When Ed Thorpe played blackjack to beat the casinos at their own game, he did it by strategically betting into “good decks” and staying away from bad decks. Can you apply this same idea to investing by investing into good markets, and staying away from bad ones? I believe you can, which is why Geometric…
Category: Philosophy
Volatility Clusters
Volatility Clusters. The concept often causes strange reactions in people. So many think the market is totally unpredictable, that no part of the market’s behavior can be forecasted. I believe this is essentially true for returns, but it’s not true for how choppy and bouncy those returns are. Volatility is partially predictable because it clusters.…
The Greatest Geometric Balancers: Renaissance Technologies, Part II
Let’s pick up where we left off earlier in our exploration of the Geometric Balancing techniques hiding inside Renaissance Technologies’ spectacular returns. For those that don’t remember, we ended part one with Renaissance Technologies–the greatest investment company the world has ever known–having produced their finest returns to date in 1990. Elwyn Berlekamp took over investment…
What Keeps a Portfolio on Track
Which part of a train is always moving backwards while the train is moving forwards? And why is this part of the train absolutely critical to ensuring a successful and safe journey? Take a look at this train and think about it for a minute before reading further. Moving Backwards While Moving Forwards The answer…
The Greatest Geometric Balancers: Renaissance Technologies, Part I
Renaissance Technologies is the ultimate Rorschach test in the investing world. Factor investors think they are the best at implementing factors. Machine Learning advocates think they are the best at applying machine learning. Day traders think they are the best day traders. Trend followers think they are the best trend followers. Operations people think they…
Invest Like a Pronghorn
Pronghorn antelopes are the fastest animal in the world. I know what you’re thinking, cheetahs are faster. Not really. What is Fastest? Well speed is a distance travelled per time. Miles per hour. Meters per second. But of course this is an instantaneous measure. If we’re running a race, the winner has the highest average…
Two Sides of the Kelly Criterion
There are two sides to the Kelly Criterion which often get equated as the same, when they really are quite different. Using Cash to Create a “Kelly” Portfolio Traditional Kelly betting is about limiting your exposure to a risky bet. The wager in question is usually a “bet”, in that when you lose, you lose…
The Shape of Rebalancing: Why Some Studies Don’t Find a Rebalancing Benefit
The great age of rebalancing is upon us, and yet many people will ignore this superpower. They will point out some studies claim rebalancing doesn’t help. Those studies are flawed, and I’m going to show you why. By exploring further how rebalancing works, you will see why prior studies on rebalancing may have missed its…
The Great Age of Rebalancing Begins
Sometimes I’m asked why Geometric Balancing hasn’t been invented and implemented already? Well in many ways it was invented decades ago. But there are two main reasons why it hasn’t been implemented in any widespread capacity yet. The first is psychological.1 Rebalancing costs were the second, and more important reason. Let’s explore through the lens of Shannon’s Demon.…
It Hits All By Itself
I came across this Bruce Lee clip on the web the other day and was quite taken by it. I don’t have any martial arts background, but listening to this, I thought there is a lot of investing wisdom here. Let’s run through it. To Have No Technique Do not wall yourself off into one…