Capital Allocators – Inside the Institutional Investment Industry [REPLAY] James Aitken – Systemic Risk in a Crisis (Capital Allocators, EP.126)
Dec 28, 2020
James Aitken, a renowned macro strategist, examines the intricacies of systemic risk in financial markets. He discusses how the COVID-19 pandemic and geopolitical tensions expose vulnerabilities in market stability. Aitken emphasizes the essential roles of central banks and fiscal measures in alleviating economic challenges. He delves into liquidity mismatches in credit markets, the complexities of the treasury curve, and the ongoing implications of government interventions. Aitken's insights shed light on navigating these unprecedented times with a keen eye toward long-term investment opportunities.
AI Snips
Chapters
Transcript
Episode notes
Initial Conditions of Market Instability
- Current market instability stems from a monumental risk asset bubble.
- Uncapped leverage in the non-bank sector, due to low interest rates, worsened the situation.
Causes of Abrupt Market Movements
- Abrupt market moves are often caused by over-reliance on short-term financing and changing correlations.
- Volatility scaling and the assumption of predictable volatility contributed to market disruption.
Richard Dennis's "Slower Fool Theory"
- Richard Dennis's "slower fool theory" illustrates the fallacy of relying on being quicker to exit the market than others.
- It's dangerous to assume you'll be faster than everyone else.