Invest Like the Best with Patrick O'Shaughnessy Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13]
8 snips
Nov 29, 2016 AI Snips
Chapters
Transcript
Episode notes
Convexity in Investing
- Most investment strategies are short convexity, profiting from stability but experiencing large drawdowns during crises.
- Long convexity strategies, like Chris Cole's, seek small losses during stability with the potential for large gains during market dislocations.
Value Investing as Short Convexity
- Value investing, while a classic strategy, is short convexity because it suffers during market crises.
- Though value investing often performs well after crises due to market inefficiencies, Cole seeks strategies that profit during the crisis itself.
The Illusion of Stability
- Central banks create a false sense of stability by suppressing small market fluctuations.
- This creates the potential for larger, more devastating crises, similar to an arms race or forest fire suppression.