Eric Peters - 2022-2023

febr 2023

Anecdote (Sept 2018): “I’m fortunate to live in a time where the political system allows my kind of work,” said the Physicist. “Historically, it’s not always so.” Below us particles raced around CERN’s 27km subterranean track, held in precise formation, accelerating toward collision, obliteration, observation.

We discussed magic, mysteries, the sublime wonder all around. “It’s incredible that we’ve been able to learn so much about nature, and that the language of mathematics turns out to be so effective in describing it,” he said. I smiled, having never quite considered that fact. “We’re now trying to produce a substance found throughout the universe that interacts with gravity but not light,” he explained. “But so far, no success.” The existence of Dark Matter was first hypothesized in the 1930s, we’ve searched ever since. It accounts for 95% of the Universe’s mass. The Physicist asked me about markets, intrigued by their movements, mechanics. There are parallels with quantum theory. Investor perceptions impact markets, which in turn changes investor perceptions in a reflexive loop that grows highly unpredictable in the extreme. The greatest opportunities in markets often reveal themselves first as mysterious phenomena. When markets move in opposition to general principles, it often means that something fundamental is changing. Reality is always changing. Our job as investors is to identify shifts early and adjust our frameworks accordingly.

I asked the Physicist to explain the mystery that confounded Einstein and every physicist since: Quantum Entanglement. “I can understand the equations that describe it. But I’m intuitively mystified by the phenomenon,” he admitted. “In my field of work, I’m astonished often. And each time, I’m reminded that what we know about reality fits within perhaps 5% of all there is. And when you know so little about something so vast, it’s impossible to be certain whether what you believe you know is even reality.”

oct 2022

• argument in favour Trend-following in 2023-25

Novelties III: “But the issue of course, is that the risk in the system has been transferred from banks to asset managers,” he said. “And asset managers do not have flexible balance sheets.” In an industry that has grown to be dominated by passive, long-only products, asset managers simply buy assets when they get inflows and sell assets when they get outflows. They do not have the ability to expand their balance sheets when assets are being sold at distressed prices. No such mechanism exists. “In today’s system, the shock absorber is the asset price.”