We Study Billionaires - The Investor’s Podcast Network TIP455: Indicators for Crisis Investing w/ Dan Rasmussen
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Jun 10, 2022 
Dan Rasmussen, an expert in crisis investing and portfolio manager, shares his insights on navigating turbulent financial times. He discusses key indicators such as high yield spreads that signal economic downturns. Rasmussen critiques the discounted cash flow model, urging caution in reliance on traditional forecasts. He introduces Verdad's four-quadrant framework to mitigate biases and emphasizes the shifts in investment strategies post-COVID, particularly towards value and small cap stocks, equipping listeners with essential tips for informed investing.
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Market Risk Indicators
- High yield spreads above their 10-year median indicate a risky market.
- A high VIX, spreads above median, and indices below moving averages all signal potential drawdowns.
High-Yield Spread as Default Risk Indicator
- The high-yield spread reflects default risk assessment by banks and fixed-income investors.
- Rising spreads signal increased default risk, impacting marginal borrowers and potentially triggering the financial accelerator.
Limitations of DCF Models
- Discounted cash flow models rely on unpredictable future cash flows and risk assessments.
- They create a false sense of certainty and often lead to overconfidence in investment decisions.