"Finance is dominated by randomness. Randomness is everything. Because randomness is everything, you need to be uncertain. You need to have a lack of conviction and dogma in certain things. Because you want to be able to prove certain things are wrong." (Ewan Kirk - Cantab Capital)
Let’s kill it!
You like the idea of proving a strategy is broken rather than it is right. This was the question Michael Covel asked Ewan Kirk of Cantab Capital during one of his recent trend following mega episodes. The answer was fascinating: I don't think I'm the first person to come up with that. Effectively that is the scientific … Continue reading Let’s kill it!
"Imagine that every day you have to got to go to a Manhattan junction on a street corner with your folding chair, thermos of coffee and sandwiches. Morning rush hour comes by and you get jostled around. Same for the evening, you get jostled around and they knock over your thermos of coffee and step on your sandwiches. You got fumes of cars and weather changes. This is a terrible way to spend your life. Until one day the parade comes by. You don't know which direction the parade is coming from, but when it does come, you have the best seat in the house. This is trend following. The secret is to just stay on that street corner." (Chris Cruden - Insch Capital Management)
Today I came across an article of Gerry O'Reilly, portfolio manager of the Vanguard Total Stock Market Index Fund. The fund has $ 488 billion AuM. Key success factor (besides Vanguard's overall culture) is operational excellence / technology: Vanguard has invested heavily in technology. Algorithms help managers figure out where to buy and sell while minimizing market … Continue reading Execute!
"Everyone at Oaktree has opinions on the macro. And when we see extremes in markets and, especially, capital market behavior, we’re apt to take strong action. But we’re highly aware of what we don’t know, and when conditions are moderate or indistinct, we don’t bet heavily." (Howard Marks - Oaktree Capital)
That’s why they’re called surprises (Howard Marks – Expert Opinion)
Expert Opinion, the latest memo of Howard Marks is once more an interesting read. The reasoning throughout the memo resonates well with me since I believe it is worthwhile for a (discretionary) money manager to: (try to) understand the economy (try to) figure out the expectations embedded in the market bet small most of the time bet … Continue reading That’s why they’re called surprises (Howard Marks – Expert Opinion)
"It ain't what you don't know that gets you into trouble. It's what you know for certain that just ain't true." (Mark Twain)
The 7 business questions (Peter Thiel)
In his book Zero to One, Peter Thiel talks about seven business questions to answer in order to successfully start a business: [...] If you don't have good answers to these questions, you'll run into lots of 'bad luck' and your business will fail. If you nail all seven, you'll master fortune and succeed. Even … Continue reading The 7 business questions (Peter Thiel)
Understanding the world we live in (the Soros version)
From time to time, I grab a book from a few years ago and browse through it. This time 'The New Paradigm for Financial Markets' of George Soros (2008) was the lucky one. Although the Alchemy of Finance is the standard book here, this little book also contains some nice wordings. As a side note: AQR … Continue reading Understanding the world we live in (the Soros version)
Organizational alpha: Investment Committees
At money management firms, the investment decision making process is one of the crucial elements. While the investment process/philosophy itself often gets lots of attention, the investment committee making the investment decisions does not always get the same level of scrutiny. Being part of an investment committee myself, I experienced the pro's and con's of making investment … Continue reading Organizational alpha: Investment Committees