Good thoughts. Diversification in the traditional sense is dead, as evidence of 2022 like you mentioned. The only way to truly be diversified is to find strategies that are completely uncorrelated to each other.
For example, a profitable trading strategy that is completely uncorrelated to the market moving higher or lower. This strategy should perform well regardless of market direction, and that also means that some years when the S&P's are up 25% on the year it underperforms relative.
However, in a year like 2022 it outperforms, and 2022 also gives you a chance to aggressively increase passive investment allocations.
This is the only way to be truly diversified and continue benefiting over time regardless of market direction.
How do you identify the fundamental variables of a dynamic system with the most impact? Why only these and not adding say interest rate, market sentiment, technological change?
All of these are connected and interrelated. You need to structure these variables as well right ? For example interest rates would fall under the “liquidity”. Tech would fall under growth or the productivity of growth.
Good thoughts. Diversification in the traditional sense is dead, as evidence of 2022 like you mentioned. The only way to truly be diversified is to find strategies that are completely uncorrelated to each other.
For example, a profitable trading strategy that is completely uncorrelated to the market moving higher or lower. This strategy should perform well regardless of market direction, and that also means that some years when the S&P's are up 25% on the year it underperforms relative.
However, in a year like 2022 it outperforms, and 2022 also gives you a chance to aggressively increase passive investment allocations.
This is the only way to be truly diversified and continue benefiting over time regardless of market direction.
Would it be possible to list all the articles that are for teaching only? You got a gazillion good stuff but I think I'm reading them out of order!
Pinned article : https://open.substack.com/pub/capitalflows/p/research-synthesis-direction-of-capital?r=21qfqf&utm_medium=ios&utm_campaign=post
Freaking awesome... Muchhhhh easier! Thank u. So glad to have joined this
How do you identify the fundamental variables of a dynamic system with the most impact? Why only these and not adding say interest rate, market sentiment, technological change?
All of these are connected and interrelated. You need to structure these variables as well right ? For example interest rates would fall under the “liquidity”. Tech would fall under growth or the productivity of growth.
Could you precisely define these variables: growth, inflation, and liquidity?
And how the various subvariables map to them?
e.g. liquidity == expansion of global M2 supply
inflation == rising prices