Bubbles and Anti-Bubbles

Published on
October 24th, 2018
41 minutes

Bubbles and Anti-Bubbles

The Expert View ·
Featuring Diego Parrilla

Published on: October 24th, 2018 • Duration: 41 minutes

How can investors position themselves to profit from irrational markets? Diego Parrilla of Quadriga Asset Management explores the opportunities behind bubbles — and their funhouse mirror opposite, anti-bubbles — which result from artificially suppressed prices. Filmed on October 16, 2018 in New York.


  • SH
    Stephen H.
    31 January 2019 @ 14:14
    Excellent presentation and discussion, really worth coming back after reflecting on the content. Diego walks you through his thesis with a straightforward and clear style, taking the complex constructs and articulating them clearly.
  • DS
    David S.
    21 November 2018 @ 00:28
    Restated. The anti-bubble strategy can certainly work. The other possibility is just to deflate the bubble. S&P P/E of 22 down to 15. The decline in the S&P can be even greater than the delta in the P/E ratio if corporation earnings are reduced by the high US dollar and the escalating trade war. DLS
  • DS
    David S.
    20 November 2018 @ 23:32
    I revisited this interview today. It would be excellent to have Mr. Parrilla do a follow up now that the VIX is around 22 and much more expensive. Gold has not done as well as we would expect either. The central banks are realizing that each new QE has less and less effect on the economy. With floating rates and off the gold standard I think that stocks and bonds both dropping sharply is the only an-bubble that works.
    • DS
      David S.
      20 November 2018 @ 23:42
      Sorry,..the only anti-bubble that works. We are seeing bear markets around the world. Even though I bought a few initial positions in stocks today, I think the market in both stocks and bonds have more to fall. Where the market can force the governments into bankruptcy they will, but the US and China will be able to protect themselves from being foreclosed. DLS
  • RK
    Roger K.
    11 November 2018 @ 19:54
    If the evidences are presented that would have been helpful.
  • DY
    Dmytro Y.
    10 November 2018 @ 10:10
    Diego, thank so for the interview! Can I ask this: - if I understand correctly one possible trade idea is to short high yield bonds? Is it still okay to do and what is the vehicle for a smaller retail sophisticated person to do? - speaking of Gold do you prefer Physical or ETF or gold miners. Just a quick general answer would be greatly appreciated. Thanks
    • DP
      Diego P. | Contributor
      11 November 2018 @ 06:27
      Hi. For High Yield we buy put options but I believe there are ETF with short exposure. For gold, same. We buy mostly options but long ETF is fine. Miners are more volatile and not bad tactical play but have significant basis risk, so strategic positions should be in gold and not miners in my view. Good luck
  • GF
    Gordon F.
    27 October 2018 @ 01:53
    Excellent interview. Just one complaint, for which I feel like a broken record. RV PLEASE voice over the questions. I prefer to listen to these interviews, as the video is just a talking head, but only flashing the questions on the screen makes that difficult. If we could hear the questions, the flow of the presentation would be greatly enhanced!
    • TE
      Tito E.
      27 October 2018 @ 21:14
      Agree with Gordon on this one.
    • DS
      David S.
      29 October 2018 @ 06:31
      I agree as well. Thanks for bring this up Gordon.
    • NH
      Nigel H.
      30 October 2018 @ 10:17
    • Kv
      Kristian v.
      3 November 2018 @ 07:17
      I’ll forth that. Without the voiceover of the questions listening to interviews without watching them is a real challenge.
    • DY
      Dmytro Y.
      10 November 2018 @ 10:05
      Agree here as well
  • WS
    William S.
    8 November 2018 @ 23:19
    I see Diego responded below, so I will hope he reads this and responds...Diego: When you mention insurance, what product or what exactly are you using as insurance? Are you able to share this? Thanks.
    • DP
      Diego P. | Contributor
      9 November 2018 @ 12:36
      Hi Will. The general idea is 1) buy something you like, in my case anti-bubble and anti-crisis underlyings such as gold or US Treasuries. 2) buy put options on those underlyings, effectively turning exposure into synthetic call, which I manage dynamically to protect gains/capital and take advantage of sell-off. This achieves capital preservation objective. 3) I buy insurance against tails risks (mainly via exotic options) that monetíze volatilty and correlation. They are customised pay-outs that for my view and I purchase in deriavite form without credit risk. All together we try to achieve “tail risk with neutral/positive carry”. If you For further information about potential investments and suitable vehicles pls feel free to contact me on diego.parrilla@quadrigafunds.es Pls note double r and double l in my surname. Hope helps. Good luck!
  • WM
    Will M.
    4 November 2018 @ 15:14
    Very coherent simplified explanations. Thanks Diego for a quality and straightforward explanation supporting the "its all one big trade" perspective. Just bought the book.
  • ZW
    Zachary W.
    25 October 2018 @ 02:22
    Last I checked Romeo and Juliet is play not a movie... :) Great interview.
    • WM
      Will M.
      4 November 2018 @ 15:07
      There are several Romeo & Juliet Movies Zach...........
  • Kv
    Kristian v.
    3 November 2018 @ 07:15
    One of the most logical and air tight pieces of analysis I’ve seen on RV. Fantastic!
  • CD
    Chris D.
    1 November 2018 @ 10:20
    One of the best interviews I have seen here on RV. Just great logic, reasoning and conclusions. Get Diego back!
  • AS
    Aleh S.
    31 October 2018 @ 13:46
    thanks! gone to buy some VIX calls
  • WB
    William B.
    31 October 2018 @ 04:35
    Fantastic. Period.
  • JL
    Johnny L.
    30 October 2018 @ 19:18
    excellent presentation with keen observations about volatility and a nice reminder at the end of what the likely future is for markets.
  • my
    markettaker y.
    29 October 2018 @ 01:19
    Anyone got an idea what his exact strategy sounds like? He's buying cheap gld calls? Spx call spreads? Not clear just what he's up to.
    • DP
      Diego P. | Contributor
      30 October 2018 @ 17:13
      Hi. My strategies Smart Gold, Smart Treasuries and Igneo (50/50 Smart Gold and Smart Treasuries) are liquid absolute return strategies that seek long/bullish exposure to what we believe are artificially cheap anti-bubble and anti-crisis assets (such as precious metals or US Treasuries) and artificially expensive short/bearish exposure to bubles (such as equities or high yield) with a bias to implement via long insurance and tail risk and aspiirwtionally low/neutral or even positive carry. For more information please feel free to contact me directly and I will put you in contact with the relevant team depending on your legal jurisdiction. You can find me in Twitter @ParrillaDiego. All the best, Diego
  • MG
    Mike G.
    27 October 2018 @ 00:12
    Fantastic! Thank you Diego!
  • PG
    Philippe G.
    26 October 2018 @ 23:53
    Interesting angle to describe current state.
  • HS
    Hisham S.
    26 October 2018 @ 23:34
    Fantastic. Thank you Diego.
  • tW
    tgwtom W.
    26 October 2018 @ 21:33
    Bubbling brilliance.
  • MR
    Mathew R.
    26 October 2018 @ 16:55
    Quite liked this video. Good job
  • BF
    Bill F.
    26 October 2018 @ 15:06
    the single best description of the macro economic/financial environment that i have seen.
  • JB
    Joe B.
    24 October 2018 @ 14:33
    What a brilliant way to describe a complex issue and to summarize what appears to me to be a great book. What I’d love to learn is how - as a retail investor - I can invest in volatility and other insurance products?
    • RA
      Robert A.
      25 October 2018 @ 22:46
      After viewing some of Chris Cole’s RV presentations I invested in his Artemis Capital Vega fund a couple of years ago. Suggest you plug Chris Cole into the RV search box and watch his interviews. He has also done podcasts with Grant Williams and others. To my mind, the Artemis Capital Vega fund is truly a tail risk insurance policy in that, IMO, Chris uses a sophisticated proprietary system to try to fund his DEEP tail protection by selling some of the modest and temporal Volatility spikes. IMO again, the “insurance policy” kicks in when there is a LARGE Vol spike that STAYS high for a considerable time—you don’t make money on the smaller Vol spikes or medium Vol spikes that revert down quickly. I think Chris’s genius is partially funding the costs of the Fat Tail protection by selling some of the more modest Volatility occurrences. Hope this helps.
    • DS
      David S.
      26 October 2018 @ 08:15
      I also really enjoyed Jerry Haworth RVTV interview PROTECTING AGAINST PORTFOLIO DISASTER 1/15/2018.
  • JS
    Joseph S.
    24 October 2018 @ 22:32
    WOW !!! I want that book.
    • RA
      Robert A.
      25 October 2018 @ 22:28
      I ordered it minutes after viewing his presentation. Great pricing on the Hardback or the Kindle version!
  • TS
    Theodore S.
    25 October 2018 @ 21:40
    As a fellow alumnus of the Colorado School of MInes, I know the rigor behind your thinking and analysis. Looking forward to reading your book on anti bubbles! Also listening to your colleague, Daniel Lacalle on Macro Vision.
  • AB
    AJ B.
    25 October 2018 @ 17:55
    My scrambled thoughts put into a well structured presentation. Well done
  • PC
    Peter C.
    25 October 2018 @ 12:46
    Great overview of our big picture & practical too
  • NI
    Nate I.
    25 October 2018 @ 04:56
    Thanks Diego. I enjoyed your presentation. Do you worry about counter party risk? Especially if the markets had a 1987 type event. I think about insurance companies and how often mommies and daddies (in the form of re-insurance and taxpayers) are forced to run to the rescue and bailout the insurer when the cat 5 hurricane actually hits. Could the put writers cover them vis-a-vis a major market dislocation? Kinda thinking a good old fashioned long-short book is maybe a better way despite the availability of cheap insurance (that I worry might not be able to pay when it's needed most).
  • PD
    Pat D.
    25 October 2018 @ 02:43
    Simple, eloquent, ..... superb!!
  • FC
    Fractal C.
    25 October 2018 @ 00:44
    Good presentation. His framework is very similar to Mark Spitznagel (Universa). BTW, Mark should definitely be a guest on RVTV
  • CA
    Christopher A.
    25 October 2018 @ 00:21
    Does anyone know what watch Diego is wearing in this interview?
  • RA
    Robert A.
    24 October 2018 @ 22:55
    Have enjoyed every Diego RV presentation! Great synopsis of where we are (I bet even his Mother understands). Japan, of course, seems to be the Canary and the one to watch—Japan does have some well known shock absorbers in that they are an insular Country with significant cultural, linguistic and behavioral homogenous attributes. Better hope the Robotics arrive in time to feed and clean them due to their demographic deficit though. Some Gold, some Volatility tail risk insurance and a heavier weighting of cash seems to be the “participation fee” for staying @ the Party.
  • SP
    Steve P.
    24 October 2018 @ 22:47
    Probably one of RV's best overall presentations on the current global financial systems' woes. His analogies used to explain in simply terms, the very complex interactions between investors, monetary authorities and markets are superb. Diego is just one of a growing number of top money managers warning us that major social and monetary system change is not far off. At least we are receiving plenty of warning via RV. The sub is worth every cent!!
  • TJ
    Terry J.
    24 October 2018 @ 21:20
    Diego has an extraordinarily charming style of presenting his case and even more importantly some very persuasive arguments on bubbles and anti bubbles. With Wall Street stocks looking decidedly wobbly once more, a very timely video to help focus what Mr. Market may do next.
  • JF
    Joanne F.
    24 October 2018 @ 20:35
    Very clear. Too bad this knowledge isn't even more wide spread!
  • CL
    Charles L.
    24 October 2018 @ 20:30
    Hola Diego. The climbing comparison is fantastic. Are there any non-sophisticated instruments to use as that "market insurance" you state which would be accessible to a non-expert individual investor? I have no clue about derivatives but I am myself investing in uranium related equities and would be very much interested in hedging those specific positions in that manner given the intrinsic volatility this sort of asset usually has. I'm guessing for this asset insurance would not be so cheap but might be worth looking into. P.S: la manera de explicar toda la dinámica (opinión que comparto) es cojonuda. Enhorabuena!
  • DB
    David B.
    24 October 2018 @ 20:03
    Wow - really awesome presentation. Loved the concepts and investment thesis. Thank you, RV!
  • rr
    rlw r.
    24 October 2018 @ 16:43
    Thanks Diego, excellent analysis of the big picture provided through the system(s) thought processes of an engineer. The examples and imagery add great color and make the discussion quite enjoyable.
  • JH
    Jesse H.
    24 October 2018 @ 15:12
    I loved this analysis — absolutely fantastic. Please have Diego on again soon. His ideas and approaches really merit a deeper dive, I believe.
  • DS
    David S.
    24 October 2018 @ 14:43
    Excellent use of thoughtful metaphors and examples to explain the current situation vis-a-vis Mr. Soros' groundbreaking book. The point of view is solid and helps us to keep thinking about what kind of bubble are we in now. I loved the use of "anti-bubble" for symmetry. Good luck on your book and investing. DLS
  • MS
    Marcio S.
    24 October 2018 @ 13:31
    Congrats on the interview. Diego, timing is everything in life for the precise point of reversion of a trend, nevertheless there is no time for insurance! I couldn't agree more with the idea of market complacency and "belief bubble". Insurances should be on portfolios and true diversification...
  • PD
    Peter D.
    24 October 2018 @ 13:05
    This guy (whom I have never heard of before) is a great communicator. He explains the bear dilemma - how to invest in a world of bubbles - perfectly. His "anti-bubble" thesis is a bit gimmicky ...but it's effective. I'd be interested to know how his book is doing and how his funds are performing. In any case, the video is worth watching twice.
  • PH
    Paul H.
    24 October 2018 @ 12:18
    Such a great overview of the largest bubble in modern financial history.
  • JS
    John S.
    24 October 2018 @ 11:10
    Very well articulated ...really enjoyed this interview