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I Don't Know

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Summary

This article explores the phrase "I don't know" and how it applies to investing. It looks at the pitfalls of believing you know the future without a shadow of doubt and shares Bain & Company's study on the private wealth market. It presents a few questions for which the author does not have an answer, such as the sustainability of high levels of government debt, whether asset allocation is the most important driver of returns, what will happen across the food chain of capital in a slowdown, and more. It also shares a personal story about the author's experience with death and how it has reduced his fears.

Q&As

What is Ted Seides' biggest investment pet peeve?
Ted Seides' biggest investment pet peeve is investors who express absolutes in a world of probabilities.

Is asset allocation the most important driver of returns?
I don't know if asset allocation is the most important driver of returns.

What happens across the food chain of capital in a slowdown?
I don't know what happens across the food chain of capital in a slowdown.

Where will the stock market go?
I don't know where the stock market will go.

Is private credit an opportunity or a risk?
I don't know if private credit is an opportunity or a risk.

AI Comments

👍 The article is written in an informative and thorough manner, with an interesting perspective on investment strategies and the economy.

👎 The article is long and complex, which makes it difficult to understand for beginners.

AI Discussion

Me: It's about investment pet peeves and how investors often act as if they know the future when they don't. It also talks about the different investment questions that investors have to answer and the uncertainty of the outcomes.

Friend: That's an interesting topic. What are the implications of the article?

Me: The article highlights the importance of being humble when it comes to investing and understanding that no one really knows what will occur in the future. It encourages investors to think through different scenarios and to be mindful of the risks associated with each one. It also emphasizes the idea of having a range of possibilities and not relying on only one outcome. Additionally, the article talks about being aware of the liquidity risks that come with investing in private credit and the importance of making sure that there is enough capital to sustain any losses that may occur. Finally, the article makes a point about the importance of having a good understanding of the markets and being aware that the stock market is unpredictable.

Action items

Follow the podcast and join the mailing list to stay up to date on the latest insights.
Research the Bain & Company study on the private wealth market to gain a better understanding of the democratization of alternatives.
Explore the Brinson study from 1986 to gain a better understanding of performance attribution across investment policy, market timing, and security selection.

Technical terms

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Zero-Coupon Bond: A zero-coupon bond is a bond that does not pay periodic interest payments, but instead is sold at a discount from its face value and matures at its face value.
Mean-Variable Optimization Model: A mean-variable optimization model is a mathematical model used to optimize a portfolio of assets by minimizing the risk of the portfolio while maximizing the expected return.
Asset Allocation: Asset allocation is the process of dividing an investment portfolio among different asset classes, such as stocks, bonds, and cash.
Private Credit: Private credit