My Worst Investment Ever Podcast

BIO: Vincent Deluard is the global macro strategist for StoneX Group Inc., where he authors weekly commentary on global macro topics and advises pension funds on asset allocation.STORY: Vincent decided to overleverage an ETF during the financial crisis of 2008 in the belief that the economy would bounce back. Interest rates, however, fell, and he lost 70% of his investment.LEARNING: Take into account falling yields and falling inflation. Understand the difference between a trade and an investment. “The more volatile something is, the more likely it will lose its value over time.”Vincent Deluard Guest profileVincent Deluard is the global macro strategist for StoneX Group Inc., where he authors weekly commentary on global macro topics and advises pension funds on asset allocation. Prior to joining StoneX Group Inc., Vincent served as Europe strategist for Ned Davis Research, where he created the firm’s Europe product. Before that, Vincent was executive vice president for TrimTabs Investment, where he headed the firm’s quantitative research. Vincent is frequently quoted in the Financial Times, the Wall Street Journal, and Barron’s and is regularly on Bloomberg TV and CNBC.Worst investment everDuring the great financial crisis of 2008, Vincent had just started working and decided to get into investing. The interest rates at the time were stable at 5%—which seemed like a good number to Vincent.Then in a matter of a week, the interest rates went all the way to 2.5% in the wake of the Lehman Brothers panic. As the interest rates went down, bond prices went up. Vincent believed the situation would reverse, so he leveraged an ETF that gave him access to shorting the US Treasury prices. This worked at the beginning.The economy came out of recession, the yield curve steeped, and interest rates increased. Vincent thought they would go higher and back up to the 5% range, so he didn’t sell his position. Unfortunately, the interest rates didn’t go back up, and Vincent lost about 70% of his investment.Lessons learnedThe more volatile something is, the more likely it will lose its value over time.Take into account falling yields and falling inflation.Understand the difference between a trade and an investment.Andrew’s takeawaysAvoid leverage.Be careful about treasuries and Forex. Because basically, you’re fighting against the Fed, banks with a massive balance sheet, and a limited buyer who can move in any direction.Don’t overestimate the genius of the Fed and other bureaucrats.Actionable adviceMake your mistakes when you’re young, and learn from them to become a prudent investor.Vincent’s recommendationsVincent recommends signing up for his weekly reports, in which he addresses risks that people may have missed and other overlooked things. Sign up on his pinned tweet to get a two-month free trial.No.1 goal for the next 12 monthsVincent’s number one goal for the next 12 months is to do what matters to him and live a more meaningful life.Parting words “This was fun, and I like your humility. I think we all need some of that.”Vincent Deluard [spp-transcript] Connect with Vincent DeluardLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Igor Yelnik founded Alphidence Capital Ltd in 2020 and holds the positions of CEO and CIO. Alphidence is a systematic macro hedge fund management firm based in London, UK.STORY: Igor’s company entered into a forward contract with one of Russia’s biggest banks and sold a very significant amount of the Russian ruble against the US dollar. The company made a considerable profit, but the bank decided not to pay. After a lengthy court battle, the company gave up and counted its losses.LEARNING: Infrastructure and systematic risks can affect your trade significantly. “Non-market risks are really paramount in forward currency trades.”Igor Yelnik Guest profileIgor Yelnik founded Alphidence Capital Ltd in 2020 and holds the positions of CEO and CIO. Alphidence is a systematic macro hedge fund management firm based in London. Previously Igor was the CIO for ADG Capital Management from 2013 to 2019. Prior to that, he spent 9 years at IPM Informed Portfolio Management, where he was a Partner and Head of Portfolio Management and Research. Before this, Igor co-founded St. Petersburg Capital, an asset management firm that specialized in the Russian securities market, and later Unibase Invest, a managed futures business based in Tel Aviv.Worst investment everIn 1998, Asian prices, oil prices, stock prices, and the Russian ruble were going down. Igor was still working in Russia at that time. The Russian Central Bank established a cap—the currency corridor—they set ranges for the ruble. The exciting part was how much the US dollar could appreciate against the ruble. Everybody understood that the ruble was doomed to depreciate in that macroeconomic environment.Then the most popular trade of the summer of 1998 happened. This was the currency forward trade. Russian banks believed the Russian Central Bank would support the currency, so they bought the ruble. Then all the foreign banks played against them and sold the ruble.The ruble was already trading in the Chicago Mercantile Exchange. The foreign price of the ruble on the over-the-counter market in Russia was higher than in Chicago. So in principle, you could sell the ruble in Russia and buy it in Chicago, which was like free money.Under Russian law, Igor’s company entered into a forward contract with one of Russia’s biggest banks. The company sold a significant amount of the Russian ruble against the US dollar. The trade was entered into in July, and the delivery would be on the 15th of September 1998. The price of the trade was 6.37 rubles for $1.On the 17th of August, Russia defaulted on its debt denominated in the national currency. At the same time, it stopped supporting the ruble, so it devalued. By the middle of September, the ruble depreciated relative to the US dollar. It went from 6.37 to around 16. So Igor’s company won in that trade. Then on the 14th of September, the morning trading session set the price of the ruble at 8.25. This was still profitable for Igor’s company.The most interesting thing happened. The Russian bank refused to pay for these contracts, so Igor’s company wasn’t paid for its trade. The company decided to go to court and won. The bank appealed, but Igor won again.At that time, the Supreme Court decided in a similar case, where another major Russian bank was sued by one of the major French banks because of a non-payment on a similar contract. The Russian Supreme Court decided that the law should not protect a currency-forward transaction because it’s akin to betting. Igor and his company decided enough was enough, so they just dropped the matter that was it. They never received any payment and also lost legal fees.Lessons learnedBeing right and making money are two very different things.Infrastructure risks matter because a winning trade may become a losing one if you have the wrong counterparties and infrastructure.If your trade presents a systemic risk, there’s no guarantee you’ll get paid because the government could find non-market ways to deal with you.Andrew’s takeawaysGovernment makes the rules. You may think you’ve made a good bet, but there’s no telling what will happen.Actionable adviceThink about non-market risks when making forward currency trades. It’s also crucial to understand who you’re in business with. Your business partners have to be honest and dependable.Igor’s recommendationsIgor recommends three books:Market Wizards: Interviews with Top TradersReminiscences of a Stock OperatorA Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial InnovationNo.1 goal for the next 12 monthsIgor’s number one goal for the next 12 months is to perform well as a hedge fund manager.Parting words “The last 12 months have been very difficult for many people. I really hope that the next 12 months will be much, much better for all of you.”Igor Yelnik [spp-transcript] Connect with Igor YelnikLinkedInWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Bogumil Baranowski is a founding partner of Sicart Associates, LLC, a New York City investment firm. He has almost two decades of investment experience.STORY: Bogumil invested a lot of time and money in two companies that were drowning in debt, had poor management, and had a secular decline.LEARNING: Just because it’s cheap, don’t compromise on debt, management, and secular decline. Debt is the number one risk for an existing company. “Yes, you can make money, but keeping it is equally as important.”Bogumil Baranowski Guest profileBogumil Baranowski is a founding partner of Sicart Associates, LLC, a New York City investment firm. He has almost two decades of investment experience. He holds a master’s degree in Finance and Strategy from Sciences Po Paris and a master’s in Finance and Banking from the Warsaw School of Economics. He is the author of Outsmarting the Crowd and Money, Life, Family. He is the host of the Talking Billions Podcast.Worst investment everIn 2011, Bogumil picked up Verifone stock because it was cheap. The company had just acquired Hypercom, one of its competitors. It looked like they were well positioned, with Ingenico being the other competitor to coexist in a growing industry. Bogumil paid attention to how cheap the stock was. However, he had questions about how the merger would go, and the management was questionable. But Bogumil thought the price was so reasonable. So he overlooked the debt added for the acquisition and the fact that management was not exactly the team he was comfortable with.Soon enough, the management changed. There was a temporary chairman who even went to Bogumil’s office for a chat. Bogumil and his team invested so much time in understanding all the Verifone’s pieces, the payment systems, and how its products are sold.Then the stock started going down and got to 50% of his entry point. The earnings were also dropping, but Bogumil kept holding onto the stock. Then the tipping point came when Bogumil met with the new management. He didn’t like their approach, so he finally dropped the stock. He walked away with about a 70% loss at the time.Bogumil also shared an interesting case study, a South African retailer - an example of what can go wrong. The company was importing furniture from communist countries and then reselling it at very good prices. So it was a good business. One of the managers decided to get more aggressive with growth, and the company ran into some trouble.Bogumil looked at this company because some people had told him it was an exciting story. He had reservations about retail but put the company on the list regardless. Bogumil did his research well. Five minutes into reading about the company, Bogumil was ready to say no, no matter who was recommending it. But he decided to use it as a case study to teach his interns.The company was piling up debt quickly, and the market cap reached 20-something billion. It was the zero interest rate time in Europe, and money was so cheap. Businesses could easily get loans. This company accumulated about 20 billion in debt and was not picky about what it bought. The company purchased a US mattress business rolling up at a very high premium (over 100%). Bogumil thought it was crazy for an over-leveraged company to buy another over-leveraged company at a 100% premium and borrow money as if there was no tomorrow. And when he watched the management, listened to them, and read what they were saying, Bogumil felt uncomfortable.But as Bogumil continued learning the company’s story, one of the executives was featured on a cover of a prestigious magazine. The magazine called him the new visionary of retail, the one who figured out retail. So Bogumil made a note of it and kept watching it. A year later, the company went to almost zero and was nearly bankrupt. It negotiated a deal with the banks, and the management was fired.Lessons learnedJust because it’s cheap, don’t compromise on other factors that affect a stock, such as debt, management, and secular decline.Decide to cut your losses and not just think in terms of money but also in terms of timeAs an investor, money is one thing, but time is also crucial. Don’t waste too much time on a bad investment.It’s not only what you’re buying but also what you choose not to buy that can make a difference in the portfolio.Too much debt in a company is a red flag.Pay attention to how the management communicates with you.Be careful with a secular decline if you’re a value investor looking for a bargain.A company that can hold on to cash and is ready to survive will flourish in any economic downturn.Andrew’s takeawaysDebt is the number one risk for an existing company. Run with a minimal amount of debt.When acquisitions come along, and you got the cash, you can move fast and beat your competitors.Just because it’s cheap doesn’t mean you have to buy it.Actionable adviceWhen analyzing a company, pay attention and ask the right questions. Take the time to get to know the company’s story. Then explore the worst thing that can happen and how you can lose money on that business. Once you have that figured out, you can get excited about why you can make money in it.Bogumil’s recommendationsIf you’re new to investing, Bogumil recommends reading One Up On Wall Street by Peter Lynch. If you know a bit about investing, then any book about Warren Buffett is fantastic.No.1 goal for the next 12 monthsBogumil’s number one goal for the next 12 months is to keep publishing an episode weekly on his Talking Billions Podcast and get to his first 100 guests.Parting words “Investing is fun, so have fun with it. Happy investing.”Bogumil Baranowski [spp-transcript] Connect with Bogumil BaranowskiLinkedInTwitterInstagramYouTubeWebsitePodcastBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry discuss a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this second episode of the series, they talk about mistake number two: Do you project recent trends indefinitely into the future?LEARNING: Hyper-diversify and rebalance your portfolio. “You cannot run away from risks; you can only choose which risk you’re going to take. Hyper-diversify on as many different unique risks as you can, stay the cause, and rebalance.”Larry Swedroe In today’s episode, Andrew continues discussing with Larry Swedroe, head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.Larry deeply understands the world of academic research and investing, especially risk. Today Andrew and Larry discuss a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this second series, they talk about mistake number two: Do you project recent trends indefinitely into the future?Missed out on mistake number one? Check it out: ISMS 8: Investment Mistake No.1: Are You Overconfident in Your Skills?Recency bias explainedAccording to Larry, most investors suffer from recency bias. Recency bias is that we tend to overweight whatever has happened in the most recent past, whether it’s months or years, and ignore long-term evidence. Say you’re watching a stock and go back to 1995 and notice that technology stocks in ‘96, ‘97, and ‘98 performed well. So you think the same performance will prevail, and now you buy tech stocks based on that recent trend.If you buy things that have done well in the last few years, and now you think it’s safe, what you’ve done is bought high. You didn’t get those great returns but paid high prices. High prices generally mean you’ll get low expected returns.Larry reminds investors that knowing your history is the best way to overcome recency bias. History tells us that all risk assets, gold, real estate, US stocks, small stocks, value stocks, high-yield bonds, etc., go through very long periods of poor performance. That means you don’t want to be subject to recency bias because you think three, five, or even ten years is a long time to judge performance. It’s not; otherwise, there would be no risk for an investor with a 10-year horizon. So you just have to wait it out.An excellent example of that problem is when the S&P underperformed T bills for at least 13 years for three periods, from 1929 to 1943, from 1966 to 1982, and then again from 2000 to 2012. Of course, the stocks did great in the other half of that period, but you don’t get those returns if you’re subject to recency bias.The never-ending game of buying high and selling lowThe message that Larry tries to give investors is that there are no clear crystal balls. So don’t be subject to recency bias because you’ll forever chase and buy high and sell low. This is not a prescription for success. You cannot run away from risks; you can only choose which risk you’ll take. And if you don’t have a clear crystal ball, there’s only one logical answer; you should hyper-diversify on as many unique risks as possible and stay with the cause.Also, rebalance your portfolio and do what Warren Buffett, maybe the greatest investor of all time, has told people to do: don’t try to time the market. But if you’re going to because you can’t resist, buy when everyone else is panic selling and sell when everyone else is getting greedy.Reversion to the mean of abnormal returnsAccording to Larry, investors get hooked on recency bias and ignore that one of the most powerful forces in the universe is the reversion to the mean of abnormal returns, both good and bad. That’s not necessarily true of individual stocks. For example, a stock could do poorly and then eventually go bankrupt. But it’s true of country indices or any broadly diversified portfolio. When you have a terrible performance period, that’s likely a result of the fact that valuations are falling. And if valuations are falling, your earnings-to-price ratio is going up, which means your expected returns are going up. But investors run away from the bad performance instead of rebalancing their portfolio.Is recency bias symmetrical or asymmetrical in our decision-making?Larry believes recency bias is both symmetrical and asymmetrical in our decision-making. Whatever is done well, people jump on the bandwagon due to fear of missing out (FOMO). But on the downside, the impact is worse because losses have a much more significant effect than an equal-size gain and how we feel.So if you invest $100, for example, you feel twice as bad when you lose that $100 than if you make it. If you turn it around to a million dollars, the multiple effects may be 10X. The bigger the number, the worse that ratio becomes. So what happens is, when markets are going down, you feel that pain and project that it’s going to keep going down. Now you want to get out. The key to avoiding this is to avoid taking more risks than you can stomach in the first place. Then stick with your plan, and don’t chase returns.Larry also insists on being aware that our biases, like political bias, cause us to take action when inaction is almost always better.Your labor capital has to be low in correlation to the equity riskLarry says that many investors set up their asset allocation thinking they have a long investment horizon before they start to withdraw. So they believe they can wait out a bear market—and that’s true. But it’s only a necessary condition to take a high equity allocation, not a sufficient condition.Larry advises investors to take on the sufficient condition: their labor capital should be low in correlation to stocks’ economic risks. Because if the stock market goes down due to a recession and you get laid off, you have to sell stocks when the markets have already crashed to put food on the table, so you lose your investment. Therefore, people whose labor capital is closely tied to the economic cycle risk shouldn’t take as much equity risk in the first place.The risk of confirmation biasYou get an echo chamber effect when you read articles about disruptive industries, technologies, artificial intelligence, and all other hyped stocks. You hear precisely what you want, making you feel even better. Then you ignore all the other evidence. Now, you only see bullish signals, become more optimistic, and buy.However, if you’re more open-minded and look at the negative information about a stock, you get a more balanced view. You’ll do better in the market than a person who hears one side of the story. If you listen to both sides, you’ll still underperform the market because of trading costs and too efficient markets. Still, you’ll only lose by a small margin.Final thoughts from LarryWe’re all subjected to recency and confirmation biases. To overcome them, have a well-thought-out plan, write down your asset allocation, and hyper-diversify. Once a month or once a quarter, look at your portfolio and rebalance it. Then ignore what is going on in the market.About Larry SwedroeLarry Swedroe is head of financial and economic research at Buckingham Wealth Partners. Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match.Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has authored or co-authored 18 books.Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets.Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect, Advisor Perspectives, and Wealth Management. [spp-transcript] Connect with Larry SwedroeLinkedInTwitterWebsiteBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

Emerging Countries - China and Russia with stable rates, LT rates up only slightly, yield curve inversion less severe except RussiaInterest rate overviewChina 3m yield 2.5%, India 7.2%, Korea 3.3%, Russia 22.3%, Brazil 13.6%China 1yr yield 2.2%, India 7.2%, Korea 3.3%, Russia 10.0%, Brazil 13%China 10yr yield 2.9%, India 7.3%, Korea 3.3%, Russia 10.3%, Brazil 13.1%Year-on-year changes3m yield went up in most emerging countriesChina 3m yield was up 0.1ppts, India up 3.4ppts, Korea up 2.1ppts, Russia flat, Brazil up 1.9ppts1yr yield increases most prominent in India and KoreaChina 1yr yield was up 0.1ppts, India up 2.9ppts, Korea up 1.6ppts, Russia down 4ppts, Brazil up 0.2ppts10yr yield curve hasn’t changed significantly among emerging countriesChina 10yr yield was flat, India up 0.5ppts, Korea up 0.4ppts, Russia down 0.8ppts, Brazil up 1.5pptsRate progression3m yield was quite stable in developing countriesOverall, developing countries have been more cautious in adjusted their short-term interest rates1yr yield was volatile in Russia over the past year; other developing countries remained flat10yr yield almost stayed constant in all emerging countriesYield curveChina yield curve remained constant over the past 12 monthsBoth short-term and long-term yield haven’t moved muchAs of March 2023, the 10yr yield remained 0.4ppts higher than the 3m yieldIndia yield curve flattened massively and looks set to invert3m yield almost reached the same level as 10yr yield recentlyThis is a massive change YoY as the yield curve was pretty steep back in March 2022Korea yield curve inverted slightly in March 2023Russia yield curve stays invertedBoth short term yield and long-term yield haven’t moved muchBrazil yield curve inversion has widenedThe inversion accumulated to 0.5 ppts which is a bit higher compared to the previous yearKey pointsIndia, Korea, and Brazil raised ST rates significantly; China and Russia were stableLT rates are up slightly in all EM countries but increased less than WorldBrazil and Korea saw yield curve inversion recently, Russia remains worst Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

Developed Countries - Vast DM Country increases in ST and LT rates, Japan stays an outlier, US looks worst based on yield curve inversionInterest rate overviewUS 3m yield 4.9%, Japan -0.3%, Germany 2.6%, UK 4.1%, France 2.8%US 1yr yield 4.7%, Japan -0.1%, Germany 2.9%, UK 4.0%, France 3.0%US 10yr yield 3.6%, Japan 0.3%, Germany 2.3%, UK 3.5%, France 2.8%Year-on-year changes3m yield in US up the most YoY as it started the interest rate hikeUSA 3m yield was up 4.4ppts, Japan down 0.2ppts, Germany up 3.2ppts, UK up 3.5ppts, France up 3.4ppts1yr yield has risen significantly in developed countries; only Japan’s yield didn’t moveUSA 1yr yield was up 3.1ppts, Japan down 0.1ppts, Germany up 3.3ppts, UK up 2.7ppts, France up 3.5ppts10yr yield grew in all developed countries YOY, even in JapanUSA 10yr yield was up 1.2ppts, Japan up 0.1ppts, Germany up 1.8ppts, UK up 1.9ppts, France up 1.8pptsRate progression3m yield has risen steepest in the USGermany, UK, and France 3m yield follows US, but with a delayJapan remains an outsider and continues with its negative interest rate policy1yr yield in developed countries moved up aggressivelyHowever, in March 2023, US 1yr yield dropped for the first time in 12 monthsOther developed countries also saw a slight fall recently10yr yield has risen in all developed countries, but starts to show flattening behavior recentlySince October 2022, the 10yr yield among the developed countries hasn't moved much and stayed flatYield curve3m yield curve inversion in the US widened after the Fed aggressively increased short-term ratesIn March 2023, the 3m rate was 1.3 ppts higher than the long-term rate1yr yield curve in Japan steepened over the past 12 monthsJapan is among the few countries that haven’t seen a yield curve inversionQuite the opposite is true as the differential between 10yr yield and 3m rates doubled over the past 12 months10yr yield curve in Germany turned into negative territory, but far less severe compared to World10yr yield curve in the UK also saw a slight widening of its yield curve inversion10yr yield curve in France flattened massively and seems likely to invert soonKey pointsAggressive ST rate hikes led by the US and followed by European developed countriesLT rates seem to have peaked and fell MoMJapan with different policy sees almost no movements in both ST and LT ratesUS faced steepest inversion among developed countries; Japan maintains positive yield curve Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

Developed Market Regions - ST rates about to peak, LT rates are falling, inverted yield curve in DM Americas and Europe widenedInterest rate overviewDM Americas 3m yield 4.8%, DM Europe 3%, DM Pacific much lower at 1.1%DM Americas 1yr yield 4.6%, DM Europe 2.8%, DM Pacific same as 3m yield at 1.1%DM Americas 10yr yield 3.5%, DM Europe 2.9%, DM Pacific 1.4% is higher than 3m and 1yr yield, normal yield curveYear-on-year changesBiggest rise of 3m yield in Developed AmericaWorld 3m yield was up 3.2ppts, DM Americas up 4.3ppts, DM Europe up 3.3ppts, DM Pacific up 1.1pptsFollowing 3m yield, 1yr yield YoY changes were most prominent in DM Americas and DM EuropeWorld 1yr yield was up 1.9ppts, DM Americas up 3ppts, DM Europe up 2.9ppts, DM Pacific up 0.8ppts10yr yield in DM Europe and DM Americas widened fastest, little movement in DM PacificWorld 10yr yield was up 0.9ppts, DM Americas up 1.2ppts, DM Europe up 1.8ppts, DM Pacific up 0.4pptsRate progression3m yield has risen most aggressively in DM AmericasDM Europe yield moved at a similar pace to WorldDM Pacific yield only rose slightly, widening the 3m interest rate differential to other DM regionsUnlike World, 1yr yield has fallen in all DM regions in March 202310yr yield in DM Americas and DM Europe moved up simultaneouslyDM Pacific 10yr yield stayed almost flatAll DM 10yr rates fell MoM in MarchYield curveDM Americas yield curve has inverted the most among all DM regionsIn March 2023, the 3m yield was 1.3ppts higher than the 10yr yieldThe degree of inversion is similar to WorldDM Europe yield curve just inverted in March 2023The yield curve turned to negative territory as the 10yr yield dropped in March by 0.4ppts compared to FebruaryThough the inversion is much less extreme compared to WorldDM Pacific sees flattening yield curve over the past 12 months, but remains positiveAs of March 2023, the long-term 10yr yield was 0.3ppts higher compared to the short-term 3m yieldOne year earlier, the difference was 0.9pptsKey pointsST rates in DM Americas and Europe risen more aggressively than World, DM Pacific much slowerSmall increases in LT rate in all DM regions YoY, but fell MoMDM Pacific maintains a positive yield curve while inversion worsened in DM Americas and EuropeEmerging Market Regions - Massive ST rate hikes in ME&A and Frontier, LT rates more stable, no yield curve inversion in AsiaInterest rate overviewEM Americas 3m yield 12.7%, EM Asia 3.2%, EM Europe 14.6%, EM ME&A 52.7%, Frontier markets 23%EM Americas 1yr yield 12.6%, EM Asia 3.2%, EM Europe 9.4%, EM ME&A at 23% is half 3m rate, Frontier markets 17.1%EM Americas 10yr yield 11.2%, EM Asia 3.6%, EM Europe 8.8%, EM ME&A 10yr yield  at 15.4%, 1/3rd of 3m rate, Frontier markets 10yr yield 11.9%, half 1yrYear-on-year changes3m yield has risen in all EM regions; it was most extreme in ME&A and Frontier marketsEM Americas 3m yield was up 3.1ppts, EM Asia up 0.9ppts, EM Europe up 0.3ppts, EM ME&A 3m yield was up 43.2ppts, Frontier 3m yield was up 10.6ppts1yr yield saw a rise in all EM regions YoY, except in EM EuropeEM Americas 1yr yield was up 1.8ppts, EM Asia up 0.8ppts, EM Europe down 3ppts, EM ME&A up 9.2ppts, Frontier up 4.3ppts10yr yield surged in all EM regions, except EM EuropeEM Americas 10yr yield was up 1ppts, EM Asia up 0.1ppts, EM Europe down 2.7ppts, EM ME&A up 2.7ppts, Frontier up 3.4pptsRate progression3m yield has moved in different directions among EM regionsME&A and Frontier saw extreme increases in their 3m rates mainly driven by EgyptEM Asia and EM Europe actually stayed flat over the past 12 monthsSpotlight on Egypt Inflation went from 9% to 32% in 12 monthsRussia and Ukraine account for 80% of Egypt’s wheat importsSince the war, import prices  skyrocketed50% currency devaluation in 2016 and another 50% since March 20221yr yield in all EM regions higher than World, except Asia10yr yield in EM regions were less fluctuatingAll EM regions have a higher long-term 10y yield than WorldYield curveEM Americas yield curve inverted slightly more than WorldEM Asia yield curve is the only EM regions which didn’t see an inversion of its yield curve yetThough, the yield curve has flattened over timeIn March, the difference between the 10y yield and 3m yield was just 0.4pptsOne year earlier, the difference stood at 1.2pptsEM Europe yield curve inversion more than doubled over the past 12 monthsIn March 2023, the long-term yield was 5.8ppts higher than the 3m yield12 months ago, the difference was only 2.8pptsEM ME&A yield curve has massive inversionGiven the aggressive increase in 3m yield, the inversion amounted to 37.4ppts in March 2023This compared to no inversion one year agoFrontier yield curve stays inverted in March 2023, but a bit less MoMKey pointsST rates exploded in ME&A and Frontier, EM Asia and Europe were more cautious in raising ST ratesLT rates of all EM regions rose and remained above World; only EM Europe saw falling yield YoYAsia remains the sole EM region with no yield curve inversion, inversion looks painful for EM Europe, ME&A, and Frontier Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

World - End of DM ST rate rise, inverted yield curves remain, high rates in EMLevel – High ST global and EM rates, yield curve inversionWorld ST rates at 5.3%, DM 3.6%, EM 7.7%World 1yr rates at 4.4%, DM 3.4%, EM 5.8%World 10yr rates at 4.1%, DM 3.0%, EM 5.6%YoY rise – ST rates up massively YoY, small increase in LT ratesWorld 3m yield was up 3.2ppts, DM up 3.5ppts, EM up 2.6pptsWorld 1yr yield was up 1.9ppts, DM up 2.6ppts, EM up 0.7pptsWorld 10yr yield was up 0.9ppts, DM up 1.3ppts, EM up 0.1pptsProgression – ST rate rise stopped in DM, DM LT rates fell MoM3m yield consistently grew over the past 12 months, but DM is flat MoMWorld 1yr yield has fallen for the first time in March 2023, driven by fall in DM10yr yield has risen less extreme compared to short-term rates, again DM fell MoM Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Peter Ricchiuti is a graduate of Babson College and began his career with the investment firm Kidder Peabody in Boston. He later managed Louisiana’s $3 billion investment portfolio while serving as the assistant state treasurer.STORY: Peter made the mistake of falling in love with a particular stock and hyped it to his clients. The company had no moat and couldn’t stand the competition. Peter’s reputation was severely affected after the stock price fell significantly.LEARNING: Don’t fall in love with a stock. Diversification is key. “If you meet a money manager and they tell you they’ve never had any big losers, just run because losses are part of the game.”Peter Ricchiuti Guest profilePeter Ricchiuti is a graduate of Babson College and began his career with the investment firm Kidder Peabody in Boston. He later managed Louisiana’s $3 billion investment portfolio while serving as the assistant state treasurer.From Memphis to Mars (PA), Peter has addressed more than 1,200 groups in 47 states and several countries. He has been featured in BARRON’S, Kiplinger’s, The New York Times and The Wall Street Journal. He also hosts a popular weekly business show on National Public Radio in New Orleans called “Out To Lunch.”Worst investment everPeter got interested in a new company making soft soap that would replace the bar soap, which it did. The stock was trading at around $19 a share, and Peter just fell in love with it. He got many blatant signals that this would not work, but he ignored them.At first, the stock performed very well. However, the company had no moat. So the stock started falling. It got to $9, and Peter was beside himself because he had the stock in many client accounts as a speculative stock. The stock price just kept falling.As a broker, Peter’s biggest loss was not the money but the fact that his entire clientele and institutional salespeople wouldn’t believe him anymore.Lessons learnedDiversification is crucial.Don’t fall in love with a stock.Andrew’s takeawaysJust because a company or a CEO has an idea and is implementing it well doesn’t mean they can hold on to it.Actionable adviceThink of all the downsides before you take a position.Peter’s recommendationsPeter recommends reading How to Invest: Masters on the Craft to learn more about investing.No.1 goal for the next 12 monthsPeter’s number one goal for the next 12 months is to dig deeper into a few stocks he liked a couple of years ago and are now selling for much lower prices. [spp-transcript] Connect with Peter RicchiutiWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedDavid M. Rubenstein (September 2022), How to Invest: Masters on the Craft

BIO: Jason Hsu is the founder, chairman, and CIO of Rayliant Global Advisors (RGA), a global investment management group with over US$15+ billion in assets managed using its strategies as of June 30, 2022.STORY: Jason bet against the GameStop short squeeze and learned that John Maynard Keyens’ saying that “markets can remain irrational longer than you can remain solvent” still holds true.LEARNING: The market can be crazy for longer than you have the conviction to stay invested. Apply position constraints and diversify. “In the short run, the market can really stay crazy for longer than you have the money to stay on. And if you forget that, the market will remind you in as painful of a way as possible.”Jason Hsu Guest profileJason Hsu is the founder, chairman, and CIO of Rayliant Global Advisors (RGA), a global investment management group with over US$15+ billion in assets managed using its strategies as of June 30, 2022. Rayliant applies quantitative methods to access behavioral-based alpha prevalent in inefficient markets like China. Jason also co-founded Research Affiliates, a smart beta and asset allocation leader with over US$143 billion in assets managed using its strategies.Worst investment everGameStop is a sleepy, almost dead brick-and-mortar retail store selling video games that come in a DVD ROM you put into your laptop to play. It sells cartridges for your Nintendo. In a world where online games are reigning, GameStop is definitely a dying business, and the stock price shows it.Two years ago, the stock price was trading at a couple of bucks. A forum on Reddit started hyping the stock and convincing everyone that hedge funds shorted GameStop since they had realized the company would declare bankruptcy. The forum insisted it was a good time to do a short squeeze and screw the hedge funds. All this started as a joke, but in no time, the share price got to as high as $300.When Jason first caught wind of this, he thought the situation would make a fascinating case study. Jason would do a case study and use it to teach his MBA class about how markets can become inefficient and how these prices clearly violate any rationality.After a while, the stock price started pulling back and gradually falling. By that time, most people had recognized that it was just a crazy short squeeze, and now things were going back to normal. Jason figured the stock price would drop to $30 or $40. He decided to make a bet on that. This was when the second wave of the leading stock rally on GME happened, and the stock, for bout a two-three day run, went from $40 to $200. Jason lost a lot of money on that bet.Lessons learnedThe market can be crazy for longer than you have the conviction to stay invested.Be diversified. Don’t research one stock and bet big on it. Have lots of research and lots of uncorrelated possibilities.Apply position constraints so your portfolio is well diversified.Andrew’s takeawaysThe market can wear you down, but that doesn’t mean you’re wrong. It just means that your timing was terrible.Stop losses is a great way to protect you from an inefficient market.Actionable adviceApply risk management through a stop loss or position constraint. It doesn’t matter how convinced and sure you are about a stock; size it so that if you lose the entire position, you won’t commit suicide because the pain is intolerable.Jason’s recommendationsJason recommends following him on LinkedIn, where he posts his commentaries, random musings, and links to his research papers.No.1 goal for the next 12 monthsJason’s number one goal for the next 12 months is to stay alert as he observes the bonding process for global equities. He hopes to participate in the next global bull market cycle.No.1 goal for the next 12 monthsJason’s number one goal for the next 12 months is to stay alert as he observes the bonding process for global equities. He hopes to participate in the next global bull market cycle.Parting words “Always ask yourself before you make any trade; am I smarter than the person who’s selling me that share of stock?”Jason Hsu [spp-transcript] Connect with Jason HsuLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast