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EssentialThe Essential Conversation

Liquidity Cascades: The Culmination of Suppressed Rates, Passive Mandates, & Excessive Risk Taking

Featuring Corey Hoffstein and Jason Buck

Feb 19, 2021 • 79 minutes

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Essential

The Essential Conversation

Liquidity Cascades: The Culmination of Suppressed Rates, Passive Mandates, & Excessive Risk Taking

Jason Buck welcomes Corey Hoffstein for an in-depth investigation into the pivotal forces that are shaping markets.

Featuring Corey Hoffstein and Jason Buck

Feb 19, 2021 • 79 minutes

Jason Buck of the Mutiny Fund welcomes Corey Hoffstein, co-founder and chief investment officer of Newfound Research, for an in-depth investigation into the pivotal forces that are shaping markets. Hoffstein argues that rate suppression via the Federal Reserve has forced active investors out on the risk curve in order to beat their benchmarks. Meanwhile, the rise of passive investment vehicles, which as Hoffstein writes "know the price of everything but the value of nothing," create severe market distortions, which heighten volatility. This insufficient liquidity is exacerbated, Hoffstein continues, by the convex hedging pressures of market makers in the options market who buy as the underlying stock goes up and sell as it goes down. The confluence of these factors create phenomena that Hoffstein calls "liquidity cascades," or rapid melt-up and melt-downs. For Hoffstein’s report, "Liquidity Cascades: The Coordinated Risk of Uncoordinated Market Participants," click here: https://docsend.com/view/cx86pd8yyyea4isw. Filmed on February 17, 2021. Key learnings: Hoffstein argues that a portfolio consisting of out-of-the-money puts and calls, combined with an equity portfolio consisting of trend, momentum, and quality factors, is best prepared to handle a market landscape with frequent liquidity cascades. Hoffstein calls this portfolio "The Daedalus Portfolio." Show More

The Essential Conversation is the world's premier financial-market-focused conversation series. The smartest people in markets, finance, economics, and business engage in deep-diving discussions about the global macro landscape, generating actionable takeaways that can help your decision-making process. Tune in to peer-to-peer conversations between the brightest minds in the investing world, and tune up your portfolio.

More Episodes

The Essential Conversation is the world's premier financial-market-focused conversation series. The smartest people in markets, finance, economics, and business engage in deep-diving discussions about the global macro landscape, generating actionable takeaways that can help your decision-making process. Tune in to peer-to-peer conversations between the brightest minds in the investing world, and tune up your portfolio.

More Episodes

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