SI314: Algo Anxiety... Can AI Resolve This? ft. Mark Rzepczynski

Sep 21, 2024

Mark Rzepczynski, a trend-following and systematic trading expert, engages listeners with insights on financial trends and the influence of central banks. He discusses the importance of carry trading and the innovative KuU framework for strategic investing. Delving into AI's role, Rzepczynski contrasts investors' trust in algorithms versus human insights, exploring the nuances of market behavior and decision-making. The conversation also highlights the challenges faced by traders amid evolving market dynamics and the significance of clear communication in systematic strategies.

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ANECDOTE

Private Equity Replication

Mark Rzepczynski discusses his recent work on private equity index replication.
This involves making illiquid assets appear liquid through financial engineering.

INSIGHT

Robotaxis and Algo Anxiety

Waymo's robo-taxis now provide 100,000 driverless rides weekly.
This raises questions about algo anxiety and its relevance to trend following.

INSIGHT

Fed's Inconsistent Cut

The Fed's recent 50-basis point cut contradicts its emphasis on forward guidance.
Market reactions, like falling bond prices, further highlight this inconsistency.

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Together with Mark Rzepczynski we dive deep into the outlook for trend following and discuss what may drive trends in the coming years. We analyze the role that the Fed plays in the rise of carry trading and we discuss how the so-called KuU framework can be used for in your strategy. We also discuss the use of AI when it comes to forecasting and building models and why systematic managers should be better at explaining what they do, how to use the 3 C’s to better understand markets, the pros and cons of buying an index and more.

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Episode TimeStamps:

01:03 - What has caught our attention recently?

04:18 - Industry performance update

09:58 - Who is responsible for the rise of carry?

16:30 - The markets are the real voting machine

18:34 - Reviewing Powell's speech

23:39 - The KuU framework

29:13 - The difference between AI generated and human-made forecasts

38:15 - The flaws of systematic managers

47:05 - Working with the 3 C's

57:13 - "What was it like to be in a bear market?"

01:01:42 - The pros and cons of buying an index

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