242994390325664702024-03-03T10:49:00.002-05:002024-03-03T10:49:42.355-05:00The rise and fall of globalization - The change in eras<p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwSiH5PKwJkEA9zfNbaMX258XwlkvBWxh_Gdlj_p6VvopWTZPc0J1P3xFTRLsHVfhUV25nsfDXQCIga5UH_rAOz2Jy__Yb1zA_7dQh2bJnmBANFKYb43hjvHKSHElvIhX44-xLCZiyYtWHgzW5yOwEgIQxRqpSQKh5BD2Glpg8GdauPXuwjdkZB55bHA/s964/Screenshot%202024-02-25%20at%2011.38.30%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="964" data-original-width="740" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwSiH5PKwJkEA9zfNbaMX258XwlkvBWxh_Gdlj_p6VvopWTZPc0J1P3xFTRLsHVfhUV25nsfDXQCIga5UH_rAOz2Jy__Yb1zA_7dQh2bJnmBANFKYb43hjvHKSHElvIhX44-xLCZiyYtWHgzW5yOwEgIQxRqpSQKh5BD2Glpg8GdauPXuwjdkZB55bHA/s320/Screenshot%202024-02-25%20at%2011.38.30%20AM.png" width="246" /></a></div><span style="font-family: Lato; font-size: large;"><div><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;">We need to think about large and important economic era beyond the business cycle to truly understand what may happen to international returns. There have been three great eras of globalization that have changed the world, and we are in another period of transition which can be described as the fourth great globalization. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">First great globalization (1.0) - the period of the last quarter of the 19th century until the beginning of WWI. The combination of the industrial revolution with cheap transportation, and a growing financial banking sector allowed for the transfer of manufactured goods and commodities around the world. This abruptly ended with the Great War in Europe. Trade growth did not return until the end of WWII.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Second great globalization (2.0) - The period from the end of WWII until the end of the 1980's. The regrowth of Europe coupled with lowering of tariffs and dollar-based currency system allowed for strong increases in trade among countries.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Third great globalization (3.0) - The period from 1990 until 2008 and the great financial crisis. In the third era, manufacturing was sent to the cheapest source of labor and the modern supply chain management was used to integrate economies around the globe. Capital was moved around the world based on growing diversification of sourcing of goods and services.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The possible fourth globalization (4.0) - This is what we are living in today. The post-GFC period and the search for new trade relations. There is growing regional trade across blocks with also a change in tariff and sanction dynamics. The cost of trade has increased, and the flows capital and goods have moved with a growing belief in on-shoring and friend-shoring. This cuts some the financial and trade links that were present during the third globalization.</div></span><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-6653114077625788012024-03-03T10:23:00.000-05:002024-03-03T10:23:06.673-05:00The Scout Mindset - What is needed for good investing<p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjmR4c_IseHOU-wTJGafeHVes0e1_c4J8ByWLtKex6ioit_hT0SSMmNo_rUOvWs66k3zoJ68jkOOBNTrtu-MPQ-KpUCC24ksjfevfA2K-dRk_EkUD-Rj92qpVaHItVw3IIIKdK7Aib3WYhOWK8DKPevE9QaDNTd9PlgTLv0QbOTI-FGtfMdwIbCMjNhkQ/s588/Screenshot%202024-03-02%20at%2011.39.14%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="588" data-original-width="384" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjmR4c_IseHOU-wTJGafeHVes0e1_c4J8ByWLtKex6ioit_hT0SSMmNo_rUOvWs66k3zoJ68jkOOBNTrtu-MPQ-KpUCC24ksjfevfA2K-dRk_EkUD-Rj92qpVaHItVw3IIIKdK7Aib3WYhOWK8DKPevE9QaDNTd9PlgTLv0QbOTI-FGtfMdwIbCMjNhkQ/w261-h400/Screenshot%202024-03-02%20at%2011.39.14%20AM.png" width="261" /></a></div><br /><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><b>The Scout Mindset</b> by Julia Galef, starts with a very simple premise, have "the motivation to see things as they are, not as you wish they were". Looking for the truth is not in conflict with your goals. It only enhances your chance of reaching your goals. To be a good scout you need to understand whether or when you are biased. You cannot fill yourself. There is no right way or wrong way to thing, only a way to focus on the truth. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">The search for the truth starts with the simple question with anything we see, Is it true? You are not focused on motivated reason to look for confirmation but focus just on what is reality. This scout mindset can be summarized in Galef's table on the difference between a soldier and a scout. </span></p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLVnqVu7lkRO0-wb6OMZVWFC8bBhYQXKpQeSlgTHCz7CkfHeu33vHkZOXmopxv9YoXB6ZEgoaPiMLCvgVrSIXxPDxHwng9P_ZelLkyE3AeVZT75vXLUV5G7Yn4bI4cx5UxRXydpXMGntOZYoGBMu7ywsOp66pALvTZoDCtYg8RuZj3qsOOay7yZGq7XQ/s1876/Screenshot%202024-03-03%20at%2010.11.41%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1246" data-original-width="1876" height="424" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLVnqVu7lkRO0-wb6OMZVWFC8bBhYQXKpQeSlgTHCz7CkfHeu33vHkZOXmopxv9YoXB6ZEgoaPiMLCvgVrSIXxPDxHwng9P_ZelLkyE3AeVZT75vXLUV5G7Yn4bI4cx5UxRXydpXMGntOZYoGBMu7ywsOp66pALvTZoDCtYg8RuZj3qsOOay7yZGq7XQ/w640-h424/Screenshot%202024-03-03%20at%2010.11.41%20AM.png" width="640" /></a></div><span style="font-family: Lato; font-size: large;"><br /></span><p></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Don't protect your opinion, protect or search for the truth. Unfortunately, the soldier mindset is easier. You can take comfort of being with a group that agrees with each other, have the certainty of our opinions so we can persuade others, and have an image associated with a common view. Truth seeking requires us to be more self-aware, so it is important to run some thought experiments to avoid bias traps.</span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">We should appreciate that there are two types of confidence, epistemic and social. Epistemic confidence is associated with the certainty about what is true while social confidence is the self-assurance versus our peers. </span></p><p style="text-align: justify;"><span style="font-family: Lato; font-size: large;">There are also two types of uncertainty; uncertainty due to ignorance or inexperience and uncertainty due to unpredictability. We tray and control our ignorance and then prepare for what is unpredictable. </span></p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFmCxcRy5tB2T0iqO37vEd_kOZtrGQwQ7Nju-dJmHf48jAu68Ky73wxevqpEJ4qRaCCoxQ53cfFLB-o1AJl7Bocgv4utRvZsewGA6EmxQBr4wTOlsW7CadULWvs3ySjzRJsfmGUIsvwtFyyrhE8S7GAYBdZKY_TLnSMfq03avl7fAicyD9nbfeTFhUgg/s1600/Screenshot%202024-03-03%20at%2010.11.58%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1316" data-original-width="1600" height="526" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFmCxcRy5tB2T0iqO37vEd_kOZtrGQwQ7Nju-dJmHf48jAu68Ky73wxevqpEJ4qRaCCoxQ53cfFLB-o1AJl7Bocgv4utRvZsewGA6EmxQBr4wTOlsW7CadULWvs3ySjzRJsfmGUIsvwtFyyrhE8S7GAYBdZKY_TLnSMfq03avl7fAicyD9nbfeTFhUgg/w640-h526/Screenshot%202024-03-03%20at%2010.11.58%20AM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiGMud-6xUsddwQAvSua7haqz75chrwzLYQRpm5hb2952803JJO3ioHEUnvcwS7ZzhkJi0t9siQuWyUM7w_MEfmY5BmtuZQnlkUbVxc0IoqdvfMQjPLDM-6A4pGyJOIqfsxMNR6bpwcWBAZSTWgCSDuh3tfHEaScmey12BONIGJt4IHzYwvRQ5C691bw/s1784/Screenshot%202024-03-03%20at%2010.12.14%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1254" data-original-width="1784" height="448" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiGMud-6xUsddwQAvSua7haqz75chrwzLYQRpm5hb2952803JJO3ioHEUnvcwS7ZzhkJi0t9siQuWyUM7w_MEfmY5BmtuZQnlkUbVxc0IoqdvfMQjPLDM-6A4pGyJOIqfsxMNR6bpwcWBAZSTWgCSDuh3tfHEaScmey12BONIGJt4IHzYwvRQ5C691bw/w640-h448/Screenshot%202024-03-03%20at%2010.12.14%20AM.png" width="640" /></a></div><br /><span style="font-family: Lato; font-size: large;">The critical skill for those more quantitatively focused is to think in terms of odds, but more important is the ability to say you are wrong or the model is wrong. Admitting mistakes allows for better decision-making. Be a scout and not a soldier.</span><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-19506015727369119832024-03-02T12:06:00.003-05:002024-03-02T12:06:50.741-05:00The Art of Fairness - what we need more of <p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYrOIokHasejjbyWIgYzYMj-BWBM1Cgah8iezB0x1J1Ei3rJgWGuQMPv6viJmLA8LzPEQOCmQCdGqGUc9InESj1DIbxfpW13uptEcOZPQljrUnvArBkG2FP5of0mb3ijDS0LF8SnlitIB9eTCXLQGXnXQGtSS-IBRpk4tdGCzVxLo1CgC2B1jt1iCqqg/s472/Screenshot%202024-03-02%20at%2011.37.24%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="472" data-original-width="354" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYrOIokHasejjbyWIgYzYMj-BWBM1Cgah8iezB0x1J1Ei3rJgWGuQMPv6viJmLA8LzPEQOCmQCdGqGUc9InESj1DIbxfpW13uptEcOZPQljrUnvArBkG2FP5of0mb3ijDS0LF8SnlitIB9eTCXLQGXnXQGtSS-IBRpk4tdGCzVxLo1CgC2B1jt1iCqqg/w300-h400/Screenshot%202024-03-02%20at%2011.37.24%20AM.png" width="300" /></a></div><br /><p></p><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">David Bodanis, writes about fairness in, <b>The Art of Fairness: The Power of Decency in a World Turned Mean. </b>This is a necessary discussion through looking at the profiles of different success stories that did not focus on displays of power or big ego. Success can be achieved through simple fairness and being an Ignatian, "man for others". It is not enough to tell others to be good. We need to point to ordinary people who have acted in extraordinary ways when it was not required. When in power, fairness and kindness are not necessary yet fairness by those in power should be a requirement. The world can be very different if there is greater focus on decency in business, politics, and everyday life, and it is not hard.</span></div>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-65622620877560568602024-03-02T11:58:00.003-05:002024-03-03T10:23:16.762-05:00Napoleon's Glance - A different take on strategy <p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJb9o16JqIx1o7keCf8XnqIH5z6lRyl-yP-Ecii6M8KZex3dhTwn9c1_t821ofAfyA1WOGpGnTr2wPslMvVocWOaYCo6d7dnszNbHWJJVS3WUab6ZsB28aAeFJAaPzON6Y_XDAvMRQMQcdu8wb8gSNFDURiA7OSdFT9M5PhPgkDTRKb11bFjZ3JWSXkA/s332/Screenshot%202024-03-02%20at%2011.34.22%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="332" data-original-width="260" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJb9o16JqIx1o7keCf8XnqIH5z6lRyl-yP-Ecii6M8KZex3dhTwn9c1_t821ofAfyA1WOGpGnTr2wPslMvVocWOaYCo6d7dnszNbHWJJVS3WUab6ZsB28aAeFJAaPzON6Y_XDAvMRQMQcdu8wb8gSNFDURiA7OSdFT9M5PhPgkDTRKb11bFjZ3JWSXkA/w313-h400/Screenshot%202024-03-02%20at%2011.34.22%20AM.png" width="313" /></a></div><br /><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">William Duggan teaches strategy at Columbia University, and has written the book, <b>Napoleon's Glance</b> as a rejoinder to the work of many that good strategy requires deep planning. He argues in his book that the secret to strategy is coup d'oeil. Literally it means a stroke of the eye or a glance. In Clausewitz, it will mean the sudden insight that shows you the course of action to take. You put a strategy in motion, but you have to be ready to take advantage of any opportunity when it presents itself.</span></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">This is an odd strategy. Plan and then jump at the right moment to exploit a chance that you may not have fully anticipated. Be flexible for the right moment. Is that good strategy, planning a strategy to be flexible?</span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">Plan but be ready for the truth which may allow for exploitation for profit. Duggan present this idea through ten studies of different people from different walks of life. Each seize an opportunity within a plan to reach longer-term objectives. I am not fully convinced of this approach, but I also accept that being ready to adapt when new information or new events present themselves is a critical part of investing and business success. </span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;"><br /></span></div><div style="text-align: justify;"><span style="font-family: Lato; font-size: large;">See:</span></div><h3 class="post-title entry-title" itemprop="name" style="caret-color: rgb(102, 102, 102); color: #666666; font-family: "Trebuchet MS", Trebuchet, Verdana, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 22px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; font-weight: normal; line-height: normal; margin: 0.75em 0px 0px; position: relative;"><a href="https://mrzepczynski.blogspot.com/2021/03/from-von-clausewitz-coup-doeil.html">From Von Clausewitz - Coup d'oeil - strategic intuition with a glance</a></h3><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0tag:blogger.com,1999:blog-4479657772321364065.post-58545619884812178652024-03-01T18:21:00.004-05:002024-03-01T18:21:54.390-05:00Shipping is telling us a negative story <p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHtToGYf3rZsQVihcU4cHhEtQkKfaOAHM4YY-Haz_EIGb35sHl3lgxrBh069Z5pGJTaiDKG9UAjdgLYmPOL2qk7KwU8I9gFnr_J7H-qMOtx1NWaSjhVX-XDuI0K9QZYE231S0I_UYOITkbVCkRb7cOrUKziQGHsH-ad_ucjMCDSX2_DBznPisSLAWB-Q/s1516/Screenshot%202024-03-01%20at%202.27.18%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="976" data-original-width="1516" height="410" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHtToGYf3rZsQVihcU4cHhEtQkKfaOAHM4YY-Haz_EIGb35sHl3lgxrBh069Z5pGJTaiDKG9UAjdgLYmPOL2qk7KwU8I9gFnr_J7H-qMOtx1NWaSjhVX-XDuI0K9QZYE231S0I_UYOITkbVCkRb7cOrUKziQGHsH-ad_ucjMCDSX2_DBznPisSLAWB-Q/w640-h410/Screenshot%202024-03-01%20at%202.27.18%20PM.png" width="640" /></a></div><br /><div style="text-align: justify;"><span style="font-family: Lato; font-size: x-large;">The Case Freight Index continues to be in negative territory. The flow of goods is much slower than last year, and this is a good sign that the economy is slowing; nevertheless, the trough seems to have been reached and we are not seeing the large declines in 2020. Of course, 2020 seems like a different time completely. </span></div><p></p>Mark Rzepczynskihttp://www.blogger.com/profile/13692706752978475626noreply@blogger.com0