There is a theory in marketing that you don’t sell someone a drill, you sell them the quarter inch hole in a wall.1 Taken further: you don’t sell them the hole in the wall, you sell them a picture hanging on the wall. Even still you don’t sell them the picture, you sell them the…
Portfolio on 7.20.21
A bit of volatility arrived this week, leading to a portfolio calling for a far lower stock position. Interesting, the up today was larger than the down yesterday. We don’t care if volatility is up or down, so even though today was a good day in stocks, the higher volatility is a warning sign that…
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.…
Portfolio on 6.18.21
The decision last week to go heavy stocks and no bonds looked pretty good for half the week. Stocks were down, but they were down less than everything else. Then the Fed started talking. I honestly didn’t pay much attention to what they said, but its clear the market did as everything switched soon after.…
To Stay Sharpe Miss Right
With the US Open returning to the site of one of Tiger Woods’ greatest triumphs, it’s time to re-evaluate investing and portfolio construction from the perspective of Tiger Woods’ golf strategy. This time though instead of looking at the peak and maximizing return, we are going to explore errors and the affect they have on…
Portfolio on 6.10.21
I should have put this out a few days ago, but better late than never. The portfolio has moved pretty aggressively over the last few weeks away from bonds, and it’s worth discussing. Correlations between bonds and stocks are quite high right now. As we know, treasury bonds aren’t paying out much with the 30…
Averages are a Bitch
Financial statistics are hard. It’s really difficult to determine the average return of individual stocks. You would think defining typical stock properties would be straight forward, but interestingly it’s not, and I fear many have made false conclusions about stock returns. Take the question: what is a typical return of a stock in the S&P…
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…
Portfolio on 5.12.21
I said I would still do updates when things got interesting and the market has certainly been interesting lately. The prior week was a good one. But there were a couple days where everything went up simultaneously. I said in a recent post, this makes me nervous and can sometimes lead to problems. Those problems…
Breaking the Market-University
About a month ago I was lucky enough to be a guest on the Resolve Riffs Podcast. For those that saw it, near the end we discussed the idea of creating a list of “courses” outlining the lessons described on the blog (for those that didn’t see the podcast, here is a link). Adam Butler…