Also, general broad belief in passive investing seems to have slowly eroded over the last decade to the point where no serious pro investor I know seems to unqualified recommend it anymore. But Malkiel himself seems to think pandemic has changed nothinghttps://www.ai-cio.com/news/active-funds-still-losers-malkiel-says/ …
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I should add... and when vast amounts of money are invested with varying degrees of automation. Both institutional investors who must follow rules on allocations/ratings and algorithmic things going on.
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There is a lot of "algorithmic momentum" so to speak, leading to institutions and "professionals" of all sorts acting in ways that reflect pre-Covid times. Plus the disconnect from real signals people are talking about (ie Wall Street as a computer cut off from good input)
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Broader point I've made before about difference between boundary and interior intelligence. A good market needs both, but in general BI >>> II, so when signals get cut off, those with intact BI signals by virtue of NOT being institutional might pull aheadhttps://twitter.com/vgr/status/915302752720322560?s=20 …
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The real danger is in thinking you're either smarter/dumber or luckier/unluckier to explain everything. A third variable, having intact connections with the world/environment that institutions lack matters when the world is changing fast.
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I think Covid got inside OODA loop of Wall Street in a way that nobody has yet recognized. One of the textbook signs of that is being cut off from external reality leading to loop collapse. It's missed an exit that others accidentally did NOT miss by being in the rightmost lane.
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This means what the market is doing right now is somewhere between realizing it missed an exit and taking the next one and doubling back. So now is a bad time to "rebalance" out of whack portfolios to be properly passive.
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When market makes a mistake you accidentally fail to make, you do NOT want a passivity theology tempt you into *actively* tracking that mistake while it is still correcting. Ie, I'll probably still rebalance and try to lower concentration to be back to mostly index, but...later
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I'm not claiming any prescience here. I bet on "software eating the world" not "swew+covid=accelerationist wet dream." I was accidentally a bit more right than the market in a 3-month horizon. Empire may strike back and force world back to dystopian reboot into old normal.
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So I guess my actual implied thesis in NOT rebalancing right now is that the market will not waste the reboot, and will eventually steer into the acceleration despite money printer going brrr to pretend Covid didn't happen.
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End of conversation
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