Trend Momentum

... tradeoffs everywhere

Investing strategies are a tradeoff between returns, risk and costs. Theoretically, unconstrained momentum strategies give the highest returns. However, in practice, I’m yet to meet an investor who doesn’t bail on a 50% drawdown. Therein begins the journey of tradeoffs.

Our previous post discussed different approaches to this problem.

Volatility is Nature

There really no “one-size-fits-all” approach because everybody’s time-horizon in the face of loss is different.

Using trend overlays on momentum strategies is one such tradeoff. You can read about it here and here. The backtests look promising (don’t they always?) and we’ll keep you posted on their performance out in the wild.

Markets this Week

Up and down and all around…

Links

Trash is cash!

Discarded mobile phones and television sets, computer motherboards and refrigerators, microwave ovens, car components and countless other household items contain varying amounts of gold and silver, lithium, nickel, cobalt, copper and zinc. So much is discarded every year that a 2020 estimate suggested that there could be as much as 6,800 tons of discarded gold alone in Japan, which is more than the known deposits still waiting to be mined in South Africa.  (DW)

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Semiconductors are the new oil.

Gavin Baker @GavinSBaker

The bull case for semiconductors. Doubling the quality of an AI algorithm generally requires a 10x increase in the data used to train the algorithm. AI can be superhuman, but it requires a lot of semis to get there. *Much* more than software written by humans. Via @zswitten

Wasteland Capital @ecommerceshares

Did you know that semiconductors (or “integrated circuits”) are the #1 component of global trade, with a 15% share? They overtook oil in 2015. In 2020, computers were second at 12%, and oil at 9%. Cars were only #4, and then everything else quite far behind.

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Groundhog Day… again?

Michael Pettis @michaelxpettis

1/6 This is crazy. Polish homebuyers were encouraged to take out mortgages in Swiss francs because the zloty was stable against the franc and interest rates on the latter were much lower. This creates a classic "inverted" balance sheet.

ft.comSubscribe to read | Financial TimesNews, analysis and comment from the Financial Times, the worldʼs leading global business publication

Mortgages denominated in or indexed to a foreign currency became popular in central and eastern Europe from December 2004 onwards. Countries where such loans were systematically offered include Greece, Croatia, Hungary, Austria, Poland, Romania and Slovenia, and also two non-EU countries, Montenegro and Serbia. As of April 2011, these loans already constituted 40% of the loan portfolio of commercial banks in Poland, with approximately two thirds of such loans pegged to the Swissfranc (CHF).

Unfair terms in Swiss franc loans (pdf)

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Apt that the word of the year is gaslighting.

The 2022 Economic Year-in-Review

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Lindy as a screener.

Why not embrace the inevitable survivor bias, and only pick from a universe of companies that have already succeeded? Work on the basis that their age and permanence make them more reliable, more durable, and that you have time on your side as an empirical judge of this.

James Bullock (pdf)

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Immigration!

Brad Hargreaves @bhargreaves

Canada's population growth rate over the past 10 years is 10.17%. That's higher than Bangladesh (10.13%) or Vietnam (9.32%) and far above any other G7 country (US = 5.74%, UK = 5.69%)

Meme of the Week

rwlk @sherlock_hodles

“The road to financial freedom starts with investing” That mf road in 2022: