Blinded by Myopia
Myopia can mean either nearsightedness or a failure of imagination: both definitions apply here. We are blinded by self‐enforced closeness to noise and narrative, and an inability to see past it, or outside the prevailing narrative. We look at what is right in front of us and extrapolate. Furthermore, there are many people in the investment industry who encourage us to react to the noise and narrative because that's how they get paid.
Volatility Is in the Eye of the Beholder
I was recently one of seven speakers at a volatility conference. As I prepared, I worried there wouldn't be much to say and figured the other speakers were likely struggling as well. I was wrong. One by one, chief strategists, heads of structuring and risk takers from the sell and buy sides expressed concern over the “structural shift higher in volatility” and provided compelling reasons for the move. The impact of algorithms (algos), poor liquidity, and great uncertainty surrounding central bank policy, not to mention the insatiable and seemingly irrational appetite for risk from the investment community, were chief among them. The charts used to illustrate long‐term structural shifts rarely included data prior to two years earlier, and the evidence of the damaging effects of algos showed 20 tick moves in pairs like US Dollar versus Norwegian Kronor in the seconds leading up to the release of non‐farm payrolls.
The moderator then asked me about my apparently ...