Category: Positive Asymmetry
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Asymmetry of Loss: Why Manage Risk?
“The essence of portfolio management is the management of risks, not the management of returns.” —Benjamin Graham Why actively manage investment risk? Why not just buy and hold markets and ride through their large drawdowns?… Read More
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VIX Trends Up 9th Biggest 1-day Move
About a week after a hedge fund manager who is popular with the media but has a poor track record of managing risk said “please stop talking about the low VIX”, it gains 44.4% in a… Read More
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Essence of Portfolio Management
“The essence of investment management is the management of risks, not the management of returns. Well-managed portfolios start with this precept.” – Benjamin Graham The problem is many portfolio managers believe they manage risk through their investment selection.… Read More
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Actively Managing Investment Risk
The global market declines in early August offered a fine example of the kind of conditions that cause me to exit my long positions and end up in cash. For me, this is a normal part… Read More
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Uncharted Territory from the Fed Buying Stocks
I remember sometime after 2013 I told someone “The Fed is buying stocks and that’s partly why stocks have risen so surprisingly for so long”. He looked puzzled and didn’t seem to agree, or understand.… Read More
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My 2 Cents on the Dollar
The U.S. Dollar ($USD) has gained about 20% in less than a year. We observe it first in the weekly below. The U.S. Dollar is a significant driver of returns of other markets. For example,… Read More
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Asymmetric Returns of World Markets YTD
As of today, global stock, bond, commodity markets are generating asymmetric returns year to date. The graph below illustrates the asymmetry is negative for those who need these markets to go “up”. source: http://finviz.com Read More
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Asymmetric Nature of Losses and Loss Aversion
Loss Aversion: “In prospect theory, loss aversion refers to the tendency for people to strongly prefer avoiding losses than acquiring gains. Some studies suggest that losses are as much as twice as psychologically powerful as… Read More
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Absolute Return: an investment objective and strategy
Absolute Return in its basic definition is the return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation (expressed as a dollar amount or a percentage).… Read More