Agnostic Investing
Did you catch the drop in oil; the spike in volatility; or the $10k drop in Bitcoin?
Blind Faith
Virtually all investment strategies, styles and philosophies are premised upon a belief system. For example, the predominant approach to investment portfolio construction is based upon the multi-asset class portfolio, which is built upon the belief that fixed income investments act as a diversifier against equity market risk.
The primary problem with these underlying belief systems is not that they are mostly only partially correct but rather, once they become embedded in people's consciousness, they are no longer questioned - or even worse, they become societal doctrine that leads to biased thinking. In today's highly regulated financial environment we have a situation that people must become officially certified before they can give advice or make recommendations on financial matters. The intent is good, but the certification process includes its own inherent belief system. In this case it is the asset class-based multi-asset portfolio approach to investing. This is the philosophy that has been adopted by regulatory authorities and applied to compulsory retirement savings either through legislation or their oversight requirements.
At Morpho Advisory, we have developed our own investment strategies that are built upon our own belief system. However, we remain cognizant of that belief system and suggest would-be investors that they adopt complimentary strategies that mitigate the potential weakness of our approach. In fact, we have also developed our own methods that allow us to take an agnostic approach to investing on a tactical basis, both fundamental and technical.
Tactically Agnostic
As posted previously, we have developed our own proprietary trading model that we particularly like to use to get a gauge on potential changes in the direction of financial markets with a short to medium-term horizon. Our post from early-August of this year illustrated its effectiveness in the following markets:
commodities
currencies
high yield credit
emerging market equities
volatility
Around the time of the above-mentioned post we began providing occasional access to select output from this model to our paying subscribers here on Substack, and we are pleased to say that we have been able to provide them with valuable insight across the full gamut of financial markets.
Let's have a look at three such examples that we posted out in recent weeks:
Volatility (VIX Index)
In early November we posted the following chart and warned of a likely spike in the level of implied volatility over coming weeks. On Black Friday the VIX closed at 28.6.
Bitcoin (BTC/USD)
In mid-November we posted out the following chart and warned our subscribers that Bitcoin could be in for a move to the downside. The BTC/USD rate has duly delivered a move lower of just over US$10,000.
Crude Oil (CL futures)
In late October we wrote a post dedicated entirely to crude oil here on our Substack page, which included the following two charts (but only beyond the paywall). In that post we suggested to paying subscribers that we could see some weakness in the price of oil.
Here's how the price of oil was looking at Friday's close.
A Questioning Faith
As you can see, we operate with an awareness of the belief system which underlies our investment strategies, but we also leave room to question and retain the ability to change what we believe for periods of time. We let the market tell us what is going to happen rather than trying to impose our opinion on the market.
We operate with a practical faith where ideological zeal and agnostic indifference can work together for better outcomes.
Christmas is coming
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