Chris Cole's 100 Year Portfolio (and Q about long vol)

[jennypenny]

Did anyone watch the video Building the 100-Year Portfolio with Chris Cole and Danielle DiMartino Booth on Real Vision?

I'm trying to understand what Cole means (in the video and elsewhere) when he talks about long volatility. His asset allocation has 20% in Long Vol, but it's not clear to me what he means. Maybe I'm just being dense or overcomplicating the term? (apologies if this is a dumb question)

His suggested asset allocation is 20% each in gold, commodity trends, fixed income, equity-related, and long volatility.

[jacob]

Either 20% of portfolio is a long position in VIX (or similar) expecting volatility to go higher(*); or he calculated the volatility of his entire portfolio and it comes out to +20%/year (which is kinda high for this day and age).

(*) VIX is a great instrument for traders since it tends to be range bound and is almost always trending downwards interrupted by sharp jumps at which point one sells, waits, and starts over.

PS: I did not watch the video and the doc is walled off.

[jennypenny]

I've traded the VIX but I'm trying to find an allocation that I can pass on, as it were. I'm not going to attempt to explain VIX trading to someone.

I'm moving toward the GB now, only I've substituted EM for SCV and added antennae in bitcoin and REITs. Cole's is different and I'm trying to understand the fundamentals so I can understand why they are different (on a meta level).

Maybe I should have more coffee and read that paper again.

[ertyu]

Macrovoices.com has a podcast with him here https://www.macrovoices.com/785-macrovo ... ging-times

The following week, here, https://www.macrovoices.com/787-macrovo ... sury-paper, after the main interview one of the podcast hosts has begun a segment where he explains some ways in which retail plebs can be long vol. As far as I remember he was talking about doing another segment on a different strategy the following week. He has a subscription-based trading advice/education service for retail plebs as well, which has a 2-week free trial.

[jennypenny]

I'm still researching this (it's apparently a hot topic/trend). Two different people have suggested that insurance is a good long vol play for the uninitiated or disinterested. It would certainly be easy for me to put that long vol allocation into insurance/appropriate annuities and then I wouldn't have to worry about execution after I'm gone.

Still learning though ...

[ertyu]

it sounds complicated, but it's a simple idea at its core. most strategies people employ prosper when things are pretty much stable from day to day and there's no big drama in markets or in life. a regular 60/40 portfolio, selling options (either calls or puts), getting a big mortgage and putting all your money in the market 'cause return on stocks > your mortgage interest. Owning your property outright also is a strategy that benefits from all remaining pretty much calm and peaceful.

The problem with this comes when things aren't calm and peaceful: when markets tank but you still need to pay mortgage, when there's a hurricane and your house is damaged and is suddenly worth half of what you paid for it at best. When coronavirus comes and suddenly that stockpile everyone was laughing at you for saves your ass.

Being "long volatility" can be thought of as any life or investment strategy which benefits you if this occurs. So, regular insurance, owning options (you can see these as "stock price insurance"), products that appreciate when there is more market instability (the "long position in VIX" jacob mentioned - you can actually trade futures contracts on this), etc.