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What Did Investors Learn From the 2008 Crash?
What’s the most important finding in your recent research?
For me the biggest recent issue stems from the 2008 market meltdown that defied many of the core beliefs in the financial community—the core belief that asset classes are not correlated. When stocks go down, bonds go up. So might real estate. By holding a little bit in each basket, the investor will make steadier returns and avoid losses. We found out that all of the methods based on modern portfolio theory worked within a certain range. Outside of that range, they all failed.
Ever since the collapse, there has been a fundamental question on the table, and that is do these practices, teachings, predating 2008 still hold true today? These days you can no longer afford to ignore the extraordinary volatility. Suspenders are not enough. You also have to have a belt.
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Great new paper on pension funds and how to fix them
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Nice Montier input on all the tail risk funds (HT: BA)
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WisdomTree offering a managed futures ETF based on the DTI.
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