La société dite ‘Disciplinaire’, selon le philosophe Gilles Deleuze, s’efforce d’enfermer sa population dans des lieux clos, tels des usines, des écoles, des hôpitaux ou des prisons. Cette société a prévalu en occident de la période post-napoléonienne jusqu’au début de ce siècle.

Depuis quelques années, le monde découvre la ‘Société de Contrôle’ qui simultanément libère ses membres des entraves murées et les contrôle au plus près du quotidien par l’entremise de sociétés privées qui gèrent l’information, telles Google, Apple, Facebook, Amazon et Microsof (les ‘GAFAM’). Les GAFAM, de ce fait, ne peuvent échapper au regard des autorités politiques.

Les deux premières lettres à ce sujet ont été publiées il y a plus d’un an, en juillet 2020. La partie III s’intéresse aujourd’hui à l’excroissance mondiale des GAFAM, à contre-tendance des efforts de démondialisation des activités plus traditionnelles. Un effet qui n’est pas sans conséquence dans la gestion de portefeuille.

The “Disciplinary Society” according to the philosopher Gilles Deleuze, strives to lock up its population in enclosed places, such as factories, schools, hospitals, or prisons. This type of society prevailed in the West from the post-Napoleonic period until the beginning of this century.

In more recent years, the world has discovered the “Society of Control,” which simultaneously frees its members from the walled shackles and controls them as close as possible to everyday life through private companies that process information, including Facebook, Amazon, Apple, Microsoft, and Google (aka the ‘FAAMG’). The FAAMG, therefore, cannot escape the gaze of the political authorities.

The first two letters on this subject were published more than a year ago in July 2020. Part III now focuses on the global outgrowth of the FAAMG, which is at odds with efforts to deglobalize more traditional activities – a situation that is not without consequences in portfolio management.

Ahhh, the simple scientific world of René Descartes! Single cause, single effect. In the economic world however, this unfortunately is not the case. One cause can even bring about two opposite effects.

A devaluation, for example, usually produces a deterioration in the external accounts first and then an improvement second. Economists call this phenomenon the “J-curve.”

However for more than 20 years, the financial policies of developed economies have turned the page upside down. The “J” has become an “η.” Immediate relief and pain for tomorrow.

The tapering in view of the US Federal Reserve now raises the question: Would “tomorrow” be the end of the summer?

Unlike most physicists, value investors should welcome negative mass.

Financial assets carry a mass, just like objects in physics. Some are heavy, others are light, and a few carry a negative mass, a key property for efficient portfolio construction.

Today, the energetic approach tells us more: the expected return of value stock indices outpaces growth indices for the first time in ten years.

Injecting liquidity into the stock market is a bit like taking an aspirin when one feels sick. It lowers the fever (a short-term relief), sometimes at the expense of long-term recovery.  Could it be that printing money extensively and cutting rates to low levels for too long increases market fragility as well?

Previously, Louis outlined the four asset classes that investors appear to regard as anti-fragile, now that US treasuries no longer fit the bill. With each of these four asset classes enjoying a roaring bull-run, today Louis examines the typical life cycle that lifts an asset class from unloved hell to anti-fragile heaven.

Since the 1980s, OECD government bonds have tended to be negatively correlated with equities, but during the pandemic that relationship seems to have broken down. Given that the Federal Reserve is embracing a new policy framework aimed at juicing up inflation, there are plenty of reasons to think that bonds cannot continue to play an “anti-fragile” role in portfolios. In this first installment of a two-part series looking at what…

As highlighted in Part I, we are witnessing the transition of our world from a ‘Disciplinary Society’ to a ‘Society of Control’. In Part II, we study the structural opportunity to buy the winners, i.e. the FAANMG (Facebook, Amazon, Apple, Netflix, Microsoft, Alphabet) and the likes.

A ‘Society of Control’ requires and therefore favours the mass treatment of information, and is rewarded by a multiplication effect. Today, the FAANGM provide access to computing, communication, internet, social network, gaming, film, music, and e-commerce. In other words, they all leverage the intangible part of value, i.e. information.

The three trillion-dollar hedge fund industry has spent the past decade traversing a barren desert, experiencing disappointing performance and dried up returns. An oasis, however, may be in view!

Science and philosophy have debated the significance (and even the existence) of ‘Time’ since ancient Greece. Finance, however, is the only discipline providing a market price for the uncertainty of the future, which means ‘Time’. Resultingly, it deserves a seat in the debating chamber. There are two ‘clocks’ in Finance, turning at different speeds. The first one synchronizes market trading and option values. It provides the tempo of the inherent random variability of asset prices. Only the second clock controls the directionality in ‘Space’, i.e. the expected drift of an asset. The Theory of Fragility provides the missing link between the two clocks, which reconciles most of the scientific interpretations of ‘Time’. Unlike ‘Traders’, ‘Investors’ should ignore the first clock and focus on the second

Balanced investment portfolios intuitively combine fragile assets, such as most equities, and antifragile assets, such as government bonds from developed economies or precious metals, gold or silver. However, how does one choose the right antifragile asset? The answer depends on monetary policy.