The Climate Change Trade: Your Portfolio May Never Look the Same
|Apr 17th, 2012 | Filed under: Alpha Strategies, Today's Post | By: dfriedenberg||
The Negative Alpha of Flies
A lot of problems get solved when you understand natural tendencies. Everyone has had the experience of a single buzzing fly in the house on a summer night We used to run around with a newspaper while the fly laughed, until we remembered that flies gravitate towards light. So when a rogue fly appeared in the evening, we would turn off all the lights and open the door to a small lighted room. The fly would fly into the room, we would close the door, and summary execution soon followed. It’s easier to get flies or people to move in the directions they’re predisposed to move.
With no disrespect intended toward the flies, just as flies move towards light, so investors move towards the prospect of profits. And they generally don’t expect to get whacked either.
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Doug Friedenberg has a knack for taking esoteric financial topics and rendering them merely obscure. He is principal of www.jigsaw-capital.com, which arranges asset-based finance for small and mid-sized businesses.