Michael Green, Chief Strategist, Logica Capital Advisers

Managing portfolios over the course of two decades, Mike Green has developed a unique framework for assessing risk and opportunity.  Trained in his early days to perform equity valuation, Mike came on the scene just as the tech bubble was imploding and the massive discrepancy between growth and value was coming undone.  In a great seat to ride the small cap value wave during the post internet bubble, but pre-crisis period, Mike began to appreciate the force of market prices and their impact on behavior, narratives and how they become entangled in feedback loops.  Our conversation is a retrospective on these situations of co-dependency – between profits, psychology and the economy.  In this context we discuss left and right tail events – in valuations, in housing price appreciate and in events of extreme high and low implied and realized volatility. Mike’s insights on market structure bring to life the motivations and market frictions that ultimately give rise to a transaction.  Price, in his rendering, is less about valuation and more about the conditions that give rise to a trade to occur.  The result can be option prices that clear the market considerably higher than what one would think possible and Mike references the near 100% bid to implied correlation in 2012 as an example. Today, Mike is Chief Strategist for Logica Capital Advisers and, as usual, he has a lot on his mind.  We talk a good deal about passive investing, a strategy increasingly embraced as simply a better way.  For Mike, passive indexation is plenty active - there’s a  specific decision being made to buy stocks in proportion to their market caps.  At a time when both the SPX and NDX have become substantially top heavy, investors ought to question the efficacy of such a valuation agnostic approach. Please enjoy this episode of the Alpha Exchange, my conversation with Mike Green.

Om Podcasten

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.