Have you ever read something, and instantly thought, that just blew my mind. Well this post is about one of those moments for me, and hopefully it will be the same for you as well. I’m also going to introduce you to the brilliance of Ole Peters and Alexander Ademou and their work on Ergodicity.…
Category: New Perspective
A Grand Unified Theory of Market Behavior
In 2013 the Nobel Prize committee gave the economics prize to two academics with fundamentally opposite beliefs.1 On one side they gave Eugene Fama the award for his work developing and expanding the efficient market theory. And on the other side, Robert Shiller won the award for effectively disproving the efficient market theory. If you…
Klay Thompson From Downtown: Why I’m Skeptical of Momentum, and You Should Be Too
Momentum investing might be a fraud. I’m positive pieces of it are. Momentum studies actually display evidence of a random market, evidence which some very very smart people use to disprove the efficient market theory. Sadly, they didn’t truly understand randomness. Open up your mind for this one, it’s going to get deep and very weird.
When You Eat Matters More Than What You Eat.
Nassim Taleb has an interesting story from Antifragile that correlates uniquely to investing strategies. The passage is as follows: “And one blatant denial of convexity bias is the theory about the benefits of the so-called Cretan (or Mediterranean) diet that triggered a change in the eating habits of the U.S enlightened class, away from steak…
Why Market Index Investing Works
Why does market index investing work so well? Most say it’s because you can’t beat the market over the long run, so why try. That nonsense. Index investing works by automatically “rebalancing” multiple assets, and by rebalancing more frequently, you can easily beat the market. Let’s investigate further. The Components I’m going to use the…
Solving the Equity Premium Puzzle, and Uncovering a Huge Flaw in Investment Theory.
The equity premium puzzle has troubled economists for over 30 years. I’ve solved it, and in the process identified a major flaw with investment theory. Put simply, the puzzle is: “Equities (stocks) have provided a real return of about 7% for the last 100 years. The risk-free rate (treasury bills) has provided about 1% of…
The Most Misunderstood Force in the Universe
I once believed Einstein called compound interest the most misunderstood concept in the world. He didn’t. Google claims he actually said, “compound interest is the most powerful force in the universe”.1 Well, I’m going to build on Einstein’s supposed quote and state that: “Random compound interest is the most misunderstood force in the universe.” The…