False Assumptions: Liquidity & Passive Investing

Published on
November 13th, 2019
25 minutes

False Assumptions: Liquidity & Passive Investing

The Interview ·
Featuring John Bollinger

Published on: November 13th, 2019 • Duration: 25 minutes

Legendary technical analyst John Bollinger sits down with Tom Thornton of Hedge Fund Telemetry to break down the invention of Bollinger Bands and to review several false assumptions in today's markets. Bollinger notes the issues with welding securities together through passive vehicles, points out the blatant destruction of diversification, and examines why bond investors face a rude awakening. Filmed on October 30, 2019.



  • MS
    Martin S.
    12 November 2020 @ 18:10
    Loved this interview. There must be a series on ‘The Legends of Technical Analysis’.
  • LB
    Leanne B.
    14 November 2019 @ 01:12
    Great interview- very informative. I don’t understand the negative comments about this interview or others as I appreciate the format. I like how the interviewers provide context and help explain jargon etc.
    • pd
      peer d.
      15 November 2019 @ 18:48
      Leanne in our techno-narcissistic times, super critics populate like flies.
    • BM
      Bryan M.
      18 November 2019 @ 01:41
      Peer D, you are axactly right.
  • BD
    Bruce D.
    14 November 2019 @ 02:00
    Excellent interview. That said when there is nowhere else to put money but the stock market it will keep going up, trendlines, BB, MA will work for short plays but int he end the market will continue to rise. That's just my opinion and I don't know any more than anyone else. It's a strange new world.
    • BM
      Bryan M.
      18 November 2019 @ 01:39
      Exactly! Errr...until it's not...
  • KG
    Kumeran G.
    16 November 2019 @ 16:16
    Awesome, need more...demark, Larry Williams, Linda raschke....
  • GS
    Gero S.
    13 November 2019 @ 11:25
    Whats the problem with calculating sharpe ratio when rates are zero?
    • GF
      Gordon F.
      15 November 2019 @ 01:33
      Gero, it puts a zero in the denominator of the fraction, i.e., you are dividing by zero, and the result can be considered either infinity or undefined. The point they were making is that the Sharpe ratio is not useful in this situation.
  • TR
    Thomas R.
    14 November 2019 @ 20:11
    Quick observation on bond comments starting at about 9 minutes left. While I agree with the "risk" assertion of owning bonds - the comment concerning "tiny bid of appreciation" on movements of rates lower, I would say is dramatically inaccurate. Just as when rates rise the dramatic reduction of principal value is reduced, as rates fall the volatile increase of value is equally startling. All one needs to do is look at the ridiculous returns thus far on the Austrian 100 year bonds as yields have gone from a starting point of roughly 2% to roughly 1%. NOT advocating bonds in this comment. Just pointing out the inaccuracy of the speakers comment. Volatile movements in principal value go each way on long term bonds these days - and I like most, would not want to be there when the music stops.
  • DR
    David R.
    14 November 2019 @ 19:27
    Fantastic interview and great insights! Thank you.
  • AE
    Abou E.
    14 November 2019 @ 09:21
    Very average interview. Didn't learn anything new! I highly respect Bolingbrook, it's just that topic interviewer choose to address were not of a great interest or didn't lead to a great deal of insight as far as I am concerned.
    • AE
      Abou E.
      14 November 2019 @ 09:23
      I meant to write Bollinger bands!
  • JC
    Joe C.
    13 November 2019 @ 23:36
    Bollinger bands are a great tool. I use them as a starting point for measuring volatility across durations. However, they have a fatal flaw—they assume a Gaussian (read: normal) distribution of price change, when in practice real measures of volatility are anything but. Anyone who trades markets knows... there are many, many small changes in price coupled with MANY more large changes than conventional probability theory would assume (a Cauchy distribution). The result? In my experience, Bollinger bands work very well in low vol or steady vol environments, but struggle to meaningfully signal overbought/oversold in changing volatility environments (the vol of vol). For the curious, Benoit Mandelbrot's "The (Mis)Behavior of Markets" completely changed my perspective on market volatility (H/T Keith McCullough and the Hedgeye team). His work is nothing short of remarkable. Still, John's book "Bollinger on Bollinger Bands" was my first exploration of volatility and remains a personal favorite. It contains one of my all time favorite market quotes: "While price is neither cyclical nor forecastable, volatility is both."
    • DS
      David S.
      13 November 2019 @ 23:54
      Do you really believe that volatility is both cyclical and forecastable? In what time frame? Thanks. Just asking the question. DLS
    • JC
      Joe C.
      14 November 2019 @ 00:08
      Bollinger's general take was that low volatility begets high volatility and so on. It's an oversimplification, but Mandelbrot attempts to forecast volatility probabilities with fractal math. He argues markets are fractal, such that a 1-minute chart and a 100-year chart "look" the same. So the answer would be... across ALL time frames, if you know what to measure.
    • DS
      David S.
      14 November 2019 @ 01:55
      Thanks. I understand fractals in science. In markets, which are produced by millions of individual human decisions, fractal modeling is way above my comprehension. Good luck. I hope it works for you. DLS
  • DS
    David S.
    14 November 2019 @ 00:01
    "TOM THORNTON: Tell us a little about your indicators, you have three you mentioned to me that you use as your secret sauce." You discussed the Bollinger Bands, but not his other two favorites indicators to my memory. I enjoyed the presentation very much. Thanks to both of you and RVTV Team. DLS
  • RM
    Robert M.
    13 November 2019 @ 21:14
    Great guest...a little surprised when you get someone like John that the interview is not a little bit longer.
  • TT
    Tommy T. | Contributor
    13 November 2019 @ 17:51
    I was honored to chat with John as I've been a fan of his work throughout my career. I am fascinated how he discovered and created his Bollinger Bands way back by hand/pre computers to dispell a false assumption that stocks had static volatility. It sounds incredible to believe that was a market assumption with all of the data we have today. The basis of questioning market "knowns" is what guides him today. I tried to get through as many market assumptions with his views in the very short time we had together. I hope we can at Real Vision interview more of these legends of technical analysis. Hint hint!!
    • DS
      Dusko S.
      13 November 2019 @ 20:17
      Tommy, kudos on the fine interview!
  • AP
    Adam P.
    13 November 2019 @ 20:14
    An interviewer not wearing white sneakers... finally! haha
  • TC
    Thomas C.
    13 November 2019 @ 20:13
    Good guest but interviewer failed to get best due to poor questions. So as a consequence a little rambling and little specific advice given. In summary ok could have been great
  • JR
    Joe R.
    13 November 2019 @ 13:26
    Interesting thought from John on stock picking becoming more attractive due to indexing.
  • TJ
    Terry J.
    13 November 2019 @ 09:17
    I enjoyed this video and especially some of the excellent observations from John on the continuing validity or otherwise of historical market indicators in a surreal ZIRP world. I also think he was spot on in his comments on the Fed's bizarre monetary policy actions. Let the market determine interest rates and get rid of the interfering manipulative Fed I say!
  • BS
    Benjamin S.
    13 November 2019 @ 09:02
    I know that everyone thinks rates are not going up any time soon. But if the trade war gets worse, wouldn’t that be inflationary with both sides adding tariffs?