This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global*.

“As the discount rate drives towards zero, it inflates every asset on the planet, including their correlations. Today’s dominant factor is discount rate risk.”

Fasten your seatbelt and dial down the speed on your podcast player, because you are in for an epic ride. With our good friend Corey Hoffstein (CIO of Newfound Research) as co-host, we were once again joined by one of the most interesting and thought-provoking guests we’ve had on the show: Chris Schindler (Co-founder, CEO and CIO of Castlefield Associates). This incredibly rich and nuanced conversation touched on themes that included:

• Who is “on the other side” of trades and investment strategies – persistent wealth transfers that lead to positive utility for both parties, with no “willing losers”
• Crowded and anti-crowded trades – drilling into the reflexive nature of markets
• What leads to crowding – structural and behavioral reasons, along with naturally-long players
• Why alternative risk premia (aka investment factors) have become shockingly crowded, and where investors might find blue ocean in the space
• Behavior doesn’t manifest in a vacuum – why the efficient market hypothesis is naturally at odds with human synchronization
• Alpha in traditional investments implies being early and/or different
• Social media, riot theory and the emergent phenomenon of crowds
• The ultimate CIO’s dilemma – where do we go from here?
• The moral hazard trade – governments, central banks, and self-fulfilling prophecies
• A basket of call options is always preferable to a call option on a basket

We also covered some of the underlying reasons for market synchronization, how many steps ahead of the crowds are likely to lead to profitable trades, and much more. This episode contains more nuggets of wisdom than we could count and is certainly worth saving for future reference.

Thank you for watching and listening. See you next week.

 

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.