A Three-Body Market requires us to think differently about strategies that worked in previous environments. In this continuing series, Rusty digs deeper into the principles of Ben's The Icarus Moment and Three-Body Problem notes to explore their practical implementations for investors and portfolio managers.
The Three-Body Portfolio
In a two-body market, the interactions of fundamental data and prices are generally predictable. In a three-body market, the epsilon — investor behaviors in response to narratives — exerts a powerful gravitational force which must be considered when building a portfolio.
The allure of a fundamental truth is powerful. Investors are hungry for that kind of clarity about markets, but it doesn’t exist. In the first in a series, Rusty discusses a framework for investing in a time of Icarus.
Part 2 of the multi-part Three-Body Alpha series, introduced in Rusty’s recent Investing with Icarus note. The Series seeks to explore how the increasing transformation of fundamental and economic data into abstractions may influence strategies for investing — and how it should influence investors accessing them.
Part 3 of the Three-Body Alpha series, written for anyone puzzled by value’s underperformance over the past NINE YEARS. Systematic value still works in markets warped by the Three-Body Problem, but works differently.
In Part 4 of the Three-Body Alpha series, we explore how narrative may shape the tendencies of certain trend-following strategies – and how investors should respond. We also talk Tesla, if you’re into that sort of thing.