The Missing Billionaires
This week, I reviewed two books for the Wall Street Journal: The Missing Billionaires by Victor Haghani and James White and How to Listen When Markets Speak by Lawrence McDonald. I've included the first two paragraphs of each review and a link to the full reviews below.
Also this week, I spent an hour in conversation with Hedgeye’s Keith McCullough for the Hedgeye Investing Summit. A brief blurb and a link to the full interview are also included below.
‘The Missing Billionaires’ Review: Making Money and Keeping It
An obscure mathematical formula may be the key to building and managing complex portfolios over time.
After the spectacular blowup of his hedge fund in 1998, Victor Haghani spent years studying the question of controlling risk. In “The Missing Billionaires: A Guide to Better Financial Decisions,” he and James White offer a smart and sophisticated primer on quantitative risk-management techniques.
Today the authors are principals at Elm Wealth, a multibillion-dollar wealth-management practice. They argue forcefully for a broader adoption of the “Merton share,” named after the Nobel-winning economist Robert Merton: “The expected profit required from a gamble increases not with the size of the risk, but rather with the size of the risk squared,” the authors explain.
Click here to read the full review
‘How to Listen When Markets Speak’ Review: Gathering Storm
To survive the hard times that are fast approaching. investors should focus on hard assets.
Inflation is back. The world will soon be facing catastrophic shortages in natural resources. The U.S. dollar will lose its status as the world’s reserve currency as China, Saudi Arabia and Russia lead a move away from the American-led financial system. And rising government deficits are increasing the risk of a U.S. default.
Many investors are oblivious to these risks, heedlessly dumping money into passive index funds. But as Lawrence McDonald warns, “seismic shifts in global markets” are under way.
Click here to read the full review
Conversation with Hedgeye’s Keith McCullough
In the past 25 years, institutional asset managers have radically shifted their portfolios to owning as much as 40% of assets in illiquid private equity.
"There's nothing more overbought today than private equity," says Dan Rasmussen.
Why? Dan explains why investing is a game of “meta analysis.” “It’s not about what you think. It’s about what you think relative to what everyone else thinks,” he says.
That’s why Dan is so concerned about the race to own more private equity as a percentage of assets. “The minute something becomes so expensive, especially when the smart money is 20x overweight something, you’ve gotta step back and say, ‘Maybe we should fade that,’” Dan says.
Maybe illiquid, 10-year capital lock-ups isn’t a great idea if everyone is doing it? Hmmm.
Watch the entire Hedgeye Investing Summit discussion between Dan and Keith here.