The Industry was built on Modern Finance - And MF os Flawed in it's Thinking

Stationarity

How you've been had - The Misconceprtions of Modern Finance and the implications on your retirement

Mistakes and Limitations of Modern Portfolio Theory

1- Serial correlation - Assuming that the joint distribution of Stocks and bonds is just like flipping a coin.
This is WRONG

2- ALL Modern Finance Assumes Stationary..This is Wrong - Think of pricing houses and stocks at any point in time....Decisions are made on the premise that this condition will last forever..that the market will price it self to this condition. Think about the yield curve and pricing off treasuries. if the 2 yr is always 5% and corporates 200bp above then they will always yield 7%. What do you re balance to? or price off of as conditions change.

3- The crucial mistake in portfolio theory that Samuelson pointed out was that you don't live in Tahiti. There is Nothing to Re balance to>

4- MPT assumes there are no structural Changes - That's Wrong

5- Efficient market theory assumed people were rational. That's Wrong

Some things don't Change

it's still about cash flow, always was always will be.

Our Model is based on evolution and the forces of.

The Purpose of the MATRIX

To offer a hedge-fund-like approach without the hedge-fund-like drawbacks. The MW/AM is an alternative option without the baggage of lack of liquidity and transparency, high fees and tax insensitivity

There is a time to stand on your own ASSET MANAGEMENT

Alpha Matrix Portfolio Management

A modular approach to portfolio construction and management.

The purpose of the Matrix is to produce Alpha.

Portfolio management is both a science and an Art. The purpose is to combine not only diffreent asset classes but strategies tactics and time frames to maximize returns minimize risk and produce a desired outcome. Wealth is built by compounding returns over time.

The next level is about building Adaptive Systems to capture structural change in the economy and markets...

RUNNING to Where the Money IS

It tmw Time IS A COMPONENT

it's all abou cash flows

Making Money in Turbulent markets and an uncertain economy

There Comes a times when you can't patch it up any more. you need a new one

That time has come - In the Modular World Tere is a time and a place for everything.


"It was their Time"

Risk is not about Voliyility or standard Deviation - The apple example...

Making a portfolio less risky. vs making a portfolio profitable.

Asset classes and portfolios/ an inflation hedge or a business enterprise.

BOND ANALYST VS EQUITY ANALYST - TWO DIFFERENT WORLDS

LOOKING AT CASH FLOWS
MERGING TWO VIEWS
Stocks and Bonds are Separate Worlds

When there is lack of Consensus there is Value to Undercover

HOW THE CITI MODEL arrested the evolution of the financial model

The Components got weaker not stronger in their purpose

An incestuous organization or model does not evolve it limits the gene pool and weakens the species which eventually is overtaken -



Evolution strengthens the essence. Coach KAY and assistant coaches

Understanding the FINANCIAL COMPLEX and the Players in the Game

Investment guys, salesmen, planners, analysts, traders etc and the roles they play.

The Flaw in the Model is on the Equity side

We know the 40 % Buffers risk, We know diversifiacation reduses risk that's cool. But equit prices move in different time frames.

Repetition  + thinking + provides insight = change = evolution. vs doing the smae thing over and expecting different results.

"if you want to make money you have to be ahead of others in prredicting structural change."

BUILDING A RETIREMENT PORTFOLIO

FIXING THE WALL STREET MODLEL- CITI in Reverse

Focus needs to move away from benchmarks to results - outcome drived strategy - unity of purpose

The Problem with MPT - takes 100 years to work out - the risk is different at different times if you enter or exit at an inopportune time you do not reap the benefits need to adjust for personal time frames

The reverse of BLACKJACK

Lessons of the Endowment Model, the 4% Rule and Subprime-lending

How the Citi model and Total Merrill set the retail industry back 30 years.

The model was ass backwards, it was not build to evolve. It was build to get big to survive not better. In the end  all they had was a sales machine with more sales talent than investment talent and were hoodwinked by the smart guys.

The Goldman Model was build to evolve that's why the keep making money and the  old Citi and Merrill became extinct.Go to http://www.fora.tv/ and listen to Niall Fergerson, he'll tell you how.

In the supermarket model the investment process was packaged and sold as a commodity in three sizes, small(conservative), medium( moderate ) and large (aggressive). This helped justify the existence of retail brokers and pension consultants, who guided clients through elaborate allocations between different styles. It did not encourage skillful investing.

Niall Ferguson in a lecture on FORA.TV calls it arrested evolution.

and this phase in finance as the Great Repression. Bailing out the supermarkets kept them from evolving are puts this off for another decade Citi has moved on and is now no longer the new citi is bank of america.

MPT led to market crash

Only people who use MPT are those that don"t manage money. That are not responsible for performance other than to tell you that the market sucks not thier strategy. Same concept soros talks about in mtg origination when you separate the agent from the principal and shift the risk to someone else you create a problem.

WANTED: New Model for Markets

Critics of the conventional wisdom say all these efforts are a waste of time. Jeremy Grantham of Granthan Mayo Otterloo, A Boston-based fund Manager, and a long time critic of the efficient markets hypothesis, says academics will "patch theories until they finally collapse under the weight of all the patches".



The Investors dilemma...

While academics look for deeper models of markets that work, investors are left with a toolkit they have had since business school that suddenly seems not to work. It is unsettling. "I look at this process as being, in a sense, halfway done, says Mr Putnam of Grail. We've learnt a great deal but we haven't learnt how to integrate and synthesise that into a way to go forward. So the process, the paralysis, the trauma, has really taken hold right at the moment."

UNITY OF PURPOSE -

Lessons of the Endowment Model - Even the smart guys make mistakes

Taken Institutional Investor Magazine, 04 November 2009

"Beyond then hallowed halls of Harvars University's Cambridge, Massachesetts, campus, accross the Charles River in allston.

BUILDING A MODULAR PORTFOLUIO

1- Retirement Income
2- Capital Growth
3-Avoiding Investment paralysis
4-a notion of the future