Things we’re reading today - 20th and 21st November 2022

  1. I have been looking at some of the data on debt levels and this post kind of summarised it quite well. There is build up leverage in the economy for various reasons (including govt sponsored private debt), but with rising real rates, maybe there will be gradual (and then sudden) deleveraging. Agree with the author that with all thats at stake politically, there will be frequent boom and bust - for the sole reason that govts and politicians cant afford to have lengthy periods of distress in the economy. Time will tell how this will all play out, but the signs aint pretty.
  1. Nice read on asset allocation and diversification, but as the saying goes - when the tide goes out, we know who’s swimming naked. And the past few months is just the beginning of tide receding, and when the tide goes out completely, we’ll check in back here and figure how well Yale has done. But the data is no good even at this point - most University endowments are looking at massive hits with VC investments being marked down. And since most investments are not yet marked down as a new down round has not yet materialized or because fund managers choose not to, the impact is being felt everywhere.

Check this out for damage status -

  1. Not going to opine on this one - enough has been said, still not able to figure how such a shoddy business was valued at whatever number of Billions, mockery of private markets.

Bahama-based crypto exchange FTX saw its valuation plummet from $32B to $0 in one day. It’s founder Sam Bankman-Fried (everyone calls him SBF) saw his net worth evaporate from $16B to $0.

  1. Very nice framework to workaround the uncertainty concept.

While the fear of the unknown is deeply rooted in our biology, it is possible to elevate ourselves above our automatic reactions so we can make the most of uncertainty. Metacognition can be a great ally in reducing anxiety, freeing our working memory resources, and making better decisions when navigating unfamiliar spaces.



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