Declines, Disruptions, and Distortions

Allowing Deep Knowledge To Work In Your Favor

I detest multiple guess tests. In college, my biology professor who loved them, told me life was a series of multiple guess situations. If all situations were black or white, I would agree with him; but much of life involves a lot of grey.

We live in an age of disruption where technology is changing the way we live our lives. It aids some businesses and harms others.

Facebook 6 Day 25% Decline
Facebook 6 Day 25% Decline

Asset management is one of the areas that has been disrupted. Machines are coded with algorithms to make investment decisions. No subjectivity, no deep fundamental analysis — just black-or-white, buy-or-sell decisions.

One of the many problems that arises is asset liquidity — when valuation models change rapidly (because of machine and human algorithms), it creates huge vacuums in the market and sell-offs get overdone, just as we have seen this morning.

Some equities were down 20% on the open, even though their fundamental market position did not change 20% over the weekend. The Dow was down over 1000 points and is now down less than 300 points.

What is the best way to make decisions in light of this world that we live in?


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