In no particular order, here’s a few interesting things I heard and read recently that I wanted to share.
Using Game Theory To Handle North Korea (Laurence Kotlikoff, contributor to Forbes)
When I obtained my Masters Degree, I had one particular class that made my entire degree worthwhile and memorable: Game Theory. I don’t know how I went 30-something years without knowing about game theory, but I instantly feel in love. It’s the economics nerd in me that had me obsessed with the subject. So, I was excited to see this article in Forbes discuss – in “gaming theory logic” – how we should review and possibly respond to the North Korea situation. In this case, USA versus N.Korea, game theory says that each side has a set of strategies and corresponding payoff values (good or bad). Too often the two sides do no collaborate and end up in a sub-optimal outcome (sub-optimal in this game would happen to be cataclysmic!). The author does a great job laying out the options and making his own proposal. I won’t get in to politics on my blog, but a game theory article – SURELY!
Why a toxic mix of low volatility, passive strategies, and high levels of leverage is reason for caution in U.S. equity markets. (13D Research)
This article isn’t necessarily a doom-and-gloom read, but it does point out some cautionary data on what stage of the market we are in these days. What’s surprisingly truthful is we have market volatility (aka the VIX) recently reaching record lows and you would not expect that from reading any of the daily news headlines. As the article explains, “in a world defined by political turbulence, a time when U.S. markets appear increasingly frothy, when the Fed has a declared intention to unwind QE, the stability appears unnatural”. That said, I believe that well-built portfolios can weather any storm, and I am sure to tailor client’s portfolio risk accordingly.
The Difference Between Amateurs and Professionals (Farnam Street Blog)
If you are looking for a 2 minute motivational read, check out this one on Farnam Street. This really simplifies the mindset of separating yourself from most others. The list of 18 are solid, but here are three of my favorites:
- Amateurs focus on being right. Professionals focus on getting the best outcome.
- Amateurs blame others. Professionals accept responsibility.
- Amateurs show up inconsistently. Professionals show up every day.