By Bill Kelly, CEO, CAIA Association
As a global organization, it is pleasing to know there is always a CAIA Association Member, somewhere in the world, enjoying the dog days of summer. Although we can’t get Portfolio Management Research to recognize the Southern Hemisphere of seasons on the cover of JAI, the true culprits are the ancient Greeks and Romans who connected the hottest Northern Hemisphere days with the helical rising of a star named Sirius; the brightest star in the night sky that rose to its peak during the hottest days of their summer season. Sirius has come to be known as the Dog Star, mostly because it is in the Canis Major constellation resembling a pooch in the night sky.
Conventional wisdom would tell us that the summer dog connotes heat and fatigue accompanied by a need for a respite from a blistering pace. What About Beta is going to both accept that line of thinking and use it as a teaching moment as to what happens to the mighty when they let their guard (dog) down. The developed markets (defined somewhat narrowly here as the US, Canada, and the EU) have been the top dogs in economic development and GDP dominance, where the US is ranked #1, and 6 of the top 10 largest economies fall within this defined region.
Around this dominance has been the development of an integrated banking, regulatory, and legislative infrastructure that is difficult to replicate and has stood as the very symbolism of respect and stature for this global leadership. These tools have formed a moat of structure and security for all seasons. However, that may now just prove to stifle the disruptive next-gen fintech developments growing up around us, in regions that are unmoored by the same legacy structures that have kept these dominant global leaders safe and secure for centuries. An infographic by our friends at Raconteur brings this point home. Just focus for a moment as to who the leaders and laggards are re global fintech adoption. Props to the Dutch by the way, but when a third of your country is underwater, innovatie becomes your middle name.
Still not convinced that the quick brown fox is in the process of jumping over the lazing dog? An interesting Jan 2019 article from Bloomberg remains relevant and brings this point home even further. The unbanked have no legacy technology to think about, and just look at what Unified Payments Interface has accomplished in India in just a small number of months. The aforementioned economic category-killers are going to need a bigger moat or will need to get up on their hind legs and get busy learning, evolving, and coding. As for the latter point, the title herein is a down payment on what might be your first reading of a line of Python programing -- a language that prides itself on code readability, but then again, you’ve probably already figured that out.
This new year in the United States harbingers the quadrennial presidential elections. Regardless of your locale and political views, it will no doubt make for interesting theatre. Prior contests have given us some great and very relevant sound bites: from Ronald Reagan when he described the nine most terrifying words in the English language: "I’m from the government and I’m here to help," to JFK when he famously said: "Ask not what your country can do for you." There is no sovereign protection for ignorance and disruptive technologies will eventually find a way in. The dawn of a new decade should be the wake-up call for all dogs to get busy learning or to get busy dying and the FDP Institute is here to help you learn. An old dog can, and should, learn new tricks.
Seek diversification, education and know your risk tolerance. Investing is for the long term.
Bill Kelly is CEO of CAIA Association. Follow Bill on LinkedIn and Twitter.