Having passed the CPA exam last year, I subscribed to the Wall Street Journal and found your podcast recently. As instructed on your podcast, I am emailing you because I would love any material for new investors that could help me grow and develop past the buy and hold phase I am currently in and learn to become a capable, active investor.
Love the podcast and appreciate your passion and content.
During one of your recent podcasts, you and Wesley Gray were discussing how the academic community considers the volatility of an asset’s price to be its risk while you and Gray consider the permanent loss of the capital invested in an asset to be its risk. Many years ago, I read an interview of Harry Markowitz where he stated that he used volatility to measure the risk of an asset because “it made the math easy.” I was completely shocked. The father of Modern Portfolio Theory chose his measure of risk based on its mathematical convenience.
I searched for the interview again because I wanted to send a link of it to you so that you could read it for yourself. Unfortunately, I could not find the interview but I still remember the feeling of complete shock that I felt when I read that Markowitz chose volatility as the measure of risk because “it made the math easy.”
What is your understanding of how volatility became the primary measure of risk in finance?
Regards,
[Name]
I don’t believe Markowitz believed that as you state, but rather was designing for theory. As you might recall he was surprised that modern finance was built off his work. He wrote the PhD paper, and others extrapolated his work into something else. Markowitz, himself, stated that “semi-variance is the more plausible measure of risk.”
But I have also see this:
“I would’ve created CAPM around semi-variance, but no one would have understood the math and I wouldn’t have won Nobel Prize…” –Harry Markowitz
We can never stand in the way of market moves – nobody is big enough aside from those with the deepest of all pockets and even then their luck may just run out?
However the sheer stupidity of market reactions continues to the point that I believe most market participants simply are not accepting we are living in a different World following Trumps win and Brexit.
Take today’s move lower in the Pound [ To be fair a small move lower in the Far East on headlines that May will be outlining her case for a hard Brexit shortly] – The weekend news is quite possibly the most bullish news I’ve seen for Sterling in my 30 year career trading fx markets. Here’s – for dummies – what has really been said over the weekend.
Picture of Fifty Pound Notes by Images Money; CC. Should you Follow the Trend?
Trump – I will immediately put a sizeable trade deal in place with the UK – front of the que as I am a huge believer in Brexit and as the World’s largest market the U.S will offer Britain free access on favourable terms which will boost jobs, investment and prosperity in the UK massively. As far as Europe is concerned they can go screw themselves – I am not on the same page as Merkel on anything – Europe is heading for a disaster and I am already thinking about tariffs on German products in the U.S. – BMW for example.
Meanwhile the UK government announces that it may slash UK taxes to play hardball with Europe – meaning vast increases in UK competitiveness versus Europe which means anyone else clinging on to the pipe dream that business will leave the UK and relocate to Europe – a socialist / anti-entrepreneurial cesspit of high taxes and bureaucracy then for God’s sake wake up and smell the coffee. That leaves the UK as in its strongest position for decades with the prospect of not only globally driven growth and exports surges but as a safe haven for when Europe falls to pieces and likely to see massive currency inflows into the UK.
It doesn’t get any better than this for the UK which is why my targets for Sterling over the next 3 years are very simply 0.2 for Euro / Stg and 2 for cable – easy peasey – and that’s extremely conservative.
Am I long? No I’m short Sterling right here because the price action is giving no reason to back these views at all – but when it does we will flip that is for sure. Never trade my view or opinion as many of you know but if I’m right then the price action should confirm and the Pound against the Dollar needs to break at least 1.35 to show signs of life.
Meanwhile – for me – quite possibly the second best trade out there is selling the DAX. Global imports on German goods, Germany picking up the bill for a disintegrating Europe and the demolition of German values in future years only point to one direction for the German stock market. I look for a long slow move to 6000 in the Dax with the first signals this move is underway coming when it breaks 10,500 without making a new high in this particular cycle.
And as for the market clinging on t0 2010-2015 “type” solutions with bad news is good news for stocks – just remember when the shit hits the fan – what QE? Trump is a free marketer and if markets need to head a long way lower – then that’s where they should be!
My guest today is Ayn Rand. Rand is best known for her two best selling novels, “The Fountainhead” and “Atlas Shrugged.” Michael plays two clips of Donahue interviewing Rand. Rand is controversial, but her thinking is accurate and clear. She breaks down altruism, government regulation, free market, monopoly, God, feminism, terrorism, and many more topics. You may not agree with her on all points, but there is inspiration to be taken away from her passion and to-the-point thinking.
The topic is Objectivism.
In this episode of Trend Following Radio we discuss:
Altruism
Government regulation
Acting on faith
Living by emotion, not reason
Women’s rights
Religion
Monopoly
Spending money on the un-gifted minds rather than the gifted
My guest today is Tim Price. He has worked in capital markets for over 25 years across three management firms. A graduate of Christ Church, Oxford, he spent a decade as a bond specialist before going on to serve as Chief Investment Officer at three separate wealth management firms. Tim has been shortlisted for five successive years in the UK Private Asset Managers Awards programme and was a winner in 2005 in the category of Defensive Investing. He is now manager of the VT Price Value Portfolio, a fund investing in Benjamin Graham-style value stocks, and specialist value funds, from around the world. Tim also writes regularly for MoneyWeek magazine and The Spectator.
The topic is his book Investing Through the Looking Glass: A Rational Guide to Irrational Financial Markets.
In this episode of Trend Following Radio we discuss:
Trusting central planners
Going against the establishment
Banking system
Owning gold
Lehman Brothers collapse
2008 bubble
The Brexit and Trump narrative
“Mankind has survived because of our ability to believe in things that do not actually exist.” – Tim Price
Oh, how I show my age missing discourse like this. Besides Donahue, we had William Buckley, Dick Cavett, and, often, even Johnny Carson. Hearing liberal vs. conservative in an informative way was so, so nice. NOT screaming, NOT engaging in relentless raw ad hominem attacks, NOT being proud of ignorance, nor being illogical–and so smug about doing all this. Even the audiences back then were different. Civility is always welcome. I like to hear from the dead, because what they say is locked down, therefore, allowing a true evaluation of them.
