Strategy Update II
22nd July 2021
In April 2020 Lethame Capital’s first strategy update spoke of the strong
returns generated by the strategy through a combination of robust risk premia, diversification and
risk management. As of the end June 2021...
Stocks for the long run?
26th August 2020
In “Stocks for the Long Run” Jeremy Siegel¹ argues that stocks have returned an average 6.5 – 7
per cent per year for over the last 200 years. This has become known as ‘Siegel’s constant’
and is perhaps one of the most vocal arguments in favour of buy and hold investing.
Using option theory to value value - will the drawdown continue?
21st August 2020
In a fascinating series of blog posts Logica Capital Advisors¹ provide a strong argument against a
narrative regarding the likely return of the value investing style as well as providing a very
interesting perspective on how to think about equity market returns.
Observations from an unusual sell off
13th June 2020
For an investor the process of bearing risk has some similarities to the economic exposure of an
insurer. In return for carrying the risk that other investors do not want to hold, the investor
anticipates receiving a premium – for example a value investor expects to earn the value premium
over time and is prepared to bear the risk of a sell-off in stocks generally in order to earn
this premium.
Gold futures - 'conspiracy theories'
29th May 2020
The vast majority of the time the gold futures market is contango, which is a normal condition for
durable, easily storable commodities which have a carry cost. The higher prices in the future which
contango represents is a way of paying these costs. A market in contango, which has this premium
embedded, makes life difficult for the futures long as all else equal the futures price declines
towards the spot price as the future approaches expiry. The larger the contango, the bigger the loss
the long suffers on the position.
Volatility - normalising?
9th May 2020
In a time of extraordinary market events the action in the volatility complex has been extraordinary.
Strategy Update
7th April 2020
Four years ago, I started a process that I hoped would distil close to thirty years of learning about
markets into a framework for managing wealth in the long term. The goal was to create a systematic
investment program diversified across premia
Crude Oil - record contango
26th March 2020
While the headlines focused on the carnage in the spot market, COVID-19 related fears of a slump
in demand combined with the supply shock of Russian refusing to join an OPEC production cut has
caused the oil market to enter contango in February. Contango is consistent with the physical
commodity market shifting into large surplus.
How unusual are instrument returns?
11th March 2020
Lethame Capital tracks the statistical unusualness, of the trading activity in the instruments it
trades...