Odds-On Investing

By | 2018-04-18T06:27:32+00:00 April 18th, 2018|Global Market Update|

“Don’t tell me the odds.” Photo: Michael Parzchowski. Source: Unsplash That’s how a lot of people approach gambling. For them, it’s entertainment. The risk associated with placing a bet and waiting for the outcome creates a certain exhilaration, independent of the outcome. It’s why slot machines and horse tracks are so popular, even people know that the odds are against them. People don’t want to know the odds because that information detract from the excitement. It’s fun to dream of making that big score, [...]

Looking for Risk in All the Wrong Places

By | 2017-11-15T07:11:22+00:00 November 15th, 2017|Global Market Update|

Can Artificial Intelligence really manage risk? Source: Wikipedia There’s a new application for Artificial Intelligence. It’s called regulatory technology, or “regtech.” It takes the rulebook of a supervisory agency, like the FDIC, and translates it into a computerized logic engine. The regulators evaluate the logical consistency of their rules, and the banks structure and label their data to be queried. This allows the regulator to look for broad patterns in the data that might not be immediately apparent. AI can identify deep, dynamic structures [...]

Seeking Safety

By | 2017-07-17T16:45:21+00:00 July 12th, 2017|Global Market Update|

Are there any safe places? Photo: Ben Tubby. Source: Wikipedia During the Cold War the superpowers relied on a doctrine called “Mutually Assured Destruction,” or MAD. The idea was that neither party would initiate a nuclear first strike, because enough of the other side’s nuclear arsenal would survive to retaliate. The global devastation would be so complete that both sides would lose. To average folks, the doctrine seemed “mad,” indeed. There was a low-grade fear surrounding everyday life. If someone irrational got hold of [...]

Where the Black Swans Hide

By | 2017-07-17T12:21:20+00:00 May 1st, 2017|Global Market Update|

What is a “Black Swan”? Photo: Sergio Valle Duarte. Source: Wikipedia A Black Swan event is a development that comes as a total surprise, has a major impact, and that we later see as inevitable – with the benefit of hindsight. The term was popularized by the author Nassim Taleb, and it is based on an ancient Latin expression that assumed all swans were white. After Europeans discovered black swans in Australia, however, the phrase was revised. Taleb notes that many – if not [...]

French Lessons

By | 2017-07-17T12:21:28+00:00 March 1st, 2017|Global Market Update|

And people thought our Presidential election was wild. Source: Marine 2017 Election season in France has generated one surprise after another. The first round in their Presidential race occurs April 23rd. Currently, there are 10 contenders. Marine Le Pen – the French Nationalist candidate – is leading in the polls with 27% of the vote. If no candidate wins a majority in the first round, as seems likely, there will be a run-off vote between the two leading vote-getters on May 7th. Parliamentary elections [...]

Re-Thinking Brexit

By | 2017-07-17T12:21:41+00:00 October 5th, 2016|Global Market Update|

Can uncertainty cause a recession? Source: Econlib Economists are always looking for ways to test their theories. They can’t put economies into test tubes and sprinkle a little stimulus on them—they have to look for natural ways to examine how people react economically to new conditions. So they study businesses right near a state border to see if changing the minimum wage law has much impact, or they use the draft lottery to study the effect of military service on lifetime earnings. The Brexit [...]

On Tips and Tipping (Part 2)

By | 2017-07-17T12:21:53+00:00 July 21st, 2016|Global Market Update|

On Tips and Tipping (Part 2) Everyone wants a tip. What’s the best way to make money? Photo: Nick Stanley. Source: Life of Pix Profitable investing starts with a plan. It starts with investors reviewing their goals, their fears, how much time they have, how much access to their money they need, and other circumstances. No one plans to fail, but many people fail to plan. And if you don’t know where you’re going, any road will do. But once you have a plan, [...]

Certain About Uncertainty

By | 2017-07-17T12:21:58+00:00 May 5th, 2016|Global Market Update|

How is investing like backgammon? Photo: Katana. Source: Morguefile Both involve uncertainty. Both are highly quantitative. And both combine skill, strategy, and a bit of luck. I loved backgammon growing up. I could play for hours with family and friends. I read books and studied different board combinations. I even organized a couple of tournaments in college. I loved the fast pace and exciting finishes, and learned a lot. I think the most important skills I gained were knowing how to work with uncertainty [...]

Known Unknowns

By | 2017-07-17T12:22:26+00:00 September 29th, 2015|Global Market Update|

Known Unknowns “I know something you don’t know.” © MGM 1987. Source: IMDB In The Princess Bride one of the characters smiles during an epic sword fight as he is forced back, step-by-step, towards the edge of a cliff. When his assailant asks why, he says that he knows something the other doesn’t: he’s not left-handed. As he changes hands, the tide of the fight turns. As the market struggles with fears of a Chinese economic slowdown, concerns about energy stocks, and questions about [...]

Of Risk and Return (Part 2)

By | 2017-07-17T12:22:40+00:00 August 19th, 2015|Global Market Update|

How do we manage risk? Photo: Dodgerton Skillhause. Source: Morguefile The first step is to acknowledge that it’s there, and it’s not our friend. Unworried investors are their own worst enemies. The Financial Crisis came about mainly because investors thought they were living in a low-risk world. They purchased novel and complex instruments in greater amounts than ever before. They borrowed money to buy them, which multiplied losses when they had to sell. Leverage works both ways. The world is always risky. It’s not [...]