Asset Allocation

How to avoid extrapolation bias

“The difficulty lies not so much in developing new ideas as in escaping from old ones.” ― John Maynard Keynes

Past performance may not be indicative of future results, say the regulatory disclaimers. Whichever way you approach asset allocation it relies to some extent on the past. And the past is a long time. One of our key human weaknesses is the tendency to overweight the recent past in any analysis of the future.

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Fake News

Inflation: Fact or Fiction?

“In a time of deceit, telling the truth is a revolutionary act” ― George Orwell

Disseminated at a hyperbolic rate through social media’s ‘telescreens’, the ‘Ministry of Truth’ distributes ‘Newspeak’. It’s not George Orwell’s 1984. It’s now.

Today, this type of truth has no intrinsic value, but it is shaping our world. Audiences no longer trust (or bother to check) the provenance of ‘facts’.

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Peak Welfare

The unpalatable truth?

“When I look at the current picture of expected tax revenues combined with benefits promised to future generations, this is the most unsustainable situation I have ever seen in my career” ~ Stanley Druckenmiller

The welfare state today is not fit for purpose. Its architects had not conceived it for a world of 90-year longevity, mass migration or a low interest rate environment. The mathematics of ‘Baby Boomers’ retiring plus low birth rates just does not add up.

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Back to the future

Latin America: Is democracy looming?

With its history of hyper-inflation, populist governments and more recent headline distractions, Latin America is a region that many investors frequently overlook, despite covering one sixth of the planet. Corruption, a shrinking economy and a deadly virus might sound like a script for a Hollywood movie, but could the new Brazilian government with market friendly policies see democracy returning not only to Brazil but to the region as a whole?

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Going Venezuela

Will some economies ever learn?

Albert Einstein is said to have defined insanity as doing the same thing over and over again and expecting different results. In Wriston’s Law of Capital and Sleeper pins, Alexander M. Ineichen has defined the term ‘going Venezuela’ as “doing the wrong thing repeatedly and with great conviction.” The two ideas are related. Both imply the absence of learning.

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Populism Paradox

Entering the New Age of Inflation

It doesn’t matter whether or not Trump wins on 8 November because the populism genie is out of the bottle. Just at the moment when Western governments (particularly in Europe) are reaching the limits of what they can do for their people, the people want more. It is now clear that peak globalisation lies behind us.

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Revolution or Evolution?

The Faltering Rise of Robo-Advice

In September 2013, Carl Benedikt Frey and Michael Osborne, two researchers at the Oxford Martin School, estimated that by 2033 some 47% of jobs in the US could be replaced by computers. For many working in financial services, this will not have come as a surprise.

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Influence of Gen Z 

Centennials and the Power of Like
Welcome to a virtual world where chats disappear, anything you want to watch or listen to is free and ‘truth’ lives in a search engine. If it is that important, then there’s an app. In this world, influence is power and the priority is making sure you don’t miss out.

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Euro Clash

Should I stay or should I go, now?
On Thursday June 23rd, the British people will vote on continued participation in the European Union. An astonishing array of celebrities, domestic and international political figures have been wheeled out to persuade British citizens of the catastrophic consequences of leaving. One or two have also addressed the merits of staying.

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Innovation or Diversion?

FinTech models that challenge the status quo
Innovation is a truly slippery subject. The problem is that hype must first overcome experience: without the benefit of hindsight it’s incredibly difficult to tell a genuinely innovative development from an interesting diversion. Take eBay, for example. The idea of creating a global online auction house in which people could bid against each other to buy goods was one of the early successes of the internet age. But which aspects of this innovation proved really durable?

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