Spot on article. Couldn't agree more with your conclusion. Money management is probably one of the only markets in which customers as a whole do not exhibit common sense, wether it be housing, tax exemption (in France at least) or stock market investment.
In this day and age, if customers spent 15min researching money management before investing, half of the companies would go down.
That’s probably true! The incredible story about Meriwether, who was the money manager of Long Term Capital Management, is that he started a new funds a year after LTCM’s collapse. The fund reached $3bn AUM and blowed up during the financial crisis in 2008. After that, he started again a new fund that he is currently running. The current funds, as well as the former one, uses LTCM’s strategies with high leverage...
Just checked out his new fund's performance and compared it with an equivalent investment 100% etf msci World Index over 10 years. Guess who performed better... I can't believe how these guys still manage to raise any money at all.
🤯. It blows my mind that people keep going with these guys whereas they can hire Warren Buffet in one click, buying BRK-B, to manage their precious savings!
I used to be a market maker at the CBOE, and if you ever blew out your account and got fired from one firm, there would be another ready to hire you pretty soon after that. I saw a few guys blow out at multiple firms.
- Do you include VC in the batch of money managers described here?
- Given the amounts currently printed and the related intrasequential loss of value of the dollar, do you think that having high cash reserves is relevant?
Thanks for commenting. I have heard very good thing about The Psychology of Money. I only read books that were published at least 10 years ago (https://cyberspace.substack.com/p/my-radical-information-diet), so I would have to wait for a while to read this one haha!
Yes, PE and VC firms are included. VC is a small, but growing, financial industry. Venture capital's returns are bad. It's really difficult to make money especially if you don't invest in Silicon Valley. IMO it's still an important component of the financial industry because someone has to fund the future - even if it means losing money by doing so.
A long term cash position is definitely a bad investment. A short term cash position can be smart if you are patient enough to wait for the big dip. I have a cash position. It's painful to be charged -0.75% on top of the inflation but better than buying over valued assets in my opinion.
Thank you for the really interesting resources, it was a bit the perception I had of the world of VC.
Really cool your reflection on the consumption of information, the approach is really radical but it's a subject that interests me a lot too.
For your cash reserves if you don't want to pay the premium and you have a medium risk tolerance you could explore these two tools based on the blockchain:
- Binance Swap Pools, using DeFi on Binance allowing to earn between 10 and 28% APY on usdt (Token 1:1 Usd), it's quite young for this one but being backed by Binance the security of the funds is quite good. : https://www.binance.com/fr/swap
I don't trust most DEFI and crypto products. The yield is, of course, super appealing but it's very risky. Nowadays risk free is worth -0.50% and you have almost nothing safe with a yield over 2%. It means that 6% APY is very risky. For instance, companies such as BlockFi even lends the collateral. Good article on this topic: https://unchained-capital.com/blog/ultimate-guide-bitcoin-loans/#Rehypothecation
So I know that I can have great yield with USDT and co but I'm afraid being the turkey (https://nassimtaleb.org/2013/09/turkey-problem/) which is like having good returns during years and then losing everything in few hours.
Anyway, when it comes to wealth management, I'm just super conservative (and boring!)
Spot on article. Couldn't agree more with your conclusion. Money management is probably one of the only markets in which customers as a whole do not exhibit common sense, wether it be housing, tax exemption (in France at least) or stock market investment.
In this day and age, if customers spent 15min researching money management before investing, half of the companies would go down.
That’s probably true! The incredible story about Meriwether, who was the money manager of Long Term Capital Management, is that he started a new funds a year after LTCM’s collapse. The fund reached $3bn AUM and blowed up during the financial crisis in 2008. After that, he started again a new fund that he is currently running. The current funds, as well as the former one, uses LTCM’s strategies with high leverage...
Just checked out his new fund's performance and compared it with an equivalent investment 100% etf msci World Index over 10 years. Guess who performed better... I can't believe how these guys still manage to raise any money at all.
🤯. It blows my mind that people keep going with these guys whereas they can hire Warren Buffet in one click, buying BRK-B, to manage their precious savings!
*BRK-A 😆
Well, you have probably noticed than I'm not a money manager! I don't have the money for BRK-A yet...
I used to be a market maker at the CBOE, and if you ever blew out your account and got fired from one firm, there would be another ready to hire you pretty soon after that. I saw a few guys blow out at multiple firms.
That's just insane! And still people continue to invest in this madness.
Funny Buffet's quote: "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway."
I completely share your vision, investing in a world ETF or the S&P500 on a regular basis seems much more profitable to me.
To set up for an individual a strategy of dollar cost average each month on a global index for several years is certainly the simplest and most profitable form of investment. The psychology of money is relevant enough to describe this https://www.amazon.fr/Psychology-Money-Timeless-Lessons-Happiness/dp/0857197681
I would like your opinion on two points:
- Do you include VC in the batch of money managers described here?
- Given the amounts currently printed and the related intrasequential loss of value of the dollar, do you think that having high cash reserves is relevant?
Thanks for commenting. I have heard very good thing about The Psychology of Money. I only read books that were published at least 10 years ago (https://cyberspace.substack.com/p/my-radical-information-diet), so I would have to wait for a while to read this one haha!
Yes, PE and VC firms are included. VC is a small, but growing, financial industry. Venture capital's returns are bad. It's really difficult to make money especially if you don't invest in Silicon Valley. IMO it's still an important component of the financial industry because someone has to fund the future - even if it means losing money by doing so.
You should read these articles:
https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/
https://www.sethlevine.com/archives/2020/10/vc-fund-returns-are-more-skewed-than-you-think.html
A long term cash position is definitely a bad investment. A short term cash position can be smart if you are patient enough to wait for the big dip. I have a cash position. It's painful to be charged -0.75% on top of the inflation but better than buying over valued assets in my opinion.
Thank you for the really interesting resources, it was a bit the perception I had of the world of VC.
Really cool your reflection on the consumption of information, the approach is really radical but it's a subject that interests me a lot too.
For your cash reserves if you don't want to pay the premium and you have a medium risk tolerance you could explore these two tools based on the blockchain:
- Nexo, a Swiss solution to earn 10% APY on EUR. The product is good : https://nexo.io/earn-fiat
- Binance Swap Pools, using DeFi on Binance allowing to earn between 10 and 28% APY on usdt (Token 1:1 Usd), it's quite young for this one but being backed by Binance the security of the funds is quite good. : https://www.binance.com/fr/swap
🙌🏻
I don't trust most DEFI and crypto products. The yield is, of course, super appealing but it's very risky. Nowadays risk free is worth -0.50% and you have almost nothing safe with a yield over 2%. It means that 6% APY is very risky. For instance, companies such as BlockFi even lends the collateral. Good article on this topic: https://unchained-capital.com/blog/ultimate-guide-bitcoin-loans/#Rehypothecation
So I know that I can have great yield with USDT and co but I'm afraid being the turkey (https://nassimtaleb.org/2013/09/turkey-problem/) which is like having good returns during years and then losing everything in few hours.
Anyway, when it comes to wealth management, I'm just super conservative (and boring!)
That's respectable, yes BlockFi / Nexo are the same kind of products