In the third part of our inflation series, we turn to the greatest investor and a mental model of his for unpacking the impact on inflation on equities.
The perception of inflation’s impact on stocks is mixed. A pair of researchers in the late 1970s sought to find out why. Their conclusion? A Money Illusion.
Myside Bias, as detailed by Professor Keith Stanovich in his wonderful book The Bias That Divides Us is a unique risk. It is uncorrelated with intelligence, as many other forms of bias are. This makes it a silent killer for investors.
It is our belief that capital markets are becoming increasingly reflexive. They are more financialized, reflecting flows ahead of fundamentals and all that entails. An excerpt from our 4Q21 investor letter.
Macroeconomic risk for investors has bifurcated. On one hand, duration looms large for growth assets and fixed income. On the other hand, secular stagnation has been an impediment to rate normalization. What are investors to do?
Assuming stationarity in long-term trends can lead to a poor application of base rates. This plagues various “mean-reversion” market calls. To avoid this, we must understand the principals and formulation underlying long-term metrics and find ways to unearth potential non-stationarity