data analysis

The Active Roster
photo shows Billy Garver smiling

Clients, 2020 changed work life for many, but some changes in our office had been in the works even without a pandemic on top!

I say “in our office,” but the truth is we’ve been getting more flexible in our approach to work. The roster has grown again as of December 1, with the addition of Billy Garver as our new full-time Data Analyst. For now, Billy joins the team working from afar.

Here are a few things we’re excited about:

  • This role will grow along with Billy, who is a statistician and teacher by training. His skills will bring a fresh perspective to the research that happens behind the scenes in our firm.
  • Having another teammate means greater sustainability. You know my intent to work to age 92: our practice requires we “build a deeper bench,” an endeavor that can thrive across the decades.
  • The more we work from our collective strengths, the stronger the firm will be. Billy’s experience with documentation for academic research frees me up to spend more time doing what I love the most—talking with you!

I’m grateful to have a talent like Billy on board, and we’re excited to see how this group continues to exceed the sum of its parts!

Clients, if you would like to talk about this, or anything else, please email us or call.

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The High Tech Rear View Mirror

© Can Stock Photo / canbedone

Once upon a time, we wrote that pretending present and future risk can best be measured by past volatility is akin to driving down the highway with eyes firmly planted on the rear view mirror. (Our theory is the future will not be like the past, so the windshield is a better thing on which to focus.)

The current market upset is the first one featuring the latest generation of so-called risk analytics. These high tech tools generate risk numbers for individual investments as well as entire portfolios. They are entirely based on past volatility. Incorporating frequent updates to the database of past price behavior and enabling near-instantaneous assessments expressed as an index number (say, 1 to 100), they seem quite scientific and highly analytical.

But all of this precision is predicated on the idea that past volatility is a measure of present and future investment risk. So in the latest version, it is like driving down the highway with eyes firmly fixed on an array of rear view mirrors, wide-angle and telephoto and high-definition.

The interesting thing is, when the inevitable downturn occurs, the ‘volatility equals risk’ crowd is quick to point out that their statistical methods are designed to predict what will happen, with a 95% probability. So if you run into a wall while focused on the rear view mirror, there was nothing wrong with the analytics – you just landed in the 5%.

Call us what you want, but a system designed to ferret out risk that fails exactly when you do need it to work may not be all that useful. (An elevator that does not crash to the basement 95% of the time would not be useful, either, in our opinion.)

We will continue to work with our understanding that volatility is a feature of long term investments. It necessitates a long time horizon, so the effect of temporary declines may be mitigated by time. Short term money needs to be kept out of long term investments. And we will keep our eyes focused on the future, not the past.

Clients, if you would like to talk about this or anything else, please email us or call.