Deutsche’s Kocic On Risk Parity, Policy, And The Intrinsic Fragility Of The Entire Socioeconomic System

7 thoughts on “Deutsche’s Kocic On Risk Parity, Policy, And The Intrinsic Fragility Of The Entire Socioeconomic System”

1. Thanks for posting this. The last few paragraphs leave us with much to ponder.

2. I almost hate to break the meditative, big picture musings, but I still would love to hear from any of you on investment committees and such: how well are those risk parity funds doing? What kind of returns are they generating?

   Or this another hedge fund kind of story?

   1. “there is a nontrivial probability of seeing a general disenchantment with and en masse exit from the risk parity trade by investors searching for returns”.

   2. They‘ve been doing great bcs all assets were rallying, stocks bonds and currency. But that is not the point going forward. Clearly, this has come to an end bcs bonds have no place to rally anymore, stocks probably as well and deficit spending is erosive for currency. So, why would anyone pay money to asset managers who invest in assets the have no returns, certainly not what they used to have. And they will start withdrawing their money from those funds and put them into alternative assets etc. which will force risk parity to adapt to the new paradigm and change the allocation.
      Any semblance of inflation on the horizon will have a panic run for the door and there won’t be anyone to take the other side, so rotation from risk parity might start before tthat

3. An investor by definition has money to invest to try to increase one’s wealth. There are millions of Americans who have never had or lost their good paying jobs and who make up the “one paycheck away from oblivion” group. These people need a massive return of good paying jobs. They may need to have their skills upgraded to take on the new jobs but if so, so be it. If we’re going to increase the percentage of assets owned by the 99% these people have to have money to invest. In these days of lower and lower employment demand as manufacturing etc. use higher and higher amounts of technology this will prove to be a mountain to climb.

   1. Indeed. And neither of the two major parties is interested in addressing this most fundamental and critical of problems.

      1. I know one party that hasn’t a clue because its leader believes he’s a singularity. Not even a stable genius can fix what he doesn’t see. I agree that there aren’t enough ‘middle class’ jobs that provide at least a 6 to 12 month financial cushion. I haven’t heard anyone effectively explain where those missing jobs will come from. We’ve killed the golden goose and now justice may be served.