Narrative

From our A-Team of seasoned subject matter experts, the Narrative is an evolving stream of perspectives and insights on a broad range of financial subjects and asset classes. Please read, enjoy and share.

Author: W. Ben Hunt, Ph.D.
Date: April 26, 2017
Category: Rabbit Hole
Tags: big compute, AI, algorithms, video games, Alibaba, StarCraft, Facebook, Google, DeepMind, NLP, STEM, memories, physics, Chögyam Trungpa

AI has moved one step closer to mastering the classic video game StarCraft. Google, Facebook and now Alibaba have been working on AI StarCraft players, and last week a team from China’s Alibaba published a paper describing a system that learned to execute a number of strategies employed by high-level players without being given any specific instruction on how best to manage combat.

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Author: Rusty Guinn
Date: April 24, 2017
Category: Theory in Action
Tags: active management, stock picking, AQR, scientific method, data mining

Epsilon Theory readers, my kids eat because I’m a fund manager. Mostly hot dogs and Kraft macaroni & cheese, but they eat. So it pains me to tell you that the amount of time, personnel and attention we all spend picking, talking to, debating and stressing over fund managers is ridiculous. This is why picking fund managers comes in at #3 on our list of Things that Don’t Matter.

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AI Hedge Funds, Corporate Inequality & Microdosing LSD

Author: W. Ben Hunt, Ph.D.
Date: April 18, 2017
Category: Rabbit Hole
Tags: technology, big compute, AI, artificial intelligence, hedge funds, algorithms, quantum computing, Julia, income inequality, HBR, talent

Allow me to reintroduce Neville Crawley.

Neville Crawley is not only an Epsilon Theory fellow traveler and recent podcast guest, he’s also a brilliant technologist. As part of the ET 2.0 expanded sandbox, I’ve asked Neville to write a weekly-ish “Down the Rabbit Hole” column with his observations on what he calls Big Compute, I call non-human intelligences, and the rest of the world calls AI. This is the biggest revolution in markets and the world today.

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What a Good-Looking Question! The Five Things that Don’t Matter | Part II

Author: Rusty Guinn
Date: March 31, 2017
Category: Theory in Action
Tags: investment philosophy, code, active management, volatility, things that don't matter, bike shed, stocks, stock picking, portfolio risk

It is hardly a novel observation that disputes among those who agree on the most critical questions and disagree on details are often among the most violent. After all, more died in the disputes between French Catholics and Huguenots alone than in all three of the Crusades. And it took twice as long for John Lennon and Paul McCartney to get in a recording studio together after the Yoko Ono Experience than it took for King George III to receive John Adams as ambassador after the Treaty of Paris. As investors, however, we have turned this seemingly normal human behavior into an art form.

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Salient and Other Just-So Origin Stories

Author: Jeremy L. Radcliffe
Date: March 24, 2017
Category: Rabbit Hole
Tags: Houston, baseball, Bill Simmons, rabbit hole

I get to play GM in this business that we’ve built at Salient, and Ben’s not the only talent I can claim (some) credit for “drafting.”

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The Rabbit Hole: The War on Bad Science

Author: Jeremy L. Radcliffe
Date: March 24, 2017
Category: Rabbit Hole
Tags: science, medicine, fake news

A methodical dissection of the peer-reviewed studies underpinning all sorts of critical science reveals that they are likely highly flawed.

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I Am Spartacus: The Five Things that Don’t Matter | Part 1

Author: Rusty Guinn
Date: March 17, 2017
Category: Theory in Action
Tags: active management, passive management, S&P 500, Russell 2000, Russell 1000, diversification, large-cap, small-cap, mid-cap, mega-cap, MLP, costs, volatility, Spartacus, things that matter

It seems like every few years the debate on active vs. passive management comes back in full force — not that any of this is new, of course. DFA, Vanguard, and brilliant investors and writers like Charlie Ellis have been shouting from the mountaintop about what a waste of time active management is for decades now. So why the breathless excitement from the financial press on the topic this time? Mostly because they haven’t the faintest idea what they’re talking about.

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A Man Must Have a Code

Author: Rusty Guinn
Date: March 5, 2017
Category: Theory in Action
Tags: investment philosophy, code, poker, worldview, Dalio, Bridgewater, Dimensional Fund Advisors, DFA, things that matter

A few years back I worked with the Teacher Retirement System of Texas. I was responsible for hiring ostensibly sophisticated money managers—the type hedge funds and others generally regarded as some of the most intelligent people our society has to offer. But the most impressive people I worked with were not London-based portfolio managers but two of my fellow laborers. At a public pension plan in Austin. Go figure.

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