Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

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Mister Imperceptible
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Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Mister Imperceptible »

Fond though I am of Stendhal, I dug up this jewel of a quant and his website. I am reading every article voraciously.

His thesis is that in a Federal Reserve dominated environment, we are going to experience cycles of crisis and containment of crisis. I want to point to multiple articles, but anyone interested can go down the rabbit hole with me.

http://danielamerman.com/aHome.htm

http://danielamerman.com/Products/RedBlackBrochure.pdf

trfie
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by trfie »

Not very trenchant, is he? One could spend months going through the material. I wouldn't mind dividing it up among a large group of ppl and then each person summarizes her part. A group of us used to do it in school when there was too much reading material for a class. Our group always got the highest marks compared to anyone trying to read everything himself.



technohead
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by technohead »

Mister Imperceptible wrote:
Fri Aug 10, 2018 7:32 pm
Fond though I am of Stendhal, I dug up this jewel of a quant and his website. I am reading every article voraciously.
You mean the classical French novelist? I read The Red And The Black, one of my favourites.
His thesis is that in a Federal Reserve dominated environment, we are going to experience cycles of crisis and containment of crisis. I want to point to multiple articles, but anyone interested can go down the rabbit hole with me.
Completely agree. One blog I follow is predicting ZIRP to go into effect in the near future as positive interest rate cycles have now expired. It's all down hill from here into negative interest rate territory. Of course us proles won't see any free money. No, that goes to all those high performance car collectors in their Hampton mansion or on their super yacht parked up at the marina in Monaco. The rest of us get smashed down into 3rd World status.

Mister Imperceptible
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Mister Imperceptible »

Yes, I have a bit of Julien Sorel in me.

It will be interesting to see if we can see NIRP in the USA. Unlike the gilets jaunes who must resort to using cobblestones and billiard balls against riot police, the Americans have firearms- over 300 million of them. There is a great danger.

One thing I have been hearing from a lot of macro analysts and hedge fund traders like Ray Dalio is their sudden concern with “social unrest and populism.” Because they are not sure the hoi polloi will put up with QE 4 5 6 7 8 9 etc.... so persons like Dalio who have profited disproportionately from the financialization and gameification of the economy are publishing lists of “principles” and lessons on how master the market cycle. As if to say “See, I am a nice guy, I’m trying to pay it forward, please do not drag me from my mansion and kill me!”

I cannot say I am categorically opposed myself to the high performance cars or the super yachts. I find the AOC gimme-gimme types as distasteful as the banksters. It just appears to me that we are at a point where the system starts to cannibalize itself.

The ouroboros.


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Jean
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Jean »

One Guy managed to get his country out of a similar situation quite peacefully but the violent answer came from the ultra riches.



ertyu
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by ertyu »

technohead wrote:
Fri Jan 25, 2019 4:50 pm
Of course us proles won't see any free money.
Correct. In a low-yield world, banks make it up through fees. I know someone from a NIRP/ZIRP country and there is a banking fee on anything you can think of. The interest rates on your 30 y/o mortgage are low, but they're also adjustable and there's a penalty for early repayment which makes up for any slack you could've gotten in the early, low-interest part of the mortgage. Fixed interest rate mortgages? Starting at 4.5%, max timespan 10 yrs. So the "interest rate" to consumers is actually rising. Couple this with the fact that low interest rates promote saving if a person doesn't think they'll make enough yield to retire on, and you've got a situation where rates are kept low to prevent shit from hitting the fan for sovereign and corporate debt, but where those same low rates have actually became contractionary. Meanwhile, as long as rates stay low, the cycle of borrowing and buybacks continues - so low rates don't even help the debtors they're designed to help, they only help kick the can down the road.


Mister Imperceptible
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Mister Imperceptible »

http://danielamerman.com/va/ccc/35Iterate.html

“For what is now 35 times in a row, no reasonable person could have been expected to see what was on the way. And for what is now 35 times in a row, such a reasonable person would have been blind-sided by reality.

This gets us to the heart of the common logical fallacy. The idea is that if an intelligent, well educated person who follows the mainstream experts is surprised by a shocking event - then they are allowed to write themselves an "excuse note" of sorts, and then go right back to what they are doing. After all, none of the experts (or at least, those that they follow) saw it coming, it was therefore an aberration, and it can therefore be safely discounted for future decision making.

The tech stock bubble collapse of 2001, the financial crisis of 2008 and now the coronavirus pandemic of 2020 too? Just aberration, aberration, aberration, what prudent and reasonable person could have possibly expected something like that?

The completely unexpected economic stagnation, high rates of inflation and devastating investor losses (in purchasing power terms) of the 1968 to 1982 period? A quaint aberration, no relevance. The extraordinary economic and investment damage from the completely unexpected Great Depression of the 1930s? The much more lethal and completely unexpected Spanish Flu pandemic of the late 1910s? Both ancient aberrations, no relevance.

But yet, if we don't dismiss much of history as a series of aberrations because it doesn't fit with what we want to believe, and instead look what history actually shows, then a long series of completely unexpected shocks and surprises is what we see. A prudent investor seeking financial security over the long term should expect to have to withstand a series of devastating financial blows that none of the most quoted experts saw coming, it should be the baseline expectation - because the so-called aberrations are not deviations from the norm, but they are themselves the true historical norm.

Smashter
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Smashter »

@MI don't most investors expect dips? Isn't the optimistic way of looking at this that if you stay invested through the downturns everything will pretty much be okay?

Market timing masters like yourself (being serious) can profit off timely predictions, but I'm not sure it makes sense for the rest of us to try.

Mister Imperceptible
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Mister Imperceptible »

I definitely want to dissuade anyone from thinking I am a market timer. I just try to handicap positions with favorable risk/reward profiles.

I think a lot of the recent Boglehead type literature and resulting psychology is based on a foundation that market returns will always outpace other asset classes in the long run provided you have the discipline to buy and hold. And that has been true if you have been a US investor but not if you have been in other developed markets (Europe, Japan). In the spirit of “the future is here but not evenly distributed” people and especially US investors should start to question that assumption, and look at the policy support and debt growth that has been required to support those returns in recent decades.

I did not come back from a hiatus from the forum to gloat. I came back because the recent bear market rally and the central bank put has lulled many to sleep and I have to say so. I do not know if that is obnoxious or unwanted or a disservice if I am doing the intellectual heavy lifting in this particular category but if this is a tribe I feel I should say something. I think if you have a PP or T9K GB portfolio you will be better off than most. But the assumptions are still being held and that means the psychology has not been broken.

Seppia
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Seppia »

The real monstrosity we have been seeing since 2008 is the death of true capitalism.
We are firmly in the situation where the gains are privatized and the losses are socialized through bailouts, which creates very obvious moral hazard issues and rewards bad behavior.
The government should now be focused on protecting the people, not the businesses. Crisis periods are healthy as they weed out the weaker business models.
This is how we got to the situation where the Ubers, Teslas of the world get to sky high valuations while destroying capital.

Mister Imperceptible
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Mister Imperceptible »

Hahahah if you are referring to my COVID 19 posts it is really Dalio and to a lesser extent Buffett that grind my gears. I do not begrudge them their wealth but I think their holier than thou act is intolerable. And a lot of what Buffett says in particular feeds into the buy and hold psychology that does people a disservice. They play one game in private and they feed the public a different story. That is the way the rich and powerful have always operated so no further need to go down that rabbit hole.

I do not know if there is any easy way but I use derivatives to bet against the market using put options. It is not rocket science but I started with small positions and when I felt more comfortable I sized up. I watch the market like a hawk, there were really only 3 days in March where there was an opportunity to take maximum profits. Do you have time for that? A simpler way is you could buy SH but you need a margin account. The market probably will not go to zero so you should have an exit strategy.

You already know how to bet on inflation and you can search my posts for details. The Fed cannot inflate away the Sig Sauer on your right hip.

Mister Imperceptible
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Re: Le Rouge et le Noir - Daniel Amerman Edition: Asset Class Based Investing in a Federal Reserve Dominated World

Post by Mister Imperceptible »

I guess it depends on what you are hedging. Size the positions big enough and it is no longer a hedge but a directional bet. It is like I bought lots of fire insurance but I had no house to insure. Or rather, I bought fire insurance on someone’s else house that I thought had a good likelihood of burning.

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