YouSaid · the spoken record

Christopher Cole

lines on the record: 57
first: 2016-11-29
most recent: 2016-11-29
sittings or episodes: 1
sources: podcast

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“They specialize on because I've always been amazed at what they do in like Second City in Chicago and some of the improv. Is it sort of that type of? Performance based improv, or”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah Yeah, really interesting. It's interesting in that book, he talks a lot about how they encourage lots of little failures. They want their, that's an example of convexity in the process. A lot of that book is about encouraging people to take small risks and fail and then learn from those small risks.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I was in New Zealand and I was just transfixed by these, they called them Kiyas. In New Zealand, birds have developed a niche where most mammals do and other parts of the world. These kias are the only alpine parrot and they have the intelligence of a four to five-year-old kid. They're known for completely destroying cars. They love to rip the plastic out of cars. They're highly intelligent. They can solve problems and they're predatorial. So I just would watch these birds. I was amazed by them. And then a friend of mine was reading this book and she recommended it. And it not only talks about kias, but they talk about a lot of different, in many instances, forms of intellect that we don't fully understand, that they have in senses. Another book I really enjoyed was called Creativity. It was about Pixar.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Exercising, I'll try to do a combination of weights and running. And then some yoga put on in last book I read that I really enjoyed was Genius of Birds.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I meditate daily. That's been powerful. I exercise daily. That's powerful. And I try to read something challenging, to be challenged by something I haven't. And it needs to be something outside of the sphere of influence. So, I mean, it's one thing to read market-based things, but if you're just solely in that world, you're not making neural connections. So try to read something outside of... Outside of and learn something outside of your direct daily needs.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I was in a personal relationship and I really wanted to grow my business and she wanted something different and she forego she could have taken a lot more money than she did but she didn't out of love and that allowed the business to keep going.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“To me was actually the flash crash. Most people would think that would be a wonderful day. It was for about 10 minutes. I learned when you have a hedged position, I learned my big lesson that day because we had market drops 10% comes right back and I learned not to change your hedges that day. That was a difficult lesson for me that day because we were very well positioned for that, made money into the spike, and then as Vaughl collapsed back down and had begun to actually adjust some positions and were caught off guard by the extremity of the moves. So what should have been a fantastic day ended up being not as fantastic as result of an attempt to sort of rebalance into that.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's interesting. I'd have to say the day Lehman went, I mean, it's such a It's such an easy choice. But that day is particularly interesting, and it's interesting for reasons I think most people wouldn't think. Most people would say, okay, Artemis exists because of the money that I made over 2008. I've audited very large gains over that period. Although that pre-existed the Artemis fund. And I think most people would say, oh, wow, that's because you made a ton of money that day because you were long volatility. And I did make good returns that day. I think the real reason is because I put on more risk because this is the, as it started to develop, that was the beginning of where there was opportunity. So that's the difference in the thinking. It wasn't that I took the gain on that day. It's that I saw, wow, the opportunities are beginning to expand like I've never seen before. Now it's time to put on more risk. So it was the beginning of a journey, not the end of one, as most people would imagine. The other day was most painful.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Dynamite and nitroglycerin to blow up a oil fire in the middle of the jungle. So they're driving these gigantic but rickety trucks with very explosive nitroglycerin through a horrific jungle environment where any misstep could cause the truck to blow up, but they're all doing it for money and they're all men who are desperate because they got into their predicament by shorting volatility in their lives. Organized crime is a form of a short volatility, short convexity. They find themselves in South America and now they're just making a bigger short convexity bet in order to try to get out of their predicament and they never learn. And so that's a classic film that go check it out. It was recently re-released and it's a brilliant one as well.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“But at some point in the movie he decides to do something selfless. He decides to put himself at risk in a selfless form and actually protect this civilization. And as a result, he gains back his humanity that he's lost. And of course it's an incredible kinetic action film at the same time with classic Joseph Campbell mythology. The other one that's really actually just came out, sorcerer, which for a long time was you can only see they had old reels of it. It was recently re-released to work by Friedkin as a brilliant short volatility story about a bunch of individuals stuck in one was an ex-con who was on the run from the mob another one was a Lebanese terrorist another one was a French banker who had conned a bunch of people and they'd all fled to South America and they're given a large sum of money to drive a nitroglycerin a truck full of”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, that follows a classic Western, the Road Warrior is a classic Western where you have a vestige of society with a sheriff who represents society in order. You have savages that will challenge that order. And it takes a man who is part savage, part order, so to actually successfully navigate and be the hero. So Mad Max has torn after the apocalypse, he's lost his wife, he's lost his child.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“In my mind because you have Mad Max is a man who really, he's lost everything, he's experienced, he really has very little more to lose, very little linear losses. But by putting himself out there in a moment of self-sacrifice, in essence achieves great non-linear spiritual growth.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, you know, it's interesting because I think that was the end of my paper. There were two great movies that I love. I think The Road Warrior really is a long volatility film in Mike.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“And finding ways to make that tangible and using technology to do it. It's not all that different of a skill set, as most people would imagine. Or even you look at Andy D.S. Hope and Laurel Roth, who did the brilliant tapestry, the allegory of the prisoner's dilemma that's that we had permission to use for my paper. Andy used to be engineer at Apple. So I think everyone can benefit by working out that side of the brain and having it cross play between the combination of technical and logical and creative is a very, very powerful combination.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I actually, in a past life, I actually spent a lot of time focusing on cinematography and film. So I actually studied cinematography in college way, way, way before ever touching Wall Street. So truly a past life. So I've always been interested in the visual arts. But I feel like a lot of times I hate this idea that people segment left brain, right brain, because I think truly some of the investors I admire the most are actually truly creative. Particularly if you look at the global macro space, someone has to envision a reality that is different than the reality we have today and understand how to structure instruments to profit from that potential reality shift and assign probabilities on that. Now, intellectually, I actually don't see that as being that much different than some highly technical artists. I mean, if you look at great filmmakers, they're envisioning a reality, a tour filmmakers are envisioning a reality that”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Really on most people's radar screens. It's sometimes hard to find options data going back that far. But it's another example of a tremendous period of high volatility that was actually contained within a year that, I mean, the market dropped 20% in one day and then rebounded very, very quickly.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's certainly there's been an underperformance over the last four years. But I would go back and I would say I spent a lot of time studying financial crisis in history. Consider the period of the late 90s. Wonderful timeframe for long volatility. Most people don't realize this, but Vall averaged over 20 in the period between 1997 and 1999. The market was up 20, 30 percent every single year, but we had tremendous volatility. There were 20% drawdowns over that time period, and the VIX went up to 38 in 97 and retested 40 multiple times in 1998. And in both those years, the market ended up over 20%. So people tend to associate these periods of calamity with just 2008, but you can actually have high volatility and high change coupled with high asset prices. In the late 90s, are an example of that. Similar to also the period of 87, which is not”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's like that, you know, the long vault hedge fund index and even the tail risk hedge fund index, if you just take 50-50, it's just a naive 50-50 and put that with equity beta. We're not talking about any additional value you get from value stocks or momentum stocks or other alpha. Just take it and put it with beta and that dramatically outperforms either of those dramatically outperform the average hedge fund since 2005.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“You take these anti-correlated asset classes that are long convexity, they rebound the misses for your value stocks, for your fixed income when things are not doing so well and allow you to have nonlinearities through the interplay of correlations in a powerful way. How you size that it largely depends on that mix of asset classes. But the point is recognizing how powerful that is and how those asset classes actually outperformed in 2008 when diversification failed these asset classes because they're positively exposed to change did really, really well and would have been the difference between protecting a portfolio from disaster and also and having good outcomes.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“In terms of rebounding. That was a degree of statistical difference that no other player in any other stat had ever achieved. So Rodman was much better at He, by simply putting Rodman, even with a group of mediocre offensive players, it greatly amplified the offensive potential of the team. So Rodman had one of the greatest wins over replacement value and improvements in offensive efficiency when he played. He was a member of multiple championship teams, including two of the greatest teams ever to play the game. He won five championships. When he went to a good team, he turned that good team great. And he went to even a bad or a mediocre team, he turned that bad or mediocre team good because he was so good at rebound it created so many second chance opportunities that adding him created nonlinearities. And this is kind of the idea behind a anti-correlated or convex exposure, be it long volatility, systematic CTAs, or contrarian global macro. It's almost like Dennis Rodman for the portfolio.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Feeds into that. I wrote this paper about Dennis Robin and port I think Yahoo picked it up and wrote an article about it, and somehow a lot of the people thought I was recommending that people invest like Dennis Rodman. I was not saying that people should invest like Dennis Rodman. But the concept at the end of the day was that Dennis Rodman was a guy, he's part of the Hall of Fame, basketball hall of fame. Lowest scoring inductee in the basketball hall of fame. And sometimes people say, why is he part of this hall of fame? The guy could barely score outside of five feet. Modern advanced statistics has taken another look at Rodman. And by a lot of metrics, Rodman is actually one of the 20 greatest players ever to play the game of basketball. Now, for people who don't know basketball, Dennis Robman could not. But Dennis Robin was a prolific rebounder. When other people missed shots, he would go get the rebound, and he was better at this than anyone in history. seventeen percent of the offensive rebounds. He was six standard deviations away from the mean.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think one needs to look at the different payouts. What is one hoping to get and what type of change do you want to be positively exposed to? And what's the expected payout of that? And then that informs the sizing decision. For some of our larger clients, they actually can cross-collateralize our exposure. So that's how it's worked. But even in that scenario, it comes down to a idea of what is your idea of change? Is that a 10% decline in markets? Is it a 20% or a 50% decline? What are you trying to protect against? Or is it a 50% increase with tremendous volatility? And then that informs that decision. It's interesting that the power of nonlinearities by combining the right assets. I use this example of Dennis Rodman. It's a great example.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Bright future to exist through technology change, but not if policymakers are looking to, in essence, use medicine on yesterday's problems. So you can have a situation where you're spending a tremendous amount of money and stimulus, and the tech companies are just buying back their own shares. In the past, you would have a situation where a company would take the ultra-low interest rates, invest in a plant, hire a bunch of workers, and then great, it works. Now it's a tech company that already has the needed engineers. They issue ultra low rates, or they issue debt, and they buy back their shares. And now we have a dynamic where share buybacks have now eclipsed the operating earnings of the S&P 500. So in some instances, you have this incredible technological change, but you have policies that are economic policies that are being applied.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Technology and then how classic econometric thinking is being impacted by the new technology as well. So you have a situation where tremendous technological advancements, which is actually resulting in deflation, increased productivity growth, if you buy into that argument, all of a sudden you have a huge portion of the population that is systematically underemployed. Now, the question is, how do we deal with that unemployment or underemployment, and are they systematically no amount of money printing or no amount of stimulus is going to impact the fact that they don't have the job skills for the modern economy? So you have in some instances a game changer in this technology, and it's just amplifying. I mean, a substantial number of people make a living driving, and all of a sudden all those people are going to be out of jobs when they're self-driving cars. So you have these policymakers that are responding using old tools to a changing game. And I think it's possible for a”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Great question. I was actually at a conference, I spoke at a conference in Europe, and an individual pulled me aside. He had read the paper, volatility and the allegory of the prisoner's dilemma, and he said, look, I really agree with a lot of what you've mentioned in this paper. However, I disagree with your, you know, from Norway, work for an Norwegian pension system. We're heavy into oil. I disagree with your assertion that the global decline in commodity prices is, as I put it, there's a decline in the real supply and demand, and there's a disconnect between the real and the surreal economy. I was saying that I would expect that given the decline in commodity prices, whenever we've seen that historically, we've seen a global decline follow. It says, well, I think the game might be changing because technology and the way that technology has impacted commodity prices and particularly shale is a perfect example. In that sense, though, what we really need to explore is the interplay between the workforce, how that workforce is impacted by the new”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because I'm never 100% certain that I'm correct. And the smartest people I know are never 100% certain on anything. Whether it's market fall, whether it's social fall, or whether it's war, how that vol is expressed, I'm not entirely certain. But I'll give a less than 1% probability that I'm wrong and that they'll engineer it.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“And that they can gradually release steam, gradually release bit by bit any volatility pressure and centrally plan the global economy and have this 10 or 15 year soft landing and then inflate our way out of our pension problems and inflate our way out of our debt problems, our global debt problems. It would be an empirical study of history would say that it's never happened before, that they might have names for what they're doing now, like quantitative easing, but that it's no different than what John Law did, what the Romans did, with decoinage. So can it end in a way that is engineered? Sure, it's possible to be wrong, but I think the hurdle for that, the burden of history, the burden of math would argue heavily in the other direction. I'm not like Ben Bernanke, though. When Ben Bernanke says he's 100% certain that he's correct, that scares me.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a great question because I asked myself and my staff that question all the time. What if we're just wrong? And this is an existential question if you're a long volatility manager. It's a truly existential question. Is it possible that they can engineer forever an environment where we'll never have another 20% drawdown in markets where markets can be continuously propped up by central banking? Now, it's interesting because to get the same benefit on bonds as we got in 2008 to now. I mean, you go back to early 2008, the German bond was around four and a half percent. The US Treasury is around 4.2%. Today, Bund has gone all the way negative to flat. U.S. treasuries are like 1.7%. To get the same convex benefit from fixed income, rates have to go all the way to negative 3 to negative 5%. Crazy, but it's possible. Can capitalism function or will we go into a regime where there's just helicopter money, ultra-low zero rates forever?”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“100 or a 200 basis point increase in rates over a period of a year without a complete meltdown in both the stock and fixed income complexes, which would be disastrous to the system. And then what would governments do to respond to that? I'm a gold blog, I'm a believer in gold. I own gold. I don't own fiat gold. I don't think owning GLD is, I think it defeats the purpose of owning gold. I think you need to own physical gold. And that is a right tail convex asset class. So that's another, that combination of these assets, I think, is quite defensive.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Anti-correlation and convexity. I think contrarian global macro is another asset class where you might be able to find good managers. There are systematized strategies that can be executed that show that type of anti-correlation. I think the institutions that try to implement, they might actually have a defensive component to their portfolio, which will include long ball tail risk, systematic CTAs, and contrarian global macro that are all considered long convex anti-correlated managers. And we'll take a combination approach. We always talk about the left side of the return distribution. Everyone's worried about classic losses in 2008. We're forgetting about the right side. It's not trendy to talk about hyperinflation nowadays. But I think one of the scenarios that really is quite scary is a destabilization of both stocks and bonds. There's a question, will the global financial system be able to tolerate a”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you're not an institution, or this is terrible, there's actually a lack of retail products out there. It's very hard for the average guy with $20,000 to invest to actually execute this. It's one thing if you're a pension system or a very wealthy family office. Some ideas on this is that to find combinations of strategies or managers or active strategies that are systematically and positively exposed to change. One, there aren't that many long volatility managers out there. I mean, the CBOE long volatility hedge fund index has about, I think, about nine or ten managers, Artemis is one of them. But other asset classes that are long volatility, systematic CTAs have a long volatility component to them. That's an asset class that is available from a retail perspective, and they offer some...”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Will sell volatility where it's expensive and recycle it into convexity to minimize the cost of carry. You may time your exposure to convexity, ramping it up or down based on the developments of markets, which also helps. So the difference between tail risk and long volatility is that tail risk is a true insurance policy, whereas long volatility is an active management strategy. Tail risk protects against endogenous and exogenous risk, meaning risk that comes from markets like 2008, and risk that comes externally from markets, like a natural disaster. Whereas long volatility tends to focus mostly on endogenous risk and may or may not fully capture exogenous shocks. So when people come to this idea of carry, I like to say that the longball hedge fund index, which Sacebo put out, Artemis is a member of that, if you combine that with the S&P 500, since 2005 that's beaten the average hedge fund by 90%.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“That if you're losing 10% a year, the average tail risk fund is down 40 to 50 percent over the last, since 2012. If you're down 50%, you have to make 100% just to be back at even. So it's one thing to have convexity, but if it's incredibly costly, then you end up in this hole that you can't come back out of. One idea is to take a small amount of that convexity exposure and to pair it with beta, or to pair it with value investing and other forms of traditional carry, and maybe use the, since the carry is actually, or the other traditional investments tend to be linear in nature, you can maybe lever those up slightly to pay for the cost of the tail risk. We've seen some people do this or use this approach. There's another, the approach that Artemis uses and some of our peers use is we consider ourselves long volatility, not tail risk. We're trying to create an alpha product. And long volatility will use”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“A couple different ideas on how to, and Artemis specializes in trying to find ways to own convexity inexpensively and carry that. In some instances, even be positive carry. One way that we approach this problem is you might sell the first movement in markets for carry and buy the second movement. So you're selling linearity for carry and you're buying the nonlinearity. That makes you negatively exposed to maybe a 5% decline in markets and positively exposed to very positively and nonlinearly exposed to a 10, 20, negative 20, negative 30% decline. That philosophy allows you to carry what is essentially insurance at a much, much less expensive cost. And there's a variety of ways to do that with options. That is one concept. I think a lot of people drive their energy into, when they think convexity, they think tail risk. And the problem with a lot of tail risk funds is”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's a great sign of that. And now what happens when you end up having pension systems go belly up in the next 10, 20 years? Because some of these systems have actuarial expected returns of 8%. I mean, that's their baseline expectation. So either A, there has to be a massive mean reversion in what people can earn, or B, there has to be cuts in these programs. And then how do people respond to those cuts who are already politically angry? It presents definitely a unique challenge there. And I think that's the biggest risk. The biggest risk is not a 20% or a 30% decline in markets. The bigger risk is how socially we respond to that. And then it also means if you look at someone like China, you have this massive urbanization. And in the event of a global recession, do they have social unrest if they're not able to sustain such a pronounced growth rate?”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“That World War II didn't happen and it was all monetary and fiscal policy. And I find that puzzling. I'm not saying that it's crazy to advocate a world war to get us out of the predicament that the global economy is in right now, but I think I don't think people are being sort of radically honest when they don't admit how much World War II helped us resolve many of the issues stemming from the Great Depression.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“There are some people that use the 30s as a One of the greatest books about this is Lords of Finance, is about the history of central banking through that period. I think a lot of people use the late 30s as an example of why we need more stimulus today. And I definitely think there could be more fiscal stimulus today. That's maybe the difference between that period and now. But beyond that, I think what got us out of the Great Depression is that we won a world war. I mean, this seems to be the thing that none of the economists seem to take note of. It really, really helps your economy when A, you have an existential threat overseas and you respond to that through massive production potential in a massive war, incredible global war. And B, after that global war, you're the only industrial superpower left standing. That is a growth model. The effect of World War II on resolving the issues of the Great Depression, I think there's a disconnect between people who just”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“The suspension of constitutional controls that Hitler took advantage of later on were initiated to control the hyperinflation. And then obviously there was a tremendous anger by the middle class in Germany over their declining place in the world, which was misplaced into xenophobia and racism. So, I mean, Hitler was democratically elected, but he was democratically elected out of this type of horror of an economic disparity.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's happened. There's a historical precedent for it. And that's why if you read Devil Take the Hindmost and you read the work of Neil Ferguson, it's why all these guys, I mean, they're not economists, they're historians, and they're sitting there being like, whoa, what is going on in the world? What are these central bankers doing? Why are all the historians criticizing central banks and the economists are all behind it? Because the historians know, and they've seen this time and time again. You end up having a situation where there is a suppression of volatility, a funneling of money into asset prices. There's a financial crisis. There's a massive wealth disparity. And that leads to sometimes a democratic revolution that results in a new regime that causes tremendous issues. I think go back and look, I don't think there is a Hitler if there's not a Weimar Republic hyperinflation in the early 20s. So in fact, some of the constitutional...”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“And a forest fires the same thing. In fact, the sequoia trees in the Great Sequoia Forest, they will not release their seeds until they sense a forest fire. The forest fire clears out the bad trees and allows healthy trees to then develop. And as a result of that, the forest service was actually, they actually now institute controlled burns. When they tried to do forest fire suppression, it resulted in bigger and bigger and bigger fires. So today what central banks are doing is completely analogous to all of these different factors. They're trying to remove intermediate and small risks and at great, great potential of large risks. And the largest risk isn't even from markets, it's social. I mean, I'm actually worried that democracy will not survive what they're trying to do.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Volatility. It's true with marriage counselors. They always say that the people that are most likely to get divorced are the ones that aren't fighting. The ones that aren't fighting at all have the most tension because they've given up on one another. It happens with avalanche prevention and ski slopes. The Forest Service will blow up different portions of amount, the dynamite mountains to release the avalanche pressure.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Heavy Cold War. Yeah. So rural North Carolina, this bomber crashes, the only thing that prevented a massive nuclear disaster in North Carolina was a very simple fail-safe trigger, a very weak fail-safe trigger. But consider that if that bomb had gone off, it would have spread radioactive debris all over New York City and Washington, D.C. And you could imagine that if all of a sudden a massive nuclear bomb exploded randomly in North Carolina, that could have well been the start of World War III and the end of the world by an accident. So it's an example that fortunately that never happened. Now this book goes through many different accidents, but you have a situation where because of this arms race, we have this false stability. But underneath that is this incredible potential for vault. And so we see this every time people try to suppress smaller.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Command and control. It's amazing and terrifying book. I mean, it's one day removed from Halloween. This is the scariest book you'll ever read. And it's all true. A bomber crashed in rural North Carolina and was carrying two nuclear weapons. If either of them had detonated, it would have been over 100 times the power of Hiroshima.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Hope in Laurel Roth did. It's a tapestry, actually, that actually shows cooperation competition across time to incredible artists out of San Francisco. And it builds up this amalgamation of different human achievements and conflict in a teetering tower of Babel reference. It's incredible. The idea of prisoners' dilemma where you end up in this equilibrium of false peace. And the greatest idea of prisoners' dilemma is actually the arms race where you have two sides, they build up, they don't trust one another, they build up massive arsenals of weapons that can destroy the world. And this creates a sense of stability. But it's not true stability because what you've done is you've taken the potential for intermediate risk or one or two standard deviation movements and you've pushed the greater potential for five standard deviation or ten standard deviation events. So an example I give in this paper, which is great from a book called”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, there is a control model now where I almost call it a mommy daddy market, where beginning in 2012 central banks began responding to market conditions rather than economic conditions. And that really started with Draghi's whatever it takes speech. And it's extended all the way to QE3. And then what we've been seeing in Japan with the ECB, where they will not allow any momentary drawdown in markets before either coming to the rescue with stimulus or with talking up markets. But this actually creates risk. It doesn't destroy risk. You can't destroy risk. What they've done is they've taken returns from the future and they brought them to the present and they've taken tails from the present and pushed them into the future. And in the paper, the volatility and the allegory the prisoner's dilemma, there's this wonderful piece of artwork and a DS.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think a positive black swan is any surprise nonlinear benefit from, I mean, I think we've seen it where a guy starts a company in his bedroom and is excited about the potential and has no idea about how nonlinear that growth curve becomes. I mean, that's a great commercial example of that. If you look at a Facebook or even before that, Adele or an Apple. Another great nonlinear example of that in a personal dynamic is just you might meet thousands of people and one person defines your life. That's nonlinearity. Some of them might say that's not a black swan. Everyone has, but everyone might have their own black swan purse.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Exposed to that change. So I think oftentimes Taleb has done a great service to the concept of the ideas of anti-fragility and fragility and black swan, but I think people have many times focused on core concept of disaster. It doesn't necessarily need to be a disaster. Change is occurring all around us. It's finding ways to be robust and profit from that change, whether that's occurring in markets or in a personal life.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is very, yeah, he was in one of the original, he was actually in the original Market Wizards. He said, you know, the biggest fallacy about him is that he's right most of the time. He says, he is wrong. 8 out of 10, 9 out of 10 times. It's just the one or two times that he's right. It pays for all the other times that he's wrong and more. So in that concept, he might not be looking for the world to end, right? The world doesn't have to end for him to make money. He's looking at different ideas, creative concepts about how reality might move. And then he's finding inexpensive ways to structure positions that are positively exposed to that change. So the best global macro investors have always executed that philosophy. The idea that might be a change in a currency peg, or it might be the change in a political regime, but finding a way to express that in an inefficiency in the way it's priced, and they're positively”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's definitely a period of large scale systemic crisis is a period that can be very positive for these strategies. But I think that tends to take most of the focus away from other environments that can also be very good. I mean, I would argue that the best type of macro investors have elements of convexity built into their process. So I once had the opportunity to talk to a legendary macro investor. And of course, I asked him a ton of questions. And he told me that the biggest fallacy about him is that he was right most of the time. Very private, so I can't really say who it was”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“A valid classic strategy, but value investing extracts an equity risk premium. But during large-scale declines in markets, value investing is not immune to the crisis that can envelop a market endogenous crisis. And we've seen that in periods 1998, in 1928, in 2008. Now, the irony is that I would say in many ways value investing needs these crises because it results in all this behavioral inefficiency that allows for the value risk premium to be extracted. So oftentimes value investing does the best after the period of crisis. But we're talking about trying to find investment strategies that actually will do well in a crisis or during change, but don't cost you that much during other periods of stability. If you take that, you combine that with value investing. You have a very, very powerful combination.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source